TMI Tax Updates - e-Newsletter
April 30, 2018

Case Laws in this Newsletter:

Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax

News

1. Auction for Sale (Re-issue) of Government Stocks; Auction for Sale (Issue) of New Government of India Floating Rate Bond 2031

2. Union Minister of State Shri P.P.Chaudhary visits Barbados, meets Prime Minister H.E. Freundel

Notifications

GST - States

1. F.12(46)FD/Tax/2017-Pt.-II-05 - dated 18-4-2018 - Rajasthan SGST

The Rajasthan Goods and Services Tax (Fourth Amendment) Rules, 2018.

2. 126-29 - dated 10-4-2018 - Rajasthan SGST

Regarding the proper officer to intercept any conveyance to verify the e-way bill.

SEZ

3. S.O. 1713 (E) - dated 17-4-2018 - SEZ

Central Government re-notifies areas comprising survey numbers as a Multi-Product Special Economic Zone

Circulars / Instructions / Orders

GST - States

1. Circular No. 05/2018 - dated 26-4-2018

Procedure for interception of conveyances for inspection of goods in movement, and detention, release and confiscation of such goods and conveyances.

2. Circular No. 04/2018 - dated 19-4-2018

Clarification on issues related to furnishing of Bond/Letter of Undertaking for exports.

FEMA

3. 24 - dated 27-4-2018

Investment by Foreign Portfolio Investors (FPI) in Debt - Review

4. 25 - dated 27-4-2018

External Commercial Borrowings (ECB) Policy – Rationalisation and Liberalisation

Companies Law

5. 03/2018 - dated 27-4-2018

Condonation of Delay Scheme, 2018

Highlights / Catch Notes

Income Tax

• Section 37(1) Royalty Payment Classified as Revenue Expenditure Due to Trademark License Agreement with No Long-Term Benefit.

  Case-Laws - HC : Deduction u/s 37(1) - onetime royalty payment - revenue expenditure or capital expenditure - On an analysis of the agreement on record, there is no doubt that it was merely a trademark license agreement, which conferred no enduring benefit or long term benefit to the appellant. - HC
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• Court Denies Living Allowance Exemption Claim u/s 10(14) of Income Tax Act Due to Lack of Evidence.

  Case-Laws - HC : Salary - perquisite - exempted living allowance u/s 10(14) - there was no evidence on record to establish that the living allowance was paid to the assessees in connection with the duties to be performed by them - No exemption - HC
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• Interest u/s 201(1A) Applies Automatically for TDS Failures, Regardless of Good Faith or Intentions.

  Case-Laws - HC : Levy of interest u/s 201(1A) - bonafide belief - Non deduction of TDS on perquisite - unlike Section 221 of the Act, Section 201 (1A) of the Act is not hedged in by any requirement such as good faith, wilful default etc. - Section 201 (1A) is automatically attracted and even if the appellant is bona fide in not making such deduction, it is nevertheless liable to pay interest. - HC
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• High Court Emphasizes Integrity for Retired Officers Turned Advocates in Income Tax Cases to Prevent Citizen Harassment.

  Case-Laws - HC : Advocates appearing on behalf of the revenue - retired Officers becoming advocate - The responsibility of an Advocate appearing for the State is much greater to ensure that justice is done and common people/ citizens are not harassed. - HC
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• Court Holds Assessee Liable for Bitumen Scam Under Income Tax Act Section 69A, Involving M/s Pawan Carrier as Agent.

  Case-Laws - HC : Additions u/s 69A - Bitumen Scam - Act of agent on behalf of principal - M/s Pawan Carrier has been held to be an agent of the assessee, the assessee would be liable for the shortfall in the quantity of Bitumen delivered by M/s Pawan Carrier. - HC
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• Court Rules Assessee Can Challenge Comparable Entity Inclusion in ALP u/s 92CA; No Estoppel Applies.

  Case-Laws - HC : ALP determination u/s 92CA - selection / exclusion of comparable - there is no estoppel against the assessee from demonstrating that a particular comparable was wrongly included in earlier year and, therefore, it should be excluded in this year. - HC
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• Supreme Court rules interest income not assessable to broker; no ownership over funds, diversion by overriding title applies.

  Case-Laws - SC : Accrual of interest - diversion by overriding title - transfer of income - additional interest income belongs to the assessee or not - assessee had acted only as a broker and could not claim any ownership on the sum payable to the PSUs - the said sum cannot be termed as the income of the Respondent. - SC
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• Court Upholds Use of ICAI Guidance Note for Tax Treatment of Lease Equalization Charges Under Income Tax Act.

  Case-Laws - SC : Deduction on account of lease equalization charges from lease rental - No force in the contentions of the Revenue that the accounting standards prescribed by the Guidance Note (issued by the ICAI) cannot be used to bifurcate the lease rental to reach the real income for the purpose of tax under the IT Act. - SC
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• Redemption of Stock Appreciation Rights (SARs) is Capital Gains, Not Perquisite, u/s 17(2)(iii) Income Tax Act.

  Case-Laws - SC : Perquisite or capital receipt - SARs - the amount received on redemption of Stock Appreciation Rights (SARs) is to be treated as capital gains and not perquisite u/s 17(2)(iii) of the IT Act. - SC
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FEMA

• India's ECB Policy Simplified: Easier Access to Foreign Capital with Enhanced Borrowing Limits and Expanded Eligibility Criteria.

  Circulars : External Commercial Borrowings (ECB) Policy – Rationalisation and Liberalisation
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• Review of FPI Investment Regulations in Debt Instruments under FEMA: Key Updates on Compliance and Tax Implications.

  Circulars : Investment by Foreign Portfolio Investors (FPI) in Debt - Review
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Corporate Law

• Companies Law 2018: Delay Condonation Scheme Helps Firms Avoid Penalties for Late Compliance, Boosts Corporate Governance.

  Circulars : Condonation of Delay Scheme, 2018 - On day extension for compliance.
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IBC

• Investment Lacks Time Value Consideration, Not 'Financial Debt'; Applicant Not a 'Financial Creditor' in Insolvency Case.

  Case-Laws - Tri : Corporate Insolvency Resolution Process - Financial Creditor - the investment was not made against the consideration for time value of money and therefore neither the present claim can be termed to be a ‘financial debt’ nor does the applicant come within the meaning of ‘financial creditor’ - Tri
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Service Tax

• Refund of Special Additional Duty Possible with Photocopies; Originals Not Required per Notification No. 102/2007.

  Case-Laws - AT : Refund of SAD - only photocopies of the Bills of Entry, TR6 challans and sales invoices were produced - N/N. 102/2007 - there is no requirement of producing the originals before the refund sanctioning authority - AT
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• Service tax under VCES can be paid using Cenvat Credit; no restrictions prevent using credit for tax dues.

  Case-Laws - AT : Payment of Service tax under VCES through Cenvat Credit - there is no restriction either under the scheme or anywhere else to compute tax dues after considering all payment either out of challan or out available credit. - AT
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• Appellant Reverses Full CENVAT Credit on Service Tax for Common Input Services, Enhancing Compliance Status.

  Case-Laws - AT : CENVAT credit - common input services - appellant having reversed the entire CENVAT credit of the service tax on the common input service stands on a better footing. - AT
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Central Excise

• Small Scale Industry exemption applies even if goods are removed secretly, exemption remains valid despite clandestine removal.

  Case-Laws - AT : Clandestine removal - benefit of SSI exemption - exemption cannot be denied even if the goods are removed clandestinely - benefit of SSI Exemption to be allowed. - AT
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• Factory Closure Entitles Assessee to Cash Refund for Unused Credit Balance in Accounts.

  Case-Laws - AT : Cash refund of un-utilised credit balance - closure of factory - in case of closure of factory, the assessee should be allowed for cash refund of the un-utilised credit balance available in the books of account. - AT
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VAT

• Nylon-6 Classified as Plastic Raw Material for Tax Purposes, Influencing VAT and Sales Tax Rates.

  Case-Laws - HC : Rate of tax - nylon - Tribunal has rightly held that polymide - Nylon-6 is a plastic raw material - HC
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Case Laws:

• Income Tax

• 2018 (4) TMI 1485
  Deduction of expenditure u/s 37(1) - revenue expenditure or capital expenditure - Instead of a royalty payable periodically, a onetime royalty of 1 Crore was payable towards the Trade Mark license - Right to use the Mark “HILTON” - Held that:- The fundamental test to determine as to whether a particular mark has been licensed or assigned is to see if the licensor/assignor has retained any rights in the mark. If rights are retained with the owner, usually it is a license and if no rights are retained by the owner, then it would usually be an assignment. A license is, therefore, nothing but a permissive use of the mark, which permission, is revocable. A 'right to use' is usually a license and not an assignment, except in certain circumstances. A license agreement usually has some or all of the above stipulations. Thus, the nature of the agreement can be easily deduced from the existence of all or any of the above conditions/characteristics. In some circumstances however, an exclusive licence which excludes the owner from using the mark and vests perpetual rights without any termination clause, could constitute an assignment. However, the present case is not one such case. The payment of 1 crore ought to be treated as revenue expenditure. There is no doubt in the proposition relied upon by the revenue, as held in Honda Siel (2017 (6) TMI 524 - SUPREME COURT OF INDIA), the Court has to look at the real nature of the agreement. On an analysis of the agreement on record, there is no doubt that it was merely a trademark license agreement, which conferred no enduring benefit or long term benefit to the appellant. Even the corporate name license agreement was terminable and did not create ownership rights in the appellant for the word “HILTON”. The Court takes notice of the fact that the corporate name has in any event been changed by the appellant. Held as Revenue expenditure - Decided in favor of assessee.

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• 2018 (4) TMI 1484
  TDS on Salary - perquisite - Living allowance u/s 10(14) - inclusion of boarding and lodging allowances paid to employees sent on deputation to U.K. - whether these allowances paid to the employees deputed to the U.K. fall within the provisions of Section 10(14)(i) of the Income Tax Act - Held that:- After considering Section 10 (14) of the Act, this Court, In Bellien Michael Andresmant (1998 (10) TMI 58 - ANDHRA PRADESH High Court), has observed that there was no evidence on record to establish that the living allowance was paid to the assessees in connection with the duties to be performed by them and that in the absence of such evidence, it cannot be held that the allowance paid to them was exempted under Section 10 (14) of the Act. The amounts in dispute attract the definition of perquisite in Section 17 (2) of the Act and they do not fall within the exception of Section 10 (14) of the Act. Levy of interest u/s 201(1A) - bonafide belief for non deduction of tax on perquisite - Held that:- As rightly argued by the learned counsel for the Revenue, unlike Section 221 of the Act, Section 201 (1A) of the Act is not hedged in by any requirement such as good faith, wilful default etc.,. Therefore, for levying interest, mens rea or wilful conduct is wholly irrelevant. In view of the fact that the appellant failed to deduct tax on the payments made, Section 201 (1A) is automatically attracted and even if the appellant is bona fide in not making such deduction, it is nevertheless liable to pay interest. The third question of law framed by the appellant is accordingly answered against it.

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• 2018 (4) TMI 1483
  Claim of depreciation u/s 32 when exemption has been availed u/s 11 towards applicable of income - claiming depreciation on the same capital assets tantamount to double deduction - Held that:- The issue is covered by the decision in the case of Commissioner of Income Tax vs. M/s Mahima Shiksha Samiti [2017 (11) TMI 1421 - RAJASTHAN HIGH COURT] - Decided against the revenue.

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• 2018 (4) TMI 1482
  Conduct of the advocates before the High Court on behalf of the revenue - advocate being retired Officers - The learned ASG appearing on behalf of the Revenue points out that there was a misunderstanding on the part of its Counsel Mr. Chhotaray, on instructions received from the Assessing Officer. The ASG fairly states that it was a mistake which should not have happened. - Held that:- it appears that the Officers of the Revenue believe that once the matter is in Court, it is the sole responsibility of the Counsel for the Revenue to protect the interest of the State and their responsibility comes to end. This cannot be. The conduct and role of an Advocate is much more than that of being an expert in tax matters. This has to be realized by the domain expert Advocates. An Advocate must have a broader vision and look upon themselves as Officers of the Court, assisting the Court to do justice and not right or wrong, my client is correct as now done by some of the Advocates for the Revenue. The responsibility of an Advocate appearing for the State is much greater to ensure that justice is done and common people/ citizens are not harassed. This conduct on the part of the Revenue's Counsel of not taking proper instructions and arguing matters as they perceive a debatable point involved, does lead to undue harassment of the tax payers-Respondent. We understand that while appointing panel Advocates for the Revenue, the requirement of having practiced for some number of years is not insisted upon in case a person has domain expertise, such as retired Officers of Revenue. If this indeed be the practice, it would, in our view, need revisiting the same. This is so, as the skill and conduct required to appear as an Advocate, are honed by working in the chambers of an experienced Advocate, particularly that he is part of a system which seeks to ensure that Justice is achieved, beyond the cause of the client. It is indeed for the CBDT to decide and take appropriate action. Undoubtedly, these retired Officers do have domain expertise and do render assistance.

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• 2018 (4) TMI 1481
  Claim of Exemption u/s 54B - LTCG - transfer of land used for agricultural purposes - Held that:- There is no evidence in support of the contentions raised in the submissions by the ld AR. It is admitted fact that there was no agriculture activity on these lands in the two preceding years from the sale of the land. - Benefit of exemption / deduction u/s 54B cannot be allowed. - Decided against the assessee.

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• 2018 (4) TMI 1480
  Additions as income from other sources u/s 69A - Bitumen Scam - Act of agent on behalf of principal - it was found that the contracted quantity of Bitumen was not delivered to consignees, whereas all the oil companies confirmed lifting of Bitumen. - Additions of the cost of short supply of Bitumen in the total income u/s 69A. - Held that:- If the appellant introduced M/S Pawan Carrier as its agent and by virtue of his authorization given in favour of M/S Pawan Carrier if the oil companies allowed M/s Pawan Carrier to lift the Bitumen and then M/s Pawan Carrier being an agent of this assessee did some unauthorized act, the appellant-assessee cannot escape the liability arising out of such unauthorized act of his agent. Mrely because payments have been received in the name of M/s Pawan Carrier the assessee cannot derive any benefit out of that and the assessee cannot be allowed to avoid the liability arising out of non- supply of Bitumen to the consignees. M/s Pawan Carrier has been held to be an agent of the assessee, the assessee would be liable for the shortfall in the quantity of Bitumen delivered by M/s Pawan Carrier. The amount received by M/s Pawan Carrier was on the basis of the authorization of the assessee as an agent of the assessee, therefore the assessing officer and the appellate authority as also the learned Tribunal has rightly taken a view based on the materials available on the record. The assessee was given opportunity to bring the proprietor of M/s Pawan Carrier and when he failed to bring the proprietor of M/s Pawan Carrier before the assessing officer, a notice was sent to M/s Pawan Carrier on which a reply was received that they had executed the work on behalf of the appellant-assessee, therefore no grave error leading to miscarriage of justice has been committed by the assessing officer. Decided against the assessee.

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• 2018 (4) TMI 1479
  ALP determination u/s 92CA - selection / exclusion of comparable - functional dissimilarity - assessee objected to the inclusion of that concern on the ground that it reported high profits - Held that:- no segmental data with respect to the disparage income schemes of Brescon Corporate Advisors Ltd. was available. - the exclusion of Brescon Corporate Advisors Ltd. does not per se result in any error of law. In case of another company, the ITAT took note of the fact that the profitability of M/s Keynote Corporate Services arose unusual to 185% from the reported level of 94%. - ITAT noted that, There is no estoppel against the assessee from demonstrating that a particular comparable was wrongly included in earlier year and, therefore, it should be excluded in this year. - the findings of the ITAT cannot be faulted.

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• 2018 (4) TMI 1474
  Amount received is in the nature of perquisite or capital receipt - Amount received on redemption of Stock Appreciation Rights (SARs) - Whether to be treated as capital gains and not perquisite under section 17(2)(iii) of the IT Act or the same is not taxable under the category of capital gains since no consideration had passed from the Respondent - taxability of the perequisite on shares issued to employees at less than market price - Taxable income under the head income from “Salaries” - Held that:- No force in the argument of the Revenue that the case of the Respondent would fall under the ambit of Section 17(2) (iii) of the IT Act instead of Section 17(2) (iiia) of the IT Act. It is a fundamental principle of law that a receipt under the IT Act must be made taxable before it can be treated as income. Courts cannot construe the law in such a way that brings an individual within the ambit of Income Tax Act to pay tax who otherwise is not liable to pay. In the absence of any such specific provision, if an individual is subjected to pay tax, it would amount to the violation of his Constitutional Right. It is apparent that such benefit or perquisite shall have arisen from the business activities or profession whereas in the instant case there is nothing as such. The applicability of Section 28(iv) is confined only to the case where there is any business or profession related transaction involved. Hence, the instant case cannot be covered under Section 28(iv) of the IT Act for the purpose of tax liability. Respondent got the Stock Appreciation Rights (SARs) and, eventually received an amount on account of its redemption prior to 01.04.2000 on which the amendment of Finance Act, 1999 (27 of 1999) came into force. In the absence of any express statutory provision regarding the applicability of such amendment from retrospective effect, no force in the argument of the Revenue that such amendment came into force retrospectively. It is well established rule of interpretation that taxing provisions shall be construed strictly so that no person who is otherwise not liable to pay tax, be made liable to pay tax. High Court didn't erred in law while upholding that the amount received on redemption of Stock Appreciation Rights (SARs) is to be treated as capital gains and not perquisite under section 17(2)(iii) of the IT Act.

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• 2018 (4) TMI 1473
  Accrual of additional interest - transfer by overriding title to the PSU - additional interest income belongs to the assessee or not - investment on behalf of Banks - determination of true nature of relationship between the Indian Bank and the Respondent with regard to the transactions in question - relationship between the Indian Bank and the Respondent - Held that:- The relationship between the Indian Bank and the Respondent is very much clear by the evidence led during the criminal proceedings. The Executive Director of the Bank has specifically spoken about the role of the Respondent as a broker specifically engaged by the Bank for the purchase of securities and that the Bank has included the interest money too in the consideration paid, for the purpose of taking demand drafts in favour of PSUs. The evidence led by other bank officials points out that the price of securities itself were fixed by the bank authorities and as per their directions the Respondent had purchased the securities at the market price and the differential amount was directed to be used for taking demand drafts from the bank itself for paying additional interest to the PSUs. The conduct of the parties, as is recorded in the criminal proceedings showing the receipt of amount by the broker, the purpose of receipt and the demand drafts taken by the broker at the instance of the bank are sufficient to prove the fact that the Respondent acted as a broker to the Bank and, hence, the additional interest payable to the PSUs could not be held to be his property or income. The income that has actually accrued to the Respondent is taxable. What income has really occurred to be decided, not by reference to physical receipt of income, but by the receipt of income in reality. Given the fact that the Respondent had acted only as a broker and could not claim any ownership on the sum payable to the PSUs and that the receipt of money was only for the purpose of taking demand drafts for the payment of the differential interest payable by Indian Bank and that the Respondent had actually handed over the said money to the Bank itself, no hesitation in holding that the Respondent held the said amount in trust to be paid to the public sector units on behalf of the Indian Bank based on prior understanding reached with the bank at the time of sale of securities and, hence, the said sum cannot be termed as the income of the Respondent. The decision rendered by the High Court requires no interference.

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• 2018 (4) TMI 1472
  Deduction on account of lease equalization charges from lease rental - significance of Guidance Note issued by the Institute of Chartered Accountants of India (ICAI) - Held that:- It is wrong to say that the Respondent claimed deduction by virtue of Guidance Note rather it only applied the method of bifurcation as prescribed by the expert team of ICAI. A conjoint reading of Section 145 of the IT Act read with Section 211 (un-amended) of the Companies Act make it clear that the Respondent is entitled to do such bifurcation and in our view there is no illegality in such bifurcation as it is according to the principles of law. The rule of interpretation says that when internal aid is not available then for the proper interpretation of the Statute, the court may take the help of external aid. No force in the contentions of the Revenue that the accounting standards prescribed by the Guidance Note cannot be used to bifurcate the lease rental to reach the real income for the purpose of tax under the IT Act. Thus the Respondent is entitled for bifurcation of lease rental as per the accounting standards prescribed by the ICAI. There is no express bar in the IT Act regarding the application of such accounting standards. Deduction on account of lease equalization charges from lease rental income can be allowed under the Income Tax Act, 1961,

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• 2018 (4) TMI 1471
  Rectification of mistake - Held that:- The Tribunal in its wisdom and by taking overall view of the entire facts and circumstances of the case thought it just to follow the judgment rendered in the case of Pooja Construction Company (1998 (8) TMI 111 - ITAT AMRITSAR). This judicial discretion exercised by the Tribunal cannot be construed to be an error on the face of record which could be rectified by resorting to Section 254(2) of the Act. The order of the Tribunal impugned in this appeal is well reasoned order and supported by judicial precedents and therefore does not call for any interference by this Court.

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• 2018 (4) TMI 1470
  Imposition of penalty u/s 271A - assessee failed to maintain books of account as per the provisions of section 44AA - Held that:- So far as the case of Contractor is concerned, there is no scope for imposing penalty under section 271A of the Act. We, therefore, respectfully following the Third Member decision of Chennai Bench of the Tribunal in the case ACIT vs. Aggarwal Construction Co. (2007 (1) TMI 203 - ITAT CHANDIGARH-B) order deletion of penalty levied under section 271A of the Act. - Decided in favour of assessee.

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• Customs

• 2018 (4) TMI 1476
  Revocation of courier registration - penalty - it was alleged that assessee have neither obtained the KYC document of Maria Albania Micha nor any authorization regarding the subject consignment at the time of filing the shipping bill - Held that: - procurement of KYC and authorization are mandatory requirement under the provisions of Regulations 13(a),(i) & (j) of the Courier Imports & Exports (Clearance) Regulations, 1998 read with the Regulation 12(1)(i)(iv) of the Courier Imports & Exports (Clearance) Regulations, 2010 - assessee-Appellants in the instant case have failed to discharge its duties as they have not obtained the KYC document of Maria Albania Micha, which was not in existence. Taking into account the nature of offence, the quantum of punishment appears to be on a higher side, quantum of penalty reduced - revocation of licence also set aside. Appeal allowed in part.

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• 2018 (4) TMI 1475
  Condonation of delay in filing appeal - appellant submits that the then Council was under the impression that the appeal before the Commissioner can be filed within a period of 90 days - Held that: - Hon’ble Supreme Court in the case of Singh Enterprises V/s CCE, Jamshedpur [2007 (12) TMI 11 - SUPREME COURT OF INDIA] observed that 60 days is the time to file the appeal and the Commissioner (Appeals) has the power to condone the delay up to the further period of 30 days on sufficient cause being shown - In the instant case, the Commissioner (Appeals) has not exercised this power though the sufficient cause for delay was shown by the appellant. The assessee should not suffer for the wrong advice /presumption of the council. Matter remanded to the Commissioner (Appeal) to decide the issue on merit without raising the issue of limitation.

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• Insolvency & Bankruptcy

• 2018 (4) TMI 1478
  Corporate insolvency process - Held that:- Corporate Debtor has committed default and the amount of 3,73,612.43/- has remained unpaid. It is patent from a perusal of the reply affidavit given by the Corporate Debtor that it admits the liability which is due and payable to the Operational Creditor. Thus, there is default committed on the part of the Corporate Debtor within the meaning of Section 3(12) read with Section 4 and Section 9(1) of the Code, 2016. Even a copy of the certificate from the financial institution/bank maintaining accounts of the Operational Creditor has been filed to satisfy the requirement of Section 9(3)(c) of the Code. As a sequel to the above discussion, this petition is admitted and Shri Atul Kumar Kansal is appointed as an Interim Resolution Professional.

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• 2018 (4) TMI 1477
  Initiation of Corporate Insolvency Resolution Process - whether the applicant does not come within the definition of “Financial Creditor” and the claimed amount is not a “financial debt” and the present application filed under Section 7 of the Code is not maintainable - Held that:- In the present claim there is no whisper of inclusion of any unpaid assured return amount. In the absence of any provision of assured return, it can be said that the investment was not made against the consideration for time value of money and therefore neither the present claim can be termed to be a ‘financial debt’ nor does the applicant come within the meaning of ‘financial creditor’. Once the applicant does not come within the meaning of ‘financial creditor’, he becomes ineligible to file the application under Section 7 of the Code. For the reasons stated above this petition fails and the same stands dismissed as not maintainable.

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• Service Tax

• 2018 (4) TMI 1469
  Construction services - Department was of the view that the Service Tax was not paid in full by the appellant - Held that: - for the period up to 31/05/2007, no Service Tax will be payable by the appellant since the construction activity undertaken by them is in the nature of composite works contracts in which the transfer to property in goods involved in the execution of such contracts is liable to tax as sale of goods - the demand for the period up to 31/05/2007 set aside. Extended period of limitation - Held that: - In principle no Service Tax can be charged in respect of construction work for Government departments such as residential house for police but we are of the view that individual contracts are required to be scrutinized before such benefit is extended. For this purpose the issue is remanded to the adjudicating authority for passing de novo decision. Appeal allowed in part and part matter on remand.

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• 2018 (4) TMI 1468
  Refund of SAD - rejection on the ground that only photocopies of the Bills of Entry, TR6 challans and sales invoices were produced by the appellant - N/N. 102/2007 dated 14.9.2007 - Held that: - there is no requirement of producing the originals before the refund sanctioning authority - the authorities below cannot insist that the appellant has to produce the original document - rejection of refund set aside - appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 1467
  Voluntary Compliance Encouragement Scheme (VCES) - utilization of credit for payment of tax under the scheme - Held that: - as per scheme there is no bar for utilization of credit upto 31.12.2012, however, the liability due i.e. not paid upto 31.12.2012 is required to pay in cash. Thus, only tax due upto 31.12.2012 and not paid up to 01.03.2013 cannot be paid by utilizing cenvat credit. There is no restriction either under the scheme or anywhere else to compute tax dues after considering all payment either out of challan or out available credit. As such, the appellants were entitled for making declaration under VCES and the balance unpaid service tax of 1,75,87,371/- the period from July, 2011 to December, 2012 was the amount of “tax dues” as per Section 105(1)(e) of Service Tax Voluntary Compliance Encouragement Scheme, 2013. As provided under Rule 6(2) of the Service Tax Voluntary Compliance Encouragement Rules, 2013 and clarified by CBEC Circular No. 170/5/2013-ST dated 08.08.2013, such unpaid service tax of 1,75,87,371/- was required to be paid in cash and could not be paid by utilizing Cenvat. Since the appellants have deposited the 50% of service tax before 31.12.2013 and rest amount of service tax on 28.03.2014, therefore, the compliance has been made by the appellants as per scheme. The respondent is entitled for the benefit of Service Tax Voluntary Compliance Encouragement Scheme, 2013 for discharge of the unpaid Service Tax as per the Scheme and there is no violation of the scheme and rules framed there under - appeal dismissed - decided against Revenue.

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• 2018 (4) TMI 1466
  Tour Operator Services - abatement - N/N. 01/06-ST dated 01/03/2006 - Held that: - benefit of availment is allowable under the said Notification subject to the condition that the assessee does not utilize Cenvat Credit for payment of Service Tax - since the entire Cenvat Credit has already been paid back, it is to be held as not availed ab initio - abatement to be allowed - appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 1465
  Rectification of mistake - applicant claims that remand order to examine the applicability of bar of limitation would not suffice - Held that: - the grounds raised in the present application cannot be entertained as the order has taken into account all the pleadings made on behalf of the appellant - Furthermore, the order was dictated in open court and any discrepancy between the submission and records should have been pointed out then. It would appear that the appellant did not press for resolution' of any matter except limitation - application for ROM dismissed.

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• 2018 (4) TMI 1464
  Manpower Recruitment and Supply Agency Services - reverse charge mechanism - Department was of the view that such employees were being paid by the foreign principal and not the appellant, and hence, MCI has supplied manpower from abroad to the appellant - Held that: - this issue has been considered by the Tribunal in the case of Airbus Group India Pvt. Ltd. vs. Commissioner of Service Tax, Delhi [2016 (7) TMI 1209 - CESTAT NEW DELHI] and stands decided in favor of the appellant, where reliance placed in CCE vs. Arvind Mills Ltd. (2014 (4) TMI 132 - GUJARAT HIGH COURT), the Hon’ble Gujarat High Court held that deputation of employees from one company to another does not involve profit or finance benefit there is no relationship of agency and client involved in such deputation. Appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 1463
  CENVAT credit - common input services for rendering taxable service and also were engaged in trading of the goods - rule 6(3A) of CCR 2004 - Held that: - as per the provisions of rule 6(3A), an assessee is required to reverse the CENVAT credit attributable to the exempted service, proportionate as per the formula laid down. If that formula is applied, appellant is required to reverse only that amount of CENVAT credit on the common input services which can be attributed to the trading activity. In the case in hand, appellant having reversed the entire CENVAT credit of the service tax on the common input service stands on a better footing. Appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 1462
  Penalty - revenue neutrality - Reverse charge mechanism - GTA services - commission paid to commission agent situated abroad - Held that: - the appellant has been taking consistent stand before the lower authorities that even if the service tax liability needs to be discharged they are eligible to avail the same as CENVAT credit as the services of GTA and the commission agent’s services were in relation to the manufacturing of final products - revenue neutrality being a situation, there would not be any willful suppression of fact. Revenue neutrality argument can be claimed for setting aside the penalty. Penalty set aside - appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 1461
  Invocation of extended period of imitation - section 73 (1) of the FA, 1994 - decision in the case of The Commissioner of Central Excise Customs & Service Tax Versus M/s Suvidha Engineers India Ltd. [2017 (2) TMI 674 - ALLAHABAD HIGH COURT] contested - Held that: - there is no ground to interfere with the impugned order - SLP dismissed.

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• 2018 (4) TMI 1460
  Leave of the court for Withdrawal of present SLP and instead file an appeal challenging the order of the Customs, Excise and Service Tax Appellate Tribunal - the decision in the case of Commissioner Versus Punjab Technical University [2017 (3) TMI 1657 - PUNJAB & HARYANA HIGH COURT] referred - Held that: - Leave as prayed for is granted - SLP dismissed as not pressed.

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• 2018 (4) TMI 1459
  Services to SEZ developer - N/N. 04/2004-ST - the decision in the case of Commissioner of Service Tax-I Versus Fedco Paints and Contracts [2017 (5) TMI 338 - CESTAT MUMBAI] contested - Held that: - The appeal is dismissed on the ground of delay.

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• 2018 (4) TMI 1458
  Valuation - Business Auxiliary Service - additional consideration in the form of iron ore fines emerging during the course of such crushing - the decision in the case of M/s Godawari Power & Ispat Ltd. (formerly known as Hira Industries Ltd.] Versus CCE, Raipur [2017 (5) TMI 704 - CESTAT NEW DELHI] contested - Held that: - there is no merit in the present appeal - Admission is refused and the civil appeal is, accordingly, dismissed.

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• Central Excise

• 2018 (4) TMI 1457
  Monetary amount involved in the appeal - the decision in the case of M/s Pioneer Industries Versus C.C.E. & S.T. -Bhavnagar [2017 (4) TMI 687 - CESTAT AHMEDABAD] contested - Held that: - In view of the small amount of revenue involved, we are not inclined to interfere with the impugned order - appeal dismissed.

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• 2018 (4) TMI 1456
  Classification of goods - Chewing Tobacco - the decision in the case of M/s Hira Packaging Versus CCE, Raipur [2017 (9) TMI 346 - CESTAT NEW DELHI] contested - Held that: - there are no merits in these appeals - Admission is refused and the civil appeals are, accordingly, dismissed.

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• 2018 (4) TMI 1455
  Cash refund of un-utilised credit balance - closure of factory - Held that: - Since, the appellant had lawfully earned the Cenvat credit and due to closure of the factory, is not in a position to utilise the same now, such pre-deposited amount, should be refunded to it in cash - the decision in the case of M/s. Shalu Synthetics Private Limited Versus CCE. & ST. Vapi [2014 (6) TMI 343 - CESTAT AHMEDABAD] squarely applies to the case, where it was held that in case of closure of factory, the assessee should be allowed for cash refund of the un-utilised credit balance available in the books of account. Appellant is entitled for refund in cash - appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 1454
  Clandestine removal - demand based on third party records and statements - Held that: - the issue i.e whether third party records can be held to be sufficient for clandestine removal is the subject matter of various decisions of the Tribunal and it has been repeatedly held that the third party records cannot be considered sufficient for upholding the charges of clandestine removal - demand not sustainable - appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 1453
  Clandestine removal - benefit of SSI exemption - whether the benefit of small scale exemption is required to be extended to the assessee, when the final product stands removed by clandestine manner? - Held that: - the issue stands decided by the Tribunal decision in the case Premier Rubber Factory vs. CCE [1989 (10) TMI 145 - CEGAT, MADRAS], laying down that, exemption cannot be denied even if the goods are removed clandestinely - benefit of SSI Exemption to be allowed. Penalty on the Director u/r 26 of Central Excise Rules, 2002 - difference of opinion - Whether in the facts and circumstances of this case, a penalty of 5 lakh should be imposed on Shri Pritpal Singh, Director under Rule 26 of Central Excise Rules, 2002 - majority order - Held that: - though the difference of opinion is on the merits of imposing penalty under Rule, 26, the issue has become infructuous and redundant in view of both the points raised by the learned Counsel for the respondent - there could be no proceedings further by appeal against the impugned order which dropped the demand against Shri. Pritpal Singh, Director. The reference is returned to the Division Bench for further decision.

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• 2018 (4) TMI 1452
  Clandestine removal - demand based on third party records and statements - Held that: - the issue i.e whether third party records can be held to be sufficient for clandestine removal is the subject matter of various decisions of the Tribunal and it has been repeatedly held that the third party records cannot be considered sufficient for upholding the charges of clandestine removal - demand not sustainable - appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 1451
  SSI exemption - use of Brand name of third party - N/N. 8/03-CE dated 01.03.2003 - Confiscation - redemption fine - penalty - Held that: - Although, the appellant is exporting the said goods but the appellant has not followed any procedure i.e. payment of duty, and claiming the rebate claim or goods have been exported under bond. The fact is on record that out of total value of the goods of 4,76,080/- the goods worth 2,83,192/- are agriculture equipments on which, no duty is payable by the appellant - the total value of duty payable on the goods after abatement of 1,35,022/-, therefore, redemption fine and penalty imposed on the appellant are on higher side, and are to be reduced. Appeal allowed in part.

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• 2018 (4) TMI 1450
  Confiscation of seized goods - redemption fine - penalty - Held that: - the premises of Amba Bi-Wheelers Private Ltd., on the ground that same were bearing the brand name ‘Top’ and ‘Ninja’ was not owned by them and had been stocked with intention to remove without payment of duty - The learned Commissioner also accepted the contention of Amba Bi-Wheelers that they were under bona fide belief that they would be covered by the SSI exemption and duty liability has still to surface till the stocks packed before 31 May, 2006, were finally exhausted. The learned Commissioner appreciating the law being duly made applicable to packing, re-packing was made dutiable with effect from 1 June, 2006, prior to that the respondents are merely engaged in trading activity, is not amounting to manufacture and these were not aware with the procedures and law governing Central Excise, levied on manufactures. As regards penalties on the respondents under Rule 26 the learned Commissioner have observed that for such penalty, necessary ingredients that is, the knowledge and reasons to believe that the goods which the person had dealt with were liable to confiscation, is completely missing in the facts of the case. Further finding was recorded that the Adjudicating Authority have imposed penalty under Rule 26 without there being any evidence on record in support of the allegations that the respondent(s) had knowledge or had reasons to believe that the goods in question were liable for confiscation under the provisions of Central Excise Law. Appeal dismissed - decided against Revenue.

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• 2018 (4) TMI 1449
  CENVAT credit - capital goods - duty paid LPG gas - Held that: - the issue has came up before the Tribunal in the case of Singhal Enterprises Pvt. Ltd. vs. CC&CE, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the CCR, hence will be entitled to the Cenvat Credit - credit allowed - appeal dismissed - decided against Revenue.

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• 2018 (4) TMI 1448
  Clandestine manufacture and removal - four trucks were carrying drinking water and irritated water under the brand name of Kingfisher and Kwality were seized, which were having no duty paying in documents - seizure of goods with vehicle - Held that: - there is no dispute on merits that appellant was engaged in activity of clandestine manufacturer of clearances on their goods. Therefore, the demand confirmed in the impugned order is confirmed. As the appellant has submitted that they might have paid duty involved in the matter, the same is required to be verified. As appellant was involved in the activity of clandestine manufacturing and clearances of goods, therefore, no immunity is granted with regard to the penalties - quantum of redemption fine reduced. Appeal allowed in part.

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• 2018 (4) TMI 1447
  Manufacture - processing of iron ore - Revenue held a view that such conversion of iron ore into concentrates will amount to manufacture and liable to central excise duty - Held that: - the identical issue has come up before the Tribunal in the case of M/s. Jains Mines and Minerals (India) Ltd. vs. CCE & ST, Jabalpur [2017 (10) TMI 1283 - CESTAT, Delhi], where it was held that There is no special process facility with the appellant. Improvement in the content of “Fe” due to the processes undertaken by the appellant by itself will not make the resultant product as iron ore concentrate - the process do not amount to manufacture - appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 1446
  CENVAT credit - duty not required to be paid on finished goods - Revenue has taken the view that such Cenvat Credit is required to be reversed since these inputs have been utilized for the manufacture of finished products which are not required to pay duty - Held that: - the CENVAT Credit which has been availed, has been utilized by reversal for payment of duty on the finished products. Consequently, such CENVAT Credit is to be considered as already reversed and the Revenue is not justified in once again demanding the reversal of such CENVAT Credit. Reliance paced in the decision in the case of Commissioner of Central Excise & Customs, Surat-III vs Creative Enterprises [2008 (7) TMI 311 - GUJARAT HIGH COURT], where it was held that Tribunal is justified in holding that if the activity of the assessee does not amount to manufacture there can be no question of levy of duty, and if duty is levied, Modvat credit can’t be denied by holding that there is no manufacture. Appeal allowed - decided in favor of appellant-assessee.

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• 2018 (4) TMI 1445
  Valuation - inclusion of VAT paid - Revenue was of the view that the VAT liability discharged by utilizing the investment subsidy granted in form 37B cannot be considered as VAT actually paid, for the purpose of Section 4 of the CEA 1944 - Held that: - the identical issue has already come up before the Tribunal in the case of Shree Cement Ltd. vs. CCE, Alwar [2018 (1) TMI 915 - CESTAT NEW DELHI], where it was held that There is no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans - appeal allowed - decided in favor of appellant.

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• 2018 (4) TMI 1444
  Clandestine removal - It is the allegation of the Department that with the help of raw material, finished product (Gutka) was sold by the appellant in the grey market and finally, Department has made out a case for clandestine removal - Held that: - all business entities mentioned in the Lorry Receipts are independent business entities as their assessment, registration etc. were separate - LRs which are in the name of M/s. R S Company only will have to be adjudicated for the purpose of making the duty demand from the appellants. The rest receipts cannot be added in the hands of the appellants. Adjudicating authority directed to verify all the Lorry Receipts and raise the duty demand pertaining to the Lorry Receipts in the name of M/s. R S Company only - appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2018 (4) TMI 1443
  Rate of tax - nylon - taxable at 4% or 11%? - Tribunal treated the item falling under Entry 51 in Part B of First Schedule to the Tamil Nadu General Sales Tax Act, 1959 - Held that: - Tax exempted goods, listed in Schedule III of Tamil Nadu General Sales Tax Act, 1959, include tobacco, sugar, cotton and woolen fabrics, handloom cloth and few other commodities. Besides, conditional exemption, effected through special notifications, is also accorded to the sale/purchase of a number of goods by certain persons or institutions - The Tribunal has rightly held that polymide - Nylon-6 is a plastic raw material, would fall under Entry 51 in Part B of First Schedule to TNGST Act, 1959, at the relevant time and eligible to be taxed at 4%. Tax case revision dismissed.

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