Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 13, 2020
Case Laws in this Newsletter:
GST
Income Tax
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Construction service - works contract - Rate of tax on goods supplied under the contract, independent of the Works Contract being executed in the contract. - Applicability of Explanation to Entry No. 234 - in case of a Works Contract, the explanation to Entry No. 234 shall apply if and only if, the goods the title in which is/'are being transferred during the execution of Works Contract find a place in Entry No. 234. Works Contract in relation to any of the goods listed in Entry No. 234, where such goods are not part of the Works Contract shall not merit taxation under Entry No. 234. - AAR
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Detention of goods alongwith the vehicle - correction made in E-Way bill - correction of wrong truck number after detention - This Court cannot sit over the decision of the adjudicating authority to form an opinion as in my view, it is strictly within the domain of the authority to consider at appropriate and relevant point of time - HC
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Jurisdiction - appropriate authority to complete the proceedings - state authority or central authority - although the action was undertaken under Section 67 of the Act by the DGGI, AZU, yet the two summons came to be issued: one by the Deputy Commissioner of State Tax and another by the DGGI, Surat - This writ application is disposed off with a direction to the DGGI, AZU, Ahmedabad to look into the matter and ensure that no undue harassment is caused to the writ applicant by different authorities on the same subject matter. - HC
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Cancellation of registration of petitioner firm - failure to file GST returns for 6 months continuously at time of issuing SCN but, return for one month filed as on the date of order passed for cancellation of registration - therefore continuous default remains for 5 months only - Though the SCN is valid, order is illegal and ultra vires - HC
Income Tax
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Deemed dividend - Buy back of shares / reduction in share capital - amount remitted to non-residents - Determination of liability of the appellant u/s 115-O - as submitted that the appellant was never put to notice about the proposed determination - The communication dated 22.03.2018 shall be treated as a show cause notice calling upon the appellant to respond with regard to the aspects adverted to in said communication. The appellant shall be entitled to put in its reply and place such material - SC
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Addition u/s 41 - Cessation of liability - Addition of amount of stale drafts not claimed for more than three years and the claim for which had become barred by limitation - Addition cannot be made under Section 41(1) of the Act, since the liability of the assessee Bank to pay back the amounts to the customers in respect of such stale Demand Drafts and Pay Orders does not cease in law. - HC
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Bogus purchases - estimation of profit of 17.5% on the total alleged bogus purchases and thereafter, to delete the balance amount of addition - merely because the suppliers had not appeared before the Assessing Officer, no conclusion could be arrived at that the purchases were not made by the assessee - Relief granted to assessee by the CIT(A) and ITAT confirmed - HC
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Salary receipt - receipt pertaining to redemption of stock appreciation rights (SARs) - whether amount can be assessed as salary income in the hands of a person when received from a person other than his employer? - The SARs redeemed much prior to insertion of clause (iiia) to Section 17(2) of the Act w.e.f 1.4.2000 - No addition could be made - HC
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Nature of land sold - Capital asset u/s 2(14) or agricultural land - If both the conditions are present then it would not be agricultural land and would be treated as capital asset. However, inversely speaking, if either of the two conditions are absent then the land would be agricultural land and excluded from capital asset. Though we have held the land in question to be within the jurisdiction of a municipality we find the second condition to bring the land outside the ambit of agricultural land i.e. that the area has a population which is not less than 10,000 absent. - HC
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Income accrued in India - Benefit of consistency on the basis of orders for earlier assessment years - There was complete silence on this issue by the assessing officer and in our view , there is no purpose of perpetuating the illegality/irregularity either by the assessing officer or by the tribunal. There cannot be consistency of decisions but when there is no decision by the revenue for the earlier years, then there cannot be consistency for no-decisions. - No reason to grant the benefit of consistency to the assessee. - AT
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Assessment u/s 153C - unexplained sale consideration - Addition based on some computer generated loose sheets which was seized and found from the computer of another person - in the case of the assessee whose name is not even was mentioned in the seized documents, no addition can be made. - AT
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Disallowance u/s 40A(2)(b) - excessive or unreasonable payments made to specified persons - AO has not done any exercise to determine as to whether the amount paid by the Assessee to the aforesaid two ladies were excessive or unreasonable by comparing the prevalent market rates. He has not arrived at an exact figure of excessive payment by comparing the amount paid by the assessee with the market rates for similar services - ad-hoc disallowance deleted - AT
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Taxability of proceed of share premium u/s 56(1) - utilization of share premium account for not specified purposes - violation of section 78 of the Companies Act, 1956 - money was received from 10 corporate share holder group companies of the assessee. - the amount and share premium account were utilized by assessee for its business purposes - additions deleted - AT
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Exemption u/s 11 - rejecting the application made for registration u/s 12AA - What needs to be done on the part of the assessee is to fulfill the requirements as provided in Rule 17A and also guidelines provided in Form No.10A/10G in the Income Tax Rules 1962 and if Ld. CIT(E) founds that the application has been properly made and the objects of the Trust are charitable in nature as per the provisions of Income Tax Act then the assessee should not be denied the registration u/s 12AA of the Act. - AT
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Deemed dividend u/s 2(22)(e) - Assessee contention the amount is not a loan taken from PASPL rather said amount is a security deposit received in terms of agreement under which the industrial land was given for industrial use to PASPL. - Since the amount is taken for business purposes only, no addition could be make - AT
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Addition u/s 68 - unexplained cash credit - source of amount deposited in the bank account - represents sale proceeds or not - Peak Credit - Once the purchases have been accepted, then the corresponding sales cannot be disturbed without giving any conclusive evidence/finding. - AT
PMLA
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Fraudulent availment of VAT refund - Validity of Provisional Attachment Order - Money Laundering - proceeds of crime - concededly property was purchased in 1991 and mortgaged with bank in 2009. The alleged offence was committed in 2013 whereas attachment order was passed in December’ 2017. There is nothing on record to show that Appellants after 2009 or 2013 attempted to dispose of property in question which prompted the Respondent to pass attachment order. - HC
Service Tax
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Rectification of Mistake - Error apparent on the face of record or not - benefit of the extended period was denied - The CESTAT, while dismissing the application for rectification of mistake, has gravely erred in failing to take note of the same, despite making a note of the argument by the counsel for the applicant therein, that the plea invoking extended period has been iterated more than once in the order of the Adjudicating Authority. - HC
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Classification of services - Business Support Services or not - service of providing transponders on hire basis by IGSML to UEPL - transfer of right to use even without transfer of ownership of property - department has rightly categorised the said transaction as an activity being provided by M/s IGSML to M/s UEPL in view of supporting the business of the later classifying it as a business support service. - however, demand set aside on the ground of period of limitation - AT
Central Excise
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Maintainability of appeal - appropriate forum - CENVAT credit - activity amounting to manufacture or not - activity of re-packing which is not packing in “unit containers” - activity of re-labeling - the issues raised in the present Appeals are governed by the domain jurisdiction of Hon'ble Supreme Court of India and the present Appeals filed by Revenue, cannot be maintained before this Court. - HC
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Refund of CENVAT Credit reversed - it is seen that the appellants have voluntarily reversed the Cenvat Credit and now are seeking the refund. There is no provision for granting refund of any Cenvat credit voluntarily reversed by the appellant - Refund of any credit can only be granted when it is sanctioned by law and there are specific provisions for it. - AT
VAT
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Benefit of concessional rate of 2% of CST - Post GST era - On a conjoint reading of both sub-sections (1) and (2) of Section 7 of the CST Act, it is clear that the Respondents/Assessees and their likes can continue to have registration under the provisions of the CST Act and the contention raised on behalf of the Revenue that they have lost their entitlement to be so registered is misconceived and liable to be rejected. - HC
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Levy of penalty - The fact that the Assessee was not previously registered and later on got registered upon inspection or survey by the Department is not relevant for the purpose of Section 12(3)(a) of the Act - Since the fact that the Assessee got himself registered and filed the return and paid the due tax thereon is not disputed, it is sufficient to set aside the penalty in question. - HC
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Input Tax Credit (ITC) - Restriction of ITC to the extent of CST payable in case of interstate sale - Restriction of ITC in case of goods consumned or burned but not transferred into or existent in finished product - No retrospective effect could be given - In absence of machinery provision having been prescribed by the State of Jharkhand for giving effect to the proviso inserted in clause(ii) and (iii) of sub-section 4 of Section 18 of the JVAT Act, the said provisos were unworkable between the period 23.09.2015 till 16.02.2017 and during the said period no assessment could be made and for the said period no forfeiture of ITC can take place - HC
Case Laws:
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GST
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2020 (3) TMI 481
Construction service - works contract - Rate of tax on goods supplied under the contract, independent of the Works Contract being executed in the contract. - Applicability of Explanation to Entry No. 234 of Schedule I to Notification No. 01/2017 - Central Tax (Rate) - construction of new 33 / 220 kV Pooling Substation at Badwar, REWA along with associated 220 kV DCDS Transmission line (Route length 3.0 Kms) and associated feeder bay work on total Turnkey basis Applicability of explanation to Entry No. 234 - HELD THAT:- The contract is in relation to a Solar Power Plant, which finds mention in Entry No. 234. However, the goods being supplied in the execution of the works contract are not covered in Entry No. 234. The goods being supplied by the applicant are not renewable energy devices or their parts. The relation of the work being done by the applicant and renewable energy is that the electricity being generated by the renewable energy plant is evacuated by the infrastructure erected by the applicant. It is further seen that during the course of the execution of the works contract, the applicant is not supplying any of the items listed in Entry No. 234 - It is pertinent to note that the explanation which provides for splitting the value of the supply into goods and supplies is in Entry No. 234 and not in Entry No. 38. The contention that supply of the goods in Entry No. 234 is essential is further supplanted by the inclusion of the explanation in Entry No. 234. Thus, in case of a Works Contract, the explanation to Entry No. 234 shall apply if and only if, the goods the title in which is/'are being transferred during the execution of Works Contract find a place in Entry No. 234. Works Contract in relation to any of the goods listed in Entry No. 234, where such goods are not part of the Works Contract shall not merit taxation under Entry No. 234. Rate of tax on goods supplied under the contract - HELD THAT:- T he contract identifies the goods that form part of the works contract and goods that form part of supply as goods and not as part of a works contract. Also, unless the goods being supplied are part of contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property, they shall not form part of Entry No. 38 and it is explicitly clear in the contract, where the goods are part of the construction activity and otherwise. The work related to supply of goods, civil construction and erection are clearly delineated in the contract. In the supply of equipment for Sub-Station and transmission line, transfer of property is not in the execution of a works contract, but during the course of Erection Testing and Commissioning, as well as in the execution of the Civil Construction work, there is transfer of title in goods during the course of the execution of the contract. Therefore, in the supply of equipment for Sub-Station and transmission line, the supply is that of goods and accordingly the rates given in Notification No. 1/2017 - Central Tax (Rate) and corresponding notifications issued under MPGST Act shall apply. Further in the case of Erection Testing and Commissioning, as well as in Civil Work for Substation, the supply shall be taxed as service and rates applicable to a Works Contract shall apply.
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2020 (3) TMI 480
PIL against the company organizing online Fantasy games - gambling or betting - actionable claim - game of chance or game of skill - supply of services or not - alleged conducting illegal operations of gambling/betting/wagering in the guise of Online Fantasy Sports Gaming - violation of Rule 31A of CGST Rules, 2018. It was held by High Court that this activity or transaction pertaining to such actionable claim can neither be considered as supply of goods nor supply of services, and is thus clearly exempted from levy of any GST. HELD THAT:- Impugned Order upheld - SLP dismissed. However, liberty granted to Government to file review petition before the concerned HC within four weeks regarding GST aspect.
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2020 (3) TMI 479
Detention of goods alongwith the vehicle - correction made in E-Way bill - correction of wrong truck number after detention - case of Revenue is that at the time of interception, the alleged correction sought to be relied upon was not recorded in the e-way bill as it was issued at 3.55 pm - HELD THAT:- Section 129 of the CGST Act starts with a non obstante clause enabling the officers of Revenue to detain vehicles in case the vehicles are transported without statutory documents. The e-way bill at that relevant point of time did not mention the truck No. KL07 BY 3069 whereas at the relevant time it was no. KL07 CM 5213. This Court cannot sit over the decision of the adjudicating authority to form an opinion as in my view, it is strictly within the domain of the authority to consider at appropriate and relevant point of time - However, as an interim measure, I order the release of vehicles provisionally on submission of the bank guarantee in terms of the provisions of Section 129. Application disposed off.
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2020 (3) TMI 478
Jurisdiction - appropriate authority to complete the proceedings - state authority or central authority - grievance of the writ applicant herein is that the proceedings came to be initiated by the DGGI, AZU, Ahmedabad and therefore, the proceedings should be completed by the DGGI, AZU - HELD THAT:- By way of a letter issued by the Central Board of Excise and Customs dated 5th October 2018, it is clarified that if an officer of the Central tax authority initiates intelligence based enforcement action against a taxpayer administratively assigned to the State tax authority, the officers of the Central tax authority would not transfer the said case to its State tax counterpart and would themselves take the case to its logical conclusions. In the case on hand, there is nothing on record to indicate that the officer of the Central tax authority has transferred the case of the writ applicant to any other authority of the State. However, it appears that although the action was undertaken under Section 67 of the Act by the DGGI, AZU, yet the two summons came to be issued: one by the Deputy Commissioner of State Tax and another by the DGGI, Surat. This writ application is disposed off with a direction to the DGGI, AZU, Ahmedabad to look into the matter and ensure that no undue harassment is caused to the writ applicant by different authorities on the same subject matter.
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2020 (3) TMI 477
Cancellation of registration of petitioner firm - failure to file GST returns for 6 months continuously at time of issuing SCN but, return for one month filed as on the date of order passed for cancellation of registration - therefore continuous default remains for 5 months only - Scope of 29(2)(c) of the CGST Act - HELD THAT:- Sec. 29(2)(c) mandates that power for the cancellation of registration in a case where there is continuous six months' default on the part of the assessee in filing the returns. Since the competent official is obliged to issue a notice in the nature of Ext.P-1 before he passes final orders, it goes without saying that the requirement of 6 months' continuous period should be fulfilled both at the time of issuance of the abovesaid notice in terms of the proviso to Sec. 29(2) of the CGST Act read with Rule 22 of the CGST Act, but also at the stage of passing the final order cancelling the registration as per Sec. 29(2)(c). In the instant case, the jurisdictional fact regarding the six months' continuous default on the part of the assessee is certainly fulfilled at the time of issuance of Ext.P-1 show cause notice dated 13.11.2019. Whereas, the said vital requirement of jurisdictional fact is non-existent as on the date of issuance of the impugned Ext.P-3 cancellation order dated 10.12.2019. If that be so, it is only to be held that the impugned order as per Ext.P-3 is illegal and ultra vires and is liable to be interdicted by this Court. Accordingly, it is ordered that the impugned Ext.P-3 order will stand quashed. Petition disposed off.
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Income Tax
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2020 (3) TMI 476
Deemed dividend - Buy back of shares / reduction in share capital - amount remitted to non-residents - Determination of liability of the appellant u/s 115-O - as submitted that the appellant was never put to notice about the proposed determination - HELD THAT:- On the issue whether communication dated 22.03.2018 was in the nature of determination of the liability, both the learned counsel were heard at considerable length, at the end of which it was agreed by Mr. Zoheb Hossain, learned Advocate for the Department, that the communication dated 22.03.2018 could be treated as a show cause notice and the Department be permitted to conclude the issue within a reasonable time, provided the interim order passed by the Single Judge of the High Court on 03.04.2018 was continued. The course suggested by the learned counsel for the Department was acceptable to the learned Senior Counsel for the appellant. Therefore, suggested that the appellant may file an affidavit of undertaking to withdraw the proceedings initiated by it before the AAR and the Department may also file an appropriate affidavit stating that it was willing to treat the communication dated 22.03.2018 as a show cause notice. An appropriate affidavit of undertaking to withdraw the proceedings initiated before the AAR has since then been filed by the appellant. The communication dated 22.03.2018 shall be treated as a show cause notice calling upon the appellant to respond with regard to the aspects adverted to in said communication. The appellant shall be entitled to put in its reply and place such material, on which it seeks to place reliance, within 10 days from today.
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2020 (3) TMI 475
Addition u/s 41 - Addition of amount of stale drafts not claimed for more than three years and the claim for which had become barred by limitation - HELD THAT:- As decided in THE RADDI SAHAKARA BANK NIYAMITHA BANK ROAD, DHARWAD [ 2017 (2) TMI 734 - KARNATAKA HIGH COURT] Addition cannot be made under Section 41(1) of the Act, since the liability of the assessee Bank to pay back the amounts to the customers in respect of such stale Demand Drafts and Pay Orders does not cease in law. See KARNATAKA VIKAS GRAMEEN BANK [ 2015 (12) TMI 1420 - KARNATAKA HIGH COURT] - Decided in favour of assessee
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2020 (3) TMI 474
Bogus purchases - CIT-A directed to estimate profit of 17.5% on the total alleged bogus purchases and thereafter, to delete the balance amount of addition - Tribunal concurred with the view taken by the CIT(A) that the Assessing Officer had erred in disallowing the entire total purchases and adding the same to the total income of the assessee - HELD THAT:- View taken by the CIT(A) that 17.5% of the purchases be added to the total income of the assessee as the profit element was a reasonable one. It was also noted that the said percentage was accepted by the assessee with a view to close the litigation. Nothing was brought on record by the Revenue to contradict the findings recorded by the CIT(A). Tribunal had also referred to the decision of this court in CIT Vs. Nikunj Eximp Enterprises Pvt. Ltd. 3 [ 2013 (1) TMI 88 - BOMBAY HIGH COURT] . Infact, this court has also held following the decision of Nikunj Eximp Enterprises Pvt. Ltd. that the revenue is required to furnish the information received from the Sales Tax Department or from the Investigation Wing of the Department to the assessee allowing the assessee to test the veracity of such information otherwise such information could not be relied upon. As decided in VAMAN INTERNATIONAL PVT. LTD. [ 2020 (2) TMI 464 - BOMBAY HIGH COURT] merely because the suppliers had not appeared before the Assessing Officer, no conclusion could be arrived at that the purchases were not made by the assessee - No error or infirmity in the finding returned by the Tribunal. - Decided against revenue
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2020 (3) TMI 473
Salary receipt - receipt pertaining to redemption of stock appreciation rights (SARs) - whether amount can be assessed as salary income in the hands of a person when received from a person other than his employer? - absence of an employer - employee relationship - HELD THAT:- Assessing Officer himself had recorded in the assessment order that the petitioner had redeemed the SARs during the financial year 1997-98 relating to the assessment year 1998-99 which is prior to insertion of clause (iiia) to Section 17(2) of the Act w.e.f 1.4.2000. Therefore, the said amount could not have been treated as a perquisite to be included as income under the head salaries and taxed accordingly. Following the decision of the Supreme Court in the case of Bharat V. Patel [ 2015 (2) TMI 761 - GUJARAT HIGH COURT] we answer the substantial questions of law framed in favour of the assessee and against the revenue.
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2020 (3) TMI 472
Nature of land sold - Capital asset u/s 2(14) or agricultural land - jurisdiction of a municipality or a cantonment board - HELD THAT:- For land to be excluded from capital asset, it has to be agricultural land in India; such land to be not agricultural must fulfill two conditions viz. it must be land situated in any area which is comprised within the jurisdiction of a municipality or cantonment board and which has a population of not less than 10,000. These two conditions are pre-conditions and must be read conjunctively. If both the conditions are present then it would not be agricultural land and would be treated as capital asset. However, inversely speaking, if either of the two conditions are absent then the land would be agricultural land and excluded from capital asset. Though we have held the land in question to be within the jurisdiction of a municipality we find the second condition to bring the land outside the ambit of agricultural land i.e. that the area has a population which is not less than 10,000 absent. In this connection, Tribunal had considered the census report as well as the population certificate of the village dated 02.06.2008 and other relevant documents and thereafter returned a finding of fact that at the time of sale, the land in question was situated at village Juchandra, the population of which was 5,912 which is less than the statutory requirement of 10,000. Thus, this condition being absent the sold land was rightly treated as agricultural land, not included within the ambit and meaning of capital asset. This is a finding of fact which has not been questioned by the revenue as perverse being contrary to the record as would be evident from the two questions which have been raised. On this finding of fact, we are of the opinion that Tribunal was justified in holding that the lands which were sold were agricultural lands, not forming part of capital asset within the meaning of Section 2(14) of the Act. - Decided in favour of assessee.
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2020 (3) TMI 471
TP Adjustment - MAM selection - contention of the Assessee that CUP should have been accepted as the MAM - HELD THAT:- We direct the TPO to apply CUP as the MAM and determine ALP after due opportunity of being afforded to the Assessee. Treatment of alleged excess AMP expenditure pertaining to trading segment as an international transaction - determining the ALP and making the consequent addition to the total income of the assessee TPO adopted Resale Price Method (RPM) as the most appropriate method - HELD THAT:- it would be just and appropriate to set aside the issue of determination of net margin of the assessee and in the trading segment, as claimed by the assessee in Scenario-3 before the TPO. If the margins are accepted as at arm s length and then applying the principles laid down by the Hon ble Delhi High Court in the case of Sony Ericsson Mobile Communications India P. Ltd. [2015 (3) TMI 580 - DELHI HIGH COURT ] incurring of AMP expenses cannot be treated as international transaction and consequently determination of ALP would not arise for consideration at all. We therefore set aside the order of the AO and remand the issue to the TPO for consideration of ALP of the trading segment applying the net profit margin method and if by such method the price received in the international transaction is considered as at arm s length, then no separate addition needs to be made. Determination of ALP in respect of price received by the assessee from its AE for providing sales facilitation services and for providing administrative and business support services - HELD THAT:- Due to increasing presence of composite contracts and package deals in an MNE group, the aggregation of transactions become necessary as a composite contract may contain a number of elements including royalties, leases, sale and licenses all packaged into one deal. One would usually want to consider the deal in its totality to understand how various elements relate to each other, but the components of the composite package deal may or may not, depending on the facts and circumstances of each case, need to be evaluated separately to arrive at the appropriate transfer price. Aggregation issue may also arise when looking at uncontrolled comparables. This is because third party information is not often available at the transaction level. In such circumstances, entity level information is the only recourse available. Therefore, whether ALP-principle is to be applied on a transaction by transaction basis or on an aggregation basis depends on the facts of each case and is not universally or generally applied in all composite contracts involving multiple transactions. Since this specific objection of assessee has not been met by the TPO/DRP, we deem it fit and proper to set aside the order of AO in this regard and remand the matter to the TPO for fresh consideration of the question, whether international transactions can be aggregated in the given facts and circumstances. If aggregation is not possible, then the ALP of the sales facilitation services segment and administrative business support services segment should be determined separately. The assessee will be afforded opportunity of being heard in this matter. In view of the above, the other grounds related to manner of determination of ALP by aggregating the above two transactions does not require consideration at this stage. Disallowing provision for warranty - HELD THAT:- The hypothetical computation by the revenue authorities of percentage of actual claim for the year and provision made for the very same year, cannot be sustained because the basis of providing warranty is Machine months x repair rate x cost per claim. The tribunal has already pointed out the flaw in the approach of the revenue authorities in its order for AY 2006-07 that the basis should be the actual expenditure incurred on discharge of warranty claims in future which is much more than the provision made in an earlier year. The warranty obligation is not just for one year and it spreads over a period of more than 1 year and therefore the comparison as done by the revenue authorities is unsustainable. The method followed by the Assessee for creating provision for warranty has been held to be scientific and based on historical data of sales and repair ratio in every region in which the products are sold. The method has been accepted by the Tribunal in its order for several AYs. The method followed has not been shown to be not scientific by the revenue authorities. In such circumstances, we are of the view that the method followed by the Assessee should be accepted as proper and the deduction allowed as per the provision created by the Assessee. Addition made to the book profits u/s.115JB on account of provision for warranty liability - Addition treating the same to be a liability of a contingent nature and hence liable to be added to the profit as per profit and loss account prepared in accordance with companies act to arrive at the book profit of the Assessee for the purpose of levy of tax on book profit under Sec.115JB - HELD THAT:- As already held that the provision for warrant expenses is not contingent and has to be allowed as deduction while computing income under the head Income from Business Profession . As a consequence of such finding, the addition made to the book profits is to be deleted because the liability cannot be said to be contingent.
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2020 (3) TMI 470
Income accrued in India - Royalties and Fees for Technical Services - DTAA of INDO-US - amount attributable to services rendered by Vice President Manufacturing - HELD THAT:- As obvious that vice president manufacturing was having sufficient knowledge and experience of the technology and its standards used by the assessee in US. The Vice President was not an ordinary engineer but was having sufficient experience, exposure and knowledge about the technology of the assessee and was also having expertise to ensure the implementation of the standards of the assessee in India. In auto mobile industry, assembly of product and standards of company are patented/ protected technology and owner of the standards, charges Royalty for sharing the standards and assembling of products. But in the present case, no Royalty had been charged by the assessee from Indian counterpart, as the assessee had sent its employee under the agreement to India, in whom the technology/ experience for the assembly of product and knowing the standards of company , for setting the bench mark and implementing the standards of assessee in India. No transfer of technology by sending the expert technical employees of the assessee to in India, as in the present case, rather there was an agreement for erection of power generation plant in India. But in the present case, the employees who are having the technical expertise are not only managing but also ensuring due adherence to the standards of the assessee, by continuously monitoring and mentoring the production. Hence the decision of Rolls Royce is factually distinguishable. Same is the case with regard to other decisions cited by the AR. The third argument raised in support of the first ground by the assessee was the argument of consistency. We have examined the order passed by the assessing officer for the earlier years and we do not find even a whisper or examination of the fact by the assessing officer were done and conclusion was drawn that the services rendered by the vice president manufacturing was in the nature of managerial service. There was complete silence on this issue by the assessing officer and in our view , there is no purpose of perpetuating the illegality/irregularity either by the assessing officer or by the tribunal. There cannot be consistency of decisions but when there is no decision by the revenue for the earlier years, then there cannot be consistency for no-decisions. No reason to grant the benefit of consistency to the assessee. Accordingly argument of the assessee to give the benefit of consistency is devoid of merit and is accordingly dismissed.- Decided against assessee. Computing tax by applying the provision of Section 44D - services as attributable to the said permanent establishment - HELD THAT:- Benefit of Article 7(3) is subject to the limitation provided under the domestic law (44D of the Act). Section 44D of the Act clearly provides that for the purpose of computation of income by way of Royalty, FIS, etc., assessee is not entitled to any deduction. Once the domestic law prohibits allowing any deduction for the purpose of calculating fees for technical services/fees for included services , then, the same is not an allowable deduction and, therefore, the AO and the CIT(A) were right in holding that the assessee was liable to be taxed on gross basis rather than on net basis. The argument that the provision which is beneficial to the assessee should be applied, i.e. treaty provision rather than the domestic law, is in accordance with Section 90 of the Act. We are afraid that this argument is to be noted but is summarily required to be rejected for the reason that if the domestic law prohibits grant of any deduction, the same cannot be granted. There is no contradiction in the treaty provision or domestic law, rather the treaty provisions provide by incorporation the applicability of domestic laws for computing the profit of the assessee. No merit in the contention of the assessee. A plain and simple interpretation is required to be given which commands us to give the deduction to the assessee for the purpose of computing the profit if such deduction is permissible under the domestic law. Since no deduction is permissible under the domestic law, therefore, the assessee is not entitled to any deduction. In the result, ground nos. 3 and 4 raised by the assessee are dismissed. Invoking the provisions of Section 92 and adding 10% mark up on the invoices billed by the appellant to GMIL - HELD THAT:- Order passed by the TPO for the subsequent years wherein the TPO has not computed the profit by marking-up 10% on the amount received by the assessee. Further, the analysis of the TPO was not premised on the applicability or otherwise of the method provided under the rules framed under Chapter X of the Act. The authorities below have not benchmarked the transactions on the basis of any comparable instances or otherwise. This dispute is now well settled that the benchmarking of transactions need to be done by using any of the prescribed methods in Rule 10B of the Rules, which in the instant case was admittedly not done by the lower authorities. We are of the opinion that the arguments raised by the assessee in support of ground nos. 5 to 8 are in accordance with the law and we have no hesitation to allow the same. Accordingly, ground nos. 5 to 8 raised by the assessee are allowed. Applicability of Section 234B - Respectfully following the decision of the Hon'ble Jurisdictional High Court in the case of Ngc Network Asia LLC [ 2009 (1) TMI 174 - BOMBAY HIGH COURT] and GE Packaged Power Inc [ 2015 (1) TMI 1168 - DELHI HIGH COURT] we allow the ground raised by the assessee.
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2020 (3) TMI 469
Assessment u/s 153C - unexplained sale consideration - Addition based on some computer generated loose sheets which was seized and found from the computer of another person - HELD THAT:- Admitted fact that name of the assessee nowhere appeared in the said document albeit the name of Shri Kamal Kishore Chaurasia that he has entered into an agreement for sale of commercial property in Cross River Mall has been mentioned. This addition cannot be made in the hands of the assessee for the reason that, firstly , the name of the assessee is not mentioned in the seized document; secondly , there is no corroborative evidence or any statement that the payment has been received by the assessee other than cheque amount as entered in the sale agreement; and lastly , on the bare perusal of the document it cannot be inferred or concluded that seized document belongs to or has any nexus with the assessee. Here, in this case, as pointed out by the ld. counsel similar matter had come for consideration before Tribunal in the case of Mr. Kamal Kishore Chaurasia where exactly same addition has been made based on same seized documents that the amount is an unexplained investment. Hon ble Delhi High Court in the appeal filed by the Revenue has dealt with exactly the same seized document in the case of PCIT vs. Mrs. Vineeta Chaurasia [2017 (5) TMI 992 - DELHI HIGH COURT] . Once on exactly same seized document the Hon ble High Court has decided this issue that this document does not belong to Mrs. Vineet Chaurasia nor any adverse inference can be drawn, therefore, in the case of the assessee whose name is not even was mentioned in the seized documents, no addition can be made. Accordingly, the said addition is deleted and the order of the Ld. CIT(A) is confirmed. - Decided against revenue
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2020 (3) TMI 468
Rejection of books of accounts - invoking section 145 - NP estimation - HELD THAT:- We find the AO in the instant case, invoking the provisions of section 145 of the IT Act, rejected the book results and estimated net profit at ₹ 8,58,68,992/- by adopting net profit rate 2.77% and thereafter made addition of ₹ 3,37,59,.400/- declared by the assessee as its additional income. We find the Ld. CIT(A) deleted the addition of ₹ 8,58,68,992/- determined by the AO by estimating the net profit at ₹ 2.77% over and above the profit declared by the assessee, the reasons of which have already been reproduced in the preceding paragraph. We find identical issue had come up before the Tribunal in the case of the sister concern of the assessee namely M/s. Pearl Bottling Private Limited [ 2019 (2) TMI 1811 - ITAT DELHI] held his is not a fit / case for rejection of books of account and estimation of profits as the search has not thrown up any specific discrepancies in the accounts regularly maintained by the appellant. A.O. has rejected the books of account and estimated the profits of the business only based upon NP ratio without confronting the same to the appellant. This is completely in violation of principles of natural justice. A.O. has adopted a very simplistic approach in completing the assessment. - Decided against revenue.
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2020 (3) TMI 467
Disallowance u/s 14A - No exempt income earned - HELD THAT:- We are of the view that since no exempt income in the form of dividend has been earned by the assessee from the investments made and relying on the aforesaid decision of M/S CHETTINAD LOGISTICS PVT. LTD. [ 2018 (7) TMI 567 - SC ORDER] no disallowance u/s 14A of the Act is called for in the present case. We therefore direct the AO to delete the disallowance made by the AO . Thus, the ground of assessee is allowed. Disallowance u/s 40A(2)(b) - excessive or unreasonable payments made to specified persons - Expenses towards RCC Labour contractor / masonary work paid - HELD THAT:- In the present case, it is seen that AO has not done any exercise to determine as to whether the amount paid by the Assessee to the aforesaid two ladies were excessive or unreasonable by comparing the prevalent market rates. He has not arrived at an exact figure of excessive payment by comparing the amount paid by the assessee with the market rates for similar services but he has rather proceeded to disallow the expenses @ 5% on adhoc basis. We are of the view that in the present case, no case has been made out for disallowance u/s 40A(2)(b) of the Act and therefore no disallowance can be made u/s 40A(2)(b) of the Act. We therefore delete the disallowance made by the AO . Thus the ground of the Assessee is allowed.
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2020 (3) TMI 466
Deemed dividend u/s 2(22)(e) - preference share application money received from Banneret Trading Pvt. Ltd. - Sham transaction or not - Lending of money in the course of business activity - HELD THAT:- Undisputedly and factually, the assessee is not a registered shareholder of M/s. BTPL and therefore the condition as envisaged in the provisions of section 2(22)(e) of the Act are not satisfied. Further, the assessee is also not a beneficial shareholder in M/s. BTPL and therefore there is a merit in the contentions of the assessee that the preference share application money received by the assessee can not be treated as deemed dividend in the hands of the assessee as the basic condition as envisaged by section 2(22)(e) of the Act is not satisfied. In our opinion, the assessee has to be registered as well as beneficial shareholder of the lender company in order to attract the provisions of section 2(22)(e) of the Act as held by the Hon ble Apex Court in the case of CIT vs. Madhur Housing and Development Company [ 2017 (10) TMI 1279 - SUPREME COURT] We are not in agreement with the conclusion of the lower authorities that the transaction by M/s. BTPL to assessee was sham. Therefore, we are inclined to hold that the provisions of section 2(22)(e) of the Act are not applicable in the present case and accordingly, we set aside the order of Ld. CIT(A) and direct the AO to delete the addition made under section 2(22)(e) of the Act. The ground no. 1 is allowed. Unexplained cash credit under section 68 - HELD THAT:- The assessee has taken preference share application money of ₹ 90.00 crores from M/s. BTPL who in turn borrowed this money from M/s. CISPL ₹ 71.00 Crores as loan and from M/s. Merind Ltd ₹ 19.00 as share application money which is also a group company. Thus identity of these companies are very much established as the assessee has filed all the necessary evidences before the authorities below as regards the genuineness of the transactions. We are of the view that since the source of money is not in doubt and even the source of source has been explained thus the transactions in this case are genuine and there is no reason to treat the same as non genuine. As regards creditworthiness of the investor i.e. M/s. BTPL, we have no doubt as the money is advanced out of borrowed fund from M/s. CISPL and M/s. Merind Ltd. In our opinion, all these three ingredients of section 68 are fully satisfied. Moreover, the money has transferred through banking channel and thus all the evidences are on record. The case of the assessee is also supported by the decision of the Apex Court in the case of CIT vs. Lovely Exports Pvt. Ltd. [ 2008 (1) TMI 575 - SC ORDER] wherein the Hon ble Court observed that once the assessee has given names and identity of the shareholders, the onus upon it gets discharged and no addition can be made in the hands of the assessee and the onus shifts to the department and if the department thought it to be appropriate, the Act permitted the tax department to proceed against such shareholder and even to reopen the individual if necessary in accordance with statutory powers under section 147 Addition u/s 14A - HELD THAT:- First plea is that since the entire expenses were disallowed in the computation of income so the issue becomes academic and no further disallowance is called for. Secondly the disallowance cannot exceed the exempt income . We find merits in the contentions of the assessee the issue is squarely covered the decision of the Bombay High Court in the case of Pr CIT Vs Ballarpur Industries Ltd. [ 2016 (10) TMI 1039 - BOMBAY HIGH COURT] , Pr. CIT Vs Caraf Builders Construction (P) Ltd. [ 2018 (12) TMI 410 - DELHI HIGH COURT] which has considered the decision of Hon ble Apex Court in the case of Maxopp Investments Ltd Vs CIT [ 2018 (3) TMI 805 - SUPREME COURT] . After considering the ratio in the various decisions as discussed above we are inclined to set aside the order of ld. CIT(A) on this issue and direct the AO to restrict the disallowance to the amount of exempt income at ₹ 7,02,745/-.
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2020 (3) TMI 465
Taxability of proceed of share premium u/s 56(1) - utilization of share premium account for not specified purposes - violation of section 78 of the Companies Act, 1956 - HELD THAT:- We find that the provisions of Section 78(2) of the Companies Act, 1956 specifies the manner of utilization of share premium account for specified purposes which are relevant only for compliance with the provisions of the Companies Act, 1956 and have agreed absolutely no relevance for the purpose of Income Tax Act, 1961. In the instant case, there is absolutely no dispute with regard to receipt of share premium by assessee at ₹ 990/- per share was duly justified. There is no dispute that all the necessary documents were duly filed before the AO and all the share subscribers have directly replied to the notice issued u/s 133(6) of the Act by Ld. AO. It is not in dispute that the money was received from 10 corporate share holder group companies of the assessee. We find that the Ld. CIT(A) had given categorical finding that the entire transactions cannot be termed as unrealistic and cannot be termed as not genuine. There is absolutely no dispute in the instant case that the amount and share premium account were utilized by assessee for its business purposes. Respectfully following observations and respectfully following the judicial precedent hereinabove we direct the Ld. AO to delete the addition made in sum of ₹ 10,66,23,000/- u/s 56(1) of the Act. Accordingly, the ground nos. 2 3 raised by assessee are allowed.
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2020 (3) TMI 464
Exemption u/s 11 - rejecting the application made for registration u/s 12AA - rejecting application of Form No.10G made for grant of approval u/s 80G(5)(vi) - whether a trust or a charitable organization is mandatorily required to perform charitable activities as per trust deed before proceeding to file an application for registration u/s 12AA or u/s 80G(5)(vi)? - HELD THAT:- We observe that in the impugned order Ld. CIT(E) has not questioned the genuineness of the objects mentioned in the trust deed. Therefore, so far as the objects of the assessee trust mentioned in the trust deed page placed at 5 6 of the paper book have been considered to be charitable in nature. As relying on D.P.R. Charitable Trust [ 2011 (8) TMI 1136 - MADHYA PRADESH HIGH COURT ] it can safely conclude that carrying out of actual charitable activity cannot be a pre-condition for granting registration u/s 12AA of the Act. What needs to be done on the part of the assessee is to fulfill the requirements as provided in Rule 17A and also guidelines provided in Form No.10A/10G in the Income Tax Rules 1962 and if Ld. CIT(E) founds that the application has been properly made and the objects of the Trust are charitable in nature as per the provisions of Income Tax Act then the assessee should not be denied the registration u/s 12AA of the Act. However, in case the activities of the trust or the institution are being carried out in a manner that the provision of section 11 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13, then the Pr. Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution, as provided in sub-section (4) of section 12AA of the Act unless it is proved that there was a reasonable cause for the activities to be carried out in the said manner. We direct the Ld. CIT(E) to grant registration u/s 12AA of the Act to the assessee. As regards granting of approval u/s 80G(5)(vi) of the Act, the issue is restored to the file of Ld. CIT(E) for reconsideration - Decided in favour of assessee.
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2020 (3) TMI 463
Deemed dividend u/s 2(22)(e) - Assessee contention the amount is not a loan taken from PASPL rather said amount is a security deposit received in terms of agreement under which the industrial land was given for industrial use to PASPL. - HELD THAT:- Assessee has taken security deposits from his sister concern. In our considered opinion, same will not be covered under section 2(22)(e) of the Act and we hold advances were given for business purpose only. - Decided in favour of assessee.
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2020 (3) TMI 462
Penalty u/s 271(1)(C) - addition made on account of disclosure of additional income while filing return as part of search proceedings - assessment was completed u/s 153A r.w.s 143(3) without making any addition to returned income - HELD THAT:- CIT (Appeals) has erred in confirming the levy of penalty under section 271(1)(C) of the Act by the Id. AO on addition made on account of disclosure of additional income while filing return as part of search proceedings. While doing so, the Hon'ble CIT (Appeal) failed to appreciate that there was no addition made by the Id. AO during the course of assessment proceedings u/s 143(3) r.w.s 153A of the Act to the returned income under section 153A of the Act, and therefore appellant cannot be treated to be assessee concealing income.See RAJKUMAR GULAB BADGUJAR [ 2019 (9) TMI 360 - SC ORDER] - Decided in favour of assessee -
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2020 (3) TMI 461
Addition u/s 68 - unexplained cash credit - source of amount deposited in the bank account - represents sale proceeds or not - Peak Credit - HELD THAT:- Provisions of section 68 of the Act can be attracted where there is a credit found in the books of accounts and the assessee failed to offer any explanation or the offer made by the assessee is not satisfactory in the opinion of the assessing officer. The assessee has explained to the authorities below that the impugned amount represents the sale which has not been doubted by the authorities below. Thus in our considered view, the impugned amount cannot be treated as unexplained cash credit under section 68 of the Act merely on the ground that the assessee failed to furnish the details of the existence of the parties. Provisions of section 68 cannot be applied in relation to the sales receipt shown by the assessee in its books of accounts. It is because the sales receipt has already been shown in the books of accounts as income at the time of sale only. We are also aware of the fact that there is no iota of evidence having any adverse remark on the purchase shown by the assessee in the books of accounts. Once the purchases have been accepted, then the corresponding sales cannot be disturbed without giving any conclusive evidence/finding. In view of the above we are not convinced with the finding of the learned CIT(A) and accordingly we set aside the same with the direction to the AO to delete the addition made by him. Suppression of sales - Rejection of the books of accounts under the provisions of section 145(3) - HELD THAT:- The rejection of the books of accounts of the assessee has not been challenged either by the assessee or the revenue. Thus the order of the learned CIT-A qua to the rejection of the books has reached to its finality. It is the settled law that once the books of accounts have been rejected the only option available to the revenue is to estimate the profit on scientific basis. We find support and guidance from the judgment of PRESIDENT INDUSTRIES. [ 1999 (4) TMI 8 - GUJARAT HIGH COURT] There was no allegation by the authorities below that the assessee has made some investment in the sales which has been suppressed. Therefore, the learned CIT (A), in our understanding, has correctly estimated the profit. Accordingly, we do not find any reason to interfere in the finding of the learned CIT-A. We also note that the entire basis of the additions as discussed above was on the basis of the information received from the central excise department - DR at the time of hearing has not brought anything contrary to the finding of the central excise department as reproduced above. Thus in the absence of any assistance from the learned DR we have no alternate except to place the reliance in the aforesaid order as true and correct. Furthermore, we also assume that the impugned order of the central excise department pertains to the year under consideration. - Decided in favour of assessee.
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PMLA
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2020 (3) TMI 460
Fraudulent availment of VAT refund - Validity of Provisional Attachment Order - Money Laundering - proceeds of crime - Adjudicating Authority confirmed the attachment for a period of 90 days during the pendency of investigation or pendency of the proceeding before a court under PMLA - case of appellant is that at the time of expiry of 90 days from the date of confirmation order investigation was pending; property in question was purchased much prior to not only commission of alleged offence but also introduction of PMLA; and there is non-compliance of the requirement of recording of reasons prior to provisional attachment of property. HELD THAT:- Two sets of proceedings are initiated under PMLA after recording of ECIR. In first set of proceedings, initiated by Enforcement Department, property i.e. proceeds of crime are provisionally attached and in second set of proceedings criminal complaint is filed before Special Court which has power to convict the accused and confiscate attached properties. The conceded facts emerging from record are that two Appellants had purchased their property in 1991 and one Appellant in 2011. The alleged offence of fraudulent availment of VAT refund was committed in February-March 2013 and PMLA came into force w.e.f. 1.7.2005. As per FIR of scheduled offence, ECIR and different orders passed by Respondents, M/s Jaldhara Exports, a proprietorship concern of Raman Garg fraudulently obtained VAT refund from VAT authorities without actual export of goods. The properties in question are lying mortgaged with bank since 2009. As per impugned order, the Respondent is empowered to attach any property, thus property even though purchased in 1991 could be attached. Concededly, the Appellants are neither arrayed as accused in scheduled offence nor criminal complaint filed before Special Court under PMLA. The Respondent has already filed criminal complaint under PMLA against Raman Garg and others before Special Court, however admittedly investigation is still pending. The Respondent has not filed any criminal complaint under Section 3 of PMLA against Appellants and a period of even 365 days from the date of confirmation order passed by Ld. Adjudicating Authority has already expired. Whether provisional attachment of property is sustainable after the expiry of 90 or 365 days from the date of order passed by adjudicating authority? - HELD THAT:- The Respondent in its reply before Tribunal as well during the course of arguments before this Court conceded that investigation is still pending and although complaint stands filed against only Raman Kumar and Others but not present Appellants. As investigation even against Raman Kumar and Others is still pending, Adjudicating Authority ordered to continue attachment for 90 days during the pendency of investigation. The Appellants were neither arrayed as accused in police case (FIR relating to scheduled offence) nor in the complaint filed before Special Court, thus the Appellants are entitled to benefit of time period cap prescribed by Section 8 (3)(a) of PMLA. The 90 days period prescribed under Section 8(3)(a) has been enlarged to 365 days w.e.f. 01.08.2019. In the present case even 365 days period has expired but investigation is still pending, thus Appellants are entitled to benefit of 90/365 days cap and provisional attachment order stands ceased to exist by operation of law. Whether property acquired prior to enactment of PMLA i.e. prior to 1.7.2005 can be provisionally attached under Section 5 of the PMLA? - Whether phrase value of such property occurring in definition of proceeds of property includes any property of any person irrespective of source of property? - HELD THAT:- As per Section 8(6) of the PMLA, where the Special Court finds that offence of money laundering has not taken place or property is not involved in money laundering, it shall release such property. If contention of Respondent is upheld, there would be no need of recording findings by Special Court with respect to property attached being proceeds of crime, no sooner it is held that offence of money laundering has been committed, then the Special Court would be bound to confiscate every attached property because every property in the hand of a person, who had obtained or derived property from scheduled offence, would be proceeds of crime - A person who is not connected with commission of scheduled offence as well property derived from said offence but had dealt with any other property of a person, who had committed scheduled offence, would fall within the ambit of Section 3 of the PMLA, which cannot be countenanced in law. There would be total chaos and uncertainty. The authorities would get unguided and unbridled powers and may implicate any person even though he has no direct or indirect connection with scheduled offence and property derived from thereon but has dealt with any other property (not involved in scheduled offence) of the person who has derived or obtained property from scheduled offence. It would amount to violation of Article 20 and 21 of Constitution of India. There may be a case where a person accused of commission of scheduled offence, on account of destruction or disposal of property, is having no property. Non-availability of property derived from scheduled offence does not immune an accused from offence of money laundering committed under Section 3 of the PMLA. As per scheme of the Act, there is criminal liability of an accused apart from civil liability of attachment of property, thus object of the Act is not defeated merely on the ground that property derived from crime is not available for attachment. The property derived from legitimate source cannot be attached on the ground that property derived from scheduled offence is not available. There are so many scheduled offences where property may or may not be involved because every scheduled offence is not committed for the sake of property e.g. offence relating to wild animals, waging war against Government of India, murder, attempt to murder, offences under Arms Act. There is a long list of offences under different enactments where property is normally not involved still these are scheduled offences and punishable under Section 3 4 of PMLA - Thus, the phrase value of such property does not mean and include any property which has no link direct or indirect with the property derived or obtained from commission of scheduled offence i.e. the alleged criminal activity. Whether officer attaching property is required to record reason that property is likely to be concealed, transferred or dealt with in any manner which may frustrate proceedings relating to confiscation? - HELD THAT:- Section 5(1) specifically requires that Director or any other officer authorized by him shall record reasons in writing on the basis of material in his possession that he has reason to believe that proceeds of crime are likely to be concealed, transferred or dealt with. Like PMLA, there are a number of enactments viz Income Tax Act, 1961, Customs Act, 1962, Central Goods and Services Tax Act, 2017 where there is requirement of recording of reasons prior to taking particular action like arrest, search, seizure of goods/records, attachment of bank accounts etc. - an authority required to record reasons prior to initiating any action is duty bound to record reasons in writing which cannot be mere formality but should be germane and relevant to the subjective opinion formed by authority. Reasons recorded are subject to judicial review and court may look into material which made basis of reasons recorded. In the present case, concededly property was purchased in 1991 and mortgaged with bank in 2009. The alleged offence was committed in 2013 whereas attachment order was passed in December 2017. There is nothing on record to show that Appellants after 2009 or 2013 attempted to dispose of property in question which prompted the Respondent to pass attachment order. The Respondent has simply taken wording of Section 5(1) of the PMLA and reiteration of these words would not constitute recording of reasons that if property is not attached, it may result in frustrating any proceedings of confiscation - the Respondent has passed attachment order without recording the reasons on the basis of material in his possession that property in question was likely to be concealed, transferred or dealt with in any manner which would frustrate confiscation proceedings. Appeal allowed.
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Service Tax
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2020 (3) TMI 459
Rectification of Mistake - Error apparent on the face of record or not - benefit of the extended period was denied on the ground that the Appellant had not invoked the plea, or that it was a registered as a not-profit organization under the Societies Registration Act, 1860. Whether the CESTAT suffered from any error apparent on face of record in light of the contention of the appellant that it had on numerous instances invoked the plea of the extended period? HELD THAT:- Honorable Supreme Court in COMMISSIONER OF CENTRAL EXCISE, MUMBAI VERSUS BHARAT BIJLEE LIMITED [ 2006 (4) TMI 136 - SUPREME COURT ] has held that Failure to take into considerations the material evidence, which is present on the record, would certainly amount to mistake apparent on the face of record and the tribunal under the circumstances would have the jurisdiction to correct the said mistake in exercise of its powers under Section 35C(2) of the Act. In light of Bharat Bijlee Ltd., it is amply clear that the failure to consider material evidence on record, would amount to mistake apparent on the face of record, and hence, the failure of the CESTAT to take into consideration the plea of the appellant regarding extended time period, at numerous instances as delineated above, amounts to mistake apparent on the face of record. The CESTAT, while dismissing the application for rectification of mistake, has gravely erred in failing to take note of the same, despite making a note of the argument by the counsel for the applicant therein, that the plea invoking extended period has been iterated more than once in the order of the Adjudicating Authority. In such a circumstance, we can not uphold the impugned order and thus, the impugned order is set aside - appeal allowed - Matter restored before CESTAT - decided in favor of appellant.
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2020 (3) TMI 458
Business Auxiliary Service - receipt of commission - Sugarcane was procured through various societies formed at district level which controlled the sale of sugarcane by the farmers to the respondent - treatment of payment received by the respondent - whether can be considered as commission or not, taxable under the head Business Auxiliary services? - HELD THAT:- The said issue was considered by the Tribunal in the same assessee s case reported as M/S KISAN SAHKARI CHINI MILLS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND S.T., MEERUT-I [ 2019 (5) TMI 658 - CESTAT ALLAHABAD] where it was held that appellant is not engaged in promotion of any sale of goods on behalf of anybody else, nor any service, nor any activity being undertaken on behalf of the clients. Clear meaning of the transaction is that when sugarcane is purchased by the appellant, some amount is received back from the seller of the sugarcane. It clearly means that it is a type of discount. We, therefore, are not satisfied that appellant had provided any Business Auxiliary Service. Demand do not sustain - appeal dismissed - decided against Revenue.
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2020 (3) TMI 457
Classification of services - Business Support Services or not - service of providing transponders on hire basis by IGSML to UEPL - transfer of right to use even without transfer of ownership of property - suppression of facts - extended period of limitation - Revenue neutrality - Penalty - HELD THAT:- As for amendment of Article 366 of Constitution of India in the year 1983 Transfer of right to use goods has been included in the definition of sale. Thus transfer of right to use even without transfer of ownership of property is deemed as a sale. Accordingly hire/lease of goods is a deemed sale and is liable to sales tax. Thus hiring of transponder of satellite can never be a case of providing taxable service. Once the transaction is within the scope of sale and admittedly the transponder is hired by the appellant from M/s IGSML for supporting his business of broadcasting we are of the opinion that department has rightly categorised the said transaction as an activity being provided by M/s IGSML to M/s UEPL in view of supporting the business of the later classifying it as a business support service. Extended period of limitation - Penalty - HELD THAT:- The period of dispute is with effect from 2006-07 to 2009-10. The show-cause notice was received by the appellant only on 7th of April 2011 though it appears to have been issued on 24.03.2010 but we observe that department could not have produced any document of it to have been dispatched within the reasonable time or about the service thereof on the date other than as mentioned by the appellant. From the letter given by the appellant to the department in April 2011 itself which has duly been acknowledged by the department without objecting the date of receipt as mentioned therein, there are no reason to hold that the show-cause is beyond the prescribed period of limitation - The subsequent show-cause notice cannot propose the demand for a period beyond one year of the period in dispute nor can raise the allegation as that of suppression of facts or misstatement on the part of appellant that too with an intention to evade the tax. In these circumstances, the Proviso to Section 73 of the Finance Act extending the said period of limitation from one year to five years could not have been invoked by the department. In view of these findings, the impugned show cause notice is barred by limitation. Revenue Neutrality - Penalty - HELD THAT:- Once the value of hire charges paid by the appellant to the service provider is available to the credit thereof in case such a value is categorised as service tax, there remains no question of any loss to the exchequer and the situation can very well be categorized as revenue neutral situation. As the facts are indicating absence of intention to evade tax in the circumstances, question of imposition of penalty does not at all. It is not convincing that the argument of the appellant that the impugned transaction is the transaction as that of deemed sale, rather we are confirming the observation of the department for it to amount an activity as that of business support services being received by the appellant but would have been liable to discharge the liability of service tax under reverse charge mechanism but for the show-cause notice being barred by time, we are of the opinion that the demand has still been confirmed. Appeal allowed - decided in favor of appellant.
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Central Excise
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2020 (3) TMI 456
Maintainability of appeal - appropriate forum - CENVAT credit - activity amounting to manufacture or not - activity of re-packing which is not packing in unit containers - activity of re-labeling with the name and without any hologram or marking while the re-labeling being done only for the logistics purpose by the assessee - treatment to the already marketable products by the assessee would amount to manufacture - filing of a Return under Rule 12 of Central Excise Rules, 2002 - disclosure of full details. Whether the present appeals which raises a question of excisability itself or not, will be appealable before the Hon'ble Supreme Court or not? HELD THAT:- The question whether the activity carried out by the Assessee amounts to deemed manufacture or not is the basic question involved in the present appeals. While the Tribunal decided in favour of Assessee that the activity amounts to 'manufacture', the Revenue seeks to raise a question and doubt it on that ground that the Assessee only carried out some kind of packing/ repacking or labelling of goods not amounting to the process of 'manufacture' - It is quite obvious that clause (iii) was inserted in the definition of manufacture in Section 2(f) of the Act by Finance Act, 2003 with effect from 01.03.2003 which clearly by a deeming fiction included in III Schedule the activities which only involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers etc. In view of such extended definition now incorporated in the Statute itself, we do not find any justification for the Revenue to raise a question on this as to whether the activity carried out by the Assessee will amount to manufacture or not. Since the question of excisability under Central Excise Act and dutiability under the Customs Act are the basic questions at the root of the matter, before deciding the questions of rate of duty and valuation of goods, which as per expanded scope of 35L of the Act, should naturally now lie before the Hon'ble Supreme Court of India. Even before the said amendment in law took place, the Division Bench of Karnataka High Court in two decisions dealing with both the enactments viz., Excise Law and Customs Law made such observations and held that such appeals are maintainable before the Hon'ble Supreme Court of India - Reliance can be placed in the case of CCE., MANGALORE VERSUS MANGALORE REFINERIES PETROCHEMICALS LTD. [ 2010 (9) TMI 756 - KARNATAKA HIGH COURT ]. In view of the amendment in the provisions of Section 35 L(2) akin to Section 130 of the Customs Act, we are of the clear opinion that the issues raised in the present Appeals are governed by the domain jurisdiction of Hon'ble Supreme Court of India and the present Appeals filed by Revenue, cannot be maintained before this Court. The appeals filed are therefore not maintainable and is dismissed.
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2020 (3) TMI 455
Refund of Pre-deposit - release of Bank Guarantee furnished by the petitioner - Clandestine removal - Counsel for the petitioner states that consequent upon the above order, the petitioner made an application dated 18.02.2019 demanding the refund of the amount as also an application seeking release of the bank guarantee. It is pointed-out that inspite of the applications, till date no action has been taken by the respondent, either rejecting or allowing the applications. HELD THAT:- ssue notice returnable 15.05.2020 - List before the Regular Bench on 15th May 2020.
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2020 (3) TMI 454
CENVAT credit - fake invoices - credit denied on the ground that the appellant has received only cenvatable invoices and not the goods - HELD THAT:- Considering the fact that similar investigation has been conducted by the DGCEI against Shri Amit Gupta and show cause notices were issued to the recipients of goods against whom the invoices were issued by Shri Amit Gupta to various firms. One such firm M/s.Unnati Alloys Pvt. Ltd., Neither cross examination of Shri Amit Gupta nor Shri Amit Gupta was made party to the show cause notice which shows that the investigation conducted against the appellant is not proper. Moreover, the transporters were also not examined at all nor made party to the show cause notice. In that circumstance, the benefit of doubt goes in favour of the appellant that they have received the goods against cenvatable invoices issued by M/s Unnati Alloys Pvt. Ltd., in question and made payment through account payee cheque. In the present case, the goods received by the appellant for manufacturing of goods, which has been cleared on payment of duty. In that circumstance, Cenvat credit is allowed to the appellant - appeal allowed - decided in favor of appellant.
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2020 (3) TMI 453
Permission for withdrawal of application - Appellant have already opted for Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - HELD THAT:- The Appeal filed by the Appellant before this Tribunal ceases to exist and the same is accordingly dismissed as withdrawn.
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2020 (3) TMI 452
Interest on demand - grievance of the appellant is that the lower authorities, while confirming the demands as held by the Tribunal, should not have confirmed the interest inasmuch as the period involved is the period when there were no interest provisions - further, it is submitted that, the interest, if at all, should have been charged for the period subsequent to passing of the adjudication order, inasmuch as the said amounts were deposited prior to the passing of the final order confirming the demand no liability would arise. HELD THAT:- The challenge to the confirmation of interest, at this stage, would amount to challenging the earlier order of the Tribunal, which has attained finality. This Bench has no jurisdiction to sit in appeal over the earlier order of the Tribunal. If the appellant were of the view that no interest liability would arise against them, they should have contended so before the earlier bench or should have challenged the said order of the Tribunal - Inasmuch as the interest liability stands confirmed by the earlier order of the Tribunal, there are no reasons to interfere in the impugned orders of the authorities below, which are in conformity with the order passed by the Tribunal. Appeal dismissed.
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2020 (3) TMI 451
Refund of CENVAT Credit reversed - effect of amendment made vide notification no. 06/2015 dated 01/03/2015, prospective or retrospective effect? - Rule 6(4) of the Cenvat Credit Rules - HELD THAT:- The appellants were availing small scale exemption at the time when the capital goods were received in their factory in the year 2012-13. The appellant took registration in the year 2017. At the time of receipt of goods, there was no restriction on time for availing Cenvat credit on capital goods received in the factory. The said time limit was introduced by amendment by N/N. 06/2015 dated 01/03/2015 - The decision in the case of BHARAT RESINS LTD. VERSUS C.C.E. S.T. SURAT-I [2019 (9) TMI 701 - CESTAT AHMEDABAD] squarely covers this issue and held that the time limit introduced for availing Cenvat Credit on capital goods by the notification no. 06/2015 only has prospective effect and cannot be applied to the said amendment. In these circumstances, the appellant becomes eligible to avail the Cenvat credit on the capital goods without any restriction of the time limit imposed by notification no. 06/2015 dated 01/03/2015. Another point argued by the Revenue is that at the time when the Capital goods were received, the appellants were not entitled to avail the Cenvat Credit as the goods manufactured by them were fully exempt - HELD THAT:- It is seen that the appellants at the material time were claiming full exemption by virtue of notification and granted exemption on the basis of the value of clearances made during the Financial year - In the case of Nova Plasmold Pvt. Ltd. [2017 (7) TMI 1121 - CESTAT ALLAHABAD] , it has been held that in view of Rule 6(4) of Cenvat Credit Rules, the restriction on availment of Cenvat Credit does not apply if the goods are exempted by virtue of notification which grants all exemption on the basis of the clearance made during any financial year - In these circumstances, the appellant becomes eligible for Cenvat Credit. However, it is seen that the appellants have voluntarily reversed the Cenvat Credit and now are seeking the refund. There is no provision for granting refund of any Cenvat credit voluntarily reversed by the appellant - Refund of any credit can only be granted when it is sanctioned by law and there are specific provisions for it. There is no provision for sanctioning of refund against reversal of credit in the present circumstances and thus, while the appellants may be entitled to Cenvat credit and may have wrongly reversed the Cenvat Credit, they cannot claim refund of the same. Appeal dismissed - decided against appellant.
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CST, VAT & Sales Tax
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2020 (3) TMI 450
Benefit of concessional rate of 2% of CST - Post GST era - Denial of benefit of purchases of HSD Diesel, Natural Gas in the course of inter-State Trade or Commerce - Declaration of 'C' forms of the CST Act, 1956. The bone contention of the Revenue in the present Writ Appeal is that with the enactment of the Constitutional 101st Amendment and consequential GST Laws enacted in all the States with effect from 1.7.2017 and the consequential amendments effected in the CST Act, 1956 also and amendment in the definition of 'Goods' restricting the operation of CST Act for only six commodities like Petroleum Crude, High Speed Diesel, Motor Spirit (Petrol), Aviation Turbine Fuel, Natural Gas and Liquor, the Assessee Company or whoever engaged in the manufacture of Cement and other things, which were now covered by the GST Laws were not entitled to purchase such Diesel, etc. these six specified goods against the Declaration Form 'C' at the concessional rate on the inter-State purchases of such goods made by them. HELD THAT:- The liability to pay tax under the provisions of CST fixed on the Seller is not a condition precedent or the only contingency for getting himself registered under the provisions of the CST Act. Even a person, who is only purchasing goods in the inter-State Trade or Commerce, who may not be liable to pay tax under the provisions of CST Act as a Seller can also secure registration under the provisions of the said Act and can continue with it. Even a dealer liable to tax under State Sales Tax law, which may include even new State GST Act, 2017, can obtain registration under CST Act. In the present case, the Assessee, a Cement Company, continues to be liable to pay tax under local TNVAT Act, 2006 if it sells or purchases any of these six goods also. The TNVAT Act also has not been completely repealed but now applies only to these six commodities after 1.7.2017 , as per Section 174 of the TNGST Act, 2017. On a conjoint reading of both sub-sections (1) and (2) of Section 7 of the CST Act, it is clear that the Respondents/Assessees and their likes can continue to have registration under the provisions of the CST Act and the contention raised on behalf of the Revenue that they have lost their entitlement to be so registered is misconceived and liable to be rejected. We, accordingly, reject the same. The mere restriction of the operation of the CST Act with respect to six commodities with effect from 1.7.2017 does not take away the right of the Purchasing Dealers to purchase such goods in the course of inter-State Trade or Commerce under the said Act and their registration cannot be said to be either pro tanto cancelled nor they can be cancelled as a matter of right by the Revenue Department. The right to deal with in those six goods still continues to vest in the Purchasing Dealers and therefore, this contention is misconceived. Right to hold registration - HELD THAT:- The right to purchase, which is, essentially, a part of freedom of trade under Article 301 and 304 of the Constitution, cannot be taken away on the anvil of the argument raised by the learned counsel for the Revenue. Equally, the liability of these dealers to pay tax under local TNVAT Act on these six commodities also continues after 1.7.2017 if sale or purchase is made within the State - their right to hold registration under CST Act, 1956 cannot be denied to them under Section 7 of the Act. The next contention of the learned Special Government Pleader for the Revenue is that concessional rate of tax under Section 8(1) of the Act has to be read with the conditions specified in Section 8(3)(b) of the Act viz., against the Declaration in 'C' forms and therefore, such a provision for giving concessional rate of tax should be strictly construed and the said right should be deemed to have been taken away with the Amendment in law with the GST Regime coming into force - This is also a contention equally devoid of merit. Even a strict, literal and plain construction of provisions of the Act does not, in the opinion of this court, disentitle the Purchasing Dealers to purchase these six goods at concessional rate against 'C' forms in the course of inter-State Trade or Commerce. Since the first contention of the State that the registration of such Purchasing Dealer itself is liable to be treated as void is a misconceived contention, this second contention raised for denial of the concessional rate of tax to such Purchasing Dealers is equally unacceptable. The scope of Section 48A is very limited and does not empower the said Commissioner to issue such general Circulars or any Guidelines to the lower Authorities in the State. Besides thus, being without jurisdiction and any statutory support, the impugned Circular dated 31.5.2018 is also passed in violation of principles of natural justice. There is no justification for creating any invidious classification by creating categories of Dealers, arbitrarily, in violation of Article 14 of the Constitution as has been done in the impugned Circular - The mere target to achieve more revenue, as has been mentioned in the impugned Circular itself, also cannot be a reason to sustain such Circulars and tax collection, without authority of law is a bane under the Constitutional Scheme and therefore, we are of the opinion that the learned Commissioner has exceeded his jurisdiction to issue such a Circular. The intention of the Legislature, by the series of Amendments, cannot be inferred in the manner canvassed by the learned counsel for the Revenue so as to defeat the right of the Purchasing Dealers to purchase at the concessional rate against Declaration in 'C' form even the said six commodities. No law has prohibited any such Dealers, who purchase the six commodities to start even selling these six commodities and therefore, the Respondent/Assessee like M/s.Ramco Cements Limited can even sell any of those six commodities, subject to their complying with other licensing requirements, if any. Therefore, their act of purchasing any of these six commodities under CST Act cannot be adversely affected. Thus, if a Dealer has a right to sell as well the restricted six items under CST Act, one fails to understand as to how their right to purchase those goods at present time under the existing Registration Certificates can be taken away merely because they are not selling those goods. If sale of the goods was the only criteria of registration under the CST Act, the consequent amendments would not have allowed concessional rate of tax for purchase of those six commodities for user in activities like Mining or Telecommunication Networks, where no such resale or use in manufacturing is involved - such a right is equally available to other industries like Cement Industries and the same cannot be denied to them. That would result in an invidious classification in violation of Article 14 of the Constitution of India, which is neither envisaged nor is called for. The Appellant State and the Revenue Authorities are directed not to restrict the use of 'C' Forms for the inter-State purchases of six commodities by the Respondent/Assessees and other registered Dealers at concessional rate of tax and they are further directed to permit Online downloading of such Declaration in 'C' Forms to such Dealers - The Circular letter of the Commissioner dated 31.5.2018 stands quashed and set aside - appeal dismissed - decided against Revenue.
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2020 (3) TMI 449
Principles of Natural Justice - Restoration of the penalty under Section 12(3)(a) of TNGST Act - ex-parte order - HELD THAT:- The findings of the Assessing Authority in the impugned assessment order itself states that, the Assessee has filed the return. However, without discussing the effect thereof, the assessing authority has imposed the penalty of ₹ 1,97,534/- under Section 12(3)(a) of the Act. The learned Tribunal has erred in restoring the penalty, that too by an exparte order. The contingency in which the penalty under Section 12(3)(a) of the Act can be imposed is if an Assessee does not file any return, and it does not talk whether any return is being filed in pursuance of any inspection or otherwise. The fact that the Assessee was not previously registered and later on got registered upon inspection or survey by the Department is not relevant for the purpose of Section 12(3)(a) of the Act - Since the fact that the Assessee got himself registered and filed the return and paid the due tax thereon is not disputed, it is sufficient to set aside the penalty in question. The Tribunal has erred in restoring the penalty in the impugned order - Petition allowed - decided in favor of assessee.
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2020 (3) TMI 448
Input Tax Credit (ITC) - Restriction of ITC to the extent of CST payable in case of interstate sale - Restriction of ITC in case of goods consumned or burned but not transferred into or existent in finished product - Validity of amendments brought in Section 18 of the JVAT Act, 2005. - Retrospective effect or effective prospectively. Whether the amendments made to the provision of Section 18(4)(ii) and Section 18(4)(iii) of the JVAT Act vide amendment notification dated 8.2.2016, to the extent proviso has been inserted by providing, interalia, that ITC shall be available only in respect of tax paid on CST sales under section 8(1) of the CST Act, and the balance ITC shall be forfeited is wholly arbitrary, confiscatory in nature being violative of Article 14 of the Constitution of India? - Whether the retrospective effect granted with effect from 23.09.2015 to the substituted proviso inserted to clause(ii) and (iii) of sub- Section 4 of Section 18 of the JVAT Act, vide Amending Act dated 8.2.2016 has an effect of interfering with the vested right already accrued in favour of writ petitioners in respect of purchase and sales made between the period 23.09.2015 to 07.02.2016, and, is liable to be struck down as being violative of Articles 14 and 19(1)(g) of the Constitution of India? - HELD THAT:- The substituted provisos inserted vide notification dated 08.02.2016 are not clarificatory in nature and, has an effect of curtailing the vested right of the dealers in respect of purchases and sales of goods made between the period 23.09.2015 to 07.02.2016 and is, thus declared ultra vires to the extent said provisos have been given retrospective effect. In other words, these provisions are held to be intra vires w.e.f. 7.2.2016 only and onwards. Whether Amendment carried out in sub-section 8 of Section 18 of the JVAT Act, wherein a new clause (xviii) has been inserted after existing clause (xvii) of the aforesaid section, is ultra-vires and violative of Articles 14 and 19(1)(g) of the Constitution of India? - HELD THAT:- By virtue of said amendment the State Government is putting restrictions on the availability of ITC on such raw materials which are consumed or burnt up and not found existent in the finished product. Thus, specified class of raw materials has been excluded for being eligible for claiming benefit of ITC. The aforesaid decision being in the nature of policy decision, wherein reasonable classification has been made between two kinds of raw material, that is , raw materials found existent in the finished product and raw materials consumed or burnt up and not being found in the finished product, the same cannot be said to be unreasonable classification attracting the vice of Article 14 of the Constitution of India. Thus, the challenge to the amended provisions contained under section- 18(8)(xviii) fails having no merit. Whether insertion of Rule 26(11A) under the JVAT Rules, vide notification dated 17.2.2017 with retrospective effect i.e. from 01.04.2015, is ultra-vires to the provision of Section 94 of the JVAT Act, being beyond the powers of the delegate i.e. the State of Jharkhand? - HELD THAT:- The provision of Section- 94 of the JVAT Act, 2005 does not confer any power to the State Government to frame any Rule with retrospective effect and thus, the State Government, while enacting the machinery provision for giving effect to the amendment carried out in clause(ii) and (iii) of sub-section-4 of Section 18 of the JVAT Act with retrospective effect i.e. w.e.f. 1.4.2015 have exceeded its jurisdiction, and to that extent amended Rule is ultra vires the provisions of Section 94 of the JVAT Act, 2005 - Accordingly, we declare that Amendment carried out under the JVAT Rules, 2006 vide amending Notification dated 17.2.2017 by which Rule 26(11A) was inserted shall have only prospective operation with effect from 17.2.2017 and the provision contained in the aforesaid notification to the extent it gives retrospective application of the said Rule is hereby quashed and set aside as beyond the competence of the delegate i.e. the State Government. Whether in absence of machinery provision for giving effect to the amendments made in section 18(4)(ii) and 18(4)(iii) of the JVAT Act, upto 16.2.2017, the said provisions are unworkable and cannot be acted upon? - HELD THAT:- In absence of machinery provision having been prescribed by the State of Jharkhand for giving effect to the proviso inserted in clause(ii) and (iii) of sub-section 4 of Section 18 of the JVAT Act, the said provisos were unworkable between the period 23.09.2015 till 16.02.2017 and during the said period no assessment could be made and for the said period no forfeiture of ITC can take place and the computation of ITC is to be made for the said period in terms of existing Rule i.e. Rule 26(5) JVAT Rules, including the formula prescribed therein. Any assessment order, scrutiny order, etc, passed in respect of the writ petitioners having an effect of forfeiture of ITC are hereby declared illegal and quashed for the period 23.09.2015 till 16.2.2017.
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