TMI Tax Updates - e-Newsletter
April 18, 2018

Case Laws in this Newsletter:

GST Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

TMI SMS

• Supply of UPS along with the battery - cannot be held as naturally bundled - to be taxed as Mixed Supply u/s 2(74) of the GST Act - AAR

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Articles

1. SERVICE OF NOTICES UNDER GST

   By: Dr. Sanjiv Agarwal

2. DISCIPLINARY ACTION AGAINST INSOLVENCY PROFESSIONALS

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Clarification on the manner of filing the Quarterly Return by Composition Dealers in FORM GSTR-4

2. ITR-1 ready for e-filing: IT dept

3. Government clarifies the in-built security features of the Electoral Bonds

4. Suresh Prabhu launches digital platform for MSME Exporters

5. Government reviews the currency circulation in the country

6. RBI Reference Rate for US $

7. 121 crores released towards Government of India co-contribution in Atal Pension Yojana (APY); Total number of subscribers registered under APY as on 12th April 2018 has crossed 97.60 lakhs

8. Minimum Capital Requirements for ‘Other Financial Services’ activities which are unregulated by any Financial Sector Regulator and FDI is allowed under Government Route

9. Auction for Sale (Re-issue) of Government Stocks, Floating Rate Bonds 2014 and Government Securities

Highlights / Catch Notes

GST

• SIKA Block Joining Mortar classified under tariff item 3214 90 90, not eligible for residuary heading 3824, says AAR.

  Case-Laws - AAR : Classification of goods - SIKA Block Joining Mortar - a chemical preparation can be classified under such residuary heading only if it is not elsewhere specified. As the Applicant’s product, namely ‘Sika Block Joining Mortar’ is already specified under tariff item 3214 90 90, heading 3824 does not come into the picture. - AAR
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• Rupam and Pailab Classified as Medicaments Under Heading 3004, Affecting GST Tax Treatment for Skin Disorder Products.

  Case-Laws - AAR : Classification of goods - skin care preparations - only the products, Rupam (Pimple pack) and Pailab (Anti-crack cream) of the list of their products are offered for treatment or prevention of specific skin disorders - only these products are classifiable as Medicament under heading 3004 of the Customs Tariff Act, 1975 - AAR
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• Uninterruptible Power Supply and Battery Classified as Mixed Supply Under GST Act Section 2(74) for Combined Pricing.

  Case-Laws - AAR : Classification of supply - UPS along with the battery - cannot be held as naturally bundled - The supply of UPS and Battery is to be considered as Mixed Supply within the meaning of Section 2(74) of the GST Act, as they are supplied under a single contract at a combined single price. - AAR
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• Applicant Exempt from GST Registration; Must Comply with Reverse Charge Rules u/s 9(3) and Section 5(3) IGST Act.

  Case-Laws - AAR : The Applicant is engaged exclusively in supplying goods and services that are wholly exempt from tax, and, therefore, not liable to be registered in accordance with the provisions under section 23(1) of the GST Act, subject to the condition that the Applicant is not otherwise liable to pay tax under the Reverse Charge mechanism under Section 9(3) of the GST Act or 5(3) of the IGST Act. - AAR
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• Overseas Education Advisory Services in India Subject to GST; Not "Export of Services" Per IGST Act Section 2(6)(iii).

  Case-Laws - AAR : Overseas Education Advisory services - promotion of courses of foreign universities among prospective students - The place of supply is the territory of India - As the condition under section 2(6)(iii) of the IGST Act is not satisfied - The activity does not qualify as “Export of Services” - AAR
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• State Authorities Can Enforce CGST/IGST Provisions, Not UPGST, in Inter-State Trade Per IGST Act Section 20(xv) Compliance.

  Case-Laws - HC : Cross-empowerment under section 4 of I.G.S.T. Act 2017 and section 6 of C.G.S.T. Act 2017 merely means that State Authorities empowered under the U.P.G.S.T. Act 2017 can also enforce the provisions of C.G.S.T. Act 2017 or I.G.S.T. Act 2017, but it does not mean that they can apply the provisions of U.P.G.S.T. Act 2017 or Rules made thereunder to cases of inter-State trade in violation of section 20(xv) of I.G.S.T. Act 2017. - HC
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Income Tax

• Court Rules Penal Proceedings Invalid Against Legal Representatives Without Prior Action Against Deceased Assessee; Section 159 Inapplicable.

  Case-Laws - HC : Penalty on the legal representatives - legal fiction comes into operation - no penal proceedings have been initiated against the assessee, when he was alive. Assessment has not been done in the hands of the legal representatives and therefore, Section 159 of the Income-Tax Act, cannot be applied to the legal representative. - HC
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• Derivative Transactions Exempt from Section 73: Losses Can Offset Business Income When Traded on Recognized Stock Exchange.

  Case-Laws - HC : As derivative transactions being separate from trading in shares, provisions of Explanation to Section 73 will not be applicable to such transactions and hence, the loss incurred by the assessee in derivative transactions through recognised stock exchange has to be set off against other business income as per provisions of the Act. - HC
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• Benefit Match Fee for International Cricket Achievements Exempt from Taxation, Not Considered Taxable Income.

  Case-Laws - AT : Addition on the amount received in regard to Benefit Match fee - This proceeds from benefit match received by assessee is in appreciation of his past achievements in the International Cricket arena and such type of receipt cannot be taxed because these type of receipts are specifically exempted - AT
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• Debt Recovery Tribunal: Compensation for Cancelled Property Sale Classified as Capital Receipt After Sale Certificate Issuance.

  Case-Laws - AT : Nature of receipt - payment of damages for breach of contract - compensation from Debt Recovery Tribunal (DRT) on sum paid in auction for purchase of property, which after issue of sale certificate was cancelled - held as capital receipt - AT
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• Denial of Section 80G Tax Benefits for Donations to Kali Mata Worship Due to Religious Expenditure Classification.

  Case-Laws - AT : Approval u/s 80G - donations - worship of Godess Kali Mata and expenditure incurred towards the same is definitely incurred for a particular religious purpose. The arguments of the assessee, that any person of any religion can perform the Puja to Goddess Kali and hence the expenditure in question is not restricted to a particular religion is not correct. The expenditure is of religious nature. - AT
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• Surrendered Income from Seized Document Classified as Business Income for Property Activities u/s 69 of Income Tax Act.

  Case-Laws - AT : Nature of unaccounted surrendered income emanating from the seized document - business income OR deemed income u/s 69 - The income is business income relatable to property business - AT
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Indian Laws

• Supreme Court Affirms Party Autonomy in Arbitration: Decide Arbitrator Number & Appointment per Arbitration and Conciliation Act.

  Case-Laws - SC : Appointment of an Arbitrator - It is a cardinal principle of the Arbitration and Conciliation Act that the parties are free to decide the number of arbitrators, provided, it is an odd number, as well as the procedure for appointing them - SC
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Service Tax

• Healthy India Website Upgrade by DHFI Exempt from Service Tax under Management, Maintenance, and Repair Services Category.

  Case-Laws - AT : Management, Maintenance and Repair service - grants received from the Ministry of Health. DHFI carried-out the activity of re-launch/upgradation of the Healthy India Website for the Ministry of Health - No service tax liability - AT
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• PHFI Must Pay Service Tax on Payments from MSD for Commercial Training Services: Court Ruling.

  Case-Laws - AT : Commercial Training or Coaching Services - whether PHFI is liable to pay Service Tax on the amount received from MSD treating the same as part of consideration for providing commercial training or coaching? - Held Yes - AT
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• Tour operator activities not taxable under service tax; focus on Wildlife Protection Act and Forest Department duties.

  Case-Laws - AT : Tour operator service - The activities of the appellant, are to be seen in the context of Wilde Life Protection Act as well as Rules - Forest Department has the mandatory duty to protect the environment and to safeguard forests and wild life - This cannot be considered as consideration for purposes of organizing tour. - AT
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• Service Tax Demand Under Reverse Charge Mechanism Set Aside for Services Conducted Entirely Abroad.

  Case-Laws - AT : Import of services - Place of provision of services - Even though the goods on which test was conducted and certificate issued therefore were received by the recipient in India but the fact remains that the service of Technical Testing and analysis was only performed in abroad, no part of it was performed in India - Demand of service tax under RCM set aside. - AT
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• Expenses for Managerial Personnel Reimbursement Exempt from Tax as No Service Fee Involved under Manpower Supply Rules.

  Case-Laws - AT : Since the actual expenses incurred by the respondent towards deployment of the managerial personal were reimbursed by the hotels on actual basis, without any markup, it cannot be said that such expenses should be considered a service fee, taxable under the category of “Man power Recruitment or Supply Agency” service. - AT
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• Service Tax Exemption on Road Construction Services Applies to Both Public and Private Projects u/s 65(25)(b).

  Case-Laws - AT : Commercial and Industrial Construction Service - construction of roads - public roads or not - irrespective of the purpose of construction of the road, whether for public utility or for the utility of organization concerned for their use, the benefit of exclusion clause provided in the definition under 65(25)(b) of the Act should be available, for non-levy of Service Tax. - AT
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Central Excise

• Case on Valuation of Motor Vehicle Parts in Related Party Transaction Under Central Excise Law Lacks Evidence of Price Manipulation.

  Case-Laws - AT : Valuation - motor vehicle parts - related party transaction - there is no evidence on record of the fact that such alleged mutuality of interest has resulted in lower price due to extra commercial considerations - AT
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• Cadbury's 'Tiffins' Chocolate Clubs Classified Under Heading 1905.90 for Central Excise.

  Case-Laws - AT : Classification of goods - Cadburys ‘Tiffins’ - the appellants product chocolate clubs would be properly classifiable under Heading 1905.90. - AT
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• Di-Calcium Phosphate can be classified under Chapter 23, heading 2309, even if not explicitly mentioned.

  Case-Laws - AT : Classification of goods - Di-Calcium Phosphate - Chapter 23 clearly mentions an inclusive scope of heading 2309. It does not mean items other than what is mentioned in the note cannot be classified under 2309, if otherwise fits the description. - AT
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• Clandestine Removal Allegations Dismissed Due to Lack of Evidence Beyond Private Record Entries.

  Case-Laws - AT : Clandestine removal - demand based on the outward gate register as well as inward gate register - The allegation of clandestine removal cannot be upheld only on the basis of mere entries made in certain private record recovered from the security - the charges of clandestine clearance are not established. - AT
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• Valuation Dispute Over Aluminum & Copper Wire Strips Leads to Demand Deletion Due to Lack of CAS 4 Process.

  Case-Laws - AT : Valuation - paper covered aluminium /copper wire strips, etc. - clearance to sister unit - No process of valuation under CAS 4 was followed by the Revenue so that, the correctness can be confirmed by the remand proceedings - Demand was correctly deleted - AT
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Case Laws:

• GST

• 2018 (4) TMI 812
  Classification of goods - SIKA Block Joining Mortar - section 97 (2) (a) & (e) of the CGST / WBGST Act, 2017 - whether classifiable under tariff item 3214 90 90 in terms of Chapter Heading No. 3214 to the HSN? - Held that: - HSN 3214 90 90 is a residuary classification. It should include all other products that have the general characteristics mentioned above, and, therefore, classifiable under heading 3214, but are not specifically mentioned. Clearly, ‘Sika Block Joining Mortar’ satisfies the general characteristics of such products as per the Explanatory Notes above, and, therefore, classifiable under this tariff item. Clearly, a chemical preparation can be classified under such residuary heading only if it is not elsewhere specified. As the Applicant’s product, namely ‘Sika Block Joining Mortar’ is already specified under tariff item 3214 90 90, heading 3824 does not come into the picture. Ruling:- SIKA Block Joining Mortar” is to be classified under tariff item 3214 90 90 of the Customs Tariff Act, 1975, and, therefore, taxable under serial no. 24 of Schedule IV vide Notification No. 01/2017-Central Tax (Rate) dated 28/06/2017 under CGST Act, 2017 and 1125-FT dated 28/06/2017 under WBGST Act, 2017.

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• 2018 (4) TMI 811
  Classification of goods - skin care preparations - Appellant claims the goods to be Ayurvedic Medicaments. They are meant for therapeutic or prophylactic uses, put up in packaging for retail sale and entirely correspond to the description of goods under HSN 3004 - N/N. 1/2017-CT(Rate) dated 28/06/2017. Held that: - there is no dispute that the products are manufactured under valid drug license and following the formula prescribed in the authoritative textbooks of Ayurveda. A few ingredients may have been added for preservation of the quality of the product, which, as settled by the apex court on several occasions, should not be considered material while ascertaining the underlying Ayurvedic nature of the product. It appears only the products, Rupam (Pimple pack) and Pailab (Anti-crack cream) of the list of their products are offered for treatment or prevention of specific skin disorders. The products, namely, Swarnajyoti, Sunayana and Tarumitra-60 have not yet come into existence, and, therefore, excluded from the ambit of examination for the purpose of this ruling. The other products are either already specified under heading 3304 (like talcum powder, sunscreen, moisturising lotion etc.) and, therefore, cannot be considered for inclusion under heading 3004. The remaining products mentioned in the list submitted by them are not offered primarily as medicaments and, therefore, not to be included under heading 3004. Ruling:- Preparations for the care of the skin namely, Rupam (Pimple Pack) and Pailab (Anti-Crack Cream), in the list submitted by the Applicant of the Application are classifiable as Medicament under heading 3004 of the Customs Tariff Act, 1975 - Preparations listed as Swarnajyoti, Sunayana and Tarumitra-60 have not yet come into existence, and, therefore, no rulings are pronounced on their classification - The remaining products mentioned in the list submitted by them are not offered primarily as medicaments and, therefore, not to be included under heading 3004.

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• 2018 (4) TMI 810
  Classification of supply - UPS along with the battery - Mixed supply / Composite supply - naturally bundled - whether such supplies can be treated as Composite Supply within the meaning of Section 2(30) of the CGST/WBGST Act, 2017? - Section 97 (1) of the GST Act - Held that: - The contract for the supply of a combination of UPS and battery, if not built as a composite machine, is not indivisible. The recipient can split it up into separate supply contracts if he chooses. The goods supplied in terms of such contracts are, therefore, no longer naturally bundled and cannot be treated as a composite supply. If a combination of goods that does not amount to a composite supply is being offered at a single price, such supplies are to be treated as mixed supplies. Mixed supply is defined under section 2(74) of the GST Act as one where “two or more individual supplies of goods/services or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply”. Ruling:- The supply of UPS and Battery is to be considered as Mixed Supply within the meaning of Section 2(74) of the GST Act, as they are supplied under a single contract at a combined single price.

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• 2018 (4) TMI 809
  Levy of GST - requirement of registration - charitable institutions - non-profit organisation set up by the Central Government under Clause 17 of the Iron & Steel (Control) Order vide SO 1567 dated 07/04/1971 - main source of income is interest - Applicant declares that it has not been registered under any of the repealed Acts and wants a ruling on whether it is required to be registered under the CGST / WBGST Act, 2017 - Held that: - Exemption under serial no. 1 of the Exemption Notifications for Services is available for charitable activities within the meaning of definition clause (r) of the above notifications - Activities of applicant not eligible for those exemption. Section 24 of the GST Act requires a person to be registered under certain circumstances even if his aggregate turnover does not exceed the threshold specified under Section 22(1) of the GST Act. It will be apparent from a plain reading of Section 24 that the question is relevant in the context of the Applicant only with respect to Section 24(iii) of the GST Act when the person is required to pay tax under the Reverse Charge. The Applicant is engaged exclusively in supplying goods and services that are wholly exempt from tax, and, therefore, not liable to be registered in accordance with the provisions under section 23(1) of the GST Act, subject to the condition that the Applicant is not otherwise liable to pay tax under the Reverse Charge mechanism under Section 9(3) of the GST Act or 5(3) of the IGST Act. As the applicant is unregistered and not liable to be registered, the provisions of Reverse Charge under section 9(4) of the GST Act or 5(4) of the IGST Act will not apply. Ruling:- The Applicant is not required to be registered under the GST Act if he is not otherwise liable to pay tax under reverse charge under section 9(3) of the GST Act.

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• 2018 (4) TMI 808
  Overseas Education Advisory services - promotion of courses of foreign universities among prospective students - place of supply/provision of service - whether the service provided to the Universities abroad is to be considered export within the meaning of Section 2(6) of the Integrated Goods and Services Act, 2017, and, therefore, a zero-rated supply under the CGST / WBGST Act 2017? Held that: - in the case of Export of Services all the conditions as laid down under Section 2(6) of IGST Act 2017 is to be followed in totality without any violation, and that there is no scope of partial compliance of the conditions laid down therein. The Applicant is facilitating recruitment / enrolment of students to foreign Universities. Promotional service is incidental and ancillary to the above principal supply and the Applicant is paid consideration in the form of Commission, based on performance in recruiting students, as a percentage of the tuition fee collected from the students enrolled through the Applicant. The Applicant, therefore, represents the University in the territory of India and acts as its recruitment agent. Place of supply of services - Held that: - Whatever services the applicant provisions are provided only as a representative of the University and not as an independent service provider - Being an intermediary service provider, the place of the Applicant s supply shall be determined under section 13(8)(b) of the IGST Act and not under section 13(2) of the IGST Act. - The place of supply is the territory of India. As the condition under section 2(6)(iii) of the IGST Act is not satisfied, the Applicant s service to the foreign universities does not qualify as Export of Services , and is, therefore, taxable under the GST Act. Ruling:- The services of the applicant are not Export of Service and are taxable under the GST Act. This ruling is valid subject to the provisions under Section 103(2) until and unless declared void under Section 104(1) of the GST Act.

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• 2018 (4) TMI 807
  Seizure of goods alongwith vehicle - inter-state supply - genuine and original T.D.F. Form not present - section 129(3) of the U.P. GST Act 2017 - Held that: - on the relevant date i.e. 17.12.2017 there was no requirement of carrying T.D.F. Form-1 in the case of an inter-State supply of goods. In fact on the relevant date there was no prescription of the documents to be carried in this regard under Rule 138 of the C.G.S.T. Act 2017, accordingly, the seizure and penalty imposed upon the petitioners based on the notification dated 21.7.2017 issued under Rule 138 of the U.P.G.S.T. Act 2017, which was not applicable, is clearly illegal. Cross-empowerment under section 4 of I.G.S.T. Act 2017 and section 6 of C.G.S.T. Act 2017 merely means that State Authorities empowered under the U.P.G.S.T. Act 2017 can also enforce the provisions of C.G.S.T. Act 2017 or I.G.S.T. Act 2017, but it does not mean that they can apply the provisions of U.P.G.S.T. Act 2017 or Rules made thereunder to cases of inter-State trade in violation of section 20(xv) of I.G.S.T. Act 2017. Petition allowed - decided in favor of petitioner.

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• Income Tax

• 2018 (4) TMI 806
  Reopening of assessment - copy of the information received from the Office of the Additional Director of Income Tax (Investigation) which forms the basis of the impugned notice not supplied to petitioners - Held that:- In identical circumstances, this Court in Shri Dhlraj Uttamchand Jain Vs. Asstt. Commissioner of Income Tax & Ors. (2018 (3) TMI 673 - BOMBAY HIGH COURT) had restored the objections of the petitioners to the AO to pass a fresh order after considering the fresh objections to be filed by the petitioners to the reasons in the context of the material relied upon by the Assessing Officer to come to the conclusion that there has been an escapement of income. In our view, this petition could be disposed of on similar lines. Although, it was contended that the Assessing Officer may pass the same order rejecting the petitioners' objections, we do not accept this submission. We are confident that the Assessing Officer would independently apply his mind to the petitioners' objections and dispose of the same showing utmost fidelity in the letter and spirit - thus restore the objection to the Assessing Officer. Therefore, the parties are put to notice that on the next date it is likely that the petition itself would be finally disposed.

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• 2018 (4) TMI 805
  Stay application - grant of interim order - Eligibility for deduction u/s 80IC denied - processes adopted by the petitioner do not amount to manufacture and that the unit at Rudrapur is not eligible for deduction u/s 80IC - Held that:- AO could not have gone beyond the observations rendered or findings recorded by the Central Excise Department, as, even in the show cause notice, there is a reference only to the findings recorded by the Central Excise Department. Therefore, the observations made by AO that 50% of the products sold at Rudrapur are not subjected to any manufacturing activity, appear to be in contradiction with the findings rendered by the Central Excise Department. This aspect also touches upon the jurisdiction of the Assessing Officer to render such a finding, when he had no independent material at the first instance while issuing the show cause notice dated 24.3.2015. If this interpretation is to be accepted, then, to the extent where there is no manufacturing activity, the Assessing Officer would be justified in denying deduction under Section 80IC of the Act. However, such procedure was not followed by the AO. The Appellate Authority, while testing the correctness of the orders passed by the Assessing Officer, appears to have not made an independent exercise to refer to the findings recorded and the observations made by the Assessing Officer. This aspect of the matter ought to have been considered by the Tribunal while exercising jurisdiction by stating that the petitioner has made out a prima facie case. 30% of the demand has already been adjusted/paid by the petitioner/assessee. In our considered view, 30% of the demand, having been adjusted/paid, will sufficiently safeguard the interests of the Revenue and will be in tune with the Office Memorandum issued by the Central Board of Direct Taxes, which rationalizes grant of stay orders for the Appellate Authority to follow by imposing a condition of payment of 20%. Hence, we are of the view that the petitioner has made out a prima facie case for grant of interim order, as payment of 30% sufficiently safeguards the interests of the Revenue.

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• 2018 (4) TMI 804
  Disallowing the expenditure incurred in connection with the share issue - nature of expenditure - Held that:- From the order, we find that the Tribunal has rightly applied the decision of Brooke Bond India Ltd., Vs. Commissioner of Income Tax reported in (1997 (2) TMI 11 - SUPREME Court) and held that the expenditure incurred in respect of the issue of share is "capital expenditure". Claim of depreciation - Held that:- Since the authorities below as well as the Income Tax Appellate Tribunal found that the SRHSHL had fabricated the machinery by 22.7.94 and sold the machinery to Veera Enterprises on 22.9.95 and Veera Enterprises sold the machinery to the assessee on 25.9.95, which in turn is stated to have leased the machinery back to the vendor, SRHSHL. While the sale was effected in favour of Veera Enterprises, the Tribunal noted the sale consideration at 16,86,904/- including the sales tax. However, when the machinery was sold to the assessee / company, it was for 73 lakhs. Thus, Tribunal rightly suspected the bonafides of the transaction and remanded the matter back only for a limited purpose. Thus, we find that there is no error in the order passed by the Tribunal. - Decided against the assessee

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• 2018 (4) TMI 803
  Reopening of assessment - reopening was made on the specific information from the Joint Commissioner of Income Tax, Special Range III, Mumbai, which was not available at the time of original assessment - Held that:- CIT (Appeals) considered the merits of the matters and regarding the details called for by the AO, after issuance of notice u/s 148 as rightly pointed out by the CIT (Appeals) and affirmed by the Tribunal, AO has attempted to make a roving enquiry in the course of reassessment proceedings and has attempted to collect evidence to support the initiation of proceedings under Section 148 of the Act. There is no material to show as to how the Joint Commissioner of Income Tax, Special Range III, Mumbai, came to the conclusion that the value of the assets should be determined as NIL. Thus, we find that the impugned reassessment proceedings was a clear case of change of opinion and therefore, the proceedings could not have been initiated under Section 147 of the Act. There is no error or infirmity in the orders passed by the Tribunal. - Decided in favour of assessee.

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• 2018 (4) TMI 802
  Loss in open market trading - speculative loss or not - set off the loss against the normal business income - denial on the ground that the assessee failed to prove that transactions were done through a recognised stock exchange viz., MCX stock exchange and was not supported by proper time stamped contract notes and that the transaction did not qualify as an eligible transaction - losses in speculation business - Held that:- The transaction done by the assessee is not a speculative transaction but it only comes under provios (d) to Section 43(5) thereby it is only a non speculative transaction and thus exempt from tax. Section 73 of the I.T. Act deals with "losses in speculation business". Explanation to Section 73 categorically states that in the case of a company, business of purchase and sale of shares is deemed to be speculative business. In the instant case, the assessee had suffered loss in trading of derivatives carried through Multi Commodity Stock Exchange. As derivative transactions being separate from trading in shares, provisions of Explanation to Section 73 will not be applicable to such transactions and hence, the loss incurred by the assessee in derivative transactions through recognised stock exchange has to be set off against other business income as per provisions of the Act. The transaction carried out by the assessee is a non speculative transaction and thus Section 43(5) is not attracted to the facts of the instant case and likewise the assessee was trading in derivatives and not in shares, so the loss suffered by the assessee in trading in derivatives is excluded from the ambit of Explanation to Section 73 - We concur with the decision taken by the Appellate Tribunal as well as the Commissioner of Income Tax (Appeals) in rejecting the view taken by the Assessing Officer to add 60,66,466/- as loss, on open market trading to the income of the assessee. - Decided against revenue

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• 2018 (4) TMI 801
  Penalty u/s 158BFA(2) on the legal representatives - block assessment proceedings - Held that:- Penal proceedings have been initiated, only after the withdrawal of the appeal, filed by the deceased assessee, before the Income Tax Appellate Tribunal, at the instance of the legal representative of the deceased assessee. If the word, proceedings , includes penal proceedings , then the same should have been taken before the death of the deceased. The assessee expired on 14.02.2006. Appeal came to be dismissed as withdrawn. Only after the withdrawal of the appeal, proceedings under Section 158BFA(2) have been initiated only on 31.03.2008, in the block assessment order. A fiction is created whereby proceedings initiated against the deceased when he was alive, would continue against the legal representatives, as they have stepped into the shoes of the deceased, without there being any effect on the legality of the proceedings. Once this legal fiction comes into operation, then Clause (c) will have the consequential effect of applying all the provisions of the Act. In the case on hand, no penal proceedings have been initiated against the assessee, when he was alive. Assessment has not been done in the hands of the legal representatives and therefore, Section 159 of the Income-Tax Act, cannot be applied to the legal representative. The Tribunal has properly considered the facts, provisions and by applying the judgment of the Punjab and Haryana High Court in CIT v. Tikka Ram, through legal heir, Smt.Munni Devi reported in (2008 (5) TMI 710 - PUNJAB HARYANA HIGH COURT) held that there is no justifiable reason to impose penalty, on the legal representatives, under Section 158BFA(2) of the Income Tax Act. Going through the material on record, we concur with the same. - Decided against revenue

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• 2018 (4) TMI 800
  Penalty u/s. 271(1)(c) - defective notice - non specification of charge - Held that:- The show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 does not strike out the inappropriate words. In imposition of penalty cannot be sustained. The plea of the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled. - Decided in favour of assessee.

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• 2018 (4) TMI 799
  Addition u/s 41 - Held that:- In this case the addition has been made u/s 41(1) of the Act on the ground that it is an unclaimed loan. The presumption of the AO is that this loan will never be claimed. Such a presumption cannot be made. Respectfully following the proposition of law laid down by the Hon’ble Delhi High Court in the case of CIT vs Shri Vardman Overseas Ltd (2011 (12) TMI 77 - DELHI HIGH COURT) and Glen Williams vs ACIT (2015 (8) TMI 974 - ITAT BANGALORE) delete this addition and allow this ground of the assessee. Disallowance made u/s 14A - Held that:- The dividend earned by the assesse is only 5,280/-. The disallowance made by the AO is 4,73,913/-. The Hon’ble Delhi High Court in the case of CIT v Shri Vardaman Overseas Ltd [2011 (12) TMI 77 - DELHI HIGH COURT] held that the quantum of disallowance cannot exceed the dividend income which is exempt from tax. Hence restrict the disallowance to 5,280/- which is the exempted income in this case. The balance disallowance is hereby deleted.

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• 2018 (4) TMI 798
  Penalty u/s. 271(1)(c) - assessee firm had furnished inaccurate particulars of income in its original return filed by claiming admittedly bogus purchases - Held that:- It is a settled law that when sales are not doubted hundred percent disallowance on the plank of bogus purchase cannot be done. This exposition comes from the in the case of Nikunj eximp enterprises (2013 (1) TMI 88 - BOMBAY HIGH COURT). Just because assessee has filed a revised return of income and added the purchases as income, it can be presumed that there has been any concealment of income or furnishing of inaccurate particulars of income. This is more so when no enquiry whatsoever was made by the assessing officer himself in the assessment proceedings or in the penalty proceedings. We duly note that Hon’ble high courts and ITAT in a catena of cases have disapproved hundred percent addition in similar situation. Hence in our considered opinion in these facts of the assessee cannot be visited with the rigours of penalty under section 271(1)(c) of the Act. - Decided in favour of assessee.

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• 2018 (4) TMI 797
  Penalty u/s.271AAA - undisclosed income - Held that:- The assessee has duly made the disclosure in the course of search of for the undisclosed income and showed the same in return of income, paid taxes thereon and the assessing officer has accepted the income returned and the source of income disclosed. The ld. Commissioner of Income Tax (Appeals) has elaborately considered the issue and passed a reasonable order deleting the levy of penalty. As coming to the said conclusion the ld. Commissioner of Income Tax (Appeals) has also placed reliance upon honourable Allahabad High Court and honourable Gujarat High Court decision. The ratio emanating out of those decisions was that if the search party doesn't put question to the assessee about the source of income, any adverse inference for the levy of penalty under section 271AAA, cannot be taken. No contrary decision by the Revenue has been shown to us. - Decided against revenue

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• 2018 (4) TMI 796
  Addition on the amount received in regard to Benefit Match fee - revenue or capital receipt - AO assessed the proceeds of benefit match of the assessee under section 56(2)(vii)(a) of the Act, which is brought in the statue book with effect from 01.10.2009 - Held that:- The facts available in public domain are that the assessee has played national as well as international cricket. The assessee has played international test matches numbering 6 and ODI’s numbering 23. The assessee is full time employee of Air India. The benefit match was conducted by the BCCI, which is a regulatory body for cricket in India to appreciate the personal talent and skill in this sport because the assessee is a retire sportsman and the proceeds arising out of this benefit match is in the nature of award. There is no direct nexus between the payment and assessee’s profession and these receipts being capital in nature cannot be brought to tax. As amount represents the gratitude from the fans and followers by attending the benefit match conducting in honor of the assessee, who is a retired cricketer of international repute. This type of receipts has specifically been exempted by the CBDT circular No. 477 [F. No. 199/86-IT(A-1)] dtd. 22.01.1986, which states that the amount paid to amateur sportsman who is not a professional will not be liable to tax in his hands as it would not be in the nature of income. The assessee was an amateur cricketer and his profession is employment with Air India from where he is getting salary. He played the game of cricket for India as his passion and the receipts of the net proceeds for the benefit match was only in the nature of appreciation of his personal achievements and talent and thus, cannot be brought to tax by invoking the provisions of section 56(2)(vii)(a) of the Act. This proceeds from benefit match received by assessee is in appreciation of his past achievements in the International Cricket arena and such type of receipt cannot be taxed because these type of receipts are specifically exempted. Accordingly, we are of the view that the CIT(A) has rightly deleted the addition and we confirm the order of CIT(A). - Decided against revenue

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• 2018 (4) TMI 795
  Penalty u/s. 271(1)(c) - defective notice - Held that:- We find that the notice dt. 31-12-2007 issued u/s. 274 r.w.s 271 of the Act does not specify the charge of offence committed by the assessee viz whether had concealed the particulars of income or had furnished inaccurate particulars of income. Hence the said notice is to be held as defective. - Decided in favour of assessee

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• 2018 (4) TMI 794
  Nature of receipt - payment of damages for breach of contract - compensation from Debt Recovery Tribunal (DRT) on sum paid in auction for purchase of property, which after issue of sale certificate was cancelled - revenue or capital receipt - chargeability to tax - Held that:- In the present case, the sum is received by the assessee on cancellation of sale contract as per the auction of Sanmati Rice Mills. Further, the sum received by the assessee had direct nexus to the cancellation of acquisition of the immovable property obtained by him in auction. Further, it is clear that excess of amount then what assessee deposited, received by the assessee for a breach of a contract and hence same is a capital receipt. DR has heavily relied on the provision of section 56(2) (viii) of the act. The above section provides that income shall be chargeable to tax under the head income from other sources if it is income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A - provision of section 145A speaks about the timing of taxability and section 56 (2) (viii) the head under which it is chargeable - the character of income should be interest on compensation or enhanced compensation. As held that it is not interest but compensation. Section 56 (2) (viii) also does not provide for taxation of compensation but only interest on such compensation. In the present case, the assessee has received compensation. Ld DR also could not show that if the amount received is interest on compensation what the amount of compensation itself is. In view of this, we reject the contention of the revenue that provision of section 56 (2) (viii) applies to the impugned amount. - Decided in favour of assessee Rectification of mistake u/s 154 - Held that:- Section 154 of the Act was not applicable in this case. Right to rectify mistakes under section 154 could not be invoked in a case of mere change of opinion. A rectifiable mistake was a mistake, which was obvious, and not something, which had to be established by a long drawn process of reasoning or where two opinions were possible. A decision on a debatable point of law could not be treated as a mistake apparent from the record. In the present case, firstly it was held that the impugned sum is chargeable to tax as interest and subsequently it was held that it is capital receipt, therefore there is a change of opinion on a debatable issue. Hence, we hold that ld CIT (A) has erred in rectifying his order u/s 154 of the act. One cannot say that this is a case of a mistake apparent from record. Hence, we cancel the order of the ld CIT (A) passed u/s 154 of the act.

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• 2018 (4) TMI 793
  Addition u/s 68 - sundry creditor M/s. Transearch Consultations Pvt. Ltd - assessee has written back the amount in question - Held that:- A.O. should have made full addition against the assessee-company of 33 lakhs. The book results of the assessee-company have not been disturbed by the A.O. The decision in the case of CIT vs. Ritu Anurag Aggarwal (2009 (7) TMI 1247 - DELHI HIGH COURT) would support the case of the assessee-company. The assessee-company has also written back the amount in question in subsequent year which is also supported by the ledger account of this party. Since the assessee-company has offered the same amount for taxation in subsequent year, therefore, if the said addition is maintained in the assessment year under appeal, it would amount to double addition. Otherwise also, it is a case of loss, therefore, when amount is surrendered subsequently for taxation, at the best, it could be a tax neutral exercise. Considering all no justification to sustain the addition. - Decided in favour of the assessee-company. Addition u/s 68 in respect of unsecured loans from M/s. Maple Technology Ltd., and M/s. Marry Gold Overseas Limited - Held that:- As the assessee-company proved the identity of the creditors, their creditworthiness and genuineness of the transaction in the matter. The decisions relied upon by the Ld. D.R. do not support the case of the Revenue - no justification to sustain the addition

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• 2018 (4) TMI 792
  Calculation of long term capital gain u/s. 50C - estimation of value by DVO - Held that:- The object of the valuation by the Stamp Valuation Authority is to secure revenue on such sale and not to determine the true, correct and fair market value on which it may be purchased by a willing purchaser subject to and taking into consideration its situation, condition and other attributes such as its occupation by tenant. This was not done by the DVO. For the determination of the value u/s 50C, it is incumbent on the AO to make reference for valuation to the DVO and the DVO’s valuation is to be considered for the purposes of section 48. This, in the case at hand, has not come about, as discussed and so, recourse to section 50C(1) of the Act is not as per law. Accordingly, as also requested by the assessee, the matter is remitted to the file of the AO to be decided afresh in accordance with law, in view of the provisions of the complete section 50C. For this purpose, on reference being made to him by the AO, the DVO shall take into consideration apropos the application or otherwise of the rent capitalization method.

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• 2018 (4) TMI 791
  Penalty u/s 271B - assessee had failed to get his books of account audited before the due date as required by section 44AB - not maintained regular books of accounts - Held that:- As rightly pointed out by the DR from the relevant provisions of section 44AB, every person carrying on business is required to get his accounts audited if his total sales turnover or gross receipts, as the case may be, in business exceeds 40,00,000/- upto A.Y. 2010-11. What is relevant for the purpose of application of section 44AB is the actual gross receipts or turnover of the business of the assessee for the relevant year and not the turnover as declared by the assessee in his returns of income filed under section 139(1). In the present case, the gross receipts or turnover of the business of the assessee for all the four years under consideration was found to be actually more than the limit of 40,00,000/- prescribed in section 44AB and the said quantum having been upheld even in appeal by the Tribunal, we are of the view that the provisions of section 44AB were clearly attracted going by the actual turnover or gross receipts of the assessee’s business. Restore this matter to the file of the A.O. with the direction to verify the claim of the assessee of having not maintained any regular books of account for all the four years under consideration from the relevant record and decide the issue in the light of the decision in the case of Suraj Mal Parasuram Todi (1996 (8) TMI 102 - GAUHATI High Court) and case of Bisauli Tractors (2007 (5) TMI 181 - ALLAHABAD HIGH COURT). A.O. is also directed to verify another contention raised by the learned counsel for the assessee that the penalties of 1,47,702/- and 1,35,820/- imposed for A.Y. 2008-09 and 2009-10 respectively are more than the maximum penalty of 1,00,000/- leviable for the said years and allow appropriate relief to the assessee accordingly.

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• 2018 (4) TMI 790
  Rejecting grant of the approval u/s 80G - expenditure on particular religious purpose - as per CIT-A the assessee spent more than 5% of its income towards religious purposes - Held that:- Objects of the trust that it is constituted mostly to perform puja and seva to Shri Shri Kali Mata in a Mandir built and erected at village Thakdari, P.O. Krishnapur, District-24 Parganas (N), Kolkata – 700 102, and to keep and maintain the mandir and the land and to make arrangements to continue seva and puja. In addition to these objects, a number of charitable objects have been included. These relate to relief to poor, maintaining educational institutions etc. The religious expenditure in question is towards puja expenses and honarium paid to priests. In our view the judgement in the case of Umaid Charitable Trust (supra), does not come to the rescue of the assessee, because in that case a single charitable contribution was made to another trust, which carries out renovation of Lord Vishnu Temple. Such single contribution was not considered as a religious activity. In the case on hand, worship of Godess Kali Mata and expenditure incurred towards the same is definitely incurred for a particular religious purpose. The arguments of the assessee, that any person of any religion can perform the Puja to Goddess Kali and hence the expenditure in question is not restricted to a particular religion is not correct. The expenditure is of religious nature. Just because the expenditure is by persons of all categories, castes and creeds, does not cease to make the expenditure of religious nature. The requirement of the Section 80G(5)(iii) of the Act are not the basis on which approval u/s 80G of the Act, was denied and hence the arguments advanced based on this Section has no merit. - Decided against assessee.

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• 2018 (4) TMI 789
  Benefit of exemption under section 11 denied - whether activities of the assessee are primarily of religious nature and in clear violation of section 3(1)(b) of the I.T.Act? - not using its funds for public benefit but rather for the benefit of specified persons under Section 13(3) - Held that:- As found in assessee's own case [2017 (9) TMI 532 - DELHI HIGH COURT] that the activities of the Assessee Society, though both religious and charitable, were not exclusively meant for one particular religious community. It was, therefore, rightly not denied exemption u/s 11 of the Act. - Decided in favour of assessee

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• 2018 (4) TMI 788
  Validity of initiating proceedings u/s 153A - Validity of Search Action - reliability of seized material - Held that:- The impugned seized material AIBSG/01 and AIBSG/02 were found in the premises of the BSG and not in the premises of the assessee. AO himself has held that the seized material AIBSG/01 and AIBSG/02 did not belong to the assessee but rather belongs to BSG. Having held that the said seized material belonged to BSG, AO at a later date issued the requisite notice and completed the assessment in his case making substantial additions, largely relying on the same seized material - Unless the material belongs to the assessee, the same cannot be used or held against the assessee in proceedings under Section 153A or 153C of the Act. Thus the additions made by the Assessing Officer based on seized material AIBSG/01 is unsustainable for this reason. As the seized material AIBSG/01 as per the panchanama contained 72 total pages and 72 written pages whereas the copies supplied to the assessee contained 90 written pages - reply of Revenue is that all the seized material are properly numbered, serialized, are genuine and that the objection put forth by the assessee is hyper technical in nature. If the copies of the seized documents supplied are in excess of the actual documents seized, as seemed to be suggested by the assessee, the assessee could easily point out the documents that don’t belong to it. This has not been done. It could be merely a case of wrong mention of numbers in the Panchanama. As long as the assessee has not pointed out any document as not being genuine, this objection is technical and has no bearing on the substantive issues raised in the appeal. We, therefore, dismiss the objections raised in this regard. Statements recorded based on the seized material AIBSG/01 and AIBSG/02 from BSG, AKG and KMG - mere reliance on a statement recorded during search action, that too of third persons, for making additions in the case of the assessee is not appropriate - Where the assessee has claimed that the statement was not based on any documents. It is also settled principle that when documents / statements are used against the assessee, copies of the same have to be provided and opportunities afforded to the assessee to explain the statements made. Mere reliance on a statement recorded in the wee hours of the day in the course of search action without any further efforts to bring in corroborative evidence and afford opportunities to the assessee and to the deponents also to explain or rebut or correct the statements is inappropriate. On an appraisal of the record before us, in our view, the Assessing Officer has faultered in not following the rule of law and the procedures prescribed in this regard Disallowances made on the basis of statements of persons not being made available for cross-examination cannot be used against the assessee and hence such disallowances are not sustainable. Even otherwise, we have already held in the pre-paragraphs of this order (supra) that seized material found in the premises of third person cannot be used against the assessee without any corroborative evidence that the seized material belongs to the assessee. Therefore these additions fail on this count as well

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• 2018 (4) TMI 787
  Unaccounted surrendered income emanating from the seized document - business income OR deemed income u/s 69 - Held that:- The surrender admittedly was made qua the biana received by the assessee allegedly for the five specific properties which had not been reflected and recorded in the regular books of accounts of the assessee. The consistent stand of the assessee is that records have been destroyed after the deals were done as would be evident from the specific question No.6 put by the Investigation Wing to the assessee. The transaction as per reply to question No. 5 was also through irregular market brokers whose addresses had not been retained and records were also not retained. The surrender, admittedly was on account of the property transactions. In the face of the material available on record where the surrender is made on account of seized documents and the stated business of the assessee being only real estate business we find no good reason to vary the conclusion arrived at by the Ld. CIT-A. Being satisfied with the consistent explanation offered on behalf of the assessee which stands unrebutted and considering the legal position thereon the departmental ground is dismissed. Acting on the apprehension that there may be certain other documents which may demonstrate that surrender amount was not adequate in the peculiar facts and circumstances of the present case, the assessee specifically to cover up any discrepancies came up with the said offer. The said action cannot be said to be outlandish or not relevant. The hyper cautious approach taken in the circumstances does not warrant in the peculiar facts of the present case for the Department to conclude that it was deemed income. The income is business income relatable to property business. - Decided in favour of assessee.

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• Customs

• 2018 (4) TMI 786
  Revocation of CHA License - forfeiture of security deposit - time limitation - SCN has not been issued within 90 days from the date of the Offence Report i.e. 01.11.2014 - contravention of Regulation 11(a), (d), (e), (n) as well as Regulation 17(9) - Held that: - the contravention of Regulation 11(a), (d), (e), (n) as well as Regulation 17(9) stands established against the appellant. Keeping in view the Principle of Proportionality, the revocation of CB licence is to harsh a penalty to be imposed on the appellant. The ends of justice will be met by ordering forfeiture of the whole amount of security deposit of 75,000/- furnished by them. In addition, a penalty of 50,000/- imposed on the appellant. Appeal allowed in part.

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• 2018 (4) TMI 785
  Levy of customs duty - leftover ATF available in the fuel tank of aircraft landing in India from an international trip - Held that: - identical issue decided in the case of M/s. Inter Globe Aviation Limited Versus CC, New Delhi [2017 (9) TMI 926 - CESTAT NEW DELHI], where it was held that The fuel in the tank is part of aircraft in operation. Fuel cost is calculated, and apparently, forms part of commercial consideration while fixing ticket charges for transporting aircraft. No freight element is attributable to fuel in the tank, the usage of which varies on different parameters - customs duty cannot be levied - appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 784
  Smuggling - Gold - the jewellery made out of imported gold bars having not been exported out of country, the appellant as a nominated import agency, is held liable for such violation - Held that: - the appellant imported duty free gold with a condition that same will be used in the manufacture of jewellery for export. The export of jewellery and foreign exchange realization on such export are crucial for fulfillment of obligation s of duty free import. The appellant in fact is the Bank who arranged the foreign exchange remittance - gold imported has been put to use for intended purpose i.e. manufacture of jewellery and thereafter duly disposed of with permission from competent Development Commissioner - The Development Commissioner apparently on consideration of condition and restriction imposed on appellant allowed such clearance to DTA. That being the case, there is no question of duty liability on the imported gold on the appellant. Appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 783
  SAD Refund - N/N. 102/2007-CUS dated 14/09/2007 - time limitation - Held that: - the issue is covered by the decision in the case of Sony India Pvt. Ltd. [2014 (4) TMI 870 - DELHI HIGH COURT], where it was held that In the absence of specific provision of Section 27 being made applicable in the said notification, the time-limit prescribed in this section would not be automatically applicable to refunds under the notification - appeal dismissed - decided against Revenue.

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• 2018 (4) TMI 782
  N/N. 111-95/Cus dated 5th June 1995 - Export Promotion Capital Goods (EPCG) scheme - terms of remand - Held that: - The terms of the remand are very clear; the only issue left for the adjudicating authority was to determine fulfilment of the export obligation within the statutory period. The fulfilment of the revised export obligation within the extended period is not in question. The adjudicating authority should have limited its findings only to that and should not have traveled beyond the terms of the remand. Appeal allowed - decided in favor of appellant.

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• Service Tax

• 2018 (4) TMI 779
  Maintainability of petition - only contention raised before us is that this petition should be entertained because the order-in-original dated 20th November, 2012 is passed without affording reasonable opportunity of being heard to the petitioner - Held that: - After the show cause notice was issued and the petitioner requested that the matter be taken up post second week of July, 2012, then, we do not see how the order was passed, particularly when the petitioner was notified the dates of hearing on 16th, 19th and 20th November, 2012. It is thus uncalled for and avoidable urgency and expediency in disposal of the proceedings, which prompts us to interfere with the order-in-original. The rights and equities can be balanced by the petitioner being called upon to meet 50% of the demand in the show cause notice. The petitioner should, therefore, deposit a further sum of 5 lakhs within a period of four week from today with the Service Tax Commissionerate.

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• 2018 (4) TMI 778
  Commercial Training or Coaching Services - grants received from MSD towards provision of training to doctors - whether PHFI is liable to pay Service Tax on the amount received from MSD treating the same as part of consideration for providing commercial training or coaching? - Held that: - the amount received as grant from MSD is specifically towards defraying the cost of running the training programme for doctors - the link between the amount and the training is direct and hence the amount received from MSD, even though a third party in the transaction between the service provider and service receiver, the same is to be considered as part of the consideration for the service - Such a view also finds support from Section 2(d) of the Indian Act, 1872 which defines the term “consideration” - Service Tax is liable to be paid under the above category by including the amounts received as grant from MSD - demand upheld. Levy of service tax - Management, Maintenance and Repair service - grants received from the Ministry of Health. DHFI carried-out the activity of re-launch/upgradation of the Healthy India Website for the Ministry of Health - CBEC circular dated 09.07.2001 - Held that: - PHFI has received “grants-in-aid” from the Ministry of Health - there is no service being rendered by PHFI to Ministry in lieu of grant - there is no no service provider-service recipient relationship between the parties - no Service Tax is to be paid on the amount received by PHFI from the Ministry of Health. Appeal allowed in part.

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• 2018 (4) TMI 777
  Tour operator service - appellant comes under Department of Forests, Govt. of Rajasthan - amount recovered from the tourists are credited to the account of the State Govt. after reimbursing the vehicle owners towards the rent payable for such vehicles - Held that: - Wild Life (Protection) Act, 1972 empowers the State Government, for notification of National Park as well as to restrict the entry of visitors as well as vehicles into the National Park. The CBEC has issued master circular No.96/7/2007 ST dated 23.08.2007. One of the issues clarified is regarding whether the activities of sovereign/public authorities performed under the statute can be considered as provision of service, for purpose of levy of Service Tax. In S.No.999.01, circular has clarified that any fee collected as per the provisions of the relevant statute for performing mandatory and statutory functions under the provisions of any law are not to be treated as services provided for consideration. The activities of the appellant, are to be seen in the context of Wilde Life Protection Act as well as Rules - Forest Department has the mandatory duty to protect the environment and to safeguard forests and wild life - This cannot be considered as consideration for purposes of organizing tour. Demand set aside - appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 776
  Import of services - Place of provision of services - Reverse charge mechanism - place of provision of service - Rule 3 of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 - appellant have received Business Auxiliary Service(BAS) and Technical Testing and Analysis Service (TTA) from foreign based firms during the period from 25.5.2009 to 22.6.2011 and 20.5.2010 to 30.3.2012 respectively - non-payment of service tax - penalty. Held that: - the technical testing analysis service covered under sub-clause (zzh) received from outside India is taxable provided such service is partly performed in India - In the facts of the present case, the testing of spacer damper was wholly performed outside India in the foreign country by a foreign based testing agency. No part of the testing was provided in India for the reason that the testing agency is located outside India. Even though the goods on which test was conducted and certificate issued therefore were received by the recipient in India but the fact remains that the service of Technical Testing and analysis was only performed in abroad, no part of it was performed in India. Therefore the technical testing and analysis service on the reverse charge basis is not taxable in terms of Rule 3(iii) of Rules 2006 - Demand of Service Tax in respect of Technical Testing and Analysis Service upto the period of 31.3.2011 is set aside. However the service tax demand on this service from 1.4.2011 onwards is upheld. As regard Business Auxiliary Service which was provided by foreign based company to the appellant and received by the appellant in India, the same is liable to service tax - demand upheld. Penalty - Held that: - the grave interpretation Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, was involved and the various litigation has been taken place on this issue - penalty set aside. Appeal allowed in part.

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• 2018 (4) TMI 775
  Constructions Services - Commercial or Industrial Construction Services - non-payment of service tax - Held that: - the classification of services during the period has remained under confusion. Further the question being of law can be raised at any stage and therefore the reasoning adopted by the Appellate Authority to deny the claim of the Appellant is erroneous. It is not appearing either from the adjudication order and the Appellate order as to why the Appellants are not eligible for exemption in case of services rendered to M/s MSETCL. The Appellant is not liable for service tax in respect of services given to MSETCL - Demand set aside. Marvellous Metals and other services - whether in the nature of works contract service or otherwise? - Held that: - if the services are in the nature of Works Contract, the same shall not be liable for service tax before 01.06.2007 - matter remanded for reconsideration. Appeal allowed in part and part matter on remand.

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• 2018 (4) TMI 774
  Classification of services - the respondent stationed various Managerial / Supervisory and technical staff at those hotels - reimbursement of salaries and perks of the managers deployed to associate/subsidiary hotels - whether the service taxable under the head Manpower Recruitment and Supply Agency Service? - Held that: - the respondent was established with the sole objective of providing the hospitality business of itself and through its associated companies. Since the actual expenses incurred by the respondent towards deployment of the managerial personal were reimbursed by the hotels on actual basis, without any markup, it cannot be said that such expenses should be considered a service fee, taxable under the category of “Man power Recruitment or Supply Agency” service. In the case of Fortune P arks Hotels Ltd. [2016 (12) TMI 605 - CESTAT NEW DELHI], which is one of the hotels, where the respondent deploys its staff members, the Tribunal has held that the salary paid to the employees and reimbursed by the hotels, without any markup, cannot be subjected to service tax under Section 67 of the Act, by treating the same as part of the 'gross amount' charged by service provider for services provided by him. Appeal dismissed - decided against Revenue.

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• 2018 (4) TMI 773
  Supply of Tangible Goods Service - the respondent stated that they hire furniture on rent to visitors in business exhibitions as per the requirement of the organizers and exhibitors and they are treating the same as deemed sale and paying VAT on the same - Held that: - it is an admitted fact in the SCN, that the respondent-assessee has paid VAT on the disputed transaction - the SCN is presumptive in nature, as there is no finding and/or allegation that effective control of the goods/ furniture was not given by the respondent to its customers. There is no allegation nor any finding by the courts below that the right of Possession and/or effective control of the furniture/ equipment was not given by the respondent to its customers. Thus, the essential facts for levy of Service Tax under the category of "Supply of Tangible Goods" are wanting. Appeal dismissed - decided against Revenue.

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• 2018 (4) TMI 772
  Commercial and Industrial Construction Service - construction of roads - public roads or not - road constructed by those organizations are used for their Commercial purpose only - case of Revenue is that the roads constructed by the appellant should not be considered as Public roads, in order to fall within the exclusion clause provided under the Definition of Commercial and Industrial Construction Service - Held that: - irrespective of the purpose of construction of the road, whether for public utility or for the utility of organization concerned for their use, the benefit of exclusion clause provided in the definition under 65(25)(b) of the Act should be available, for non-levy of Service Tax. Since there is no ambiguity in plain reading of the definition and in view of the admitted fact that the appellant had constructed roads for different commercial entities/organization, the benefit of the exclusion provided in the definition clause should be available to it - demand set aside - appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 771
  Technical Inspection and Certification Services - Appellants provide certification of electrical appliances and approve the energy efficiency reading of these appliances - whether or not the assessee-Appellants have discharged the statutory obligation in pursuance to the Act of Parliament and the Regulations framed thereunder? - Held that: - the assessee-Appellants did discharge the statutory obligations mandated under the law. The fee collected in various forms is also pre-notified and fixed by the authority as per law. The mention of the original authority that the Regulation is option al for the manufacturer s is erroneous. The Regulation makes it mandatory for such labeling. The assessee-Appellants, acting in pursuance to the statutory regulations, collected statutorily fixed fee for such performance, cannot be subjected to Service Tax. Appeal allowed - decided in favor appellant-assessee.

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• 2018 (4) TMI 770
  Business Auxiliary Services - sub-contract - business of promoting and marketing of cable broadcasting service - time limitation - Held that: - prior to the issue of Circular dated 23.08.2007, admittedly, the Board had clarified on many occasions that when the full Service Tax liability was discharged by the main contractor, the sub - contractor need not to pay the Service Tax. Though, such clarification has no legal sanctity after the introduction of Cenvat Credit Rules, 2004 , the same , apparently , could lead to bonafide belief on the part of the assessee - Appellants like the present assessee-Appellants who acted as a sub-contractor. The demand is hit by limitation. The assessee - Appellants will get the benefit on the ground of limitation alone. Appeal allowed - decided in favor of appellant-assessee.

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• 2018 (4) TMI 769
  Consideration of additional documents/ grounds, which were submitted subsequent to filing of appeal before the Tribunal - the demand confirmed solely on the ground that the appellant could not produce the documents at the time of adjudication - Held that: - Since the appellant at this juncture, submits that it can produce documents before the original authority, the matter can be remanded for passing a fresh adjudication order, upon consideration of the documents to be submitted by the appellant - appeal allowed by way of remand.

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• 2018 (4) TMI 768
  Business Auxiliary Service - respondent has been appointed as a distributor of the telecom company, M/s Bharati Airtel Ltd. for the purpose of distributing the pre-paid cellular services - Held that: - Tribunal in the case of Chotey Lal Radhey Shyam vs. CCE & ST, Lucknow [2015(11) TMI 979 - CESTAT ALLAHABAD] has held that the appellant is only engaged in trading activity and does not render any taxable service in the capacity of business auxiliary service - appeal dismissed - decided against Revenue.

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• 2018 (4) TMI 767
  Valuation - includibility - service tax element - mandap keeper service - club & Association service - Held that: - since the appellant is not disputing the service tax demand confirmed under the taxable category of mandap keeper service and club and association service, we upheld the demand confirmed against it for providing such taxable service and direct the original authority to re-quantify the exact demand - appeal allowed by way of remand.

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• 2018 (4) TMI 766
  C & F Agent service - whether the activity of consignment agent should be covered under the purview of the taxable service of C & F agent service? - Held that: - the issue is covered by the decision in the case of Santani Sales Organisation Versus Central Excise, Customs And Service Tax Appellate Tribunal, Delhi [2017 (9) TMI 1265 - DELHI HIGH COURT], where it was held that consignment agent cannot be termed as C & F agent for the purpose of payment of service tax - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2018 (4) TMI 765
  Condonation of delay in filing appeal - power of Commissioner (Appeal) to condone delay - Held that: - if the appeal is not filed beyond 90 days, the Appellate Authority has no jurisdiction to condone the delay - In the instant case, the petitioner has received the copy of order of appeal on 06.08.2012 and he filed appeal on 20.02.2013 it is beyond the period of 90 days and, therefore, it has rightly been dismissed by the appellate authority. The appellate authority has no jurisdiction to condone the delay beyond 30 days in filing the appeal - petition dismissed.

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• 2018 (4) TMI 764
  Abatement - Rule 10 of CER - manufacture of Pan Masala containing tobacco - 'Gutka' - sealing of machinery - during the period of dispute, certain number of machines had been got sealed, and these machines had not been operated for the whole month but had been operated only for part of the month - whether in respect of such machines the duty would be payable only on pro-rata basis for the number of days in the month during which the machine had functioned or would be payable for the whole month without giving abatement for the period for which the machine was sealed? Held that: - it is clear that the entire factory was not closed. A few machines were working and production was on. It is not the case of the assessee-Appellants that entire factory was closed for a continuous period of 15 days or more during which there was absolutely no manufacturing activity and no removal of the finished goods. Therefore, abatement under Rule 10 is not available. Abatement under Rule 10 cannot be given in respect of individual machines which may have been sealed for a continuous period of 15 days or more, when during that period, other machines were functioning and factory was in operation. Other than Rule 10, there is no provision for charging duty on pro-rata basis in respect of machines which, for the reason of being sealed, were operating only during part of the month. Appeal dismissed - decided against assessee-appellant.

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• 2018 (4) TMI 763
  Clandestine manufacture and removal - Copper Wire - allegation made on the basis of machines found working in the units, the dairies recovered as well as the statement given by Rajesh Kumar Gupta, the Proprietor, and of two workers - Held that: - Even though the Rajesh Gupta in his statement decoded and explained the entries in the two note books and admitted to the clandestine clearances, he retracted his inculpatory statement the very next day - workers also during their cross examination before the Adjudicating Authority, have retracted their original statements and submitted that these statements were recorded under duress - the main evidence relied by the Department in the form of documentary as well as oral, are in jeopardy. The recovery of cash as well as the documentary evidence in the form of note books was made from the residence of Rajesh Kumar Gupta, Proprietor but the authenticity of the panchnama proceedings have been seriously questioned by the appellant - During the cross examination of the second panch witness, Shri L. N. Gupta, he submitted that he was not present at the residence of the proprietor during the period 7 am to 16:30 Hrs when the proceedings were already over and he was asked to sign the panchnama. These facts emerged only during his cross examination - In view of this the panchnama proceedings leading to recovery of cash and documentary evidence loses its authenticity and evidence recovered through such proceedings cannot be relied upon against the appellant. The charge of clandestine clearance needs to be established on the basis of credible and tangible evidence - In the present case the panchnama of the search proceedings at the residence stands vitiated - The statement recorded from the two workers as well as the proprietor which were originally inculpatory in nature stand retracted during various stages of the proceedings - also, the two suppliers of raw materials who had admitted to supply of wire rods to the appellant were manufacturers of wire rods which stands explained by the appellant as procured for used in their trading activity. The allegations of clandestine manufacture and clearance have not been established satisfactorily by Revenue - appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 762
  Valuation - motor vehicle parts - related party transaction - goods cleared by the appellant to M/s Maruti Suzuki India Ltd, who were holding shares to the extent of 39% in the appellant‘s company - it was alleged that the valuation of goods cleared by the appellant to M/s Maruti Suzuki should be on the basis of Rules 8 & 9 of the Central Excise Valuation Rules, 2000 - whether the two parties are “related persons” as per Section 4(3) (d) of the Act? Held that: - there is no evidence on record of the fact that such alleged mutuality of interest has resulted in lower price due to extra commercial considerations - it cannot be said that the two companies are ‘related persons’ in terms of sub-clause (ii), (iii) or (iv) of Section 4(3) (b) of the Act. Valuation of goods as per Rule 9 read with Rule 8 of the Central Excise Valuation Rules, is applicable only in a case where goods are sold to or through a person who is related. Rule 10 of the Valuation Rules deals with the valuation of goods sold to or through “inter-connected undertaking”. Since the two companies are not related in terms of sub-clause (ii), (iii) or (iv) of Section 4(3)(b) of the Act, the valuation is required to be done in terms of Rule 10 (b) of the Rules which provides the valuation to be done as if they are not related persons. Appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 761
  Clandestine manufacture and removal - it was alleged that the appellants have traded, but have used ‘Common Invoice Book’ for supply of traded goods as well as manufactured goods - Held that: - in the absence of any cogent & positive evidences in the Show Cause Notices as well as in the impugned Orders showing clandestine manufactured & clandestine removal of goods in the guise of trading, the demands of Central Excise duty confirmed by the Adjudicating Authority on the basis of evidences for the earlier period, is not sustainable - appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 760
  CENVAT credit - input services - outward freight from factory gate to the port in case of export of goods - insurance policy - man Power Recruitment Service availed for doing job work - Held that: - Cenvat credit of GTA service on transportation for export of goods from the factory gate to the port of export is allowable as in the case of export, the port of export is the place of removal - credit allowed. Insurance policy of working staff and services utilized in canteen - Held that: - the same are covered in favour of the appellant by the ruling of Hon’ble Bombay High Court in the case of Commissioner of Central Excise, Nagpur Versus Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT] - credit allowed. Man Power Recruitment Service availed for doing job work - Held that: - in case of job work, the goods manufactured by the appellant are normally taxable, but they were not subject to tax because of provisions of Notification No.214/86 as the principal manufacturer had undertaken to pay the duty, there is no case of clearance of exempted goods and accordingly I hold that the provisions of Rule 6 of Cenvat Credit Rules, 2004 are not attracted - credit allowed. Appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 759
  Valuation - Printed Circuit Board - inclusion of the design/ Art work/Photo film supplied by their customers - extended period of limitation - Held that: - The order passed by the Tribunal was not challenged by the Appellant or the revenue and has thus attained finality. Therefore no fault can be found with the method of such valuation. The issue involved has remained disputed. In such case we also do not find any intention to evade duty payment by the Appellant as all the information were appearing and no attempt has been made to suppress the same. - extended period and penalty not invokable. Appeal allowed.

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• 2018 (4) TMI 758
  Classification of goods - Cadburys Tiffins - whether classified under Chapter heading 1905.11 or under chapter sub heading 1905.31? - Held that: - The facts are undisputed that the Appellant brought biscuit from the market and coated the same with the chocolate. After process it remained biscuit only albeit covered with chocolate - The CSH 1905.11 covers the goods in relation to manufacture of which any process is ordinarily carried on with the aid of power whereas 1905.31 covers the Wafles and Wafers coated with chocolate or containing chocolate. There is no reason to classify the impugned goods under chapter sub heading 1905.31 - the appellants product chocolate clubs would be properly classifiable under Heading 1905.90. Appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 757
  CENVAT credit - fake invoices - credit availed without receipt of inputs - the revenue had alleged that the Appellant had shown excess consumption of caustic soda and the same was based upon the ratio of input to output and the opinion of Pulp and Paper Research Institute. Held that: - the revenue during investigation had recovered internal record of the Unit viz. MIS, Yearly stock report and also statements of various persons were recorded. The statement of two transporters M/s Capital Roadlines and M/s Pravin Roadways also supported the fact that the goods were diverted - the adjudicating authority has also recorded a fact that the Appellant during investigation did not provide all the copies of LRs or only one sided photocopies so that revenue cannot proceed further for investigation. The MIS reports, yearly stock report, statements of the authorized persons of the Appellant unit as well as statements of transporters clearly show that the Appellants were availing credit without receipt of inputs i.e caustic soda. Even where the revenue could lay their hands on the copies of invoices bearing rubber stamp of other parties in three cases it was found that the goods were diverted to such parties. The Appellant has availed credit without receipt of goods and their consumption - demand upheld - appeal dismissed - decided against assessee-appellant.

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• 2018 (4) TMI 756
  Maintainability of appeal - Monetary amount involved in the appeal - Held that: - in the instant case, amount involved is less than 2 lakhs in each appeal - A s per Section 35B (proviso) of the Central Excise Act, 1944, the Tribunal can refuse to entertain the appeal where the demand/penalty is less than 2 lakhs (prescribed limit) - appeal not maintainable - appeal dismissed.

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• 2018 (4) TMI 755
  Tax liability - fly ash generated by the appellant during the manufacture of sponge iron - Held that: - the Tribunal in the case of Jai Balaji Industries Ltd. vs. CCE&ST, Raipur [2017 (6) TMI 898 - CESTAT NEW DELHI] has held that the fly ash produced during combustion of coal in the manufacture of electricity is a waste by-product. The same is not emerging out of any manufacturing process - tax liability do not arise. CENVAT credit - rejected finished goods when the same were returned by the suppliers - Held that: - Admittedly, the finished goods cleared were on payment of duty. When they were returned back to the manufacturer they are entitled to take credit of such duty as if it is input credit in terms of Rule 16(i) of the CER 2002 - credit allowed. Appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 754
  Classification of goods - Di-Calcium Phosphate - Revenue has classified the goods under Chapter 28 of heading 28352500 of the Central Excise Tariff Act - appellant contested the said view and submitted that their product is correctly classifiable under Central Excise Tariff heading 23099090 - Held that: - Chapter 23 clearly mentions an inclusive scope of heading 2309. It does not mean items other than what is mentioned in the note cannot be classified under 2309, if otherwise fits the description. It is clear that Di-calcium phosphate manufactured by the appellant is used as a supplement in the animal feed manufacture. Heading 2309 clearly mentions preparation of a kind used in animal feeding - reliance placed in the case of BAMNI PROTEINS LTD. Versus CENTRAL BOARD OF EXCISE & CUSTOMS [1999 (8) TMI 101 - HIGH COURT OF JUDICATURE AT BOMBAY], where it was held that the view of the Appellate Tribunal that Di-calcium Phosphate animal feed grade is classifiable under Heading 23.02 and sub-heading 2302.00 of the Central Excise Tariff Act, 1985 stands confirmed. Appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 753
  Valuation - related party transaction - Whether appellant and EJIPL are related persons in terms of Section 4(4)(c) of the Central Excise Act and whether the sale price of EJIPL is to be adopted for determination of duty on the appellant? - Held that: - Related person as given in Section 4(4)(c) must be a person who is so associated with the assessee that they have interest directly or indirectly in the business of each other - it cannot be said that there was mutuality of interest in the business of each other. EJIPL, making payment for goods supplied by the appellant, on account basis cannot be a reason to allege financial inter-dependence - there is no justification to hold that the two entities are related persons in terms of Section 4(4)(c) of the Central Excise Act. Since the sale of goods by the appellant to EJIPL is on principal to principal basis, there is no justification to adopt the price at which EJIPL sell s the goods as value for such clearance. Clandestine removal - Whether charges of clandestine clearance is sustainable on the basis of the outward gate register as w ell as inward gate register? - Held that: - the allegation of clandestine clearance is exclusively is based on the register and the explanation offered by the Security Guard who has also maintained such register. The Security Guard, Sh. Azimuddin, in his statement has explained about some motors having been received for repairs. But the Revenue has not been taken cognizance of this fact. The allegation of clandestine removal cannot be upheld only on the basis of mere entries made in certain private record recovered from the security - the charges of clandestine clearance are not established. Appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 752
  Valuation - paper covered aluminium /copper wire strips, etc. - clearance to sister unit - Held that: - the present appeal by the Revenue simply pleads for remand of matter so that now they can consider CAS 4 valuation in proper prospective. The same is not tenable in view of the fact that original proceedings are for demand of differential duty. No process of valuation under CAS 4 was followed by the Revenue so that, the correctness can be confirmed by the remand proceedings. The proceedings are for demanding differential duty which, as correctly held in the impugned order are not sustainable for want of legal and factual basis. Accordingly, the impugned order is sustained - appeal dismissed.

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• CST, VAT & Sales Tax

• 2018 (4) TMI 751
  Stay against recovery of tax during pendency of appeal - works contract - local sale or export sale - Maharashtra Value Added Tax Act, 2002 - whether the present transaction is covered by this exception carved out in section 8? - Held that: - The tribunal holds that both parties in the present case are situate and registered in the State of Maharashtra. The goods have moved from the State of Maharashtra as per the contract executed between them. Therefore, there is a sufficient nexus to hold that the impugned sales are liable to tax under the provisions of the MVAT Act. In any event, only those goods have been considered for the purpose of levy of tax, which have moved from the State of Maharashtra. This was a highly debatable issue. If the tribunal was required to refer to not only the legal principles, but whether they are applicable will have to be eventually determined on the basis of the terms and conditions of the contract, then, in the given facts and circumstances of the case, there was no reason to impose any condition of part payment - an unconditional stay of recovery pending disposal of the appeal is justified. Petition allowed.

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• Indian Laws

• 2018 (4) TMI 781
  Appointment of an Arbitrator - Section 11(6) read with Section 11(9) of the Arbitration and Conciliation Act, 1996 - existence of arbitration clause in the contract - Held that: - the letter dated 14.06.2010 is a part of the Contract and it shall be read and construed as an integral part of the Contract. Therefore, the contention of the respondent-Company that there does not exist any arbitration agreement between the parties is not sustainable in the eyes of law - Arbitration clause exists in the Contract. It is a cardinal principle of the Arbitration and Conciliation Act that the parties are free to decide the number of arbitrators, provided, it is an odd number, as well as the procedure for appointing them - Justice Amitava Roy, a former Judge of this Court, is appointed as the sole Arbitrator to adjudicate the disputes between the parties on such fees he may fix. Petition disposed off.

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• 2018 (4) TMI 780
  Recovery proceedings - lease rights were not transferred in favour of the petitioner - attachment of immovable property of a defaulter - sale aftr expiry of three years - Held that:- Provisions show that under Section u/s 68B if the sale is not executed within a period of three years after the attachment, the same shall be deemed to have been vacated. Rule 48 mentions attachment of immovable property of a defaulter prohibiting the defaulter from transferring or charging the property in any way and prohibiting all persons from taking all benefits under such transfer or charge fees. Thus, if the facts of the present case are taken into consideration, it is apparent that Section 281 of the Act of 1961 would not come into operation to declare the sale and transfer as void since the provision is only with reference to the pendency of the proceedings before the service of notice under Rule 2 of Second Schedule. Do not agree with the said submission as there is a basic fault in it to the extent that the Rule 16(2) shall be examined on the day when the sale was executed i.e. on 17.11.2006. The attachment was enforceable on that day when the sale was executed between the Company i.e. petitioner and the defaulting company and would be void. The clams of the department being enforceable against the defaulting company the petitioner’s attempt to take umbrage of Rule 16(2) is wholly unfounded. On a conjoint reading of Rule 16(1) and 16(2), it is apparent that while Rule 16(1) puts an embargo on the defaulter or his representative in interest to mortgage, charge, lease or otherwise deal with any property belonging to him except with the permission of the Tax Recovery Officer. Rule 16(2) disallows any private transfer or delivery of property attached or of creating any interest therein for any payments to the defaulter of any debt, dividend and other monies contrary to such attachment when all such dealings have been treated as void All cases the Tax Recovery Officers may not have proceeded under 168(b) and has an option to appoint a person as Receiver instead of directing of sale of property in terms of Rule 70 and 71. Admittedly the Receiver has already been appointed on the properties of the defaulting Company which includes the property situated at Alwar thus, there was no occasion for the Tax Recovery Officer to proceed with the sale in terms of 68(b) and the argument of the petitioner relating to the same not being void on account of vacation of the attachment is not made out and in such circumstances, the sale executed in favour of the petitioner has to be treated as void. Even as per Section 222 there is an option for either to proceed with the charge sheet and sale by the Tax Recovery Officer or to appoint a Receiver on the property. However, in view of the fact that Receiver had already been appointed by the Bombay High Court, it is to be presumed that the attachment and sale could not be proceeded further and receiver as appointed by the High Court, would be deemed to do the work in terms of Rule 70 and 71 of the Income Tax, 1961. In view of the law as laid down by Apex Court in Macson Marbles Private Limited cited (2003 (11) TMI 71 - SUPREME COURT OF INDIA), the sale executed in favour of the petitioner results in the petitioner liable to pay the dues as against the defaulting company and, therefore, the demand raised by the department is wholly justified. Income Tax Act provides a complete code in itself and protect the revenue from misadventures which may be taken up by a defaulting person like the Company in the present case.

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