Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 2, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
DGFT
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F. No. 14/3/2018-EP(Agri-III) - S.O. 1481(E) - dated
29-3-2019
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FTP
Central Government notifies the Import Policy of items of Chapter 7 of the Indian Trade Classification (Harmonized System), 2017, Schedule-1 (Import Policy)
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F. No. 14/3/2018-EP(Agri-III) - S.O. 1480(E) - dated
29-3-2019
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FTP
Central Government notifies the Import Policy of items of Chapter 7 of the Indian Trade Classification (Harmonized System), 2017, Schedule-1 (Import Policy)
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F. No. 14/3/2018-EP(Agri-III) - S.O. 1479(E) - dated
29-3-2019
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FTP
Central Government amends the Import Policy Conditions of items of Chapter 7 of the Indian Trade Classification (Harmonized System), 2017, Schedule-1 (Import Policy)
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F. No. 14/3/2018-EP(Agri-III) - S.O. 1478(E) - dated
29-3-2019
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FTP
Central Government notifies the Import Policy of items of Chapter 7 of the Indian Trade Classification (Harmonized System), 2017, Schedule-1 (Import Policy)
GST
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F. No. 354/25/2019-TRU - dated
29-3-2019
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CGST
Corrigendum - Notification No. 10/2019-Central Tax, dated the 7th March, 2019
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F.No.354/25/2019-TRU - dated
29-3-2019
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UTGST
Corrigendum – Notification No. 2/2019-Union Territory Tax, dated the 7th March, 2019
Income Tax
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31/2019 - dated
31-3-2019
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IT
Notifies that every person who has been allotted permanent account number as on the 1st day of July, 2017, and who is eligible to obtain Aadhaar number, shall intimate his Aadhaar number to.
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Rate of GST - Polypropylene mats manufactured by plaiting together the Polypropylene mono-filament or tube or straw come under the Chapter 46 of Customs Tariff Act, 1975 - Taxable at 5% GST after 25.1.2018
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Liability of GST - tour packages, which are providing to guests by way of separate services like accommodation, serving food and beverages, service of authorized guides, trekking accessories etc. against separate invoices - Liable to tax at the rates as applicable to such goods and services separately.
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Classification of goods - rate of GST - The tobacco leaves including the leaves cut from plant. dry leaves. cured leaves by applying natural process ordinarily used by the farmers to make them fit to be taken go market shall qualify 5% tax rate
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Classification of goods - whether PVC Tufted Coir Mats and Matting can be fitted into low band of tax rate of 5% as Coir Mats and Matting - held NO - Liable to GST @12%
Income Tax
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Giving effect to the judgement(s)/order(s) of Hon'ble Supreme Court on Aadhaar-PAN for filing return of income
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Power of CIT u/s 263 - Commissioner in exercise of the revisional powers cannot initiate fresh inquiry about the same claim on the ground that one of the aspects of such a claim was not considered by the AO.
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Unexplained credit u/s 68 - Merely because the investment was considerably large and as noted, several corporate structures were either created or came into play in routing the investment in the assessee through P5AHIML would not be sufficient to brand the transaction as colourable device.
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Income recognition - there is a dispute with regard to the collection of the amount between the assessee and his client and the assessee client is also appears to be a bankrupt - Income not to be recognized following AS-9
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Unexplained credit u/s 68 - unsecured loan from registered NBFC and other companies - revenue failed to prove that loan were bogus - additions deleted.
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The completed assessment cannot be reopened without rejecting the books or confronting with assessee about not accepting the valuation submitted by assessee and the completed assessment cannot be re-visited on the same information available on record.
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Proceeding u/s 158BD - search u/s 132 - recording of satisfaction by AO is sine qua non that income belongs to any person, irrespective of fact that appellant on day of search revealed that the he had undisclosed income
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Rectification u/s 254 - A binding decision is always retrospective - When a court decides a matter it only interprets law and applies it to the facts of the case. any interpretation of law contrary to subsequent judicial pronouncement it is a mistake apparent from record.
Customs
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Revocation of CHA License - mere discrepancy in obtaining authorization from a client is not sufficient to revoke the licence or that absence of physical verification of the importer is also not a sufficient ground for revocation of licence.
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Penalty u/s 114A of the Customs Act, 1962 - the explanation put forth on behalf of the appellant that they were confused by the master circular of the Reserve Bank of India is acceptable - penalty set aside.
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Classification of imported goods - Audio and Video equipment - the allegation that the AVR or HTS is an AM/FM receiver is akin to identifying the elephant not from its entire body, but by its tail. - Not to be classified under Chapter Heading 8527.
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Refund of demurrage charges - Unless the rules or relevant policy clearly mandate waiver from such services, courts cannot issue directions to such service providers because warehouseman or service provider (like CELEBI) invests with its resources, deploys manpower and creates infrastructure for safety and security to the goods
DGFT
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Import Policy Conditions of items of Chapter 7 of HSN, Schedule-1 (Import Policy) - Peans (Pisum Sativum) including Yellow peas, Green peas, Dun peas and Kaspa peas.
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Import Policy of items of Chapter 7 of HSN, Schedule-1 (Import Policy) - Beans of the SPP Vigna Radiata (L.) Wilczek. - Urad
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Import Policy of items of Chapter 7 of HSN, Schedule-1 (Import Policy) - Beans of the SPP Vigna Mungo (L.) Hepper. - Moong
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Online filing, processing and system based approval of MEIS applications in respect of SEZ shipping bills
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EPCG Scheme – Applicability of amendment to Para 5.10(c) of Hand Book of Procedures 2015-20 (Mid-Term Review)
PMLA
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Attachment or retention of property or record seized under PMLA shall continue during the investigation for a period not exceeding ninety days. The said prescribed period has already been expired as more than a year has already elapsed - Documents directed to be returned.
Service Tax
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Business Support Service - Investing in the railways lines so as to enable the railways to run on the Adipur Mundra Port lines cannot be held as providing of any infrastructural services so as to boost the business of the service receiver.
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Valuation - Franchise services - By merely mentioning that for master licensee 33% of all the fees collected shall exclude advertising fee does not takes that amount out of the tax net of the amount received from franchisees for providing them the ‘Franchise Service’.
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CENVAT Credit - quantification of the amount to be reversed - non-filing of intimation is only a procedural lapse, for which the benefit provided under Rule 6(3)(ii) read with Rule 6(3A) of the rules cannot be denied.
Central Excise
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Allegation of wrong availment of cenvat credit - The oral evidences recorded are not reliable, being in violation of the provisions of Section 9D of the Act.
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CENVAT Credit - capital goods - The mere fact that they have availed depreciation disentitles them to credit. The subsequent filing of revised income tax return might have amounted to reduction of depreciation claim, but it does not make the original claim correct.
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CENVAT Credit - input service - the exclusion clause ‘A’ in Rule 2(1) of the Cenvat Credit Rules, does not cover the service in the nature of “Erection, Commissioning and Installation Service”.
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Demand u/s 11D - collection in the name of tax / duty - there was a request by the appellant for increase in the price due to revision of excise duty, but the same cannot be construed that the enhanced price represents excise duty and the same has been collected from the government agencies and not deposited with the Govt. Section 11D
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Valuation - Pharmaceutical products, Medicaments - the price at which the goods were ultimately sold/supplied to the govt. agencies against rate contract be the correct transaction value and duty is required to be paid on the same.
VAT
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Levy of penalty - non-issuance of Tax Invoice - instead, Sale Invoice were issued - in the absence of requisite details supplied by the purchasing dealers, no penalty cannot be imposing on selling dealer / assessee.
Case Laws:
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GST
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2019 (4) TMI 77
Classification of goods - polypropylene mat commonly known as Plastic Mat, Plastic mats are manufactured by plaiting together the mono-filament and strips - whether classified under HSN code 460101 or otherwise? - Held that:- The process of manufacture of plastic mat/matting (Satranji) is by converting polypropylene into tube form by application of heat and air on an extruder machine with the length of plastic tube of diametre 1.5 mm. Then cut it into the size of the mat to be manufactured. These cut tubes are further used on weaving loom machines to produce Satranji with the help of polyester or cotton yarn as weft materials. Therefore the woven plastic materials like plastic mat or mattings will not come under the classification in Chapter 39. The plastic tubes of diameter of 1.5 mm used for the manufacture of plastic mat / mattings (Satranj) would be covered within the term mono-filament and strips and the like of plastics as described in Chapter 46. Therefore mats / mattings made by weaving or binding parallel stands of plaiting materials, twine, cord etc. will be covered under Chapter 46. The Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017 was amended by Notification No. 27/2017 Central Tax (Rate) dated 22.092017 inserting a new Entry under 1st Schedule vide Sl. No. 198A which read as grass, leaf or reed or fibre products, including mats, pouches, wallets covered under HSN No.4601 or 4602. Accordingly these specified items became taxable @ 2.5% SGST from 22-09-2017. The items falling under HSN Nos. 4601 and 4602 as specifically mentioned in the Entry at Sl No. 198A of Schedule I; such as goods made from grass, leaf or reed or fibre products, including mats, pouches, wallets was taxable @ 5% from 22.092017 - the items manufactured out of polypropylene were excluded from the purview of Entry at Sl. No. 198A of 1st Schedule of GST Tariff and were covered under 2nd Schedule of the GST Tariff till 25-01-2018; when the entries at SI Nos. 103 104 of IInd Schedule was omitted and the entry at Sl.No. 198A of Schedule of GST Tariff Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017 was substituted as Manufactures of straw, of esparto or of other plaiting materials: basketware and wickerwork by Notification No-6/2018- Central Tax (Rate) dated 25.01.2018 and S.R.O. No. 555/2018 dated 10-08-2018 of SGST w.e.f. 25-01-2018. Polypropylene mats manufactured by plaiting together the Polypropylene mono-filament or tube or straw come under the Chapter 46 of Customs Tariff Act, 1975 - As per Entry 103 of Schedule of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017 and S.R.O. No. 360/2017 dtd.30-06-2017 polypropylene mats were taxable @ 12% GST 25-01-2018 and thereafter at 5% GST as per Entry 198A of the Schedule of Notification No. 01/2017-Central Tax (Rate) dated 28.05.2017 and S.R.O.No. 360/2017 dtd.30-06-2017.
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2019 (4) TMI 76
Maintainability of Advance Ruling application - non-payment of fee - Held that:- As per Circular No. 25/25/2017-GST dated 2r December, 2017 issued by Central Board of Excise and Customs, the applicant for advance ruling has to make the payment of the fee of ₹ 5,000/- each under the CGST and the respective SGST Act. But the petitioner has remitted ₹ 5,000/- under SGST head only. Even though intimation was given to the applicant to pay deficit amount, there was no response from the side of applicant. The application for advance ruling is not maintainable and rejected.
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2019 (4) TMI 75
Liability of GST - tour packages, which are providing to guests by way of separate services like accommodation, serving food and beverages, service of authorized guides, trekking accessories etc against separate invoices - Serial No.7 of N/N. 11/2017- Central Tax (Rate) dated 28.06.2017 as amended by N/N. 13/2018- Central Tax (Rate) dated 26.07.2018. Held that:- It is stated that food and beverages are prepared in each of the destinations, and are served to the guests as per their request and separate invoices are to be issued - The applicant is providing service of authorized guide which attract 18% GST. As per Circular No.47/21/2018-GST dtd.08-06-2018, it has been clarified that the taxability of supply would have to be determined on a case to case basis looking at the facts and circumstances of each case. Where a supply involves supply of both goods and services and the value of such goods and services supplied are shown separately, the goods and services would be liable to tax at the rates as applicable to such goods and services separately. In case where a supply involves supply of both goods and services and the value of such goods and services supplied are shown separately, the goods and services would be Liable to tax at the rates as applicable to such goods and services separately.
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2019 (4) TMI 74
Classification of goods - rate of tax - sun-cured Tobaco leaves Known in Kerala as purchased from farmers of Puliyampatti areas of Tamil Nadu used only for chewing by consumers in Kerala - whether taxable at 5% (CGST + KGST) classifiable under Serial No. 109 of the Schedule I of Notification No. 1/2017 - Central Tax (Rate) dated 28-06-2017 or 28% classifiable under Serial No. 13 of Schedule IV of the said notification? - Held that:- The produce Kannipukayila is nothing but tobacco leaves which are covered under Chapter 24 of Customs Tariff Act, 1975. As per HSN Code 2401, tobacco heaves are taxable at 5% GST. It is clarified that tobacco means any form of tobacco. whether cured or uncured and whether manufactured or not. and includes the leaves. stalks and stems of the tobacco plants, but does not include any part of the tobacco plants while still attached to the earth. Accordingly, tobacco leaves in any form. i.e. cured and uncured including leaves. stalks, and stems of the tobacco plant comes under entry 109 of First Schedule. The tobacco leaves including the leaves cut from plant. dry leaves. cured leaves by applying natural process ordinarily used by the farmers to make them fit to be taken go market shall qualify 5% tax rate. It is a common knowledge that without curing tobacco leaves cannot be consumed. The curing in relation to tobacco leaves, means removal of moisture from the tobacco leaves. Section 2(c) of Central Excise Act, 1944 specified that the term curing includes wilting, drying, fermenting and any process for rendering an unmanufactured product fit for marketing or manufacture. Hence. the unavoidable process of curing of tobacco leaves to make it fit for marketing will qualify the word curing mentioned in Chapter 24 of Customs Tariff Act, 1975.
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2019 (4) TMI 73
Classification of supply - Job work - Mixing of rubber compound on the materials supplied by the principal and returning the finished products to the principal - whether classified under Sl.No.26(i)(b) of 11/2017 (Central Tax (Rate)) and SRO.No.370/2017. Held that:- The materials supplied for execution of job work are falling under Chapter 50 to 63 in the First Schedule to the Customs Tariff Act, 1975. The materials like textile, carpets, coir etc. are supplied by the principal for executing job works along with moulds in the required designs. All the raw materials supplied by are covered under Chapter 50 to 63 of the Customs Tariff Act, 1975. Therefore the job work services applied on such goods are squarely come under Sl.No. 26(i)(b) of Notification 11/2017 and taxable @ 5% GST.
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2019 (4) TMI 72
Classification of goods - whether PVC Tufted Coir Mats and Matting can be fitted into low band of tax rate of 5% as Coir Mats and Matting or into standard band of tax rate of 12% as Carpets and other textile floor coverings? - whether classifiable under Chapter Heading 5703 Carpets and other textile floor coverings, tufted, whether or not made up, sub heading 570390 - of other textile materials - as Tariff item 57039020 Carpets and floor coverings of coir or as Tariff item 57039090 Other? Held that:- The PVC compound in uniform and required thickness is fed into the conveyor belt. The coir yarn cut into Pile is thickly and uniformly embedded into the PVC compound. conveyor passes through the heating and cooling zones where the product is cured. After curing the product is conveyed to the shearing machine where shearing takes place and passed through the slitting machine where the product is cut lengthwise. With the hap of a take up device, the product is fed into the cross cutting station Where the product is cut standard size. In case of matting, after shearing the matting are rolled up using roller device. The whole process is fully automated. me coir as well as PVC chemicals used for the manufacture of tufted coir mats have equal importance. However, PVC and chemicals influences cost, quality on Inputs more than coir. Coir mats, mattings and floor coverings covered under HSN 5702, 5703 and 5705 are taxable @ 5% GST vide Notification No.1/2017-CT-Rate Dtd.28-06-2017 as amended by Notification No.34/2017-CT-Rate dtd. 13-10-2017. This classification covers only the commodities which are manufactured exclusively using coir fiber. If any, PVC or rubber or any other materials are stuffed on the textile of coir, which is used as floor mats or mattings, it will come under Customs Tariff Head 5703 90 go and it will be taxed @ 12% GST.
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2019 (4) TMI 71
Extension of time period for filing of GST Tran-1 - transitional input tax credit - transition to GST Regime - Held that:- The respondents are directed to open the portal before 31st of March 2019.In the event they do not do so, they will entertain the GST ITC-01 of the petitioner manually and pass orders on it after due verification of the credits as claimed by the petitioner. They will also ensure that the petitioner is allowed to pay its taxes on the regular electronic system also which is being maintained for use of the credit likely to be considered for the petitioner. List this matter on 06.05.2019.
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2019 (4) TMI 70
Valuation - Inclusion of tax collected at soruce (TCS) as per income tax in the value for the purpose of GST - purchase of a car worth more than ten lakhs - Section 206C(1F) of the Income Tax Act - Held that:- The authority will not act on the clarification Circular No. 76/50/2018-GST, pending the disposal of the writ petition - petition disposed off.
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2019 (4) TMI 69
Extension of time to upload FORM-GST TRAN-1 - transitional credit - transition to GST regime - Held that:- Stand over to 6th February, 2019. On that date, the respondents No.3 and 4 as well as the respondents No.6 and 7 shall inform this court about the status of the petitioner s application. It is clarified that the petitioner s right to make the application within the time-limit stipulated under the relevant notification would not be prejudiced on account of the delay that has occasioned on the part of the conflicting stands taken by the respondent authorities.
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2019 (4) TMI 68
Detention of goods alongwith vehicle - seizure on the ground that the date of the tax invoice mentioned in the E-WAY bill was different from the date mentioned on the tax invoice - clause (a)(b) & (c) of Section 129(1) of the Act - Held that:- In the present case, since the petitioner is the owner of the goods, the release of the goods is directed on petitioner furnishing security of the amount equivalent to that mentioned in clause (a) of Section 129(1) of the Act - petition disposed off.
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Income Tax
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2019 (4) TMI 79
Entitlement to claim deduction of the club expenses - HELD THAT:- Admittedly, the said amount incurred by the Assessee is towards the 'membership fees', only to provide entry to the club and never to meet any expense in respect of the comforts or consumption of food or beverages by the individuals. This issue has already been dealt with in detail by this Court and the position has been answered in favour of the Assessee and against the Revenue. Entitled to make provision for loyalty payable to M/s.General Tyres International Company of U.S.A. for a period prior to 13.10.1993, as the agreement executed by the parties was approved by the Government of India only on 13.10.1993 - HELD THAT:- Referring to the actual facts and circumstances including that the approval was given with reference to the continuation of the agreement from the date of expiry of the previous agreement, this question has been answered by this Court in favour of the assessee and against the revenue, as per our verdict [2019 (4) TMI 78 - KERALA HIGH COURT]. In the said circumstance, it stands answered against the Revenue in the instant case as well, in respect of the assessment year in question. Dis-allowance on account of the lower of 4% charge on inter-corporate deposit than interest paid by the assessee on the ground of business expediency - HELD THAT:- This is sought to be rebutted by the learned Sr.Counsel for the assessee, pointing out that the payment of interest in respect of the deposits procured or made among different companies, on different dates, depend upon the facts and circumstances prevailing on the given date and the business expediency as on that date, which may vary from time to time. There cannot be any 'universal rate' or rule in this regard and further, the Department, at no point of time, was having any case that the interest satisfied by the Assessee at a higher rate to the Companies concerned, in connection with the inter-corporate deposits procured by the Assessee, was actually not incurred by the Assessee. In the said circumstance, the verdict passed by the Tribunal does not call for any interference, submits the learned Senior Counsel. After hearing both the sides, this Court is of the view that the finding and reasoning given by the Tribunal is quite in order; more so, since it is only a 'question of fact' and no substantial question of law is involved Commission paid by the suppliers of the assessee to the different investment companies amounts to diversion of funds - HELD THAT:- AO found that the commission paid by the suppliers to the investment companies was not accounted in the accounts of the assessee and hence addition was made in this regard. This was deleted by the Commissioner (Appeals) in the appeal filed by the Assessee, holding that the same is not correct or sustainable and that the said commission receipts were to be assessed at the hands of the investment companies and not at the hands of the Assessee. This was affirmed by the Tribunal in Annexure-C order, holding that the aforesaid commissions have already been substantively assessed at the hands of the investment companies. This being the position, it could not have been assessed at the hands of the assessee under any circumstance. The said finding on fact is not assailable under any circumstance and we hold it against the Revenue. Addition on account of the sale of good tyres as defective or second quality tyres - Held that:- AO restricted the quantum to 1%, as reckoned in respect of the Gujarat unit and made addition to the requisite extent. In the appeal filed by the Assessee, the Commissioner (Appeals) found that there cannot be any addition on the basis of surmises or conjectures and that the accounts were accepted and not rejected; adding that such reduction in the value was because of the defects with reference to the consumer complaints. The said finding was affirmed by the Tribunal. We are of the view that this is purely a 'question of fact' answered with reference to the materials on record and no interference is warranted at our hands, as no substantial question of law is involved. Question is answered against the Revenue. Dis-allowance from the general expenses for lack of vouchers - HELD THAT:- As per Annexure-C order under challenge, the Tribunal held that there was no valid ground to call for interference with the order passed by the Commissioner. The said 'finding on fact' is not liable to be interdicted by this Court, for want of any substantial question of law. Question stands answered against the Revenue. Entitlement to claim being the rent paid for the Allahabad Bank building and is not the rent payment, 'personal' in nature - Commissioner (Appeals), restricting the dis-allowance only to an extent of the remaining 50% - HELD THAT:- The Tribunal declined interference in both the appeals, holding that there was no tenable ground. In fact, it is borne out from the materials on record, that the Chairman and Managing Director of the Assessee Company was also the Chairman and Managing Director of some other Companies as well, who are housed in the building in question and as such, the dis-allowance/restriction to an extent of 50% came to be sustained. We do not find any reason to interdict the said finding and reasoning and no substantial question of law (but for a question of fact) is brought to our notice. It stands answered against the Revenue.
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2019 (4) TMI 78
Capital expenditure u/s 35D(1) and (2) - Revenue submits that Section 35D of the Income Tax Act is not at all attracted to the case in question as the assessee herein had already abandoned the project and as such, no benefit was liable to be extended and hence further consideration would only be a futile exercise - ITAT directing the AO to consider the capital expenditure under 35D(1) and (2) - HELD THAT:- This Court finds that no finding on merit has been arrived at by the Tribunal and it is only an 'open remand'. It is quite possible for the Revenue to raise all the relevant contentions including the 'question of law', if any, before the Assessing Officer, even with reference to Section 35D. No prejudice is caused in any manner. That apart, in so far as no finding has been rendered by the Tribunal as to the applicability of Section 35D , it cannot be said that the appeal involves any 'substantial question of law' so as to call for interference of this Court in exercise of the power under Section 260A of the Income Tax Act.
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2019 (4) TMI 67
Withdrawal of application for Advance ruling - HELD THAT:- Since the applicant is a non-resident, there is no bar in law preventing the Assessing Authority from passing an assessment order and the ITAT from deciding the appeal carried therefrom. Reference can be made to Section 245RR stating No income-tax authority or the Appellate Tribunal shall proceed to decide any issue in respect to which an application has been made by an applicant, being a resident, under sub-section(1) of Section 245Q. We also notice that the DR has no objection to the withdrawal of this application. Application is allowed to be withdrawn and is disposed off as ‘withdrawn’.
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2019 (4) TMI 66
Rectification application - admission of additional documents - an order, allowing an application for early hearing - placing on record of the additional documents - HELD THAT:- SLP dismissed.
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2019 (4) TMI 65
Challenge of stricter passed by High Court against AO - adverse remarks - HELD THAT:- High Court was not justified in its remarks against the petitioner and in issuing the directions which it has issued. The High Court, in the course of its judgment has issued a slew of directions including: (i) The necessity of weeding out ‘deadwood’; (ii) imposition of costs of ₹ 1.5 lakhs which are to be apportioned among two officers, out of them being the petitioner; (iii) Making an adverse entry in the Annual Confidential Reports of the petitioner; and (iv) Denial of promotion including monetary benefits to the petitioner. Apart from the fact that these directions were issued without specific notice to the petitioner, we find that they were wholly unnecessary having regard to the lis before the High Court. We accordingly, expunge the adverse remarks made against the petitioner in the impugned judgment and order of the High Court as well as the directions issued against the petitioner. Since the assessee is not concerned with the grievance which has been made by the petitioner before this Court, it was not necessary to issue notice to him in the present proceedings. SLP accordingly, disposed of.
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2019 (4) TMI 64
Power of CIT u/s 263 - Doctrine of merger - AO denied exemption u/s 11 to Slum Rehabilitation Authority stating that it is not Local Authority u/s 10(20) - Appeal against that order allowed by CIT(A) - CIT issued SCN to denies exemption u/s 11 in light of proviso to Section 2(15) - principle of merger - HELD THAT:- Tribunal was correct in drawing a conclusion that on the principle of merger, it was not open for the Commissioner to take the order of assessment in revision. Once the entire claim of the assessee for exemption under Section 11 of the Act was at large before the Appellate Commissioner, the Commissioner (Appeals) had wide powers and jurisdiction to examine all aspects of the such a claim. It is well settled that the Commissioner (Appeals) has even the power of enhancement of assessment once an appeal is filed by the assessee. The present case was not even one of the enhancement of assessment, it was a case where the claim of the assessee was rejected by the Assessing Officer on one ground. If the Revenue was of the opinion that such order could have been sustained not on the ground on which the Assessing Officer had rejected it, but on some other legal ground, it was open for the Revenue to argue the same before the Appellate Commissioner. Nothing prevented the Revenue from persuading the Appellate Commissioner to reject the claim of the assessee on such legal ground. At any rate, the Commissioner in exercise of the revisional powers cannot initiate fresh inquiry about the same claim on the ground that one of the aspects of such a claim was not considered by the Assessing Officer. Clause (c) of Explanation 1 may be worded in a manner as suggesting the extent of the powers of the Commissioner for taking an order in revision, its effect is of circumscribing such powers in cases where the order passed by the Assessing Officer has been subject matter of any appeal and such subject matter has been considered and decided in such appeal. This provisions thus statutorily recognizes the principle of merger and avoids any conflict of opinion between two quasi judicial authorities of the same rank.
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2019 (4) TMI 63
Unexplained credit u/s 68 - issuance of preference shares to P5 Asia Holding Investment (Mauritius) Ltd (P5AHIML) - AO alleges that only a sum of ₹ 7.31 crores received from P5AHIML for its own operation, the balance amount was transferred to Idea Cellular Ltd (holding company) or to Idea Cellular Infrastructure Services Ltd for the purpose of other investment - the Assessing Officer in his remand report agreed that the investments were genuine - investment made by P5AHIML was done registering itself with SEBI and after obtaining necessary approvals from Ministry of Finance - CIT(A) dismissed the appeal for wanty of time as it was direct by High Court to pass order within 3 months - Tribunal after detailed inquiry allowed the appeal HELD THAT:- at every stage, the full inquiry of source of funds and other relevant factors in relation to the investment in question was carried out. The Assessing Officer himself carried out a detailed inquiry. His initial suspicion or in other words starting point of inquiry on the basis that apparently the investor was investing huge amount which may prima facie appear to be without adequate possible returns, may be fully justified. However, when all the relevant factors are properly explained, including the fact that the payment of dividend was not the sole attraction for the investor and that the investor could expect a fair return on the investment, of course, subject to vagaries of the any business decision, the Assessing Officer had to advert to all such materials on record in proper perspective. As noted by the Tribunal, all necessary permissions and clearances were granted by the Government of India and other government authorities for such investment. The source of the funds in the hands of P5AHIML was also verified. The Assessing Officer himself was also prima facie of the belief that the materials on record prove genuineness and financial capacity of the persons making investment. Tribunal carried out the detailed inquiry into all aspects of the matter and noticed no suspicious movement of the funds. Merely because the investment was considerably large and as noted, several corporate structures were either created or came into play in routing the investment in the assessee through P5AHIML would not be sufficient to brand the transaction as colourable device. - Appeal of department is dismissed.
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2019 (4) TMI 62
Deduction u/s 42 - business of prospecting for or extraction or production of mineral oils - expenditure by way of infructuous or abortive-exploration expenses - non surrender of right to carry on oil exploration - assessee requested for an extension of project but DGHC rejected - HELD THAT:- For the applicability of clause (a) of subsection (1), the elements vital are that the expenditure should be infructuous or abortive exploration expenses and that the area should be surrendered prior to beginning of the commercial production by the assessee. In other words, as long as these two requirements are satisfied, the expenditure in question would be recognized as a deduction. The emphasis of this provision is of infructuous or abortive exploration expenses and that there is surrender prior to the beginning of the commercial production. The term surrender in this clause, therefore, has to be appreciated in light of these essential requirements of the deduction clause. The revenue in our opinion has put unnecessary stress on the term surrender while the main focus of the clause is on infructuous or abortive exploration expenditure in respect of area surrendered prior to the beginning of the commercial production. As long as the commercial production has not begun and the expenditure is abortive or infructuous exploration expenditure, the deduction would be allowed. The term surrender itself is flexible one and does not always connote the meaning of voluntarily surrender. As in the present case, the surrender can also take place under compulsion. The assessee had no choice but to surrender the oil blocks, because the Government of India refused to extend the validity period of the contract. Nevertheless, the act of the assessee to hand over the oil blocks before the commencement of commercial production would as well be covered within the expression; any area surrendered prior to the beginning of commercial production by the assessee. The revenue does not dispute that the expenditure was infructuous or abortive exploration expenditure - Appeal of revenue dismissed
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2019 (4) TMI 61
Reference u/s 55A to the Valuation Officer - valuation of the capital asset - value of the asset as claimed by the assessee, which is based on the estimate made by a registered valuer, is less than its fair market value - Tribunal found that there existed no circumstances to make a reference under Section 55A of the Act as demanded by the appellant - HELD THAT:- In the instant case, the AO had found that the valuation of the capital asset as on the date 01.04.1981 made by the assessee on the basis of the estimate of a registered valuer was less than its fair market value. The Assessing Officer did not make any reference to the Valuation Officer only on the premise or assumption that in the case filed by the son of the assessee, this Court had approved the cost of acquisition of the land owned and sold by him as ₹ 1,000/- per cent. AO had taken it for granted that since the assessee and his son had purchased the property in the same survey number on the same day at the same rate of price, the cost of acquisition would not be different in respect of those two lands and therefore, it was not necessary for making a reference under Section 55A of the Act. Even before the Assessing Officer, the assessee had produced the report of a registered valuer and the assessee had based his claim on the estimate made by the registered valuer. The Assessing Officer has shown no reason whatsoever for rejecting the valuation made by the registered valuer except the wrong notion entertained by him that the cost of acquisition of land owned and sold by the son of the assessee was approved by this Court as ₹ 1,000/- per cent. Thus in a case where the AO is of the opinion that the value of the capital asset claimed by the assessee, on the basis of the estimate made by a registered valuer, is less than its fair market value, it is not mandatory for the Assessing Officer to make a reference under Section 55A of the Act to the Valuation Officer. The substantial question of law is answered accordingly. However, on the facts of the case, we find that the Assessing Officer should have made a reference under Section 55A of the Act. - decided in favour of assessee.
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2019 (4) TMI 60
Benefit of depreciation on the plant and machinery purchased from vendor by the agreement - consideration for purchase of the plant, machinery etc. was much less than the whole consideration - HELD THAT:- We are of the opinion that the facts of this case have not been properly determined by the adjudicating authority below, on the basis of the said agreement by which the undertaking plant, machinery etc. were purchased by the assessee. If by the said agreement, the consideration for the plant and machinery is shown to be ₹ 4.10 crores and that the assessee was to pay ₹ 4.10 crores as consideration for it, but under an arrangement with the vendor paid a part of it to the vendor and the other part to liquidate the workman’s liability, then it can be clearly demonstrated that the entire consideration was a capital expenditure for acquisition of a capital asset. On the other hand, if it is shown that the consideration for purchase of the plant, machinery etc. was much less than the whole consideration and that payment of the statutory dues of the workman was a distinct consideration forming the other part of the whole consideration, the picture would be completely different and similar to Commissioner of Income Tax, Kolkata versus Hooghly Mills Co. Ltd. [2012 (1) TMI 319 - SUPREME COURT OF INDIA.] For proper application of law, facts are very essential. For those reasons, we remand this matter back to the tribunal to determine this particular question de novo on proper evidence and by a reasoned order within six months of communication of this order.
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2019 (4) TMI 59
Reopening of assessment u/s 147 - quashing of the assessment order - disputed questions of fact raised in the writ petition - availability of alternative statutory remedy - HELD THAT:- Keeping in view the availability of alternative remedy of appeal against the impugned order and the law laid down by the Apex Court in COMMISSIONER OF INCOME TAX & OTHERS VERSUS CHHABIL DASS AGARWAL [2013 (8) TMI 458 - SUPREME COURT] on the issue, we do not find any ground to interfere in exercise of writ jurisdiction under Articles 226/227 of the Constitution of India - Writ dismissed
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2019 (4) TMI 58
Stay petition - steps for recovery of the outstanding tax - HELD THAT:- The petitioner has challenged the order passed by the appellate authority before the ITAT, Lucknow which is pending. The petitioner has also moved an application for interim relief before the learned Tribunal which is also pending. The petitioner had deposited 20% of the assessed tax while filing the appeal before the CIT, however, the opposite parties in most arbitrary manner have seized the bank accounts of the petitioner, as such, the petitioner has been put to great hardship. As submitted that the opposite parties have already taken away an amount to the tune of ₹ 53,33,55,784/- from the bank accounts of the petitioner. Opposite parties submits that 20% of the assessed tax was required to be paid at the appellate stage. The appeal preferred by the petitioner has been dismissed and now the matter is before the learned Tribunal. No interim protection has been granted by the learned Tribunal, as such, the opposite parties are fully empowered to take appropriate steps for recovery of the outstanding tax. It is undisputed that the matter is pending before the Income Tax Appellate Tribunal and the stay application is also pending. The matter is listed for 19.3.2019. Since the application for interim relief is pending consideration before the learned Tribunal, as such, till disposal of stay application, the opposite parties shall not take any coercive measures including seizing of the bank accounts of the petitioner. The opposite parties shall, therefore, release the bank accounts of the petitioner forthwith.
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2019 (4) TMI 57
Income recognition - unrealized income - recognizing the income which cannot be recovered - method of accounting - unrealized revenue from sales toits customer - need not be recognized as per Accounting Standard-9 fr the AY 2013-14, as the assessee had filed a suit for recovery of money in April 2014 and the same is pending? - as per tribunal unrealised income need not be recognized on mercantile basis, when the corresponding expenses have been taken into account in the books of the assessee - Defendant has already become a bankrupt - Held that:- Admittedly, the assessee entered into service contract for providing software to a South African Government Undertaking called "Province" for three years. It appears that subsequently the above said undertaking become bankrupt which forced the assessee to file a suit against the said Undertaking in South Africa in the month of April 2014. From the factual narration found in the Orders of Assessing Officer and Commissioner of Income Tax, it could be seen that the amount assessed is not recognized. When the Defendant has already become a bankrupt, realisation of the amount cannot be certain. It will take its own time. There is an uncertainty in the ultimate collection of the revenue. Admittedly, there is a dispute with regard to the collection of the amount between the assessee and his client and the assessee client is also appears to be a bankrupt, certainty of recovering of amount cannot be reasonably expected within the assessment year. The Tribunal considered this aspect and found that there is no point in recognizing the income which cannot be recovered and subsequently writing of bad debts in the subsequent years and come to the conclusion that the Revenue need not be recognized for a sum of ₹ 18,94,96,500/- for the year ending 31.3.2013 for the relevant Assessment Year 2013-14. Accordingly, ordered deletion of the addition made for the relevant assessment year. The Tribunal has considered the factual aspects as well as the Accounting Standard-9 approved by the Central Government and arrived at right conclusion, we are of the view that there is no substantial questions of law involved in this matter. - Decided against revenue
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2019 (4) TMI 56
TP adjustment - upward adjustment in ITES segment - CIT(A) directed exclusion of two concerns from final list of comparables i.e. Infosys BPO Ltd. and Eclerx Services Ltd. - assessee has pointed out that two concerns i.e. Accentia Technologies Ltd. and Informed Technologies Ltd. need to be excluded from final set of comparables - HELD THAT:- The assessee was engaged in business of BPO services thus companies functionally dissimilar with that of assessee need to be deselected from final list. Eclerx Services Limited is not a comparable company as engaged in KPO services. Accentia Technologies Ltd. cannot be selected in the final list of comparables as during the year under consideration, there was an extraordinary event of amalgamation. Jeevan Softech Ltd. - We direct the Assessing Officer / TPO to work out the correct PLI of said concern and then determine the average margins of comparables in order to compute arm’s length price of international transactions. Informed Technologies Ltd. has been showing different profitability from year to year and such a concern cannot be picked up as being functionally similar because of abnormal profitability trend. Accordingly, we direct the Assessing Officer / TPO to exclude Informed Technologies Ltd. from final list of comparables. Claim of risk adjustment out of margins of comparables - HELD THAT:- The issue of allowability of risk adjustment stands settled by various decisions of different Benches of Tribunal and applying the same parity of reasoning, we direct the Assessing Officer to allow risk adjustment @ 20% to the margins of comparables and compute the transfer pricing adjustment, if any, in the hands of assessee accordingly. The Assessing Officer / TPO shall afford reasonable opportunity of hearing to the assessee before finally computing arm’s length price of international transactions in line with our directions in the paras hereinabove. In the final analysis, we summarize our decision i.e. concerns Eclerx Services Ltd., Accentia Technologies Ltd. and Informed Technologies Ltd. are to be excluded from final list of comparables; the PLI of margins of Jeevan Softech Ltd. need to be re- computed and further risk adjustment is to be allowed @ 20% and not 2%. Assessee appeal allowed.
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2019 (4) TMI 55
Estimation of GP - rejection of books of account - addition on account of low gross profit - restricting the GP rate @ 5% to NP rate @ 2.3% by CIT(A) - HELD THAT:- CIT(A) observed that in assessee’s own case for the assessment year 2007-08 had approved application of net profit rate @3.3% for estimation when there was evidence of unrecorded transactions. Considering other factors, Ld. CIT(A) applied the rate @ 2.3% on the entire turnover. Considering all admittedly the turnover which the basis of show cause notice of Excise Department has been set aside by the CESTAT, therefore the component is not available now for estimating the profit. We, therefore, direct the AO to adopt a net profit @3.3% on the turnover excluding the turnover as determined by the Excise Authorities. Ground of the appeal of the Revenue is partly allowed. Addition on account of Central Excise, addition on account of VAT and undisclosed investment - HELD THAT:- We find that the CESTAT vide its order [2018 (10) TMI 82 - CESTAT NEW DELHI] has set aside the order passed by the Commissioner of Central Excise and Service Tax, therefore, the action of the Assessing Officer is not justified. Accordingly, we confirm the order of the CIT(A) in deleting the addition Addition on account of unaccounted business of the assessee - AO on the basis of show cause notice of the Excise Department reached to a conclusion that the assessee was engaged in the business of unaccounted sales out of its books of account and therefore, some investment would also have been made by the assessee for the alleged unaccounted business confirmed by CIT - HELD THAT:- We find that the CESTAT vide [2018 (10) TMI 82 - CESTAT NEW DELHI] has set aside the order passed by the Commissioner of Central Excise and Service Tax, therefore, the action of the Assessing Officer is not justified. Accordingly, we confirm the order of the ld. CIT(A). Thus, ground of the appeal of the Revenue is dismissed. Rejection of books of account - assessee had not followed the provisions of Section 145 - HELD THAT:- Assessing Officer discussed the contents related to the show cause notice, cash payments towards purchase of scrap and also cash payment to the transporter on the same day, statements of Smt. Neera Banasal and Mayank Bansal, unexplained investment and valuation of closing stock and g.p. rate etc. in detail in the assessment order. While deciding ground no.1 of the appeal of the Revenue, we have partly allowed the ground of the appeal of the Revenue discussing the facts of present issue. Considering the material and rival submissions available on record, we find the ld. CIT(A) was justified in approving the action of the Assessing Officer. - Decided against assessee
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2019 (4) TMI 54
Proceeding u/s 158BD - search u/s 132 - Mandation for AO to record his satisfaction that undisclosed income belongs to any person - HELD THAT:- In the instant case, admittedly, the Assessing Officer had not recorded his satisfaction about the undisclosed income of the appellant. The result is that the entire proceedings initiated against the appellant stand vitiated. The Tribunal has found that only a prima facie satisfaction of the undisclosed income of the person, other than the person with respect to whom the search was made, is sufficient. The Tribunal has found that the entries in the documents seized during the search and the statement of the appellant recorded on the same day revealed that the appellant had undisclosed income and such a prima facie satisfaction by the authority concerned was sufficient. True, what is required is only a prima facie satisfaction of the Assessing Officer of the undisclosed income of the person other than the person with respect to whom the search was conducted. But, the crucial aspect is recording of such satisfaction by the Assessing Officer. We hold that it is mandatory for the Assessing Officer under Section 158BD of the Act to record his satisfaction about the undisclosed income of the person other than the person with respect to whom the search was conducted. Preparation of satisfaction note by the Assessing Officer is sine qua non before transmission of records by him to the other Assessing Officer who has jurisdiction over such other person. The substantial question of law is answered in favour of the assessee and against the revenue.
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2019 (4) TMI 53
Stay of demand - Recovery proceedings - Non speaking order - HELD THAT:- In the light of my observations in the matter M/S. SHRIRAM FINANCE VERSUS THE PRINCIPAL COMMISSIONER OF INCOME TAX-1, THE INCOME TAX OFFICER, THE COMMISSIONER OF INCOME TAX (APPEALS) [2019 (3) TMI 1478 - MADRAS HIGH COURT] as equally applicable to the facts and circumstances of the present case, the petitioner is directed to appear before the Assessing authority on 15.03.2019 at 2.30 pm. Appropriate orders on the application for stay shall be passed by the assessing authority after hearing the petitioner and considering the materials placed by the petitioner in support of the request for stay, within a period of two weeks thereafter (i.e.,) on or before 29.03.2019. There shall be an order of interim stay of recovery, till then.
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2019 (4) TMI 52
Rectification u/s 254 - Mistake apparent from record - Disallowance of deduction u/s 80IC - substantial expansion undertaken by the assessee - claim @ 100% of the eligible profits on substantial expansion undertaken, after having claimed deduction @ 100% of the profits for five eligible years - HELD THAT:- It is now settled law that even a new undertaking which has claimed deduction of its eligible profits @ 100% thereof for the first five years is entitled to claim deduction @ 100% of its profits thereafter on account of substantial expansion undertaken by it and the decision of the apex court in Classic Binding [2018 (8) TMI 1209 - SUPREME COURT OF INDIA] stands overruled. This in itself constitutes a mistake apparent from record. A binding decision is always retrospective and the decision overruled was never the law of the land. When a court decides a matter it only interprets law and applies it to the facts of the case. If the interpretation of law is found to be contrary in the light of judicial pronouncement rendered subsequently, it discloses a mistake apparent from record. Considering the entirety of facts in the present case, we are therefore of the opinion that this is a fit case for recalling the order for fresh hearing, which we hereby do. The appeal is accordingly recalled for hearing. The order was pronounced in open court. At the request of both the counsels who pointed out that the issue in the impugned appeal was covered by the decision of the Hon'ble Apex Court in the case of Pr.CIT, Shimla vs. M/s Aarham Softronics [2019 (2) TMI 1285 - SUPREME COURT] the appeal was posted for hearing today itself i.e. 28.03.2019.
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2019 (4) TMI 51
Penalty u/s 271(1)(c) - disallowance of foreign travel expenses - HELD THAT:- As pointed out on behalf of the assessee, it is manifest that the penalty u/s 271(1)(c) cannot be imposed both on merits as well as on account of non-maintainability of the Revenue’s appeal. The relevant primary details of foreign travel expenses to support the foreign travel expenses are available on record. In the circumstances, notwithstanding, the disallowance confirmed by the Tribunal in the quantum proceedings, the penalty of strict nature is not sustainable in view of long line of judicial precedents including the decision of Reliance Petroproducts [2010 (3) TMI 80 - SUPREME COURT] Secondly, the appeal of the Revenue itself is not maintainable owing to low tax effect in terms of CBDT Circular No.3 of 2018 dated 11/07/2018. Therefore, the appeal of the Revenue is dismissed on both counts.
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2019 (4) TMI 50
Unexplained credit u/s 68 - unsecured loan from registered NBFC and other companies - opportunity of cross-examination of witness was not given - HELD THAT:- We had carefully gone through the above order of the Tribunal in the case of Kota Dall Mill Vs. DCIT, [2019 (1) TMI 344 - ITAT JAIPUR] with respect to the very same search and seizure action taken with respect to the amount taken from M/s Jalsagar Commerce Pvt. Ltd. After having similar observation as in the instant case before us, the A.O. has made the addition which has been confirmed by the ld. CIT(A). We found that the Tribunal have dealt with the issue threadbare and after controverting each and every objection of the Assessing Officer and the ld. CIT(A) have confirmed the addition and also dealing with all the judicial pronouncements referred by the ld. CIT(A) deleted the addition so made with respect to the loan taken from M/s Jalsagar Commerce Pvt. Ltd.. As the facts and circumstances during the both the assessment year under consideration i.e. A.Y. 2015-16 and 2016-17 are pari material, respectfully following the order of the Tribunal in the group cases, we do not find any merit in the addition so made in respect of loan taken from M/s Jalsagar Commerce Pvt. Ltd. We found that the Coordinate Bench in the case of group concern namely M/s Kota Dall Mill (supra) vide its order 31/12/2018 deleted the similar addition made in the assessment year 2015-16 and 2016-17. We had also gone through the findings recorded by the ld. CIT(A) in deleting the addition and found that no clinching evidence was brought on record by the Assessing Officer for holding that the loan given by the M/s Competent Securities Pvt. Ltd. was bogus. The assessee proved the identity the company. The company was assessed by Income Tax Department u/s 143(3) of ITax Act.
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2019 (4) TMI 49
Condonation of delay of 2119 days - Disallowaance under various head for non deduction of TDS - appeal on advice of consultant after almost six years - HELD THAT:- The assessee itself conceded before learned CIT(A) vide letter dated 12.09.2011 to dismiss grounds of appeal concerning these four heads of disallowance of expenses which resulted in dismissal of these grounds of appeal by learned CIT(A) vide appellate order dated 23.09.2011. The assessee has now taken a u-turn almost six years after dismissal of its appeal by learned CIT(A) by filing this appeal before tribunal . There has to be an end to litigation as the other party in whose favour the issue is decided in litigation has also right to enjoy the fruits of litigation. There are certain rights which get vested in the litigant in whose favour the dispute is decided and this vested right cannot be unsettled in an casual manner. In our considered view based on the factual matrix of the case before us and our detailed discussions as contained in this order, no sufficient cause is made out by the assessee to condone delay of 2119 days which translates into delay of almost six years and appeal of the assessee is dismissed on this short ground only. The assessee fails in this appeal.
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2019 (4) TMI 48
Condonation of delay of 1274 days - earlier AR advised that substantial relief got from the CIT(A), hence there is no need to appeal further - HELD THAT:- Each case of delay has to be evaluated based on the facts available on record. We notice that the earlier AR has objected before CIT(A) only in completing the assessment based on DVO value u/s 142A. But, assessee has approached the present AR who has brought on record the other technical failure on the part of the AO, who completed the assessment u/s 143(3) rws 147. On verification of those issues for which assessee has appealed before us raising grounds of appeal. On initial observation, we notice that assessee has a favourable case, on merit. Considering the above decision of COLLECTOR, LAND ACQUISITION VERSUS MST. KATIJI AND OTHERS [1987 (2) TMI 61 - SUPREME COURT] and reasons for delay in filing the appeal submitted before us, only for the rendering of justice, we condone the delay in filing the appeal before us on the ground that the assessee was prevented by reasonable cause in filing the appeal belatedly. Reference to the Valuation Cell u/s 142A - reopening of assessment u/s 147 based on DVO report- reference to DVO without rejection of books of accounts in original proceedings - No information of reference given to asessee - allegation to failure to furnish the information despite sufficient opportunities - difference between the value determined in valuation report and the value accounted for in books of account - HELD THAT:- AO has not rejected the books nor informed the assessee that he is not accepting the valuation submitted by them or value adopted by them in the balance sheet are not proper. Without any hint, he has completed the assessment u/s 143(3). Even though, the reference was made to DVO on 17/11/2008, the assessee came to know only on 21/08/2009, when the DVO contacted the Assessee to submit various information to carryout inspection. Respectfully following the ratio laid down in the case of Lakshmi Constructions [2014 (10) TMI 223 - ANDHRA PRADESH HIGH COURT] we are of the view that the AO must have confronted the issue of not accepting the valuation of assessee and referred the issue to the DVO. In that case, AO can reopen the assessment even though the assessment was completed due to limitation. But, in this case, assessee was never informed about the reference to valuation and the assessment was completed. The completed assessment cannot be reopened without rejecting the books or confronting with assessee about not accepting the valuation submitted by assessee and the completed assessment cannot be re-visited on the same information available on record. Therefore, in our view, reopening was bad in law and, therefore, the reopening of assessment is quashed in all the appeals under consideration. - decided in favour of assessee.
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2019 (4) TMI 47
GP Estimation - G.P. rate determination - AO rejected the books of account on the plea that the stock records are not maintained and in respect of some of the suppliers notices issued u/s 133(6) was returned unserved - HELD THAT:- Mere rejection of books of account will not entitle the AO to make the trading addition unless the trading results offered by the assessee during the year under consideration are not comparative as compared to the earlier years. Even after rejection of books of account, addition can be made only on the basis of material on record. In the instant case, we found that during the year under consideration, the assessee had shown G.P. rate of 5.35% on a turnover of ₹ 51.86 crores for the year under consideration as against the G.P. of 5.26% on turnover of ₹ 45.65 crores in the A.Y. 2013-14 and 3.18% on a turnover of ₹ 33.16 crores in the A.Y. 2012-13. A trading result even after substantial increase in sale is much better than the G.P. rate of earlier two years. Accordingly, no justification for the trading addition so made by the AO. Ad hoc disallowances in respect of telephone, travelling and vehicle expenses etc. - HELD THAT:- Ad hoc basis by observing that a personal element cannot be ruled out. In this regard we observe that the assessee being a corporate entity, no disallowance can be made on the ground of personal use in view in the case of Sayaji Iron & Engg. Co. vs. Commissioner of Income-tax [2001 (7) TMI 70 - GUJARAT HIGH COURT]. Accordingly, we direct the Assessing Officer to delete the ad hoc disallowance of expenses of ₹ 45,088/-.
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2019 (4) TMI 46
Disallowance u/s 40A(ia) - maintenance charges paid to CISCO - separate transactions pertained to purchase of equipment and provision of annual maintenance services - allegation that no supporting evidences produced - payment constitute towards Fee for Technical Services (FTS) - HELD THAT:- the stand of the department and the assessee is contrary on the factual aspect of the issue i.e. as to whether the assessee had provided the relevant details and documents before the Assessing Officer or not. Looking into the facts of the case and in the interest of justice, it is our considered opinion that the issue should be reexamined by the Assessing Officer specially in the light of claim of the assessee that the assessee had submitted voluminous documents and explanations before the Assessing Officer which had not been given due credence by the Assessing Officer. Accordingly, the issue of payment of annual maintenance charges paid to CISCO System International BV stands restored to the file of the Assessing Officer with the direction to the Assessing Officer to re-examine the issue and pass appropriate orders in accordance with law Allowability of allowances paid to expatriates - non-taxable allowances - Master Service Agreement (MSA) with AT&T Communication Services - HELD THAT:- in view of the divergent claims of both the parties regarding the factual aspect of the issue and in the interest of justice, we deem it fit to restore this issue also to the file of the Assessing Officer with the direction to the Assessing Officer to reexamine the issue and pass appropriate orders in accordance with law after giving due opportunity to the assessee to present its case. Disallowance of gratuity liability of employees - employees transferred to AT&T GNS - HELD THAT:- We deem it fit to restore this issue also to the file of the Assessing Officer with the direction to the Assessing Officer to re-examine the issue and pass appropriate orders in accordance with law after giving due opportunity to the assessee to present its case. We also direct the assessee to cooperate with the assessing authority and furnish all the relevant details and documents when called upon to do so by the Assessing Officer failing which the Assessing Officer shall be at liberty to proceed ex parte qua the assessee and pass appropriate orders in accordance with law. Disallowance of differential amount of mark-up - Addition on account of notional interest - HELD THAT:- disallowance of differential amount of mark-up with respect to services provided by the assessee to AT&T Global Network Services India Pvt. Ltd. leading to an addition of ₹ 53,15,246/- and ground no. 7 pertaining to addition of ₹ 2,46,141/- being addition on account of notional interest income not charged from AT&T Global Network Services India Pvt. Ltd., it is seen that both these issues are covered in favour of the assessee by the order of the Tribunal in assessee’s own case for assessment year respectfully following the order of the Coordinate Bench in assessee’s own case for assessment year 2010-11 [2018 (4) TMI 33 - ITAT DELHI], we order deletion of addition on account of notional charging of mark-up as sustained by the Ld. DRP. On the same reasoning, we allow ground no. 7 also and hold that notional interest could not have been charged on this account and we order deletion of this addition also. Addition on account of notional profit on transfer of business - HELD THAT:- it is the contention of the assessee that neither were any employees transferred with respect to this segment nor were any assets transferred to the other company with respect to this segment and, therefore, there was no transfer of business as alleged by the department. Thus, in view of the contradictory stand of both the parties with reference to the relevant facts, we have no other option but to restore this issue also to the file of the Assessing Officer with the direction to the Assessing Officer to re-examine the issue and pass appropriate orders in accordance with law after giving due opportunity to the assessee to present its case. Disallowance of amount pertaining to the year-end provisioning - HELD THAT:- In the present appeal also, undisputedly no mistake has been pointed out by the Assessing Officer in the calculation and nor is it the case of the Revenue that the taxpayer has not paid certain bills. It is also undisputed that more than 80% of the evidence/s for the year end provisioning have been produced by the assessee and there is no finding by the Assessing Officer that the provisioning was not reasonable or did not have any scientific basis. Therefore, respectfully following the law laid down by the Hon’ble Apex Court in the case of Rotork Controls India Pvt. Ltd. [2009 (5) TMI 16 - SUPREME COURT OF INDIA] and also the order of the Coordinate Bench in assessee’s own case for assessment year 2010-11 as aforesaid, we order deletion of this addition. Short credit of TDS - deletion of addition on account of tax deposited on behalf of the expatriate employees - HELD THAT:- We deem it fit to restore these issues to the file of the AO with a direction to give due credit to the assessee both in respect of tax deducted at source and advance tax after due verification at his end.
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2019 (4) TMI 45
Transfer pricing adjustment - exclusion and inclusion of some companies as comparables - functinal similarity - HELD THAT:- Avani Cincom - No income is shown to result from sale of software product named Dxchange, the fact that the revenue and, therefore, the margin earned by Avani Cincom was impacted by use of such internally developed and owned software as an asset justified the exclusion of Avani Cincom from the final set of comparable companies. Helios Mathesan - This company is included by the TPO by overruling the objection of the assessee without citing any reasons. It is also noticed that the CIT (A) has also summarily rejected the contention about the failure of the employee cost filter and has upheld the inclusion of this company. It is seen that this company fails the employee cost filter of 25% as Helios Mathesan’s employee cost is only 1.07% of sales. We notice that employee cost filter is one of the filters adopted by the TPO himself at Para 8 of his order. The totality of above facts and circumstances as noticed in the above paragraphs clearly shows that FAR and, therefore, the margin earned by Helios Mathesan is totally different in comparison to the FAR of the assessee. It is therefore, directed that Helios Mathesan be excluded from final list of comparable companies. Ishirinfotech Limited - company failed the 25% employee cost filter based on data available in Capitoline database - Employee cost details are shown separately under schedule 15 to the financials. The company recognizes income by application of percentage of completion method unlike cost plus mark-up basis of compensation applicable to captive service providers like the present assessee. Thus, it appears that in addition to this company not qualifying the employee cost filter applied by the TPO, the FAR of Ishirinfotech Limited is different compared to that of Kaplan India Private Limited. Reference to the chart filed by the Ld. AR during the hearing indicates that other coordinate benches, details of which are mentioned in the chart, also concluded that Ishirinfotech Limited is not a valid comparable for AY 2007-08 for software development services segment. Accordingly, we direct exclusion of this company from the final set of comparable companies. Megasoft Ltd - the material available on record and also the decisions of the coordinate benches for the very same year. We are inclined to agree with the submissions of the Ld. Counsel for the assessee as this company is clearly engaged in multifarious activities including sale of software products. Further, the impact of the extraordinary event of amalgamation is also not possible to be quantified and adjusted. We also notice that the TPO himself has accepted that 19% of the revenue earned by this company is from software products - we direct exclusion of this company from the final set of comparable companies. TATA Elxsi Limited - the segment of software development services in Tata Elxsi includes Design services including hardware design and hence is not comparable to simple software development services. We find that these observations are fully applicable in the facts of present case - we direct exclusion of this company from the final set of comparable companies. We direct the TPO/AO to re-determine the arm’s length price of international transaction of software development services in case of Kaplan India Private limited after excluding Avanicincom Technologies Limited, Helios & Matheson Limited, Ishirinfotech Limited, Megasoft Limited and Tata Elxsi Ltd. from the final list of comparables. The TPO/AO will also decide afresh the comparability and inclusion or otherwise of Indium Software (India) Limited and VMF Softech after affording an opportunity of being heard as directed above. Disallowance of group medical insurance expenditure - scheme of ICICI Lombard is not recognised is incorrect as the material available in the public domain like Directors report (copy of which was handed over during the hearing) clearly indicated that ICICI Lombard offered schemes which were approved by IRDA - the schemes offered by ICICI Lombard had approval of IRDA on 03.08.2001. In the interests of justice, we direct the AO to consider afresh all the relevant material available in public domain. The assessee is directed to produce the same before the AO, who will decide the issue afresh after affording suitable opportunity of being heard to the Assessee. - Appeal of the assessee is partly allowed.
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2019 (4) TMI 44
Condonation of delay - appeals before CIT(A) - sufficient reason for delay in filing the appeals - Bank Branch staff and manager are generally not aware about intricacies and procedural aspects of income tax assessment and knowledge of limitation for filing appeal - HELD THAT:- Hon'ble Supreme Court in the case of Collector, Land Acquisition Vs Mst. Katiji [1987 (2) TMI 61 - SUPREME COURT] and also Sunil Chandra Vohra Vs ACIT [2009 (6) TMI 682 - ITAT MUMBAI] have held that for substantial interest of justice, technical delay should be ignored. Applying the propositions of law laid down in the above judicial pronouncements to the facts of the instant case, found that there was sufficient reasons for delay in filing the appeals before the ld. CIT(A) - condone the delay in filing the appeals and the matter is restored back to the file of the ld. CIT(A) for deciding the matter afresh as per law in terms of provisions of Section 250(6) - Appeals of the assessee are allowed in part for statistical purposes
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2019 (4) TMI 43
Condonation of delay - Pre-requisites for condoning delay - 'sufficiency/reasonableness of the cause' - order passed U/s 201(1) and 201(1A) - as argued by assessee DRM was not aware whether any order can be passed against it and whether such order is appealable and it came to know that such orders are appealable only when the department pressed for the payment of outstanding demand - also chronological dates of communication with the department with regard to short deduction of tax and internal communication of the assessee to the senior employees for submitting PAN details, internal circulation of direction by assessee with respect to deduction of tax at source, with respect to furnishing information in order to avoid penal provisions HELD THAT:- Evidences placed on record for the efforts done by the assessee for furnishing requires returns which includes the internal communication of the assessee to the senior employees for submitting PAN details, intimation by the Income tax Department for deputing personnel for verification of TDS and TCS details etc. After going through the detailed reasons given for delay in filing the appeal before the CIT(A), we observe that there was a reasonable and bonafide cause for delay. COLLECTOR, LAND ACQUISITION VERSUS MST. KATIJI AND OTHERS [1987 (2) TMI 61 - SUPREME COURT] held that “sufficient cause” for the purpose of condonation of delay should be interpreted with a view to even-handed justice on merits in preference to approach which scuttles a decision on merits. Further the more power to condone the delay is conferred with a view to enable the courts to do substantial justice to litigants by disposing of the cases on merits. Considering the totality of the facts and circumstances of the case, we condone the delay and matter is restored back to the file of the ld. CIT(A) for deciding on merit after giving due opportunity of hearing to the assessee.
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2019 (4) TMI 42
Disallowance u/s 14A - Expenditure incurred by way of payment of interest having direct link with the dividend income - Assessee company has purchased units from the mutual funds under the Dividend Reinvestment Plan and earned day to day dividend in the shape of units and value of the purchase account had increased by such units and the motive of the assessee company is clear to earn the dividend income - shares held as stock in trade - HELD THAT:- As relying on MAXOPP INVESTMENT LTD.case [2018 (3) TMI 805 - SUPREME COURT OF INDIA] the expenditure incurred in acquiring the shares will have to be apportioned. Also setting aside the disallowance under section 14 A of the Act in respect of the dividend earned on the shares held as stock in trade, because such shares were held during the business activity of the assessee and it is only by a quirk of fate that when the investee company declared dividend, those shares were held by the assessee, though the assessee has to ultimately trade those shares by selling them to earn profits. Though not the dominant purpose of acquiring the shares is a relevant for the purpose of invoking the provisions under section 14A of the Act, the shares held as stock in trade stand on a different pedestal in relation to the shares that were acquired with an intention to acquire and retain the controlling interest in the investee company. In the circumstances we are of the considered opinion that Application of Rule 8D to the facts of the case is not correct, hence, the addition on this account is hereby directed to be deleted. MAT tax credit u/s 115JAA - Disallowance of the MAT credit in respect of surcharge and cess - Held that:- We set aside the impugned order and remit the matter to the file of the Ld. AO for ascertaining the correct amount of MAT tax credit available to the assessee including of surcharge / cess and then allow tax credit as indicated in the decision of the Consolidated Securities Ltd. [2018 (7) TMI 1722 - ITAT DELHI]
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Customs
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2019 (4) TMI 41
Refund demurrage amount - Whether CELEBI can justly withhold the amounts paid and refuse to refund them to the ILFC, which claims that its action in importing the aircraft engine and exporting it was out of compulsion, even necessity, to safeguard its interests as property owner? Held that:- Supreme Court in the case of INTERNATIONAL AIRPORTS AUTHORITY VERSUS GRAND SLAM INTERNATIONAL OF INDIA [1995 (2) TMI 70 - SUPREME COURT OF INDIA] ruled that Section 45 of the Customs Act did not, affect International Airport Authority s right to collect charges from the importer- even if the detention were to result in no revenue. Waiver of demurrage charges cannot be issued for the asking; therefore a court in judicial review cannot issue a direction without considering the reasons if they are apparent, that underlie rejection of a request for exemption or waiver. After all, warehousing and at the behest of the law (the Customs Act) is a commercial activity, for which the warehouseman or service provider (like CELEBI) invests with its resources, deploys manpower and creates infrastructure. The fee or consideration payable are determined by the duration or period for which warehousing is necessary, the kind of storage provided including the safety and security to the goods. Unless the rules or relevant policy clearly mandate waiver from such services, courts cannot issue directions to such service providers. In this case, CELEBI relied on Clause 10.1.10 (b) to say demurrage waiver was precluded. In so saying, CELEBI was consistent with its policy. Petition dismissed - the petitioner (ILFC) shall pay the costs of these proceedings, to CELEBI, quantified at ₹ 3,00,000/- within two weeks.
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2019 (4) TMI 40
Revocation of CHA License - forfeiture of security deposit - time limitation - smuggling of Red Sander logs - Held that:- The issue of order of revocation more than ninety days after the submission of the Inquiry Officer’s report has been followed in the breach. There are umpteen number of decisions which have consistently taken the view that mere discrepancy in obtaining authorization from a client is not sufficient to revoke the licence or that absence of physical verification of the importer is also not a sufficient ground for revocation of licence. The order of revocation cannot be sustained not only on merits, but also on the ground of transgression of the mandatory time limit prescribed in the regulation - Appeal allowed - decided in favor of appellant.
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2019 (4) TMI 39
Import of restricted item or not - Remote control toy Quadcopter - Remote Control Toy Monster Truck - Whether the impugned goods come within the scope of Drones or not - Confiscation - Held that:- At the time of import of drones in the year 2017 by the appellant, there was restriction by DGCA and DGFT and as per the restriction permission of the DGCA and licence from the DGFT was required whereas the appellant did not have the permission from the DGCA and also did not have any licence form DGFT for import of the impugned goods - Further, at the time of import, DGCA was in the process of finalizing the guidelines and the same was finalized on 27/08/2018 wherein the impugned goods are now can be imported without any permission from DGCA and without obtaining any licence from DGFT. But during the period of import, there was a restriction for import of drones. Since the appellant did not have the permission of DGCA and licence from DGFT, the original authority confiscated the goods and also imposed a fine of ₹ 17000/- for contravention under Section 112(a) of the Customs Act, 1962. Permission to re-export of goods - Held that:- Since the goods have been confiscated being restricted during the time of import but the same is allowed to import after the guidelines of DGCA without any licence. In view of this, confiscated goods is allowed to be exported by the appellant. Penalty u/s 112(a) of the Customs Act, 1962 - Held that:- There is absolutely no justification and reasons given in the Order-in- Original for imposition of the said penalt - Penalty set aside. Appeal disposed off.
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2019 (4) TMI 38
Valuation - gold jewelry - price-revision clause - difference between the value of the import and the amounts paid for the exports - demand of differential customs duty, interest thereof and also for imposition of penalties u/s 114A and 114AA of the Customs Act, 1962 - Held that:- There is no dispute as to the enhanced value as accepted by the appellant and informed the Departmental Authorities on 22.12.2014 24.12.2014. The demand of the differential duty is also the same as is the amount paid by the appellant along with the interest - there is no dispute on differential duty and interest thereof and has been paid of, there being challenge by the appellant in the appeal that portion of the impugned order is upheld. Penalty u/s 114A of the Customs Act, 1962 - Held that:- In the case in hand, there is no dispute as to the fact that appellant themselves have come forward and informed the Department on 22.12.2014 and 24.12.2014 that there was a mis-declaration of the value on the gold jewelry imported and paid of the differential duty along with interest - the explanation put forth on behalf of the appellant that they were confused by the master circular of the Reserve Bank of India is acceptable and the penalty under Section 114A of the Customs Act, 1962, and there seems to be no suppression of facts with intent to evade tax; is unwarranted and needs to be set aside. Penalty u/s 114AA of the Customs Act, 1962 - Held that:- The appellant in this case has not declared the relationship between him and the exporter in the declaration which supposed to be filed that the authorities with the importing the consignment may be due to oversight. Definitely there is a lapse on the part of the appellant and penalty under Section 114AA gets attracted, however, since in the case in hand, the appellant came forward on his own and discharged of duty liability with interest, a lenient view is taken, penalty under Section 114AA is reduced the same to ₹ 5 lakhs. The penalty imposed under Section 114A is set aside and penalty under Section 114AA is reduced to ₹ 5 lakhs - appeal allowed in part.
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2019 (4) TMI 37
Classification of imported goods - Audio and Video equipment - whether classified under Customs Tariff Heading 8518 or under Customs Tariff Heading 8527? - Held that:- he device having an AM/FM receiver built-in is only by way of an added functionality, and is definitely not the main function of the item. The facility for receiving AM/FM radio signals is verily present in a number of audio/video devices as an add-on feature, such as in mobiles, watches, speakers and even devices with USB connection. This is not just because the cost of such radio receptors has come down, but also that the size of such receivers has shrunk from the large size transistor era receivers of long ago. To allege that the Audio Visual Receiver (AVR) or, for that matter, the Home Theatre System (HTS), has a predominant usage as an AM/FM receiver is surely ludicrous - In the present case, the allegation that the AVR or HTS is an AM/FM receiver is akin to identifying the elephant not from its entire body, but by its tail. In any case, it cannot be dispute that even the built-in AM/FM receiver cannot play on its own on the AVR. It definitely will require connected speakers for that purpose. In the radio reception apparatus envisaged in the classification under CTH 8527, one important aspect is that such receivers will not only be able to receive signals, but also make playback without the requirement of any additional add-on speakers or other equipment. In the circumstances, we have no doubt in our minds that the premises on which the Department has homed in to bring in the classification of AVR and HTS under Chapter Heading 8527 cannot be sustained. Time limitation - Held that:- The investigations not having been done proximate to the import, but after a prolonged period without any palpable evidence of intention to suppress, mis-state or defraud, we are unable to agree with the invocation of extended period in the Show Cause Notice. This being so, the demand, at least for the predominant period covered in the Show Cause Notice, cannot be sustained. Appeal allowed - decided in favor of appellant.
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Corporate Laws
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2019 (4) TMI 36
Scheme of amalgamation - certain companies in the scheme were carrying on NBFC activities and approval of the Reserve Bank of India had not been taken and the petition required to be rejected - reasonableness of the proposed exchange ratio could not be ascertained - financial assets are more than non-financial assets and income from operation is zero - HELD THAT:- If the transferor companies show "zero" income from operations and still show huge investments to be their assets, the Regional Director rightly observed that the intrinsic value of these investment (assets) is not known and the reasonableness of the proposed exchange ratio could not be ascertained. Such accounts showing "zero" income and showing huge investments as assets must be said to be not inspiring confidence. If there are huge investments as assets and it shows that financial assets are more than non-financial assets and income from operation is zero without its break up between financial income and non-financial income, the required criteria to determine the principal business of the company being finance company gets met. The National Company Law Tribunal not being satisfied from the case put up by the appellant declined to accept the scheme and we find it difficult to interfere with the impugned order. Even with or without the circular of the Reserve Bank of India dated October 19, 2006, keeping in view the above legal provisions, the appellants have not been able to satisfy the Regional Director or the National Company Law Tribunal that they are not involved in NBFC activities. Counsel for the appellants has not been able to satisfy us also. The appeal does not even plead that the appellants are not indulging in NBFC activities. The appeal memo while referring to the appellant-companies merely stated that the objects of the companies were as amended from time to time and which have been set out in the memorandum of association of the different companies. No such articles of association or memorandum of association have been produced before us to show what are aims and objects of these companies. No documents are shown as to what are the activities of these companies. Thus no material has been brought to satisfy that the impugned order is erroneous and deserves to be interfered with. Appeal dismissed.
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Insolvency & Bankruptcy
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2019 (4) TMI 35
Application for withdrawal under section 12A of the Insolvency and Bankruptcy Code, 2016 - seeking appropriate directions to the directors of the corporate debtor to defray the expenses of CIRP process and consequently remove the corporate debtor from the clutches of the IBC - HELD THAT:- Since regulation 30A envisages that an application for withdrawal under section 12A shall be submitted to the interim resolution professional or the resolution professional as the case may be in Form FA of the schedule before issue of invitation for expression of interest under regulation 36A and when such conditional clause has been mentioned in the regulation regarding section 12A, this Bench cannot pass an order under section 60(5) of the Code ignoring the conditional clause in regulation 30A of the IRPCP Regulations to submit application under section 12A of the Code before issue of invitation for expression of interest. Application dismissed as misconceived.
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PMLA
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2019 (4) TMI 34
Prevention of Money Laundering - Mis-management especially as regards payment of royalties with number of complaints were registered against - retention of documents seized by the Directorate of Enforcement against the appellant - non recording any ‘reason to believe’ for retention of documents seized - HELD THAT:- No civil or private disputes between two parties and any criminal proceedings can become subject matter of PMLA, unless the officer authorized has reason believe on the basis of information and material available in his possession to the effect that the ‘person concerned’ has committed an offence under Section 3 of the Act; and the ‘person concerned’ has derived and obtained proceeds of crime and as a result of criminal activities relating to a schedule offence or against third party who is in possession of any proceeds of crime and it is likely to be concealed, transferred or dealt with which may frustrate any proceedings under this Act within the meaning of Sections 5, 17 to 21 read with definition of Section (u) of the Act. The Respondent proceedings under the provisions of PMLA for securing “proceeds of crime” does not arise at all and the present proceedings are completely abuse of process of law. The continuation of proceedings are just for harassment and nothing else. The complainant has already deposed her statement who raised no-objection to quash the said F.I.R. before the Hon’ble Delhi High Court. She has settled the disputes prior to registering the ECIR, search and seizure, on the date of filing of application under Section 17(4) for retaining the records In the present case, the statutory obligations laid down in section 20 (1), 20(2), 20 (4) and 21(4) of PMLA have not been complied with. An attempt has been made to retain the records without recording any ‘reason to believe’. The provisions of section 8 (3) (a) provides that the attachment or retention of property or record seized shall continue during the investigation for a period not exceeding ninety days. The said prescribed period has already been expired as more than a year has already elapsed but the properties and records have not been returned so far which is in clear violation of the provisions of PMLA. No prosecution complaint has been filed against the Appellant. In the light of above, the present appeal is allowed. The impugned order dated 20.4.2018 is set-aside. The application filed by the respondent under Section 17(4) for retention of documents is dismissed accordingly.
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2019 (4) TMI 33
Prevention of Money Laundering - retention of certain documents seized by the Respondent during the search and seizure conducted by the Respondent - whether appeal is liable to be allowed as no prosecution complaint has been filed under Section 8(3)(a)? - No copy of reason to believe were filed or was served? - The reply to the application for retention filed by the respondent has been considered - Second ECIR was not sustainable in the facts of present case as the subject matter remains the same in the first one (which is already quashed - No valid reason to believe is mentioned in the application filed by the under sub section (4 )of Section 17 - HELD THAT:- The Article 141 of the Constitution of India provides that that the law declared by the Supreme Court shall be binding on all Courts within the territory of India. The Apex Court interpreted that “all courts” includes Tribunal and even the authorities. It is immaterial whether the law declared by the Hon’ble Supreme Court is in one enactment or the other enactment, but the ratio of that judgment, whether passed in any of the enactments is binding. Hence, the material aspect is the declaration of the law on a particular point or issue, and not the enactment in which the law was declared. If the Legislature incorporated identical language in the analogous provisions of statutes, the law declared by the Supreme Court on such language would be binding on the Court and authority where such point/ issues were raised and argued. Therefore, there is no force in the submission made on behalf of respondent. From the impugned order, it appears that there is no discussion at all with regard to retention the property or any valid reasons are given for retention of property, merely stating that no solid objection is there, therefore the order of retention of property is passed without application of mind. The case on merit of the appellant has not been discussed. The impugned order is passed in breach of order passed by the Hon’ble Division Bench. This Tribunal is of the opinion that as per scheme of the Act, if one will read in meaningful manner, no civil or private disputes between two parties and any criminal proceedings can become subject matter of PMLA, unless the officer authorized has reason believe on the basis of information and material available in his possession to the effect that the ‘person concerned’ has committed an offence under Section 3 of the Act; and the ‘person concerned’ has derived and obtained proceeds of crime and as a result of criminal activities relating to a schedule offence or against third party who is in possession of any proceeds of crime and it is likely to be concealed, transferred or dealt with which may frustrate any proceedings under this Act within the meaning of Sections 5, 17 to 21 read with definition of Section (u) of the Act. The Respondent proceedings under the provisions of PMLA for securing “proceeds of crime” does not arise at all and the present proceedings are completely abuse of process of law. The continuation of proceedings are just for harassment and nothing else. She has settled the disputes prior to registering the ECIR, search and seizure, on the date of filing of application under Section 17(4) for retaining the records and passing the impugned order, the respondent was party to the said proceedings but still the Respondent has chosen to conduct the search and seized several important and confidential records/documents belonging to the Respondent on 03.11.2017. In the present case, the statutory obligations laid down in section 20 (1), 20(2), 20 (4) and 21(4) of PMLA have not been complied with. An attempt has been made to retain the records without recording any ‘reason to believe’. The provisions of section 8 (3) (a) provides that the attachment or retention of property or record seized shall continue during the investigation for a period not exceeding ninety days. The said prescribed period has already been expired as more than a year has already elapsed but the properties and records have not been returned so far which is in clear violation of the provisions of PMLA. No prosecution complaint has been filed against the Appellant. The present appeal is allowed. The impugned order dated 10.4.2018 is set-aside. The application filed by the respondent under Section 17(4) for retention of documents is dismissed accordingly
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Service Tax
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2019 (4) TMI 32
Imposition of penalty - the entire service tax liability along with interest was deposited by the appellant before issuance of the SCN - Invocation of sub-section (3) of Section 73 of Finance Act - Held that:- Admittedly, in this case, the appellant did not comply with the statutory provisions. As a result, the department had initiated show cause proceedings against the appellant. The letter dated 21.05.2012, 10.10.2013, 04.10.20.12 addressed by the department to the appellant regarding payment of service tax and for filing of ST-3 returns were not responded at the relevant point of time. Further, it is also noticed that in some cases, the appellant had collected the service tax from the recipient of service but did not deposit the same with the Government exchequer as its statutory liability. Thus, the benefit of sub-section (3) of section 73 of the Act ibid is not available to the appellant inasmuch as the appellant has not brought any iota of evidence to prove its bona-fides regarding non-payment of service tax within the stipulated time frame. Appeal dismissed - decided against appellant.
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2019 (4) TMI 31
Classification of services - Subscription Agreement - import of services - place of providing of services / supply of services - services provided by M/s Goldman (Sachs) Asia LLC M/s Morgan Stanley Co. International PLC, situated outside India - respondent agreed to pay as Management underwriting commission and selling commission for the service provided by them - whether classifiable as Banking and other Financial Services or as underwriting services? Held that:- The role of an underwriter as defined under the relevant SEBI Rules adopted in the Finance Act,1994 on the issue of securities to shareholders or public is to bear the risk of non-subscription of securities/bonds offered and to subscribe that portion of the securities/bonds issued against the underwriting commission agreed to be paid to them. In the present case, it is clear that the Respondent issuer issued bonds of value of US $500,000,000 which are convertible into equity shares on maturity and the lead managers viz. M/s Goldman (Sachs) Asia LLC M/s Morgan Stanley Co. International PLC assumed the responsibilities to facilitate subscription of the bond by general investors outside India and in the event they fail to achieve 100% subscription of the general investors, the said lead mangers undertook to subscribe the unsubscribed bonds. This fact has not been disputed by the Revenue. The services provided by the foreign service provider are akin to the definition of the underwriting services and not Banking or other Financial service , particularly merchant banking service. No doubt, under scope of merchant banking, the underwriting is also as an activity, but considering the overall stipulation and conditions in the subscription agreement dt.24.00.2009 between the Appellant and M/s Goldman (Sachs) Asia LLC M/s Morgan Stanley Co. International PLC, it could be safely inferred that even though the amount paid for the services by the Respondent has been described as Management underwriting commission and selling commission , but the core service provided by the Lead Managers is that of underwriter service and not managerial service for the issue of Bonds as is evident particularly clause 4.1.33 where under it is mentioned that none of the managers has to provide any legal, accounting, regulatory and tax advisors; clause 9 mentions the expenses that are to be borne by the issuer and the Lead Managers. Once, it is concluded that the service provided by the Respondent fall under the category of underwriter service , the amount paid by the Respondent to the Lead Managers for the services performed outside India would come under the scope of Rule 3(iii) of Taxation of Services (provided from outside India and received in India) Rules, 2006 and accordingly not chargeable to service Tax. Appeal dismissed - decided against Revenue.
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2019 (4) TMI 30
Classification of services - Cargo Handling Service or not - shifting of boulders from the quarry and transporting the same to crusher units - Held that:- The appellant had not collected any service tax also. The service recipient used the excavators for loading of boulders from the leased out quarry. It is not seen from the statement that the appellants were, in any manner, engaged in the loading or unloading of boulders. The accounts of the service recipient viz., M/s. SRC Projects (P) Ltd. also showed that they had paid hire charges to the appellant - it is very much clear that the activity would not fall under ‘Cargo Handling Service’ and, if at all, it may only be Supply of Tangible Goods Service, which has come into the tax net only with effect from 16.05.2008 - demand of service tax under Cargo Handling Services cannot therefore be sustained. Appeal allowed - decided in favor of appellant.
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2019 (4) TMI 29
Intellectual Property Right Services - demand of service tax - Held that:- The facts in the present case and in the case of COMMISSIONER, CUSTOMS, CENTRAL EXCISE & SERVICE TAX, GHAZIABAD VERSUS M/S DABUR INDIA LTD. [2018 (3) TMI 856 - CESTAT ALLAHABAD] are identical. It was held in the said case that if the ‘Intellectual Property Right’ was sold by appellant and not transferred temporarily for use then the provisions of Section 66(55b) of Finance Act, 1994 are not applicable - appeal allowed - decided in favor of appellant.
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2019 (4) TMI 28
CENVAT Credit - input services - Air Travel Agent Services - period between April, 2011 to March, 2015 - non-production of various documents - Held that:- I fail to understand why the appellant failed to produce the documents before the adjudicating authority or Commissioner (Appeals) when they could preserve the same systematically till date for production of the same before this Tribunal? However, examination of each and every documents concerning eligibility of CENVAT credit on Air Travel Agent Services cannot be done here, since the same would mount to mini adjudication but such sample examination made personally by me clearly defied the contention available in Order-in-Original and Order-in-Appeal that nonproduction of documents concerning purpose of travel as official was beyond the reach of the appellant. Thus, it is a fit case which is required to be remanded to the adjudicating authority for examination of documents concerning eligibility of appellant to avail CENVAT credit on Air Travel Agent Services - appeal allowed by way of remand.
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2019 (4) TMI 27
CENVAT Credit - wrong utilization of CENVAT Credit - Rule 4(2)(a) of the CENVAT Credit Rules, 2004 - whether the confirmation of demand of wrongly utilized 50% Credit in respect of capital goods and interest thereon by the Commissioner is in order and subsequently, whether the waiver of penalty under Section 78 ibid is legally correct? Held that:- Sub-Rule (4) of Rule 4 of the CENVAT Credit Rules, 2004 states that Credit in respect of capital goods shall not be allowed in respect of that value of capital goods which the manufacturer or provider of output service claims depreciation under Section 32 of the Income Tax Act, 1961. Thus, availing credit on capital goods when depreciation was also claimed is against the provisions of law. The Department had sought the assessee to reverse the Credit. The assessee though availed Credit on capital goods, had not utilized it. For this reason, the assessee contended that the availment of Credit was only a book entry and therefore, the demand of interest cannot sustain. The Hon’ble High Court in the case of Commissioner of C.Ex., Madurai Vs. M/s. Strategic Engineering (P) Ltd. [2014 (11) TMI 89 - MADRAS HIGH COURT] had held that the demand of interest or penalty cannot sustain when the credit wrongly taken has been reversed - In the case before us, the appellant has not reversed the wrongly availed Credit. Actually, there would be no meaning in recovering the wrongly availed 50% Credit as the appellant would be eligible for this Credit in the next financial year. It may be correct that they have not utilized the Credit for payment of duty/tax. Time limitation - Held that:- The Credit having been held to be wrongly availed and ordered to be adjusted to the subsequent financial year, the plea of the appellant that the demand of interest alone is hit by limitation cannot sustain. Appeal allowed - decided in favor of appellant.
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2019 (4) TMI 26
Business Support Service - Revenue sharing - laying down of rail tracks - extended period of limitation - Held that:- The cost of laying of the railway lines is being recovered by the respondent from the railways, on revenue sharing basis, in terms of the agreement entered into between two - the decision in the case of M/S MUNDRA PORT SPECIAL ECONOMIC ZONE LTD VERSUS CCE, RAJKOT [2011 (9) TMI 93 - CESTAT, AHMEDABAD] is fully applicable to the facts of the present case where it was held that Investing in the railways lines so as to enable the railways to run on the Adipur Mundra Port lines cannot be held as providing of any infrastructural services so as to boost the business of the service receiver. In fact as already observed, by agreeing to run railways between Adipur Mundra Port, it is the railways who have provided services to the appellants. Similarly, maintenance of the assets which are admittedly assets of the appellants does not amount to providing any business support services to the railways - demand not sustainable. Time limitation - Held that:- The Revenue in their grounds of appeal has not advanced any arguments to rebutt the above finding of the adjudicating authority on the point of time bar. As such, the demand having been raised beyond the period of limitation stands rightly dropped by the adjudicating authority. Appeal dismissed - decided against Revenue.
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2019 (4) TMI 25
Valuation - Franchise services - Whether bifurcating the amount of weekly gross sales into the payment of royalty (@ 8% thereof) and the payment towards Franchise Advertisement Fund (@ 4.5% thereof) takes the later value out of the ambit what is called as transaction value/the gross value? - Held that:- Both prior and after the amendment the value on which service tax is payable has to satisfy that (i) the value is the gross amount charged i.e. the entire contract value between the service provider and the service recipient without deduction of any expenses ; (ii) the amount charged should be for for such service provided that the gross amount charged by the service provider has to pay for the service provided. By using the word for such service provided , the Act has provided a nexus between the amount charged and the service provided. By merely mentioning that for master licensee 33% of all the fees collected shall exclude advertising fee does not takes that amount out of the tax net of the amount received from franchisees for providing them the Franchise Service . Thus the sole reason of this advertisement fee is also the part of the contract value. More so, this value is not at all the expense incurred by the franchise for advertising his own outlet but this is the amount out of his income from the sales passed on to the service provider SSIPL in lieu of the franchise agreement between the two. Hence, this Franchise Advertisement Fund is despite a different nomenclature of being a different fund but actually is the value received by the appellant for providing franchise service to its franchisees. The amount of weekly gross sales @ 4.5% but for franchise advertisement fund is nothing but the part of gross value of the contract for providing the franchise service and, hence, was equally taxable as 8.5% of the said weekly gross sales is taxable. Time limitation - Held that:- The bifurcation of weekly gross sales by the appellant is a mere strategy to cut short its tax liability. Thus, the element of mis- representation is very much apparent on part of the appellant that too with an intent to evade payment of tax - Show cause notice dated 13/02/2009 proposing the demand for the period w.e.f. April 2007 to March 2008 is therefore denied to be barred by time. Appeal dismissed - decided against appellant.
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2019 (4) TMI 24
Non-payment of service tax - Man Power Recruitment or Supply Agency Service - quantum of demand - Held that:- Ld. Counsel for appellant has furnished a detailed calculation with regard to admitted tax liability as well as the demand raised in the SCN. It is his contention that the department has quantified the demand on the basis of TDS certificate which is inclusive of the service tax paid by them - the matter requires to be remanded to the adjudicating authority for the limited purpose of requantifying the demand after considering the plea put forward by the appellants with regard to incorrect calculation. Penalty u/s 76, 77 and 78 - Held that:- There are no grounds of suppression with intention to evade payment of service tax. The delay in discharge of service tax is only due to the delay in receiving the amounts from the customers - the penalty imposed under Section 76 & 78 ibid has to be set aside - penalty imposed under Section 77 is retained. Appeal allowed in part and part matter on remand.
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2019 (4) TMI 23
Maintainability of appeal - non-compliance with the pre-deposit - Section 35F of the Central Excise Act, 1944 - Held that:- Since the CENVAT Credit has been held to be inadmissible as such, it is not available to the appellants for any purpose, even for the payment of the amounts required to be deposited under Section 35F. If any reversal from the inadmissible credit is considered a sufficient compliance to the provisions of Section 35F, then it is like, banker allowing encashment of fraudulent financial instrument like cheque or draft to that extent. The appellants are directed to comply with the requirements of Section of 35F read with Section 83 Finance Act, 1994 within a period of thirty days from the date of receipt of this order - application allowed.
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2019 (4) TMI 22
CENVAT Credit - option to avail method for reversal - quantification of the amount to be reversed - non-filing of intimation/declaration before the jurisdictional Central Excise officer - Rule 6 of CCR - Scope of SCN - Held that:- There was no specific allegation made therein regarding adoption of wrong formula by the appellant-assessee. Since the learned Commissioner (Appeals) has held that non-filing of intimation/declaration is a procedural lapse, he should have allowed the appeal in favour of the appellant-assessee, instead of remanding the matter to the adjudicating authority for quantification of the amount to be reversed by the appellant-assessee - Also, for consideration of the prescribed formula, the learned Commissioner (Appeals) has not specifically issued any notice to the appellant-assessee for the defence submissions - Hence, consideration of altogether a new ground in the impugned order cannot be sustained for judicial scrutiny and accordingly, the appeal of the appellant-assessee should succeed on such ground. Non-filing of intimation/declaration before the jurisdictional Central Excise officer regarding availment of option is a procedural lapse inasmuch as the information required to be contained in the declaration was already available with the department, which were furnished in the periodical ST-3 returns filed by the appellant-assessee - Tribunal in the case of Mercedes Benz India Pvt. Ltd. vs. CCE [2015 (8) TMI 24 - CESTAT MUMBAI] has held that non-filing of intimation is only a procedural lapse, for which the benefit provided under Rule 6(3)(ii) read with Rule 6(3A) of the rules cannot be denied. Appeal allowed - decided in favor of appellant.
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2019 (4) TMI 21
Various construction services - Levy of service tax - Commercial or Industrial Construction Service (CICS) - Erection, Commissioning and Installation Service (ECIS) - Interior Decorator Service - Construction of Residential Complex Service. Held that:- Hearing was completed in respect of Appeal Nos. ST/163/2011 and ST/164/2011. The facts of the case and submissions of both sides were dictated in court. Due to paucity of time, further hearing of this batch of cases was adjourned to 13.03.2019.
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Central Excise
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2019 (4) TMI 20
Recovery of outstanding dues - adjustment of rebate (refund) claim - export of goods - Section 11 of the Central Excise Act, 1944 read with Section 142 of the Customs Act, 1962 - Held that:- The appellant had not accepted the liability determined in the adjudication order dated 28.02.2007 and contested the adjudged demand confirmed therein before the appellate forums i.e. the Office of the Commissioner (Appeals) as well as before the Tribunal and finally succeeded before the Tribunal as per the order dated 26.10.2016. Thus, under the facts and the circumstances of the case, it cannot be said that the amount in question confirmed vide order dated 28.02.2007 was due to the Government, which can be recovered by taking shelter under Section 11 of the Act. Appeal allowed - decided in favor of appellant.
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2019 (4) TMI 19
CENVAT Credit - capital goods - Rule 9(6) of Cenvat Credit Rules - validity of SCN - Held that:- The SCN is defective for non-joinder of essential parties. Also there is lack of sufficient evidence by the Revenue. Further, the appellant has discharged its onus as required by them under Rule 9(6) of the Cenvat Credit Rules, as it is an admitted fact that the particular machinery part/capital goods were found available in their factory at the time of inspection. The Revenue has raised the doubt as the said part of Machinery does not have any serial number and manufacturer’s name, etc. Further, the appellant has utilized statutory way-bill (Form VAT-47), and has made the payment by Account Payee cheques, both to the supplier and to the transporter. The oral evidences recorded are not reliable, being in violation of the provisions of Section 9D of the Act. The show cause notice is not maintainable as the same is presumptive and more by way of wild allegation - appeal allowed - decided in favor of appellant.
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2019 (4) TMI 18
CENVAT Credit - denial on the ground that both description and quantities mentioned did not matched in the invoice and the CENVAT credit Account - Held that:- If appellants produced such documents establishing actual charging of these goods or their utilization in the process of production, the credit should not have been denied. Admittedly such documents were either not produced or considered/verified by the Original Adjudicating Authority. Thus the matter needs to go back to them for de-novo verification of such documents which appellant will produce for establishing actual utilization of the said goods. The matter remanded to Original Adjudicating Authority for De-novo consideration - appeal allowed by way of remand.
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2019 (4) TMI 17
CENVAT Credit - capital goods - the appellant claimed both CENVAT Credit and depreciation on the same goods including the CENVAT component - Rule 4(4) of CCR - Held that:- The mere fact that they have availed depreciation disentitles them to credit. The subsequent filing of revised income tax return might have amounted to reduction of depreciation claim, but it does not make the original claim correct and accordingly the demand is sustainable. However, in this case the demand has been dropped by the lower authorities which has not been appealed against by the department. Since there is no demand, any interest on a zero demand can only be zero. Penalty - Held that:- It is for the act of taking credit wrongly which is not in doubt - the penalty imposed under section 11 AC read with CCR 2004 is sustainable and needs to be upheld. Appeal allowed in part.
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2019 (4) TMI 16
Rectification of mistake - Held that:- The Tribunal has omitted to mention the Order-in-Original No.06/2011, dated 29.12.2011 in the cause title of the final order dated 23.04.2018. The error is apparent one which requires rectification. Hence the ROM application is allowed.
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2019 (4) TMI 15
Penalty u/s 11AC of CEA - duty paid on being pointed out - Held that:- There was indeed a case for waiver of SCN under provisions of Section 11A (2B) of the Central Excise Act, 1944 since the duty liabilities were paid up immediately after being pointed out along with interest. Be that as it may be, there also cannot be any accusation that there was suppression of facts or misstatement or fraud or intention to evade payment of duty liability. It is also not disputed that ER-3 returns were being also filed regularly by the appellants. In fact, the demands proposed in both the SCNs have been worked out only on the basis of worksheets and data submitted by the appellant themselves. The ingredients which require mandatory imposition of penalty under Section 11AC ibid are not present in this case - penalty set aside - appeal allowed - decided in favor of appellant.
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2019 (4) TMI 14
CENVAT Credit - common input and input services for both taxable and exempted goods - non-maintenance of separate records - Rule 6(3)(i) of the CENVAT Credit Rules, 2004 - Held that:- The appellants have in fact maintained the separate records in respect of inputs used for dutiable and exempted goods and in case of common input services, the appellant did not maintain separate records. Further, the appellant has stated that they were having sufficient balance in their CENVAT credit account and they have not utilized the credit availed. Further, after the introduction of GST they have allegedly reversed the credit more than the proportionate credit required to be reversed. Demand of interest - Held that:- Once they have the sufficient balance in their CENVAT credit account and they have reversed the proportionate credit before its utilization, then they are not liable to pay interest in view of the decision of Karnataka High Court in the case of CCE vs. Bill Forge Pvt. Ltd. [2011 (4) TMI 969 - KARNATAKA HIGH COURT]. Appellants have filed the documents alleging that they have reversed proportionate credit and had sufficient closing balance in their CENVAT account but this fact needs to be verified by the original authority - Appeal allowed by way of remand.
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2019 (4) TMI 13
CENVAT Credit - input service - Erection, Commissioning and Installation Service in relation to making of structural duct support for capital goods such as duct support, platform, staircase, shed and other structural support etc. in their factory premises - Held that:- Both, the original adjudicating authority as well as the first appellate authority have relied on the exclusion clause for denying the credit on the services used by the appellant. It is not disputed that the services received by the appellant is classified as “Erection, Commissioning and Installation service” - the exclusion clause ‘A’ in Rule 2(1) of the Cenvat Credit Rules, does not cover the service in the nature of “Erection, Commissioning and Installation Service”. Credit cannot be denied - appeal allowed - decided in favor of appellant.
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2019 (4) TMI 12
CENVAT Credit - Furnace Oil - supply of steam to sister unit - whether Cenvat credit on Furnace Oil can be curtailed in view of the fact that the appellant supplied steam generated in their factory to their sister unit located adjacent? - Held that:- The matter has already been decided in their own case M/S ALKEM LABORATORIES LTD. VERSUS CCE DAMAN [2014 (9) TMI 686 - CESTAT AHMEDABAD] and has been followed in their case for the earlier period. In the said decision, the Tribunal has remanded the matter to Adjudicating Authority to ascertain certain facts. The impugned order in this case is also set-aside and the matter is remanded to the Adjudicating Authority to decide the matter in terms of earlier decision of this Tribunal - appeal allowed by way of remand.
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2019 (4) TMI 11
CENVAT Credit - input services - GTA services - period October 2015 to June 2016 - Held that:- Board Circular No. 1065/4/2018-CX dated 08.06.2018 clarified that credit of service tax paid on GTA services where goods are supplied on FOR basis, Cenvat credit cannot be denied for the reasons that the said service has been availed for the transportation of goods beyond the place of removal - credit allowed - appeal allowed - decided in favor of appellant.
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2019 (4) TMI 10
CENVAT Credit - input services - construction of guest house, canteen, logistic building, painting of chimney, factory building, railway siding outside the factory etc. - period from May 2009 to August 2012 - Held that:- All the input services involved in the present case have been held to be input service by various decisions - for the demand of ₹ 7,04,398/- confirmed for the period post 1.4.2011, the provision of service was completed before 1.4.2011 and the invoices for the same was also raised before 1.4.2011 and therefore, the appellant is entitled to claim the CENVAT credit in view of the CBEC Circular dated 29.4.2011 - reliance placed in the case of KAMAL RUB PLAST INDUSTRIES P LTD. VERSUS CCE-DELHI-III [2016 (5) TMI 13 - CESTAT NEW DELHI]. Appeal allowed - decided n favor of appellant.
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2019 (4) TMI 9
Demand of interest - Refund of the pre-deposit - Section 35 FF of CEA - Held that:- The interest would be paid only if amount was not refunded within three months from the date of communication of the order. In the instant case, the amount was refunded within three months - appeal dismissed.
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2019 (4) TMI 8
Valuation - Pharmaceutical products, Medicaments - whether the price charged by the appellant to the distributors be considered as transaction value or the price at which the goods are sold/supplied to the govt. authorities be considered as transaction value? - recovery under section 11D of the Central Excise Act, 1944. Held that:- Undisputedly, the appellant had succeeded in the tender floated by the Govt. authorities for supply of various pharmaceuticals products, Medicaments during the relevant period 1999 to 2005 against rate contract for supply to various government hospitals and govt. agencies and state authorities. The medicines manufactured and cleared by the appellant as per the conditions of the said tender, was required to be embossed/affixed by putting the remark on packages as “For Govt. Supply Only”, “Not for Sale”. In the tender also it is mentioned that the appellants are free to appoint distributors for supply of the said medicines. The evidences collected by the Revenue by way of statement and reproduced in the impugned order by the lower authorities reveal that the distributors have been appointed to facilitate smooth transit of the goods from the factory of the appellant to the location of the govt. authorities where the orders are placed pursuant to the rate contract entered into between the appellant and the govt. authorities. The distributors are not free to affix the price on the packages nor they can in any manner independently deal with the said goods. Therefore, the Revenue’s argument is that the transaction between the Appellant and the distributors are only on paper, which has been admitted also during the course of investigation by the distributors stating that the transaction is only on paper and the difference of price is their margin which attributes to various expenses. This Tribunal has already considered more or less similar facts and circumstances in Bright Drugs Industries Ltd.’s case [2016 (7) TMI 298 - CESTAT NEW DELHI]. In the said case, M/s Bright Drug Industries Ltd. was engaged in the manufacture of pharmaceuticals product and P&P medicaments, entered into rate contract with the Maharashtra Govt. as also with some other govt. agencies for supply of medicaments on an agreed price in response to the tender floated by the said govt. agencies. Medicaments were required to be floated by the appellants, which were clearly to be marked as “Govt. supply only” and “Not for Sale”. In these circumstances, analyzing the price charged by the Bright Drugs Industries to the distributors, this Tribunal observed that The appellant were required to discharge the duty liability at the contracted price in respect of the goods supplied by them to the Government hospitals, either directly or through M/s Anupam. Thus, The price charged by the appellant to the distributor cannot be considered as true transaction value within the scope of the definition of transaction value, therefore, the price at which the goods were ultimately sold/supplied to the govt. agencies against rate contract be the correct transaction value and duty is required to be paid on the same. Time limitation - penalty - Held that:- It cannot be said that all the facts were within the knowledge of the department when the claim for commission as deduction from price was advanced by the appellant earlier - In these circumstances, invoking of the extended period of limitation and imposition of penalty on the appellant is justified. Confirmation of demand under Section 11D of Central Excise Act, 1944 - Held that:- there was a request by the appellant for increase in the price due to revision of excise duty, but the same cannot be construed that the enhanced price represents excise duty and the same has been collected from the government agencies and not deposited with the Govt. Section 11D - the confirmation of the amount under section 11D of CEA, 1944 by the adjudicating authority cannot be sustained. For computation of the demand taking into consideration the apparent mistakes, the matter is remanded to the adjudicating authority. The penalty and interest be accordingly calculated after computing the demand. Appeal disposed off.
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2019 (4) TMI 7
Rectification of mistake - typographical error - Held that:- This Tribunal after considering all aspects of the case set aside the order of the adjudicating authority and remanded the matter for fresh adjudication and the scope of which has been further expanded in the order of the Hon’ble Supreme Court, therefore, we do not find any merit in the objection of the learned Counsel for the Revenue, that unless the typographical rectification of the amount shown in the Order is carried out, the order may be misunderstood by the adjudicating authority. Further such apprehension has been allayed by the Ld. advocate for the respondent mentioning that they would not take such a plea in the de novo proceeding. Deciding the issues whether the typographical error in mentioning the amount at para one of the order dt.31.7.2018 of this Tribunal is necessary and whether it would be within the scope of the Tribunal at this stage, would be of more academic in nature, instead of causing any hindrance in the de novo proceeding, hence, not resorted to - ROM Application disposed off.
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CST, VAT & Sales Tax
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2019 (4) TMI 6
Jurisdiction - power of Assessing Authority - the Tribunal had decided the issue, on merits, in favour of the petitioner and had thereafter remanded the matter to the Assessing Authority on a limited question - whether the Assessing Authority had no jurisdiction to look beyond that order of the Tribunal or to examine any other or further issue in the proceedings thus remanded to it? Held that:- A finding recorded by the higher Appellate Authority or Court, that is otherwise binding on a lower authority, cannot be permitted to be disobeyed by the former - Once the power of the original/Assessing Authority was held to be subject to the directions of the higher Appellate Authority, clearly, the Assessing Authority is restrained from acting contrary to the directions issued by the higher Appellate Authority. Once the directions issued in the order of remand are binding on the Assessing Authority, the specific findings recorded by the higher Appellate Authority on specific issues have to be held binding on the Assessing Authority, as well. In the facts of the present case, the Assessing Authority would remain bound by the finding of the Tribunal on the issue of eligibility to exemption available to the assessee on Forms-D issued by such purchasing dealers/institutions, on the reasoning they may not be the Central Government or a State Government. That finding having attained finality, no contrary conclusion is permissible to be drawn. Similarly, the Assessing Authority is bound to consider the claim of exemption/concession made by the assessee on the strength of Forms-C, D and F etc., that were submitted by the assessee before the Tribunal by way of additional evidence, at that evidence was admitted by the Tribunal. The Assessing Authority cannot be permitted to ignore that evidence or to refuse to verify the claim of exemption/concession made on the strength of such evidence. The Assessing Authority cannot be permitted to ignore that evidence or to refuse to verify the claim of exemption/concession made on the strength of such evidence. Also, the Assessing Authority cannot rake up the same grounds to doubt the correctness of the books of accounts of the assessee for A.Y. 2005-06 (U.P. & Central) and 2006-07 (Central), as had found favour with that authority in the first innings of the assessment proceedings and which had been specifically disapproved by the Tribunal. Besides the above issues on which the Assessing Authority would remain bound by the findings and directions of the Tribunal contained in its order dated 16.10.2015, it would remain open to the Assessing Authority to raise such other and fresh questions and issues as may be found existing and relevant in the context of the fresh assessment orders to be passed upon the remand made by the Tribunal - At present, it cannot be said that the issues raised in the impugned notices are such as had been raised earlier and that had been decided by the Tribunal. No definite conclusion can be drawn in that regard. The impugned notices cannot be quashed in entirety. However, subject to the observations made above, the assessment proceedings may be completed and concluded as expeditiously as possible, strictly in accordance with law - petition disposed off.
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2019 (4) TMI 5
Constitutional validity of the proceedings proposed/initiated and continued by the concerned authorities - Held that:- An interim stay subject to conditions can be granted pending final disposal of the writ appeals.
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2019 (4) TMI 4
Disallowance/reversal of input tax credit - premises found to be closed - Registration of the said firm was cancelled - Held that:- It is an admitted case that registration of the selling dealer M/s Shrey Import and Export, Ghaziabad was cancelled subsequent to SIB survey made on 29.5.2014 and all the transactions have been made prior to cancellation of registration, as such, no sale or purchase was affected by unregistered dealer - also, both First Appellate Authority as well as Tribunal did not consider the fact that the transactions were made through banking channel and no finding was recorded either by First Appellate Authority or by Tribunal to that extent. Thus, the order passed by the Tribunal, dated 6.2.2019 only reiterates the order passed by the First Appellate Authority and does not record its finding regarding the purchases made by assessee firm through banking channels from the selling dealers - the matter is remitted back to the Tribunal to record fresh finding in regard to the payment so made by assessee through banking channel - appeal allowed by way of remand.
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2019 (4) TMI 3
Levy of penalty u/s 54 of the U P VAT Act, 2008 - non-issuance of Tax Invoice, though admittedly, Sale Invoice were issued - Whether the assessee revisionist could have issued the Tax Invoice though the purchasing dealers had not supplied the full particulars as required by sub-section 7 of Section 22 of the Act, in view of prohibition contained in Sub-section 8 of Section 22 of the Act, so as to entail imposition of penalty? Held that:- This being a case of penal provision, the ingredient of the breach/infringement of law contemplated by the legislature, must be clearly established to justify its impost. A plain reading of Section 54(1), Table entry 5 of the Act suggests, penalty may be imposed on the selling dealer or the purchasing dealer for non-issue of either the Tax Invoice or the Sale Invoice or the Purchase Invoice. The circumstances in which such penalty may be imposed on the selling dealer are contained in sub-clause (i) of Table entry 5 being, either upon his failure to issue a Tax Invoice or a Sale Invoice or upon his deliberate non-issuance of the those documents - as to the intention or mens rea, as an ingredient for imposition of penalty on a registered purchasing dealer, for not obtaining a Tax Invoice [under sub-clause (ii) of Table entry 5, of section 54(1) of the Act], that act or omission must be deliberate. It is apparent from a plain reading of that provision inasmuch as the word 'deliberately' used therein clearly burdens the revenue to establish ill intent on part of the purchasing dealer, in not obtaining a Tax Invoice. However, for imposition of penalty for infringements contemplated under sub-clause (i), such intention or mens rea may not be mandatory. Both, a simple failure and also deliberate non-issuance of Tax Invoice or Sale Invoice appear to invite penalty on a registered selling dealer. Thus, mens rea may or may not be an ingredient for imposition of penalty under sub-clause (i). It is in such statutory context, the statute invites a construction, to locate and define the circumstance/s when a registered selling dealer may stand exposed to penalty for nonissuance of a Tax/Sale Invoice - As noted above, the legislature does appear to have treated differently, similar or comparable infringements committed by different persons, depending on their status-whether registered or unregistered and also depending on whether the person committing the infringement was a seller or a purchaser. Thus, in the first place, as the revenue suggests, with respect to a sale transaction, the registered selling dealer may be penalized if he either deliberately does not issue or if he simply fails to issue a Tax Invoice or a Sale Invoice. Whether a registered selling dealer would issue a Tax Invoice or a Sale Invoice does not depend on the free choice of the contracting parties but, it is predetermined/prescribed by the Act/law. In case of taxable and vat-able goods sold by a dealer (not admitted to compounding), primarily, that obligation hinges on whether the selling and the purchasing dealers are registered dealers or unregistered dealers. For issuance of a Tax Invoice and/or Sale Invoice, in mutually exclusive circumstances, the obligation cast on the purchasing dealer under section 22(7) of the Act is crucial and in fact decisive and mandatory as to the conduct he must offer, to test the allegation of breach/infringement of law, levelled against a selling dealer in not issuing a Tax Invoice. The selling dealer may only react to the action taken or representation made by the purchasing dealer. Only after the purchasing dealer voluntarily discloses to the selling dealer all details required to be furnished under that provision, can the latter become aware of the facts that alone may give rise to his legal obligation to issue a Tax Invoice. The assessee/appellant had from the very beginning stated, he had performed 68 sale transaction to unregistered dealers. Upon inquiry 64 of such transactions were found to have been performed with unregistered dealers. For the remaining four, the assessee had further claimed, the purchasing dealers had not provided their TIN details and, therefore, they had to be treated as unregistered dealers - There is no material on record or denial of such fact assertion. The revenue had not led any evidence to establish either that the appellant was aware of the registration granted to any of those four purchasing dealers. Consequently, in the context of the penalty provision, it had to be inferred, at the relevant time the assessee was not aware of the fact of the four purchasing dealers being registered dealers. Therefore, it could never be said that the appellant had either failed to or had deliberately not issued a Tax Invoice to such dealers or that there was any collusion between the parties. The assessee rightly assumed those purchasing dealers to be unregistered dealers. The appellant did issue Sale Invoice against each of the four disputed transactions. Absence of any statement of the purchasing dealer to establish, they had informed the applicant of the facts specified under sections 22(1)(i) to (v) and 22(7) of the Act, clearly absolved the appellant - a selling dealer from any liability under subclause (i) of Table entry 5 of Section 54(1) of the Act. Thus, facts found by the Tribunal clearly make this case fall in category (b) considered in paragraph 38 of this order. Revision allowed - decided in favor of assessee.
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Indian Laws
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2019 (4) TMI 2
Dishonor of Cheque - insufficiency of funds - Offences punishable under section 138 of Negotiable Instruments Act - petitioners arrayed as accused - summon of accused - invocation of Section 141 of the Negotiable Instruments Act, 1881. Held that:- In terms of Section 141 of the Negotiable Instruments Act, 1881 every person who at the time of the commission of offence under Section 138 of the Negotiable Instruments Act, 1881, who was in charge of, and was responsible to the company for the conduct of the business of the company as well as the company and such a director of the company would be liable to be prosecuted and punished. The proviso thereto to Section 141 of the Negotiable Instruments Act, 1881, however lays down that no person would be rendered liable to be punished if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the to commission of such offence. As regards the petitioner No.3 it is apparent that she falls in the category of director in terms of Section 2 (24) of the Companies Act and thus in terms of the verdict of the Hon’ble Supreme Court in K.K.Ahuja (Supra) para 27(iv), adverted to elsewhere herein above, it is apparent that the petitioner No.3 has also rightly been arrayed as an accused in the instant case. Though the aspect of the respondent No.3 having not been in control and in charge of the petitioner No. 1 company can always be put forth by the petitioner No.3 after putting her defence and can be so contended before the learned Trial Court at the stage of analysis of evidence that is led by either side. It is further essential to observe that it has been laid down by the Hon’ble Supreme Court in MSR Leathers v. Palaniappan and another [2012 (10) TMI 232 - SUPREME COURT ] that a prosecution based on a second or successive default in payment of the cheque amount is not impermissible simply because no prosecution based on the first default which was followed by a statutory notice and a failure to pay and had not been launched. It is not considered appropriate to exercise jurisdiction under Section 482 of the Cr.PC, in as much as there is no infirmity in the impugned order dated 1.6.2015 of the learned Trial Court, MM (N.I.Act) South-East, Saket in CC no. 1529/2015 - petition dismissed.
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2019 (4) TMI 1
Application for Leave to appear in person on behalf of the defendant/caveatrix - whether appearance, application or acting by a recognized agent of a party would include within such scope, the right to plead and argue before a court of law as defined in Rule 2 of Order III? - Held that:- In this case, Mr. Nandy is admittedly a power of attorney holder on behalf of the caveatrix and claims a right to argue the case of the caveatrix including examining witnesses in the proceedings on the basis of the authorization arising from the power of attorney. The scope of the rights given to a holder of a power of attorney/recognized agent would be clarified from a look at some of the other provisions in the CPC and the Original Side Rules. The first of such would be Section 2(15) of the CPC which says that only a pleader would be entitled to appear and plead for another in court and which would include an advocate, a vakil and an attorney of a High Court. Under Rule 1 (i) (b), a person qualifies as an “advocate” if covered within the meaning of The Advocates Act, 1961. Rule 5 provides, inter alia, that an advocate shall not be entitled to appear and plead before a court unless he has filed a Vakalatnama or is instructed by an advocate who has filed a Vakalatnama. The rights granted under Order III Rule 1 is further clarified by sections 8 and 29 of The Advocates Act, 1961 which provide, inter alia, that no person shall be entitled as of right to practice in any High Court unless his name is entered in the Roll of advocates of the High Court (Section 8) and that there is only one class of persons entitled to practice of law namely, “advocates” (Section 29). Section 119 further prohibits unauthorized persons from addressing court and mentions examination of witnesses in particular. The courts have stressed on the distinction, namely, that acting and appearing for another will not include a right to plead or argue before a court of law - It is clear from the decisions as well as the relevant statutes and Rules, that a special class of persons, namely, Advocates enrolled under The Advocates Act, 1961, have been authorised to plead and argue before a court of law. It should further be noted that the “special reason” of permitting “any other person” under Rule 5 of chapter 1 of The Original Side Rules relate only to appearance and not pleading. This is in consonance with Rule 1 (i) (a) which specifically mentions various acts which a person authorized or a recognized agent can do “other than pleading”. The application filed by the defendant for permitting Mr. Radhanath Nandy to appear and act on behalf of the defendant/caveatrix under Order III Rule 2 of the CPC, is dismissed.
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