TMI Tax Updates - e-Newsletter
May 27, 2017

Case Laws in this Newsletter:

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

TMI SMS

• To ensure recovery of the principal sums lent, assessee waives interest, addition towards the accrual of interest income cannot be made - HC

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Articles

1. SERVICES UNDER REVERSE CHARGE UNDER GST REGIME

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. After GST regime, telecom companies would be required to re-work their costing and credits availability and re-jig their prices and ensure that the increased availability of credit is passed on to the customers by lowering their costs

2. ADDENDUM TO THE GST RATE SCHEDULE FOR GOODS [As per discussions in the GST Council Meeting held on 18th May, 2017]

3. RBI Reference Rate for US $

4. Atal Pension Yojana (APY) reaches 53 lakhs subscribers’ base

5. Central Board of Direct Taxes (CBDT) Issues Clarification on furnishing Statement of Financial Transaction (SFT) & SFT Preliminary Response

6. Start Up -Definition changes

Notifications

SEZ

1. S.O. 1686 (E) - dated 17-5-2017 - SEZ

Corrigendum - Notification No. S.O. 1391(E) dated 26th April, 2017

Highlights / Catch Notes

GST

• GST Council Updates Rate Schedule: New Adjustments and Clarifications for Goods Tax Rates Announced on May 18, 2017.

  News : ADDENDUM TO THE GST RATE SCHEDULE FOR GOODS [As per discussions in the GST Council Meeting held on 18th May, 2017]
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Income Tax

• Interest Income Not Added to Assessee's Income Due to No Accrual Following Board Resolutions.

  Case-Laws - HC : Accrual of interest income - Commercial decision was taken by the appellant-assessee not to charge interest from these two borrowers as the assessee wanted to ensure recovery of the principal sums lent. In absence of realization of real income and there being no accrual of such income subsequent to the aforesaid Board resolutions, interest income could not be added to the income of the assessee for the relevant financial year - HC
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• Company's Shipping Income Under Indo-Swiss DTAA Article 22; Not Effectively Connected to Indian PE, Benefits Applied.

  Case-Laws - AT : Benefit of Indo-Swiss treaty / DTAA - Although the assessee company had a PE in India in the year under consideration, the ships i.e. the property in respect of which shipping income was paid to the assessee company being not effectively connected with that PE, the case of the assessee will be out of paragraph No. 2 of Article 22 and will fall in paragraph I of the said article - AT
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• Section 41 Additions Confirmed: Assessee's Unpaid Interest Liability Deemed Non-Genuine After Business Cessation.

  Case-Laws - AT : Additions u/s 41 - the assessee had stopped its business and liability is had been shown on account of interest payable for the last for many years which was not paid but claimed that expenses in the earlier years - Assesseee failed to prove the genuineness - additions confirmed - AT
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• Tax Treatment of Losses in Demergers: Does Partial Asset Transfer Qualify u/s 2(19AA) of Income Tax Act?

  Case-Laws - AT : Carry forward and set-off of losses - demerger - Applicability of provisions of Sec. 72A(4) - transfer of only the specified assets and liabilities - the scheme of arrangement in question does not qualify to be a ‘demerger’ in terms of section 2(19AA) - AT
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• Section 263: Opportunity to be Heard is Crucial, Not Just a Formality; Non-Compliance Voids Tax Order.

  Case-Laws - AT : Revision u/s 263 - Opportunity of being heard is little more than serving a notice on assessee. It is not an empty formality. - Since the mandatory requirement of opportunity of being heard has not been provided to assessee, the order passed by CIT is void ab-initio - AT
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• Taxpayer's Premature Insurance Write-off Sparks Accounting Accuracy Concerns in Fire Loss Claim Settlement Discrepancy.

  Case-Laws - AT : Addition on account of insurance claim - ascertaining actual loss of stock in fire - we fail to understand as to why and how the assessee has written off partial claim of insurance amounting to ₹ 1 crore in the year under consideration before final settlement of such claim by the Insurance company which was allowed at ₹ 3,40,388/- in the subsequent year - AT
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Customs

• High Court Overrules CESTAT Directive on Show Cause Notice Timeline in Fraudulent Drawback Case, Citing CBLR 2013 Provisions.

  Case-Laws - HC : Fraudulent availment of drawback - Was the CESTAT is justified in directing the concerned Authority to issue a SCN within 15 days for complete the proceeding within the prescribed time of three months, notwithstanding the CBLR 2013? - Held No - HC
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• Legal Distinction Between Detention and Provisional Release of Goods in Customs Law Explained.

  Case-Laws - HC : Detention of goods - provisional release of goods - The drawing of a distinction between seizure of imported goods as a result of undervaluation and seizure of imported goods upon misdeclaration cannot per se be said to be irrational. - HC
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• Section 28(11) Limits DRI and DGCEI Authority on Pre-April 8, 2011 SCNs Adjudication.

  Case-Laws - AT : Power of the proper officer - A new inserted Section 28(11) does not empower either the officers of DRI or the DGCEI to adjudicate the SCN issued by them for the period prior to 08/04/2011. - AT
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Service Tax

• Agent Procuring Print Media Ad Orders Exempt from Service Tax; Not Classified as Advertising Agency.

  Case-Laws - AT : Demand of service tax - An agent merely procuring an order for advertisement for a principal namely print media is not an advertising agency. The appellants activity being only this and nothing more, therefore, cannot bring them & classify them to be an Advertising Agency. - AT
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• Appellant's Lease of Plant and Machinery Not Classified as "Renting of Immovable Property Service" Under Tax Laws.

  Case-Laws - AT : Renting of immovable property service - The appellant have only let out plant and machinery and the manufacturing facility, which does not qualify under the definition of “Renting of immovable property service”. - AT
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• Assessee Exempt from Service Tax for Low-Cost Housing Construction for Varanasi Development Authority.

  Case-Laws - AT : Work Contract - Whether the respondent-assessee is liable to service tax for constructing low cost housing or housing for economically weaker section for Varanasi Development Authority, Varanasi? - Held No - AT
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Central Excise

• Court Upholds Penalty on Government Company for Lack of Prudence in CENVAT Credit Reversal Case.

  Case-Laws - HC : Reversal of cenvat credit - The appellant, being a Government Company, ought to have been more prudent and transparent in all its deeds, acting as a model to others. No materials are brought before this Court to interfere with the quantum of penalty as well - levy of penalty upheld - HC
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• Reversing CENVAT credit before use means no interest liability; interest applies only to used credit for duty.

  Case-Laws - AT : CENVAT credit - before utilisation of credit if the same has been reversed will amount to not taking credit and would not attract liability of interest - Interest liability shall be only with reference to the credit which are put to use to discharge duty on final products - AT
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• Assessees can claim CENVAT credit for duties on raw materials used in capital goods, even if immovable.

  Case-Laws - AT : CENVAT credit - Once a storage tank and pollution control equipment constitutes capital goods and any raw material purchased for construction of those goods, the duty paid could be utilized as a cenvat credit by the assessee notwithstanding the fact that the storage tank is an immovable property. - AT
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• Rectified Spirit Classified as Ethyl Alcohol Under Tariff Item 22072000: Not for Human Consumption.

  Case-Laws - AT : Classification of goods - rectified spirit which is not used for human consumption is nothing but ethyl alcohol and is finding place in tariff item no. 22072000 - AT
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• Milk Shake Mix, Soft Serve Mix, and Coffee Cream classified under Chapter 4 despite stabilizers, per HSN Explanatory Note.

  Case-Laws - AT : Classification of goods - Milk Shake Mix (MSM) - Soft Serve Mix (SSM) - Coffee Cream - Addition of stabilizers is essential to maintain the consistency and shelf life of the products. HSN Explanatory Note also qualifies the addition of stabilizers without changing its classification from Chapter 4 to 19 - the products in question will be under the Chapter Sub-heading 0404.90- AT
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• Interest Liability Limited to CENVAT Credit for Goods Not Returned Within 180 Days in Job-Work Cases.

  Case-Laws - AT : CENVAT credit - job-work - goods were not received back within 180 days - The liability of interest is limited to the amount of CENVAT credit only for the period beyond 180 days, when goods were not returned and credit continued in the assessee’s books of accounts. - AT
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VAT

• Gujarat Sales Tax Act: Section 45(6) Penalty is Mandatory, Can Be Imposed Suo-Motu by Revisional Authority.

  Case-Laws - HC : Penalty u/s 45(6) of the Gujarat Sales Tax Act, 1969 - the penalty u/s 45(6) of the Act is mandatory and therefore, the same can be levied by the revisional authority for the first time in the suo-motu revisional proceedings - HC
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Case Laws:

• Income Tax

• 2017 (5) TMI 1224
  Validity of the invocation of Section 153A - Held that:- "Habitual concealing of income and indulging in clandestine operations” and that a person indulging in such activities “can hardly be accepted to maintain meticulous books or records for long.” These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission. ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs. - Decided in favour of assessee.

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• 2017 (5) TMI 1223
  Eligibility for deduction u/s 10AA - SEZ unit - nature of distribution fee received from Amadeus Spain - DRP observed that amount received under the Distribution Agreement was not on account of any export of software or data processing for which deduction could be claimed u/s 10A - Revenue contended that, a parallel could not be drawn between the decisions in the Assessee’s own case for AY 1996-97 and the AY under consideration because the deduction that was claimed for AY 1996-97 deduction was under Section 80HHE whereas here it is under Section 10A of the Act. Held that:- There is no merit in the above contention for the simple reason that the Revenue has not been able to show that the activity of the Assessee, which was examined then and the activity now is any different. The essence of both Section 80 HHE and Section 10A in terms of the conditions of eligibility are not very different. - Decided against the revenue. Eligibility of the Assessee to deduction under Section 10AA - The basis for the AO to deny the deduction under Section 10AA of the Act for AY 2010-11 was that a majority of the invoices were addressed to the Assessee at the addresses in Mumbai, Gurgaon etc. Very few of those invoices bore the Noida SEZ address. The AO observed that the source of the data processing export had to be unit established at SEZ area Held that:- The claim under Section 10AA of the Act was supported by a certificate of a Chartered Accountant in Form 56F. It was noticed that Article 9 read with Schedule-I of the Distribution Agreement between the Assessee (Inter Globe) and Galileo showed that Galileo was entitled to a fee based on the number of segments completed by the Assessee. ‘Segment’ was defined under Article 2 to mean a booking, either of a direct flight or consisting of various legs of journeys, which is concluded and not cancelled at any stage. The more the number of segments booked by travel agent, the higher would be the revenues of the Assessee. Therefore, it was critical for the Assessee to ensure that the bookings were converted into segments. In terms of Article 8 of the Agreement, the Assessee was required to provide any kind of technical help, support or assistance as may be required by the subscribers in connection with use of Galileo GDS server located in Denver, USA. Revenue generated on creation of segment and finalisation of PNRs required the Assessee to undertake the said data processing services from its units located in Noida SEZ. The concurrent factual findings of both the CIT (A) and the ITAT as regards the Assessee/Inter Globe fulfilling the conditions of eligibility for deduction under Section 10AA of the Act have not been shown to be perverse. - Decided in favour of assessee.

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• 2017 (5) TMI 1222
  Addition u/s 68 - undisclosed cash credit - Held that:- The facts of the present case are similar and identical to that of Pancham Dass Jain (2006 (8) TMI 582 - ALLAHABAD HIGH COURT) and the credit purchases reflected in the books of accounts of the assessee of raw-hide from petty dealers even if not confirmed would not mean that it is concealed income or deemed income of the assessee, which can be subjected to tax in view of Section 68 of the Act. In respect of an earlier assessment year, 2005-2006 as opined that trade amount due to the trade creditors in the books of accounts of the assessee cannot be added towards the income of the assessee under Section 68 of the Act. The aforesaid decision of the tribunal in respect of the previous year is said to be final and conclusive, as there is no material on record to show that any appeal was preferred against it rather Sri R.P. Agarwal states at the bar that no appeal against the same was ever filed. It is not considered appropriate to allow the revenue to change the position, which it has taken in one such assessment year, in the subsequent years - Decided in favour of assessee.

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• 2017 (5) TMI 1221
  Addition on waiver of interest - accrual of income - debtors’ inability to pay the interest for years - Tribunal in the rectification proceeding rejected assessee plea on the ground that it maintained mercantile system of accounting, the debts were not declared as bad debts and the assessee continued to receive back the principal sums from the borrowers - Held that:- Mere following of mercantile system ought not to result in accrual of income from interest when there is no interest income in real terms and the statements of account of the assessee also did not reflect any credit entry in respect of interest receipt from the aforesaid borrowers. Commercial decision was taken by the appellant-assessee not to charge interest from these two borrowers as the assessee wanted to ensure recovery of the principal sums lent. In absence of realization of real income and there being no accrual of such income subsequent to the aforesaid Board resolutions, interest income could not be added to the income of the assessee for the relevant financial year We find the points of law involved in this appeal are covered by Shoorji Vallabhdas (1962 (3) TMI 6 - SUPREME Court) and Poona Electric (1965 (4) TMI 20 - SUPREME Court ). The interest income could not said to have had accrued for the appellant for the assessment year in the background of the resolutions taken for waiver of interest. - Decided in favour of the assessee.

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• 2017 (5) TMI 1220
  Disallowance of contribution to Retired Employees Medical Benefit scheme invoking Section 40A (9) - Held that:- Section 40A which starts with the non obstante clause. Prior to its amendment by the Finance Act, 2011, as per sub-section (9) introduced by the Finance Act, 1984, with effect from April 1, 1980, deduction of only payments for the purposes and the extent provided was permitted. The assessee does not have a case that the contribution made by it to the pension fund is payment which is permitted under section 36. If that be so, in view of section 40A(9), the payment made by the assessee could not have been allowed to be deducted and its disallowance by the Assessing Officer is perfectly in line with the statutory provisions. See CIT v. State Bank of Travancore [2015 (8) TMI 369 - KERLA HIGH COURT ] - Decided in favour of revenue

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• 2017 (5) TMI 1219
  Exclusion of the sum received or deemed to be received by the assessee on account of shipping business - Benefit of Article 22 of Indo-Swiss treaty - Held that:- Tribunal in assessee’s own case for the A.Y. 2004-05 [2015 (3) TMI 148 - ITAT MUMBAI] wherein held having perused the relevant clauses of the agreement between assessee company and M/s MSC Agency India Pvt. Ltd. we find ourselves in agreement with the view of the AO and the learned CIT(Appeals) that M/s MSC Agency India Pvt. Ltd. was legally and economically dependent agent of the assessee company and since the assessee company was managing and controlling some of its business operations in India through the said dependant agent, it constituted the permanent establishment of the assessee company in India in terms of the Indo-Swiss treaty. We uphold the impugned order of the learned CIT(Appeals) holding that the international shipping profits of the assessee company are covered by Article 22 of the Indo-Swiss treaty and although the assessee company had a PE in India in the year under consideration, the ships i.e. the property in respect of which shipping income was paid to the assessee company being not effectively connected with that PE, the case of the assessee will be out of paragraph No. 2 of Article 22 and will fall in paragraph I of the said article. Consequently, the same will be taxable in the country of residence of the assessee company i.e. Switzerland and not in India. - Decided in favour of assessee As regards the alternative contention of assessee that no portion of the international shipping profits earned by the assessee in any case can be taxed in India as the commission paid to M/s MSC Agency India Pvt. Ltd. which constituted its PE is admittedly at an arm's length, it is observed that this alternative claim of the assessee has now become academic in view of our decision accepting the main contention of the assessee that the international shipping profits are chargeable to tax only in Switzerland as per Article 22(1) and not in India. - Decided against assessee.

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• 2017 (5) TMI 1218
  Interest from bank - income from other sources OR income from business - Held that:- As nothing has been brought on record to prove that the assessee was in the business of earning interests from fixed deposits, so, we do not want to disturb the finding of the FAA that the interest income was to be assessed under the head income from other sources - Decided against assessee Disallowance made u/s.36(1)(iii) - Held that:- FAA held correctly that it had received loan from Federal bank as on 31.3.2008, that it had advanced loans to three entities, that it had paid interest to the bank, that it had advanced loans to other companies without charging any interest,that the borrowed funds were not utilized for the business purposes. Case of Soma Sundaram and Bros (1998 (8) TMI 59 - MADRAS High Court) held that interest paid by the assessee was not allowable u/s. 36(1)(iii) of the Act.- Decided against assessee Disallowance of depreciation - assessee had not carried out any business activity during the year under appeal - Held that:- FAA observed that the AO had given a specific opportunity to the assessee to submit complete details for furniture,AC and motor car on which depreciation had been claimed, that no documentary evidences was furnished before him to prove the genuineness of the claim, that even during the appellate proceedings the assessee had filed papers without any evidence of use of the assets for the business,that it had failed to submit to substantiate its claim. Finally,he upheld the order of the AO. As nothing has been produced before us that could lead to the conclusion that decision of the AO/FAA is factually legally incorrect - Decided against assessee Addition made u/s.14A - Held that:- FAA after considering the submissions of the assessee and the assessment order held that the provisions of section 14A were applicable for the year under appeal, that assessee had received exempt income. Referring to case of Godrej and Boyce Manufacturing Company Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT)the FAA upheld the ad hoc disallowance of 73, 705/-. There is nothing on record to prove that order of the FAA suffers from any infirmity - Decided against assessee Additional u/s.41 - Held that:- As assessee did not file complete details with confirmation,that it had submitted some photocopies without name and address of the parties,that the so-called confirmations were filed without any supporting evidences,that the assessee had stopped its business and liability is had been shown on account of interest payable for the last for many years which was not paid but claimed that expenses in the earlier years, that no documentary evidences had been filed to prove the genuineness of those papers, that for claiming any deduction the onus was on the assessee, that it had failed to submit confirmation of the parties, that it had failed to discharge its onus,that only book-entry was shown as liability, that the provisions of section 41 were applicable to the facts of the case, that the AO had allowed the credit of interest receivable, that the AO were justified in making addition - Decided against assessee Computation under the MAT provisions vis a vis disallowance u/s.14A - Held that:- FAA had decided the issue against the assessee following the order of the Tribunal in the case of R B K Shares Broking Ltd.(2013 (12) TMI 74 - ITAT MUMBAI ). Considering the above,we are of the opinion that there is no need to disturb the findings of the FAA. - Decided against assessee

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• 2017 (5) TMI 1217
  Addition u/s 14A r.w.r. 8d - assessee does not claim any expenditure against exempted income - Held that:- the investment made by the assessee in his individual capacity and the same has been reflected in the balance sheet, which has been rightly observed by the CIT-A. It is also noticed that the CIT-A found that the assessee claimed no expenses towards earning of dividend income. We find that the disallowance cannot go beyond the exempt income earned. Accordingly, the order of the CIT-A is justified and needs no interference. - Decided against revenue Disallowance on account of retention of money and security deposit - accrual of income - Held that:- We find that the retention money and security deposits are retained by the parties, who have given the contract to assessee and the said amounts would be refunded and accrued to assessee on satisfactory completion of contract work. Till then the assessee had no right to claim any parts of retention money, which retained by the parties. The Hon’ble High Court of Calcutta in the case of CIT Vs. Simplex Concrete Piles (I) Pvt. Ltd [1988 (12) TMI 52 - CALCUTTA High Court] held that all the receipts of retention and security deposit are contingent and happening of future event. The retention and security deposit deducted by various parties cannot be said to have been accrued to the assessee during the year under consideration in which year the bills are raised.- Decided against revenue Addition on account of interest earned on fixed deposits - AO added the same by treating as income from other sources - Held that:- The assessee filed necessary evidences that the assessee has earned interest from UCO Bank, Indian Overseas Bank and SBI Bank. The assessee got refund from ICICI Bank on account of excess amount paid, details of which are available at pages 80 to 86 of the paper book. It is also observed that the assessee has made fixed deposits for obtaining bank guarantee towards earnest money in terms of contract and rebate received from the ICICI Bank towards excess EMI paid by the assessee. We find that the assessee being a contractor and in order to secure the contract work bank guarantee is required for smooth functioning of his contract business. Therefore, the interest as earned and refund by the assessee is to be treated as business income.- Decided against revenue

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• 2017 (5) TMI 1216
  Addition made as undisclosed receipts - Held that:- As observed from the remand report as discussed by the CIT-A that amount of 6,49,210/- was credited to assessee’s account on 31-03-08 and other amount of 9,554/- came into account of the assessee on 31-03-08. The findings show that both the said amounts came into account of the assessee in the asstt. year under consideration. But, the AO found that the said amounts were not entered into books of the assessee. It appears that the submissions made by one of the partners, Mr. Amit Baran Roy the cheque was received by the assessee on 6-4-08 is incorrect. We find that the AO has rightly held that both the amounts were not entered in the books of account for the A.Y under consideration. The CIT-A confirmed the same, which is justified. - Decided against assessee Addition u/s. 68 - Held that:- AR of the assessee did not file anything to suggest that the entire amount cannot be added. In the absence of any evidence to substantiate the claim/contention, we find no force in the arguments of the ld.AR. Therefore, the arguments advanced the by the ld.AR of the assessee are rejected. In view of above discussion, we uphold the impugned order of the CIT-A. Non deduction of TDS u/s. 194C and 194I - Held that:- The labour sardars are not suppliers of labour and as such he rightly deleted the impugned addition made u/s. 40(a)(ia) of the Act. Therefore, we delete the addition made by the AO and confirmed by the CIT-A. TDS on Hire charges - Held that:- We find that the assessee is a sub-contractor to M/s. Pobi Technologies 4,36, 693/- to the file of AO.

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• 2017 (5) TMI 1215
  Deduction u/s. 10B computation - sale of DEPB licence - Held that:- Special Bench in the case of M/s. Maral Overseas Ltd. [2012 (4) TMI 345 - ITAT INDORE] held Once an income forms part of the business of the income of the eligible undertaking of the assessee, the same cannot be excluded from the eligible profits for the purpose of computing deduction u/s 10B of the Act. As per the computation made by the Assessing Officer himself, there is no dispute that export incentive incomes have been treated by the Assessing Officer as business income. - the undertaking is eligible for deduction on export incentive received by it in terms of provisions of Section 10B(1) read with Section 10B(4) of the Act Sub-section (4) of section 10A/10B of the Act is a complete code providing mechanism for computing the “profit of the business” eligible for deduction u/s. 10B - Decided in favour of assessee.

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• 2017 (5) TMI 1214
  Addition on account of unsecured loans - satisfactory explanation offered by the assessee - CIT-A allowed claim - Held that:- Assessee has not only established identity of the loan creditor but also genuineness of the loan transaction as well as credit worthiness of loan creditors. Detailed finding so recorded by CIT(A) and as per material on record which do not require any interference on our part. There is no dispute to the well settled legal proposition that in case of loan creditors assessee is not only required to prove the identity but also genuineness of transaction and creditworthiness of loan creditor. Since in the instant case of the three conditions duly fulfilled by the assessee in terms of finding recorded by CIT(A), there is no reason to interfere in the order of CIT(A). - Decided against revenue.

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• 2017 (5) TMI 1213
  Disallowance of prior period expenses - CIT-A allowed claim - Held that:- We find no reasons to interfere with the decision of the CIT(A) which is based on the decision of our Co-ordinate Bench in the case of Deccan Chronicle Holdings Ltd. (2014 (9) TMI 1072 - ITAT HYDERABAD). In so far as the objection of the Assessing Officer that it was a prior period expenditure, in our view, the same has been correctly negated by the CIT(A). Ostensibly, the impugned expenditure may pertain to an activity of an earlier year, so however, the CIT(A) has recorded a categorical finding that the liability for the same has crystallized during the instant year as requisite bills were received during the previous year relevant to the assessment year under consideration. For the said reasons, we find no infirmity in the ultimate decision of the CIT(A) in deleting the addition - Decided against revenue. Addition u/s 14A - assessee has made investments in shares and securities, which is capable of generating exempt income - Held that:- Factually speaking, there is no dispute to the fact that during the year under consideration assessee has not received any exempt income and, therefore, on this count alone no disallowance under section 14A is merited following the ratio in the case of Cheminvest Ltd. (2015 (9) TMI 238 - DELHI HIGH COURT ). The other finding of the CIT(A) with regard to the availability of sufficient interest free funds is also quite justified and is borne out of record as there is no material led by the Revenue to controvert the same. For the said reason also the disallowance of interest expenditure under section 14A of the Act is quite unjustified. We therefore, deem it fit and proper to affirm the action of the CIT(A) in deleting the disallowance - Decided against revenue

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• 2017 (5) TMI 1212
  Carry forward and set-off of losses - demerger - Applicability of provisions of Sec. 72A(4) with regard to the restructuring undertaken in terms of the scheme of arrangement/demerger approved by HC - Held that:- Scheme of arrangement is to be understood as ‘demerger for the purposes of section 2(19AA) only if the conditions prescribed therein are satisfied. One of the conditions prescribed is that all the properties and the liabilities relatable to the undertaking should be transferred by the demerged company to the resulting company by virtue of the demerger. In the present case, there is no dispute to the fact that the scheme of restructuring approved by the Hon'ble Bombay High Court involved transfer of only the specified assets and liabilities of the PCD and PPD divisions to the Relene Petrochemicals Pvt. Ltd, and NOCIL Petrochemicals Ltd. respectively. The aforesaid fact was very much before the Assessing Officer and has been eloquently brought out by the CIT(A) in his order, to which there is no dispute. Therefore, on this aspect itself one can conclude that the scheme of arrangement in question does not qualify to be a ‘demerger’ in terms of section 2(19AA) of the Act. In the present scheme of arrangement, the consideration in lieu of the transfer of specified assets and liabilities of the two divisions is received by the assessee company, whereas in order to qualify to be a ‘demerger’ in terms of section 2(19AA) of the Act, the consideration to be paid by the resulting company is by way of issuance of shares to the shareholders of the demerged company. In the above background, the provisions of sub-section(4) of section 72A of the Act are not attracted in relation to the instant scheme of arrangement. Decision of the CIT(A) in holding that the accumulated loss and unabsorbed depreciation relating to the transferred divisions have to remain with the assessee company for set-off and carry forward for set-off in future years, deserves to be affirmed. - Decided against revenue

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• 2017 (5) TMI 1211
  Bogus purchases - CIT(A) restricted the addition to the extent of 12.5% - Held that:- CIT(A) found that purchases themselves were not bogus but the purchase parties shown in the books were bogus, therefore entire purchases from these six parties cannot be added as bogus. Accordingly, he taxed the profit element embedded in such purchases. By following the order of Gujarat High Court in COMMISSIONER OF INCOME TAX - I Versus BHOLANATH POLY FAB PVT LTD.[2013 (10) TMI 933 - GUJARAT HIGH COURT] the CIT(A) upheld the addition to the extent of 12.5% of such purchases. The detailed finding so recorded by CIT(A) has not been controverted by learned DR by bringing any positive material on record. Accordingly we do not find any reason to interfere in the order of CIT(A) - Decided against revenue

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• 2017 (5) TMI 1210
  Revision u/s 263 - ‘opportunity of being heard’ has not been satisfied, as no notice was served on assessee - denial of natural justice - Held that:- The first condition of ‘opportunity of being heard’ has not been satisfied, as no notice was served on assessee, leave alone giving sufficient opportunity. Coming to the issue of non-service of notice, it is to be noted that the Ld.CIT did not serve any notice on assessee. As explained by the Ld.CIT-DR, the notice was sent through service by process server to the AO who reported that assessee was not living in the given address and his whereabouts are not available and the address which was given was demolished. In these circumstances, without taking recourse to any other mode of service of notice, CIT concluded that the proceedings are to be completed as they were time barring. As can be seen from para 6, the notice dt. 14-03-2011 was issued but not served but an order was passed on 28-03-2014. At any rate, reckoned from the date of issuing the notice, even the mandatory two weeks’ time was also not provided by the CIT. Ld.CIT could have sent the notice by post to make ‘evidence on record’ that a proper notice was at-least issued, if not served, on assessee. No notice was sent by post. Having come to know that assessee was not living in the given address, no attempt was made to locate assessee, as was subsequently found out in the course of recovery proceedings. In the present case, neither there was any issuance of a show cause notice by way of post nor was there any service by affixture. There is no substituted service also as admitted in this case. Apart from not giving an opportunity to assessee, Ld.CIT also did not verify the record properly. The proceedings u/s. 153C were initiated as the department has seized certain documents in search of M/s. MBS Jewellers Pvt. Ltd. Obviously, AO could not have completed the assessment, without examining these documents, as the very basis for issuing of notices u/s. 153C for the impugned year was the said sale deed copies. Moreover, AO issued a show cause notice, as discussed in the arguments of Ld. Counsel and assessee had given a detailed reply. It was further submitted that assessee has given GPA to one Shri Koteswara Rao and subsequently cancelled the same within two years. The said GPA copies were enclosed to letter by assessee in the course of assessment proceedings itself. The copies of sale documents obviously pertain to the period after GPA was cancelled. Therefore, as presumed by assessee and may be in the eye of law, they are not valid documents. Not only that assessee has also clearly stated that he has not sold any property and the statement of affairs do indicate that the impugned property is in assessee’s possession. Thus, if the CIT has examined the record correctly, he would not have come to a conclusion that there is no verification of the issue. Opportunity of being heard is little more than serving a notice on assessee. It is not an empty formality. Without giving a proper opportunity to assessee, revision proceedings u/s. 263 cannot be finalized as the provisions of Section 263 mandates that the CIT may pass such orders after giving an opportunity of being heard. Since the mandatory requirement of opportunity of being heard has not been provided to assessee, the order passed by CIT is void ab-initio. - Decided in favour of assessee.

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• 2017 (5) TMI 1209
  Penalty u/s 271(1)(C) - absence of satisfaction - proof of concealment - surrender of income by assessee - Held that:- We have perused the penalty notice dated 24/12/2009 and we note that Ld. assessing officer has not cancelled any of two options. Therefore, in the show cause notice, the Ld. assessing officer has not at all made up his mind that whether the assessee has concealed income or furnished inaccurate particulars of income. On examination of assessment order passed by the Ld. assessing officer he has merely mentioned that penalty proceedings are initiated separately. Therefore, even in the assessment order, the Ld. assessing officer has not given a satisfaction whether there is concealment of income or furnishing of inaccurate particulars of income. Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by the authorities. No doubt, the surrender from the assessee has come after detection by the revenue authorities, however, before leaving any penalty, the revenue authorities must put a specific charge on the assessee, which in this case, it has failed to. As assessing officer was not sure whether it is a consequence of furnishing of inaccurate particulars of income or concealment of income, therefore, on conjoint readings of assessment order, show cause notice and penalty order it is apparent that one cannot discern that charge on the assessee is whether furnishing inaccurate particulars of income or of concealment of income. We direct the Ld. assessing officer to delete the penalty under section 271(1)(C) - Decided in favour of assessee.

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• 2017 (5) TMI 1208
  Unexplained cash credit addition u/s 68 - Held that:- Neither the AO nor the ld. CIT(A) appreciated the facts in right perspective and did not make the further inquiry from those persons who furnished the confirmations and affidavits stating therein that the impugned amount was given to the assessee and the said amount was received by them from different customers from whom booking amount for plots/flats had been collected. We, therefore, considering the totality of the facts deem it appropriate to set aside this issue back to the file of the AO to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.

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• 2017 (5) TMI 1207
  Addition on account of ‘medical expenses’ - Held that:- On perusal of the records, we observe that the assessee had produced audited books of account before the authorities below and the AO has utterly failed to specify any defect either in the books of accounts or the relevant bills/vouchers of medical expenses placed before him. The learned CIT(A), therefore, has rightly deleted this addition after considering reasonableness of such medical expenditure in the backdrop of total medical expenditure claimed, i.e., 16,60,682/- against total turnover of 62.17 crores. We, therefore, are not inclined to interfere with the conclusion reached by the ld. CIT(A) on this count while deleting the disallowance made by the AO only on adhoc basis, as adhoc additions are not permissible under the IT Act. - Decided against revenue Addition on account of ‘workman compensation’ - Held that:- A perusal of the record shows that compensation of 7,50,000/- was paid by assessee through cheques and remaining amount of 1,00,000/- in cash on 08.07.2010 as is evident from the copy of ledger account placed in the paper book. A perusal of computation of income of assessee, we further find that the amount of 1,00,000/- paid in cash already stood disallowed by the assessee itself in its computation of income u/s. 40A(3) of the Act. Therefore, in our considered opinion, the disallowance of this amount of compensation, as made by the AO, would amount to double addition not permissible in the facts and circumstances of the case - Decided against revenue Disallowance of excess interest paid on unsecured loans - Held that:- Assessee stands supported by several documentary evidences such as copy of ITR, computation of income and relevant bank statement of the directors Sh. Anand Prakash and Sh. Ravi Prakash, Confirmatory certificate issued by M/s. Dynamic Weaving Pvt. Ltd., the original lender, copy of account of both the directors in the books of M/s. Dynamic Weaving Pvt., Ltd. along with its PAN and ITR, comparative chart of interest paid to directors @ 20% for A.Yrs. 2011-12 to 2013-13 toward reimbursement of interest on loan raised by them from M/s. Dynamic Weaving Pvt. Ltd. and so on. Moreover, the Department itself has accepted the claim of interest paid @ 20% to the same directors in A.Y. 2012-13 and 2013-14 as is evident from the respective assessment orders of the assessee company. The ld. DR utterly failed to repudiate the contention of the assessee that the interest @ 20% amounting to 10,00,000/- each was paid to its directors in 2012-13 as the loan was repaid by the assessee on 01.10.2012 the directors in turn repaid the same to M/s. Dynamic Weaving Pvt. Ltd. on 04.10.2012. In view of this applying the rule of consistency, the authorities below should have allowed the claim of assessee - Decided against revenue Addition on account of difference in sundry creditors and difference in purchases - Held that:- CIT(A) has not recorded any finding that the reconciliation statements furnished by the assessee regarding the impugned differences, were found verifiable from the books of accounts of assessee and that of sundry creditors as well as the sellers. It is no doubt true that the assessee had submitted reconciliation statements before the AO and the AO did not make thorough enquiry with reference to the books of account of the assessee as well as the books of sundry creditors and sellers, so as to verify the same before rejecting the explanation of the assessee. The crucial fact to be ascertained for adjudication of this issue is that the amounts claimed by the assessee should be cross-tallied with the accounts of sundry creditors and the sellers of goods. We, therefore think is appropriate to remit both these issues back to the file of Assessing Officer to properly examine the reconciliation statement filed by the assessee with reference to party-wise explanation furnished before the first appellate authority, as reproduced in the impugned order. - Decided in favour of revenue for statistical purposes. Addition on account of bogus purchases u/s. 69C - Held that:- As borne out on record that the AO has not doubted the genuineness of sales; that the assessee is a manufacturing company and consumption of raw material is an essential ingredients of finished products sale. A perusal of impugned order will reveal that the ld. CIT(A) has also tested the conclusions of the AO on the anvil of trading account declared by the assessee giving profit rate of 18.79%. He has also observed that the assessee during the year under consideration has declared sales at 62,17,48,614/- against cost of raw material consumed of 27,89,56,500/- and manufacturing expenses of 23,84,34,176/-, which after considering the other income of 9,88,021/- declared by assessee, gives gross profit of 11,47,41,082/- representing to 18.79% with increase in stock of 1,43,95,123/-. We, therefore, find substance in the observations of the ld. CIT(A) that if the purchases made from said supplier company worth 20,42,24,661/- are deducted from the cost of raw material consumed, it will given GP of 50.8% which is not at all feasible in the trade of assessee. It is also not the case of Revenue that the ratio of raw material consumed to sale by the assessee during the year does not commensurate to such ratio declared by the assessee in preceding assessment years, rather it stands parallel to the material consumed in preceding years. Not only this, the trading results of the assessee company was also found parallel to other paper mills during the year under consideration as examined by the ld. CIT(A) in the impugned order, against which there is nothing from the side of Revenue. The Revenue has utterly failed to rebut the reasonable analysis made by the ld. CIT(A) while accepting the impugned purchases as genuine. - Decided against revenue Addition on a/c of unexplained cash credit u/s. 68 - Held that:- We do not find any material available on record to counter the findings reached by the ld. CIT(A) on this issue. The ld. DR failed to controvert the reasonings recorded by the ld. CIT(A) based on books of accounts of both the assessee company and the supplier company. Therefore, the deletion of addition u/s. 68 also deserves to be sustained. - Decided against revenue Addition on account of insurance claim - Held that:- It is no doubt true that the assessee has made this claim by making an entry under the wrong nomenclature as “excess claim written off”, but in our opinion, nomenclature of an entry would not change the actual characteristics of the actual claim made by the assessee. In fact, the authorities below were required first to ascertain as to how much stock was available with the appellant on the date of fire accident, what was the insurance cover with respect to loss of stock, what was the actual loss of stock in fire and under what circumstances, the part of the loss claimed by assessee was accepted in the subsequent assessment year 2012-13. No exercise appears to have been made by the authorities below first to ascertain these facts with reference to the books of accounts 1 crore in the year under consideration before final settlement of such claim by the Insurance company which was allowed at 3,40,388/- in the subsequent year 2012-13 on 02.03.2012. Thus we think it expedient in the interest of justice to restore this issue to the file of the AO to make thorough examination/enquiries in the matter

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• 2017 (5) TMI 1206
  Deduction under section 80-IA - windmill unit established in 2002 - Held that:- We find that on an identical issue in similar facts, in assessee’s own case for the assessment year 2010-11 held that each of these windmills were installed in different places and were governed by separate power purchase agreement, separate meter connection and separate approvals as also meter and billing. The assessee’s claim u/s.80IA of the Act, rested on the premise that each of the windmill was a separate undertaking. While deciding the issue relating to grant of depreciation on windmill, in assessee’s own case for the A.Y. 2006-07 observed that each windmill is to be considered independent and separate and as a consequence deduction u/s.80IA to be computed and decided the issue in favour of the assessee Addition made in respect of employees contribution towards PF/ESI u/s 43B - belated payment - Held that:- It is not disputed by the Revenue that the assessee has not paid the employer’s contribution before the due date of filing of the return. Various Courts including the Hon’ble Jurisdictional High Court in the case of CIT v. Nexus Computer (P) Ltd. [2008 (8) TMI 304 - MADRAS HIGH COURT] it was held that the PF and ESI contribution paid belatedly, but prior to due date of filing of return could not be disallowed under section 43B of the Act. Decided in favour of the assessee Excess depreciation claim - Held that:- On an identical issue in the case of Devi Polymers P. Ltd. v. ACIT [2014 (4) TMI 1082 - ITAT CHENNAI] held that additional depreciation to the extent not claimed by the assessee in the earlier year ought to be allowed. Thus, the ld. CIT(A) allowed the claim of the assessee. We find no reason to interfere with the order of the ld. CIT(A) on this issue and hence, the ground raised by the Revenue is dismissed. Addition u/s 14A - apportioning the interest expenses incurred the assessee in proportion to the investments the income from which was exempt and the total assets - Held that:- The issue is squarely covered by the decision of the Tribunal in assessee’s own case for the assessment years 2008-09 and 2009-10 as held AO is directed to recompute the disallowance after excluding the interest arising from borrowed funds specifically relatable to the business and specific source of income of the appellant.

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• 2017 (5) TMI 1205
  Unexplained cash deposits - Peak credit addition - Held that:- The assessee states of earning commission, while at the same time claims to be having trade debtors qua the transport business. The word ‘commission’ as used here is a misnomer, and signifies the difference between the rate/s at which the goods carriages are taken on hire and on which they are contracted out. That would imply that the assessee, at any given point of time, has outstanding dues of the transport business, i.e., against the transport work undertaken, and which he states as received, in part explanation of the cash deposits in his bank account. The amount realized would, presumably, also go to pay the trade creditors of the said business. This follows an acceptance of the assessee being in the transport business, which is established. Both the capital investment and the interest thereon, i.e., the total receipt, would stand to be brought to tax. This of-course is subject to applying a turnover ratio, which any business would entail. The Revenue has, in rejecting the plea, acted mechanically, without applying it’s mind with reference to the obtaining facts and the merits of the assessee’s statement. In fact, considering the turnover (total receipt) to be a part of the transport business instead (conduct of which is proven), would imply a lower profit rate and, besides, a lower amount being added on account of capital investment in-as-much as the said business would entail a higher capital turnover ratio, besides trade credits. There could be a scenario of the adjusted peak credit being below 8.50 lacs. This would not by itself warrant a reduction in the amount of addition on account of the capital employed in the two businesses. This is as, apart from the bank balance, which the peak credit in a bank account signifies, the assessee has admittedly other working capital assets in the form of trade debtors, and which have not been taken into account. This is as the investment in the trade has been estimated on the basis of a working capital (i.e. cash to cash) cycle, and which includes toward trade debts/credits as well. The assessee’s argument with reference to peak credit in the account thus stands also addressed. The addition for 23.21 lacs is thus restricted to 8.50 lacs, or such other sum as may be computed on the basis of the assessee’s bank accounts, as explained hereinbefore. Qua profit, only the TDS amount (Rs. 7,438/-) would stand to be further added. The assessee gets part relief. Needless to add, the assessee shall be allowed credit in respect of TDS on the IOC receipt. Assessee’s argument with reference to s. 44-AD is not maintainable as the assessee is admittedly engaged in the transport business, excluded as an eligible business u/s. 44-AD.

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• Customs

• 2017 (5) TMI 1237
  Maintainability of petition - Levy of anti dumping duty (ADD) - Soda Ash - the decision in the case of NIRMA LIMITED Versus UNION OF INDIA AND 6 [2016 (12) TMI 899 - GUJARAT HIGH COURT] contested - Held that: - We do not entertain this special leave petition at this stage and leave it to the parties to agitate all issues including the maintainability/further continuance of the writ petition in the light of the subsequent notification dated 21.12.2016 - SLP dismissed being not maintainable.

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• 2017 (5) TMI 1236
  Fraudulent availment of drawback by exporting inferior and sub-standard quality readymade garments of different kinds through various bogus firms and by resorting to over invoicing of goods - Was the CESTAT is justified in directing the concerned Authority to issue a SCN within 15 days for complete the proceeding within the prescribed time of three months, notwithstanding the CBLR 2013? Held that: - After the suspension order was affirmed in terms of Regulation 19 of the CBLR 2013 by order dated 27th September 2016, no steps were taken by the Respondent in terms of Regulation 20 of the CBLR 2013. This required a SCN to be issued within 90 days from the date of receipt of the offence report. In the present case, the SCN was issued only subsequent to the impugned order of the CESTAT on 30th April 2017. It is held that CESTAT was in error in directing the authorities to issue SCN within 15 days and complete the investigation within a further period of three months thereafter contrary to the CBLR 2013. Appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1235
  Prohibition order - opportunity of being heard - Held that: - since the suspension of licence would hurt the business of the licence holder, it is necessary that the hearing pursuant to such suspension of licence should be concluded at an early date - while not interfering with the impugned order dated 31st March, 2017 issued by Respondent No. 2 suspending the Petitioner’s licence, the Court directs that the Petitioner will appear before the Commissioner, Meerut on 5th June, 2017 at 11:00 am and by that date also tender a reply to the order of suspension - petition disposed off.

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• 2017 (5) TMI 1234
  Detention of goods - provisional release of goods - Held that: - The power u/s 110 A of the Act involves exercise of discretion. The scope of judicial review is to examine if the discretion has been rightly exercised; that it is not based on irrelevant materials and is fair and reasonable in the circumstances. It is not an appellate power. The drawing of a distinction between seizure of imported goods as a result of undervaluation and seizure of imported goods upon misdeclaration cannot per se be said to be irrational. - goods ordered to be released provisionally subject to conditions. It is further clarified that nothing said in this order on merits will influence the final orders to be passed in the adjudication proceedings. Petition disposed off.

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• 2017 (5) TMI 1233
  Violation of principles of natural justice - Valuation - Glass Chaton (Beads) Crystal of different sizes - Held that: - there is no reference to any submission on behalf of the petitioner nor is there anything to indicate that any opportunity of hearing has been given to the petitioner - the impugned order has been passed ex parte without affording any opportunity of hearing to the petitioner and hence, is clearly in breach of the principles of natural justice which renders the same unsustainable - petition allowed - decided in favor of petitioner.

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• 2017 (5) TMI 1232
  Jurisdiction of the DRI officers to issue SCN - Held that: - w.e.f. 06/07/2011, the Additional Director General, DRI was prospectively appointed as proper officer for the purpose of Section 28 of the Customs Act - Subsequently, sub-section 11 was inserted u/s 28 of the Customs (Amendment and Validation) Act, 2011 dt. 16/09/2011, assigning the functions of proper officers to various DRI officers with retrospective effect. Matters remanded to the original adjudicating authority to first decide the issue of jurisdiction - appeal allowed by way of remand.

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• 2017 (5) TMI 1231
  Power of proper office to demand notice - Smuggling - raw silk of foreign origin was being smuggled into India from Nepal - Held that: - w.e.f. 06/07/2011, the Additional Director General, DRI was prospectively appointed as proper officer for the purpose of Section 28 of the Customs Act. Hence from 06/07/2011, ADG-DRI has been empowered to issue demand notice u/s 28 - sub-section 11 was inserted under Section 28 of the Customs (Amendment and Validation) Act, 2011 dt. 16/09/2011, assigning the functions of proper officers to various DRI officers with retrospective effect. A new inserted Section 28(11) does not empower either the officers of DRI or the DGCEI to adjudicate the SCN issued by them for the period prior to 08/04/2011. Matters remanded to the original adjudicating authority to first decide the issue of jurisdiction - appeal allowed by way of remand.

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• 2017 (5) TMI 1230
  Benefit of DFCEC scheme - PSU unit - misdeclaration of goods - appellant claims that since they came to know about the mistake due to non-receipt of other invoices they reported it to the Revenue vide letter dated 31/10/2007 - Held that: - the appellants are a Public Sector Undertakings and in the facts of the case no clear cut suppression or mis-declaration with intention to evade duty is established - the appellant had claimed benefit of DFCEC scheme, but both the lower authorities have failed to consider this claim of the appellant though the same has been recorded in order-in-original. In the absence of any hard evidence to support mis-declaration with intention, I am inclined to be lenient. The redemption fine is reduced to 5,000/- and the penalty on Indian Airlines is reduced to 1,000/- only - appeal allowed - decided partly in favor of appellant.

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• 2017 (5) TMI 1229
  Whether the goods imported by the appellant, during the relevant period, were liable to provisions of Section 49 or Section 59 of CA, 1962? Held that: - there was error on the part of Shri N.B. Shukla, Assistant Commissioner, Central Excise Division-II, Ghaziabad who has rejected the application for refund of 4,11,365/- which was required to be allowed as consequence of the Final Order No.A/54767/2014 (BR) dated 11.12.2014 - Commissioner of Central Excise-Ghaziabad directed to implement said Final Order dated 11.12.2014 by refunding 4,11,365/- along with due interest as per law within a period of 60 days from the date of receipt of a copy of this order - application disposed off.

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• Corporate Laws

• 2017 (5) TMI 1226
  Validity of notices of the Board meetings and the EOGM - oppression and mismanagement - appointment of directors - Held that:- For vacation of office of Director under section 283(g), notices of the meetings which the director is alleged to have not attended is must. Vacation on the ground that the director failed to attend three consecutive meetings is invalid, if the meetings were not validly held. Since the meetings held without notice, those are not valid. The appointment of Ms. Mridula Gupta, respondent No. 3, as Additional Director vide Board meeting dated 11-04-2013 and resolution thereat are illegal and void; The removal of Mr. Rajnandini Pachisia, (Petitioner No. 2) vide Board meeting dated 21-05-2013 and the resolution thereat, are illegal and void; The appointment of the respondent No. 4, Mrs. Priyanka Gupta and the respondent No. 5, Miss Kashmira Gupta as additional Directors vide Board meeting dated 20-04-2013 and the resolution thereat, are illegal and void; and The removal of the petitioner No. 1, Shri Shyam Saran Gupta by way of EOGM dated 03-09-2013 and 03-10-2013 and the resolution thereat, are illegal and void; and Any other act/acts done by the respondent(s) in pursuance of the Board meeting and EOGM dated 11-04-2013, 20-04-2013, 24-04-2013, 21-05-2013, 03-09-2013, and 03-10-2013 respectively are bad in the eye of law and hence, hereby declared null and void. Further, the respondent No. 2 is hereby directed not to cause any hinderance in restoration of original position of the petitioner Nos. l and petitioner No. 2. This order is hereby concluded directing the respondent Nos. 1 and 2 to give effect to the cancellation of the appointment of the Respondent No. 3 to 5 as Additional Directors and to restore the petitioners as Directors of the company and the same shall continue till either of the parties will have fair exit from the company.

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• 2017 (5) TMI 1225
  Compounding of offence under Section 621A of the Companies Act, 1956 - violation of Section 307(1) of the Companies Act, 1956 punishable under Section 307(8) - Held that:- The offence relates to the period from 2001 to 2008. The petitioners filed the petition on 20th April, 2010. Therefore, the violation under Section 307(1) was committed before the Companies Act, 2013 came into force. Therefore, this Tribunal has to follow the procedure as laid down under Section 621A of Companies Act, 1956. The Ministry of Corporate Affairs, by of notification No. SO 1936E dated 01.06.2016 declared that the matters transferred from Company Law Board to NCLT shall be disposed of in accordance with the provisions of Act 18 of 2013 or Companies Act, 1956. Since Section 441 of the Act has not come into force by the date of violation and by the date of filing of this petition, this Tribunal has to follow the procedure laid down under Section 621A of the Companies Act, 1956. Considering violation of Section 307(1) and also considering the long duration of violation, this Tribunal is directing the petitioners 1 to 6 are directed to pay 50,000/- each for the violation of Section 307(1) of the Act. The violation continues for eight years, i.e. 2920 days. Therefore, each of the petitioners is directed to pay 100/- for each day of violation. The total amount comes to 20,52000/- (Rupees twenty lakh fifty-two thousand). Therefore, the compounding amount that would be payable by each of the petitioners comes to 3,42,000/-. Hence, the violation of Section 307(1) committed by the petitioners is compounded on payment of 3,42,000/- each by way of Demand Draft drawn on any nationalised bank in favour of Pay and Accounts Office, Ministry of Corporate Affairs, Mumbai within three weeks and to file the original Demand Draft before the Registry of this Tribunal on or before 12th April, 2017.

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• Service Tax

• 2017 (5) TMI 1259
  Suppression of facts - Penalty u/s 78 of the FA, 1994 - failure to discharge liability of tax - intention to evade duty present or not - extended period of limitation - the decision in the case of Future Link India Versus The Commissioner Of Central Excise, Delhi- III [2016 (12) TMI 1279 - DELHI HIGH COURT] contested, where it was held that the assessee/appellant has the option to deposit the balance service tax together with accumulated interest and penalty of 25% of the entire tax due, within the period indicated in the third proviso to Section 78(1) - Status quo obtaining as of today, shall be maintained by the parties, until further orders.

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• 2017 (5) TMI 1258
  Penalty - non-payment of tax - supply of tangible goods service - Business Support Service - Held that: - The supply of tangible goods service was introduced with effect from 16.5.2008 and the Business Support Service was introduced with effect from 1.5.2006 - the demand for service tax in this case has arisen for the periods immediately after the introduction of these two services when the activities covered under these services were being debated and settled by various judicial forum - during the course of investigation they were convinced and they have discharged the entire service tax liability along with interest - this is a fit case to waive all the penalties under the provisions of section 80 - appeal rejected - decided against Revenue.

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• 2017 (5) TMI 1257
  Nonpayment of service tax - cargo handling service - manpower recruitment service - cleaning service - commercial & Industrial construction service - demand - Held that: - service tax liability cannot be confirmed against the appellant under cargo handling service - it is only after the commodity becomes a cargo, its loading and unloading at the freight terminal for being transported by any mode becomes a cargo handling service. Manpower recruitment service - Held that: - as the appellant never supplied any man power to be engaged by the contractee for executing the job by themselves. Hence, supply of labour by the appellant for undertaking the assigned task of cleaning will not fall within the ambit of taxable service of man power recruitment or supply agency service. Therefore, service tax demand cannot be sustained on the appellant. Works contract service - Held that: - Since the work involved both supply of goods and deployment of labour, the activities should fall within the purview of taxable service of works contract, which is leviable to service tax w.e. f. 01.06.2007 - In this case, since the period is 2005-06, which is prior to the effective date of levy of service tax on work contract service, no service tax is liable to be paid by the appellant for providing such service. However, in the present case, since the authorities below have not specifically discussed about the nature of activities undertaken by the appellant and whether there is any involvement of any material for execution of the assigned work, we are of the view that the matter should go back to the original authority for a fresh fact finding. Appeal allowed by of remand.

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• 2017 (5) TMI 1256
  Taxability - advertisements published in foreign news paper/magazines - Held that: - CBEC Circular dt 28.10.2003 clarifies that giving advertisement to a particular newspaper/magazines may involve by the advertiser only Space selling where no any further activity is undertaken; therefore, it would not fall under the definition of Advertisement Agency Service and will not be liable to Service Tax. An agent merely procuring an order for advertisement for a principal namely print media is not an advertising agency. The appellants activity being only this and nothing more, therefore, cannot bring them & classify them to be an Advertising Agency. Demand set aside - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1255
  Works Contract Service - Classification of services - transporting of cement grade limestone by semi-mechanised methods - classified under mining services or cargo handling services? - Held that: - the scope of the work of the assessee is mainly, sizing and sorting in the medium grade benches by controlling, drilling and blasting of the mines - The work of transport of quarried stone is incidental to the job of sizing of blasted bolder by mechanical means in high grade bench, sorting of the stone as per specification approved and directed by the Mines Manager. The activities would clearly indicate the Mining Service - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1254
  Refund claim - N/N. 41/2007 ST - GTA services relating to the transport of empty container to the factory - Terminal Handling Charges - Empty Container offloading - Transport Charges of Container-ICD Delhi, to ICD Dadri - Documentation Charges - Held that: - the issue is covered by precedent Ruling of this Tribunal in the case of Marco Polymers Pvt. Ltd. Vs CCE, Ahmedabad [2010 (6) TMI 257 - CESTAT, AHMEDABAD], where it was held that In the absence of any certificate or evidence produced by the appellants with regard to the actual heading under which this service was classified either service provider, the sanctioning authority could have required the appellants to produce evidence to show the category of service under which service tax has been paid, the refund was allowed. Custom House Agent Services - Held that: - the service is specifically allowed in N/N. 41/2007-ST. Appeal allowed - refund allowed - decided in favor of appellant-assessee.

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• 2017 (5) TMI 1253
  Extended period of limitation - maintenance and repair service including sale of materials used in the course of repair and maintenance - Held that: - no case of suppression of facts or contumacious conduct on the part of the appellant is made out. It is admitted fact that the appellant have made suo-moto compliance by applying for registration and have started paying the taxes and filing returns. It is also admitted fact that prior to issue of SCN in October, 2008. The appellant have suo-moto paid the admitted taxes for the prior period from 2003-04 to 2005-06, in March, 2008 and also submitted the returns - extended period of limitation not invocable - penalty set aside - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1252
  Renting of immovable property service - liability of tax - Whether appellant are liable to pay service tax on the receipts from United Breweries Ltd.; to whom they have given and/or leased exclusive usage of the facilities for manufacturing of beer? - Demand of service tax on reimbursement of expenses towards wages etc. Held that: - so far the fixed lease rent of 1 Crore per annum received by the appellant, the same is not taxable towards “Renting of immovable property service” as there is no renting out of land and building along with its fixtures. The appellant have only let out plant and machinery and the manufacturing facility, which does not qualify under the definition of “Renting of immovable property service”. Reimbursement of expenses - Appellant will be liable to service tax for the reimbursement made by UBL under clause 70 of the agreement, under “Business Support Service” with effect from 01/05/2011 - the extended period of limitation is not invokable as the transaction has been properly documented and/or recorded in the books of accounts. Matter remanded back to the Adjudicating Authority for the limited purpose of re-calculation of demand under “Support Service of Business or Commerce” for the period with effect from 01/05/2011 - appeal allowed by way of remand.

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• 2017 (5) TMI 1251
  Work Contract - Whether the respondent-assessee is liable to service tax for constructing low cost housing or housing for economically weaker section for Varanasi Development Authority, Varanasi? Held that: - this Tribunal in the case of Lanco Infratech Ltd. vs. CC, CE & ST [2015 (5) TMI 37 - CESTAT BANGALORE (LB)] has held that such activity which was not taxable prior to 01.06.2007 under the category of Commercial and Industrial Construction continue to be non taxable under the category of Works Contract Service from 01.04.2007. The activity for constructing houses by the appellant for economically weaker section under works allotted by the Varanasi Development Authority under the scheme of Government of U.P., the activities is neither taxable under works contract services nor under Construction of Complex/Commercial or Industrial Construction Services more particularly under the exclusion clause which provides that construction classifiable under the category of residential complex service does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person and personal use have been further explained as including or permitting the complex for use as residence by another person on rent or without consideration. Appeal dismissed - decided against Revenue.

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• Central Excise

• 2017 (5) TMI 1250
  Maintainability of criminal revision petition - Clandestine removal of excisable goods - The rejection of bail in a non-bailable case at the initial stage and the cancellation of bail already granted, have to be considered and dealt with on different basis - Held that: - It is not the case of the Department that the Magistrate had no jurisdiction to grant the bail. If the offence u/s 9 of the CEA would have been punishable with life imprisonment, then it could definitely be argued that the Magistrate had no jurisdiction to grant bail. Generally speaking, the ground for cancellation of bail, broadly (the illustrative and not exhaustive) are interference or akin to interference with the due course of administration of justice or evasion or attempt to evade the due course of justice or abuse of the concession granted to the accused in any manner - the revisional court committed an error in passing the impugned order and cancelling the bail granted by the learned Judicial Magistrate, Rajkot to the applicants - application allowed.

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• 2017 (5) TMI 1249
  Reversal of cenvat credit - Sale of Mercury - closure of the Mercury Cell Processing plant - Held that: - over and above the initial quantity of Mercury, the appellant had purchased Mercury at different points of time, availing CENVAT Credit and on closure of the Plant in the year 2004, there was a stock of 42262.5 kg of Mercury, which was sold by them on 22.09.2004 without payment of duty and without raising any invoice. The issue is squarely covered by the verdict passed by the Apex Court in Lord Chloro Alkali Ltd. vs. Commissioner of Central Excise [2015 (8) TMI 1052 - SUPREME COURT], where it was held that mercury was cleared by the appellant herein as mercury only. Thus, on this basis, it is clear that the provisions of Rule 3(4) of the CCR, 2001, become applicable and duty would be paid, and the fixation of liability towards Duty, Interest and Penalty does not warrant interference. Penalty - Held that: - The appellant, being a Government Company, ought to have been more prudent and transparent in all its deeds, acting as a model to others. No materials are brought before this Court to interfere with the quantum of penalty as well - penalty upheld. Appeal dismissed - decided against appellant.

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• 2017 (5) TMI 1248
  Clandestine manufacture and removal - MODVAT Credit - shortage of stock - Electric Cord/Lead having use of Braiding Thread, Rubber, Copper Wire and 3 Pin Plug, are also used with an Electric Iron - job-work - the adjudication proceedings leading to the demand of duty on allegation of clandestine removal is built upon the shortage noticed in various items, in particular that of braded thread. Held that: - before the adjudicating authority can admit the statement of any witness as evidence, the same has to be done only after summoning the makers of the statement and after examining each witness. After that the witnesses should be offered for cross examination. In the present case, we note that this is a serious lacuna in the adjudication process adopted by the learned Commissioner. The requirement of cross examination becomes even more significant in the light of the fact that every witness whose statement has been recorded has retracted them soon thereafter. Appeal allowed by way of remand.

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• 2017 (5) TMI 1247
  CENVAT credit - wrong availment of CENVAT credit - full amount has been reversed by the appellant - Held that: - The excess availment and its reversal has been duly entered in the statutory return filed by the appellant. In such situation, there is no ground to invoke penal proceedings against the appellant. There is no legal basis to impose penalty of equivalent amount invoking provisions of Section 11AC of CEA, 1944 and Section 78 of the FA, 1994. Liability of interest - Held that: - before utilisation of credit if the same has been reversed will amount to not taking credit and would not attract liability of interest - Interest liability shall be only with reference to the credit which are put to use to discharge duty on final products. There is no justification to demand and recover again the erroneous credit which is already reversed by the appellant - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1246
  Reversal of CENVAT credit - clearance to 100% EOU - case of appellant is that they had no intention to evade payment of duty and wherever there is a short payment, it was on account of mere confusion in the law - Held that: - the appellant has tried to justify the irregularities which has been pointed out by the Revenue but the said justifications have not been properly considered by the Revenue while confirming the demand - this case needs to be remanded back to the original authority with a direction to consider the reasons given by the appellant for the discrepancies observed by the Revenue during the course of audit - appeal allowed of remand.

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• 2017 (5) TMI 1245
  Clandestine removal - demand based solely on the balance sheet figure is not sustainable - Held that: - As per the assessee, the assessee has produced series of correspondences before the authorities below but none has considered those correspondences and the reasons given by the appellant for variance between the balance sheet and ER-1 returns - this case needs to be remanded back to the original authority with a direction to examine the documents produced by the appellant explaining the variance between the balance sheet and ER-1 returns - appeal allowed by way of remand.

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• 2017 (5) TMI 1244
  CENVAT credit - job-work - labour charges - courier charges - testing charges - Held that: - with regard to job work charges, it has been held that once the service tax has been paid and the service has been used in or in relation to the manufacture of final products of the appellant, the appellant is rightly entitled to avail CENVAT credit. The appellant is entitled to CENVAT credit on service tax paid on job work as well as on testing; and with regard to bank charges, the appellant is at liberty to raise the issue before the adjudicating authority by producing the documentary evidence - matter remitted for quantification of CENVAT credit on the basis of the documents produced by the appellant - appeal allowed by way of remand.

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• 2017 (5) TMI 1243
  CENVAT credit - inputs - capital goods - It is the case of Revenue that the fabricated storage tanks will not amount to excisable goods and the inputs i.e. HR plates used and consumed for fabrication of such tanks cannot be considered as inputs or as capital goods for benefit of Cenvat credit; is a wrong perception and incorrect appreciation of law - Held that: - the said storage tanks are used by appellant for storage of crude oil and fabricated in the factory premises, denial of Cenvat credit of the central excise duty paid on such HR plates during the period February 2012 to March 2012 is incorrect. Reliance was placed in the case of COMMISSIONER OF CENTRAL EXCISE, BANGALORE-II Versus SLR STEELS LTD. [2012 (9) TMI 169 - KARNATAKA HIGH COURT], where it was held that Once a storage tank and pollution control equipment constitutes capital goods and any raw material purchased for construction of those goods, the duty paid could be utilized as a cenvat credit by the assessee notwithstanding the fact that the storage tank is an immovable property. CENVAT credit allowed - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1242
  Refund claim - manufacture of Pan Masala - proviso 4 of Rule 9 of Pan Masala Packing Machines (Capacity Determination & Collection of Duty) Rules, 2008 - Held that: - if the claim of refund is allowed irreparable loss may be caused to Revenue - the order passed by ld. Commissioner (Appeals) is reasonable - appeal allowed - decided against the Revenue.

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• 2017 (5) TMI 1241
  Refund claim - unjust enrichment - SSI exemption - amount paid by mistake in computation of rate of duty at 8% instead of 4% consequent upon exceeding of turnover of 1.5 crores - denial on the ground that the applicant had not discharged its obligation to establish that the burden of duty had not been passed on to their customers - Held that: - In trade transactions, it is normal practice to issue debit notes/credit notes whenever an adjustment has to be made in the amounts specified in invoices pertaining to a transaction. In the present dispute, the existence of debit/credit notes is not in dispute; it is only the acknowledgement of the validity of these notes which is - In the absence of other evidence, the validity of debit/credit notes is not liable to be challenged. It would, therefore, appear logical and rational for the acknowledgement of the said amount as evidence of having borne the incidence of duty. Consequently, the utilisation of credit cannot also be questioned. Appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1240
  Classification of goods - rectified spirit - whether classified under CTH 22072000 or under CTH 2204.90? - Held that: - the appellant have a composite unit where sugar and molasses are manufactured. Further the molasses on fermentation in the distillery ethyl alcohol is obtained. Ethyl alcohol is denatured by mixing certain chemicals which make ethyl alcohol unfit for human consumption. Before 01.03.2005 chapter Sub heading 2204.10 covered denatured ethyl alcohol of any strength and chapter Sub heading no. 2204.90 covered ethyl alcohol except alcoholic liquor for human consumption and undenatured ethyl alcohol. From 01.03.2005 tariff item no. 22072000 covered ethyl alcohol and other spirits denatured of any strength. The rectified spirit which is not used for human consumption is nothing but ethyl alcohol and is finding place in tariff item no. 22072000 - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1239
  Classification of goods - rectified spirit - assessee contends that rectified spirit is finding place at tariff item no. 22072000 because ethyl alcohol and rectified spirit are not two different commodities - Held that: - ethyl alcohol and rectified spirit are one and the same - rectified spirit which is not used for human consumption is nothing but ethyl alcohol and is finding place in tariff item no. 22072000 - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1238
  Classification of goods - Milk Shake Mix (MSM) - Soft Serve Mix (SSM) - Coffee Cream - Cream packed - the Ld. Commissioner have confirmed the classification of the products in question under Sub Heading 1901.19 of the CET Act as food preparation of the goods - appellant adopted classification in Sub Heading 04.04 - whether goods classified under Sub Heading 1901.19 of the CET Act or under Sub Heading 04.04? - Held that: - similar issue decided in the case of AMRIT FOODS Versus COMMISSIONER OF CENTRAL EXCISE, MEERUT-I [2006 (3) TMI 523 - CESTAT, NEW DELHI], where it was held that the milk product will go to the Heading 19.01 only if it contains other ingredients not permitted by Heading 04.01 to 04.04. It was further held that no other ingredients except permissible stabilizers have been added. Addition of stabilizers is essential to maintain the consistency and shelf life of the products. HSN Explanatory Note also qualifies the addition of stabilizers without changing its classification from Chapter 4 to 19 - the products in question will be under the Chapter Sub-heading 0404.90 - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1227
  CENVAT credit - job-work - goods were not received back within 180 days - extended period of limitation - Held that: - there is no suppression of fact or wilful mis-statement etc. on the part of the appellant. That is why the SCN issued for the present facts cannot be legally sustained. The merit of the demand does not need any comments as the SCN itself is time-barred. The demand is time barred it is enjoined on the part of the appellant to honour the liability of interest automatically. The appellant has failed to honour the liability of interest which accrued automatically for the period, when they crossed the limit of 180 days’ period within which the goods are required to be returned to principal manufacturer, who is the appellant. The liability of interest is limited to the amount of CENVAT credit only for the period beyond 180 days, when goods were not returned and credit continued in the assessee’s books of accounts. Only the liability of interest for the period exceeding the 180 days’ limit when CENVAT credit continued in the assessee’s account is sustained and for requantification of said liability of interest, the matter is remanded to the original adjudicating authority - appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2017 (5) TMI 1228
  Penalty u/s 45(6) of the Gujarat Sales Tax Act, 1969 - The revisional authority took the assessment order under suo-motu revision and raised demand - penalty was deleted mainly on the ground that the revisional authority has no jurisdiction to levy penalty for the first time - Held that: - the issue is not res-integra in view of decision of the Division Bench of this Court in the case of Ridhhi Siddhi Gluco Biols Ltd. [2017 (4) TMI 309 - GUJARAT HIGH COURT], where it was held that the penalty u/s 45(6) of the Act is mandatory and therefore, the same can be levied by the revisional authority for the first time in the suo-motu revisional proceedings - penalty upheld. Interest u/s 47(4A) of the Act - Held that: - considering sub-clause (vi) of section 47(4A) of the Act, it cannot be said that the learned tribunal has committed any error in restricting interest charged under section 47(4) of the Act for the period of 36 months only. Petition allowed - decided partly in favor of petitioner.

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