Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 15, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Clarifications of certain issues under GST - Draft Circular
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No e-way bill is required to be generated - where empty cylinders for packing of liquefied petroleum gas are being moved for reasons other than supply - See GST Rule 138 as amended.
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Order of the Anti Profiteering authority - GST Rule 133 as amended.
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Consumer Welfare Fund. - an amount equivalent to fifty per cent. of the amount of cess determined under sub-section (5) of section 54 read with section 11 of the Goods and Services Tax (Compensation to States) Act, 2017 shall also be deposited in the Fund.
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Refund of tax to certain persons - specified person u/s 55 - Removal of restriction of Invoice Value of ₹ 5000/- made with retrospective effect i.e. 1.7.2017 instead of 29.12.2017 - See GST Rules as amended.
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Application for refund of ITC on on account of inverted duty structure - the formula for calculation of refund amount revised with retrospective effect i.e. 1.7.2017 - See GST Rules as amended.
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Provisions relating to a goods and services tax practitioner - person registered earlier as sales tax practitioner or tax return preparer - period of limitation for passing the examination increased from 12 months to 18 months - See GST Rule as amended.
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Reversal of input tax credit (ITC) in the case of non-payment of consideration - The amount which has been paid by the recipient on behalf of the supplier [in accordance with section 15(2)(b)] shall not be considered for reversal of ITC u/s 37 - GST Rule as amended.
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The product “Ice Cream Making Machine” is classifiable under Tariff Heading 84.18 and not under Tariff Heading 84.38 of the Customs Tariff Act, 1975 and Goods and Services Tax rate applicable to Tariff Heading 84.18 is applicable to the said product.
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The applicant are not exempted from tax under GST on their outward supplies made to ocean going merchant vessels on foreign run, Indian Naval Ships and Indian Coast Guard Ships.
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Whole pulse grains such as whole gram, rajma etc. and ‘cereal’ on which no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market, fall under the definition of agriculture produce.
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GST - groundnuts with shell, turmeric and ginger on which no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but make it marketable for primary market would fall within the definition of agriculture produce.
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GST - Pulses (commonly known as ‘Dal’) (de-husked or split), jaggery, processed dry fruits such as processed cashew nuts, raisin (kismis), apricot (jardalu), fig (anjeer), date, tamarind (ambali foal), shelled groundnuts / groundnut seeds, and copra are not agriculture produce.
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GST - High Seas Sales - place of supply - Central Board of Excise and Customs has issued Circular No. 33/2017-Cus dated 01.08.2017, on the issue of High Sea Sales. Thus, the issue of High Sea Sale falls in the domain of Customs and not under the Goods and Services Tax.
Income Tax
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Cost inflation index for the Financial Year 2018-19 notified as 280
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TDS u/s 195 - PE in India - fees in respect of the services rendered for use of a global network and infrastructure to process card payment transactions for customers in India - DTAA with Singapore - The Applicant is required to withhold tax at source on amount attributed to the PE in India at the full applicable rate at which the non-resident is subjected to tax in India.
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Fixed place PE of the Applicant in India - Applicability of Australian Ruling in India - It may not have created PE under Australia Singapore DTAA due to requirement of being “substantial equipment” but it can create PE in India since there is no such requirement under India Singapore DTAA.
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Non-compete fee receipt - consideration for transfer of the shares - Capital Gains or business income - In order to attract section 28(va)(a), there is no condition of receiving a non-compete fee for agreeing not to carry on a business which the assessee was already carrying on.
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Levy of penalty u/s 271D and 271E - transaction of advance and its receipt back in cash in excess of ₹ 20,000/- - Assessee failed to substantiate that it is trade advance - application of section 273B cannot be considered - levy of penalty confirmed.
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Additions towards income earned from undisclosed investment - The addition of income earned from the investment is also solely based upon the admission by the ex-partner with no credible evidence - No additions.
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R & D expenditure and ESOP expenses - apportionment of cost to the units which claimed exemption u/s 10B, 80IB and 80IC - there is nothing on record to show that all the R & D inventions / patents were never sold in outside market but only captively utilised in the exempted units. - apportioning R & D expenditure and ESOP cost not justified.
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Taxability of amount on which TDS credit has been claimed - Merely because TDS has been deducted, advances cannot be treated as income - as the assessee has claimed TDS on the advance, hence the TDS amount is deemed to be the income received during the year.
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Genuineness of expenditure - Additions made on carriage inward charges / loading unloading expenditure - Cash payments - allegation of split of transactions artificially - a lump sum disallowance @ 6% instead of 15% under challenge would be just and proper.
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Penalty u/s 271B - failure to get accounts audited - for technical and venial breach on the part of Chartered Accountant of the assessee, the assessee cannot be penalized
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Penalty u/s. 271(1)(c) - assessee accepted the quantum disallowance - just because assessee has not routed the same through profit and loss account does not by itself said to be a contumacious conduct warranting levy of penalty u/s. 271(1)(c)
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Just because assessee was registered u/s 25 of the Companies Act, 1956 would not ipso facto make it eligible for registration u/s 12AA - unless the dominant activity show altruistic thought and action which reflects selflessness, we cannot say it involves any “charity’
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Denial of registration u/s 12AA - trust for educational purposes - Imparting financial education to the general public through programmes sponsored by Goldman Sachs, ICICI, Tata, Reliance Life etc, will clearly show that pursuing such object would not come within the meaning of “education’’.
Customs
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Procedure for e-commerce exports through Post and clarification regarding personal imports
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Import of Edible oils falling under Chapter 15 - Rate of customs duty increased in most of the cases barring few items.
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Refund of Customs Duty paid - Refund of CVD paid in excess - MRP based valuation - the impugned order upholding rejection of the refund claim on the ground that the assessment order has not been challenged, cannot sustain
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Project import - the power generation plant where the turbine has been used is set up in the appellant's sugar factory which cannot be considered as a power generation project - the appellant will not be eligible for the benefit of the notification.
Service Tax
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Banking and Other Finance Services - appellants are a registered Trust as a Federation of Women in Micro Credit providing loans to Women’s Self Help Groups (SHG) engaged in micro finance - the appellants would not fall within the ambit of ‘banking company or financial institution’.
Central Excise
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Levy of penalty - Revenue neutrality - entire excise is revenue neutral as neither the assessee stands to loose anything by paying higher duty nor the Revenue stands to gain anything by the appellant’s adoption of lower assessable value - penalty u/s 11AC set aside
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CENVAT credit - Works Contract - The laying of railway tracks does not fit into sub-clause (a) or (b) of exclusion Part (A) in the definition of input service. Thus the disallowance of credit, alleging that these services are excluded from the definition, is without any legal basis.
Case Laws:
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GST
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2018 (6) TMI 624
Classification of goods - Ice Cream Making Machines - rate of GST - Whether the aforesaid goods fall under Chapter Heading 8438 of GST Tariff? - Whether the applicant is liable to pay GST at the rate of 18% on supply of goods in question? - Held that:- It is evident that the Explanatory Notes for Tariff Heading 8418 includes ice-cream makers - It is also observed that in the First Schedule to the Customs Tariff Act, 1975, ‘industrial ice cream freezer’ is mentioned against Tariff Item 8418 69 50 under Tariff Heading 8418. Therefore, ‘Ice Cream Making Machine’ manufactured and supplied by the applicant merit classification under Tariff Heading 8418. The Tariff Heading 8438 covers the machinery not specified or included elsewhere in Chapter 84, for the industrial preparation or manufacture of food or drink. As the ‘Ice Cream Makers’ are specifically covered under Tariff Heading 8418, the same do not fall under Tariff Heading 8438. Applicant has relied in the case of Milk Food Ltd. Vs. Collector of Customs, New Delhi [1994 (3) TMI 175 - CEGAT, NEW DELHI], where it was held that The goods covered under the Bill of Entry No. 7516 have been described as “enrober machine, conveyor system and coating & hardening tunnel”; claiming assessment of enrober machine under Heading 8438.80 (read with Notification No. 59/87-Cus.) and coating hardening tunnel under Heading 8418.69 (read with Notification No. 59/87-Cus.) - It is not the case of the applicant that the Ice Cream Making Machines manufactured and supplied by them consists of the above referred products, which were the subject matter of dispute in the case of Milk Food Ltd. Therefore, the said decision is not found to be applicable in the facts of the present case. Ruling:- The product “Ice Cream Making Machine” is classifiable under Tariff Heading 84.18 and not under Tariff Heading 84.38 of the Customs Tariff Act, 1975 and Goods and Services Tax rate applicable to Tariff Heading 84.18 is applicable to the said product.
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2018 (6) TMI 623
Supply of goods - inter-state trade - Exemption from GST - outward supplies made to ocean going merchant vessels on foreign run, Indian Naval Ships and Indian Coast Guard Ships - Reverse charge - Whether appellant are exempted from tax under GST on their outward supplies made to ocean going merchant vessels on foreign run, Indian Naval Ships and Indian Coast Guard Ships or not? - If at all they are liable for GST on their outward supplies whether they can collect the GST from the recipient for the goods namely:- (a) Ocean going merchant vessels on foreign run; (b) Indian Naval Ships; and (c) Indian Coast Guard Ships or from their authorized agents. Held that:- The goods which are received by the applicant are within the Customs area as defined under Section 2 (11) of the Customs Act, 1962. Accordingly goods cleared / supplied by the applicant is to be treated as supply of goods in the course of inter-State trade. Furthermore, the goods supplied by the applicant is also not an exempt supply as per the definition under Section 2 (47) of the Central Goods and Service Tax Act, 2017 as it is neither nil rated or being exempt by any Notification - some of the supplies of applicant may fall under the definition of "exports" which is considered a zero rated supply. However, the same is not within the prerogative of present application. Ruling:- The applicant are not exempted from tax under GST on their outward supplies made to ocean going merchant vessels on foreign run, Indian Naval Ships and Indian Coast Guard Ships. The applicant can collect the applicable GST from their customers, in case it is not exports. However, in case of exports the option lies with the applicant based on manner of exports i.e. whether they intend to export under bond or on payment of tax.
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2018 (6) TMI 622
Classification of goods - Cereals, pulses, spices, copra, jaggery (Gur), groundnuts (with or without shell), groundnut seeds, turmeric dried and ginger dried (soonth), cashew, almond, kismis, jardalu, anjeer (fig), date, ambli foal - Whether all cereals, pulses, spices, copra, jaggery (Gur), groundnuts (with or without shell), groundnut seeds, turmeric dried and ginger dried (soonth), cashew, almond, kismis, jardalu, anjeer (fig), date, ambli foal are covered under the definition of ‘Agriculture Produce’ as defined under N/N. 11/2017-Central Tax (Rate) dated 28.06.2017? - Held that:- The GST rate for services relating to agricultural produce by way of loading, unloading, packing, storage or warehousing of agricultural produce is NIL as per Sl. No. 54 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and corresponding Notification issued under GGST Act, 2017 - the applicability of Goods and Services Tax on warehousing of agricultural produce has been clarified vide Circular No. 16/16/2017-GST dated 15.11.2017 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Excise & Customs (Tax Research Unit). Ruling:- Pulses (commonly known as ‘Dal’) (de-husked or split), jaggery, processed dry fruits such as processed cashew nuts, raisin (kismis), apricot (jardalu), fig (anjeer), date, tamarind (ambali foal), shelled groundnuts / groundnut seeds, and copra are not agriculture produce as defined under Notification No. 11/2017-Central Tax (Rate). ‘Cereal’ on which any processing is done as is not usually done by a cultivator or producer will fall outside the definition of agriculture produce Processed spices including processed turmeric and processed ginger (soonth), are not agriculture produce as defined under Notification No. 11/2017-Central Tax (Rate). However, groundnuts with shell, turmeric and ginger on which no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but make it marketable for primary market would fall within the definition of agriculture produce Whole pulse grains such as whole gram, rajma etc. and ‘cereal’ on which no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market, fall under the definition of agriculture produce as defined under Notification No. 11/2017-Central Tax (Rate).
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2018 (6) TMI 621
Admissibility of Advance Ruling Application - High Seas Sales - place of supply - Whether the authority is within jurisdiction to admit application especially on the issue of ‘place of supply’? - Whether the issue is related to Customs or is related to Goods and Services Tax? - Held that:- The applicant is well aware that the issue is related to place of supply - the question raised in the application for advance ruling pertains to the Customs’ domain and not to the Goods and Services Tax domain. This fact is bolstered by the proviso to sub-section (1) of Section 5 of the IGST Act, 2017. It is also observed that the Central Board of Excise and Customs has issued Circular No. 33/2017-Cus dated 01.08.2017, on the issue of High Sea Sales. Thus, the issue of High Sea Sale falls in the domain of Customs and not under the Goods and Services Tax. The application for advance ruling is therefore rejected without going into the merits of the case, on the issue of lack of jurisdiction, at the stage of admission.
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2018 (6) TMI 620
Release of detained goods - Section 129 of the CGST Act as also the Kerala SGST Act - Held that:- An identical matter has been disposed of by a Division Bench of this Court in THE COMMERCIAL TAX OFFICER AND THE INTELLIGENCE INSPECTOR VERSUS MADHU. M.B. [2017 (9) TMI 1044 - KERALA HIGH COURT], directing expeditious completion of the adjudication of the matter and permitting release of the goods detained pending adjudication, in terms of Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017 - the writ petition is disposed of directing the competent authority to complete the adjudication provided for under Section 129 of the statutes.
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2018 (6) TMI 619
Seizure of goods - non-payment of U.P.G.S.T. - inter-state transportation - Held that:- appellant may seek instructions and file counter affidavit within a month - List immediately thereafter for admission/final disposal.
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Income Tax
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2018 (6) TMI 618
Fixed place PE of the Applicant in India - Taxability of fees in respect of the services rendered for use of a global network and infrastructure to process card payment transactions for customers in India - DTAA with Singapore - functions performed by MIPs as significant functions - payment card programs are programs of Licensee (i.e. of Banks and FIs) or MasterCard - consideration for use of intangibles in India - Withholding of tax - Held that:- Applicant is carrying out its business of facilitation of authorization of transaction through fixed place, ie. MIPs, since MIPs situated in India are at its disposal. The functions performed by MIPs in facilitation of authorization transaction are not preparatory or auxiliary in character and are significant functions. Hence, MIPs create a PE of the Applicant in India. It is clearly laid down in Note 4.1 of OECD commentary on Article 5 of Model Convention that the mere fact that an enterprise has a certain amount of space at its disposal which is used for business activities is sufficient to constitute a place of business. No formal legal right to own or use that place is therefore required. It is sufficient if it is placed at the disposal of the foreign entity. Thus, the fact that MIPs may not be owned by the Applicant is not relevant, if other tests are satisfied. Applicability of Australian Ruling in India - Held that:- It may not have created PE under Australia Singapore DTAA due to requirement of being “substantial equipment” but it can create PE in India since there is no such requirement under India Singapore DTAA. Whether the MasterCard Network creates a fixed place PE of the Applicant, in India - Held that:- Once we look at MIPs, we can see that MIPs are performing more than what CRS was doing in India. MIPs, apart from generating signal for transaction processing and receiving end results of transaction processing, are also doing activity relating to facilitation of authorization. It has been discussed earlier that the Applicant itself has admitted in the AAR application as well as in TP report of MISPL that MIPs are used for undertaking preliminary examination/validation of information at the point of authorization. The preliminary validation generally involves activities such as PIN processing, validation of card codes, name and address verification etc.. In the case of errors, the MIPs alert the acquirer bank/financial institution on the need for a correction and the data is not authorized. With these additional activities besides sending and receiving signal (which CRS in India was doing in Galileo case) the case of MasterCard network creating a PE is actually stronger. Role of the Bank of India premises, and whether any fixed place PE is formed on its account - Held that:- Downloading and dispatching may be auxiliary activity on the facts of one case but not when moving funds between two banks. We have already discussed as to how movement of fund between two banks by passing debit and credit entry is a major settlement activity and that is performed by BOI. Thus UAE Exchange Control case does not appear to be applicable on the facts of our case. - The fact that BOI is acting as an agent of the Applicant and under its instruction and supervision, and has a space at its disposal, it means that the space is at the disposal of the Applicant. - Bank of India premise constitutes fixed place PE of the Applicant. Role played by the Applicant’s subsidiary MISPL in India and whether that can constitute a fixed place PE of the Applicant - Held that:- Same activities which were creating a PE for MCI in India and for which full attribution out of transaction processing was done is now shown as only support activities and not actual transaction processing activities. Thus, there are some functions and risk related to transaction processing which were earlier carried out by MCI in India and are still carried out by MISPL(as MISPL had taken over everything) but not shown in the FAR of the MISPL. Therefore, the subsidiary company MISPL creates a PE of Applicant in India. Creation of a PE through the Applicant’s visiting employees and employees of Bank of India - Held that:- Revenue has incorrectly understood the role of the bank employees in coming to the conclusion that these bank employees working in the bank premises for the settlement function also constitute a service PE of the Applicant in India. Disagreeing with the Revenue, we hold that the employees of the Bank of India, in India, do not constitute a service PE of the Applicant in India. Creation of PE through marketing support service - Held that:- When the business is trading and there are hundreds of orders, the term will have a different meaning from that as in our case, where there are only 7 new agreements in three years, as we mentioned in the para above. In our case, if the above process is followed in all the new agreements, even though only 2 or three new contracts are entered into in a year, the requirement of “habitually” would be satisfied. Thus, we have no hesitation in holding that MISPL constitutes a dependent agent PE under Article 5(8) of India Singapore DTAA on account of habitually securing orders wholly for the Applicant. Taxability of fees to be received by the Applicant from Indian Customers, such as transaction processing fees, assessment fees and transaction related miscellaneous fees - royalty or fee for technical services (“FTS”) - Held that:- all banks in their reply to Revenue under section 133(6) of the Act have admitted that the payment made by them to the Applicant is for services and not for royalty. - it can be seen that MCI has granted Licensee right to use various trademarks and marks owned by it, solely in connection with License’s payment card programs. Thus, it is clear that the dominant purpose of the agreement is to allow use of intangibles for the payment card programs of licensees, ie. of the banks and FIs. There is no mention of any transaction processing service in this agreement or any other agreement. - the high spend on advertisement / promotion also supports the Revenue’s contention that licensing of brand/trademark is not incidental but the main activity, so that people buy credit cards with MasterCard logo. - it would get taxed with the PE under Article 7 and not under Article 12. Nature of fee received for use of equipment, and whether allowing the use of the same would constitute royalty. - Held that:- there is no compliance of sales tax at the time of transfer of ownership in Dec 2014, in fact even till today, there is no transfer of ownership under the eyes of law, and hence, the MIPs continue to be owned by the overseas AEs of the Applicant (as before reorganization) and that AEs have given the MIPs to the Applicant under a license. - the MIPs are defacto owned by the Applicant as they are charging fee for cost of MIP installation. Thus, the first test for equipment royalty is held to be satisfied. Whether the fee payable to the Applicant is taxable as FTS under India Singapore DTAA. - Held that:- they do not make available technical knowledge, experience, skill, know-how to the service recipient. Hence, they cannot be classified as Fee for Technical Services under Article 12 of India Singapore DTAA. - the part of fee paid to the Applicant, which is not royalty, is business income which is taxable under Article 7 and not under Article 12 of India Singapore DTAA. Since we have already held that there is PE in India, the fee paid will get taxed as business income arising through the PE. Process royalty - whether it is a secret process. - Held that:- The fact that only three patents are granted so far in India, would not have an impact on the inference that technology is patented and hence secret. Quite clearly, they are patented and hence cannot be known to and be used by the public. Thus these are secret process. - Thus, there is use of a secret process and hence, we hold a part of the fee paid to the Applicant is also for use of secret process and hence royalty. It is not necessary that this secret technology is licensed to customer banks. It is sufficient if secret process is used, as the definition of royalty in India Singapore DTAA classifies use of secret process as royalty. This royalty is also effectively connected to the PE created on account of MasterCard Network as well as other PEs. Ruling:- (1)The Applicant has a PE in India under the provisions of Article 5 of the India Singapore DTAA in respect of the services rendered/to be rendered with regard to use of a global network and infrastructure to process card payment transactions for Customers in India. There is fixed place PE, service PE and dependent agent PE. (2) Arm’s length remuneration to PE on account of Indian Subsidiary for the activities performed / to be performed in India, would not absolve the Applicant from any further attribution of its global profits in India since the FAR of the Indian Subsidiary does not reflect the functions/risks of the Applicant performed/undertaken by it. (3) A part of the fees received/to be received by the Applicant from Indian Customers (comprising transaction processing fees, assessment fees and transaction related miscellaneous fees) would be classified as royalty within the meaning of the term in Article 12 of the India- Singapore DTAA. However, since it is effectively connected to PE, it would be taxed under Article 7 and not under Article 12. The fee cannot be classified as FTS under Article 12 of India-Singapore DTAA. (4) The Applicant is required to withhold tax at source on amount attributed to the PE in India at the full applicable rate at which the non-resident is subjected to tax in India.
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2018 (6) TMI 617
PE in India - non-compete fee receipt - consideration for transfer of the shares - income accrued in India - India-UK DTAA - Capital Gains or business income - different business than that of the payer of non-compete fee or the transferor of shares - Held that:- Revenue’s interpretation of section 28(va) to hold that recipient of non-compete should already have been carrying on the business which he has agreed not to carry on further is erroneous and contrary to the provisions of the Act. In order to attract section 28(va)(a), there is no condition of receiving a non-compete fee for agreeing not to carry on a business which the assessee was already carrying on. Hence, we do not agree with the Revenue that the fee received by the Applicant cannot be taxable under section 28(va) because the Applicant and MPS were carrying on different businesses. As non-compete fees received by the Applicant from ADI BPO Services Private Ltd., an Indian Company, as a part of the consideration for transfer of the shares held in MPS Ltd. an Indian Company, though income from “Profits and gains of business or profession” as provided under Section 28(va) of the Act, shall not be chargeable to tax in India in the absence of any Permanent Establishment of the Applicant in India, by virtue of Article 7 of the Double Taxation Avoidance Agreement (‘DTAA’) between India and United Kingdom.
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2018 (6) TMI 616
Disallowance u/s 40(a)(ia) - notional amount of expenditure on which no TDS was deducted - Penalty - Held that:- Commissioner noticed the submission on behalf of the assessee that in a similar situation where the bills had been raised late on the assessee and the amount covered by the bills was paid during the financial year and only the tax in respect thereof deposited in the subsequent year, the penalty was not attracted - thus in the present case no penalty is attracted.
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2018 (6) TMI 615
Deduction u/s 80IB(10) - Date of commencement of Housing Project to claim deduction u/s 80IB - Held that:- There is no distinguishing features warranting a different view in this appeal from that taken in the order [2014 (12) TMI 1320 - BOMBAY HIGH COURT] there is no substantial question of law - thus not entertained. Profits from the other units worked out separately and allowed deduction u/s 80IB(10) - Held that:- Not able to show us from the orders passed by the authorities under the Act that any disallowance under Section 80IB of the Act was attributable to the flat being in excess of 1000 sq. ft. This indicates the most casual and reckless manner in which the Revenue files appeals before this Court. Treatment of rent from amenities - income from other sources - Held that:- It is not even the case of the Revenue that furniture belonging to the respondent has been let out along with building to the lessee bank - thus there is no occasion to Section 56(2)(iii) and the amount cannot be classified as income from other sources - hence there is no question of law - appeal is dismissed.
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2018 (6) TMI 614
Gain on sale of shares - taxable under the head Capital Gain or under Income from business or profession - whether the assessee company was engaged in the business of purchase and sale of shares as a trader or as an investor? - Held that:- The assessee has shown the investment in its books of accounts under the head ‘investment’ and not under the head ‘stock in trade’, therefore, the intention of the assessee is not to treat them business income but to treat them as an investment - assessee is having only one portfolio that is of investment and is consistently following to declare capital gain or loss on sale on investment, dividend is earned on investment and there is not stock in trade portfolio - the assessee is consistently valuing investment at cost and does not claim the diminution in valuing of investment - we have noted the intention of the assessee that the Board of Directors of the assessee company has passed the resolution stating that the motive of the company is to deal in investment and not to trade in shares - hence assessee’s income i.e Short term Capital Gain by way of sale of investment should be assessed under the head ‘capital gain’ instead of ‘business income - Decided in favor of assessee.
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2018 (6) TMI 613
Eligibility of deduction u/s 80P(2) - assessee is a primary agricultural credit society registered under the Kerala Co-operative Societies Act - Held that:- Hon’ble jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Limited & Ors [2016 (4) TMI 826 - KERALA HIGH COURT] held that when a primary agricultural credit Society is registered as such under the Kerala Co-operative Societies Act, 1969, such society is entitled to the benefit of deduction u/s 80P(2) - hence we hold that the CIT(A)’s are justified in directing the A.O. to grant deduction u/s 80P(2)(a)(i) - Decided in favor of assessee.
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2018 (6) TMI 612
Additions made on account of the difference in income declared in the actual return and in the return filed in the bank - information seeked from the bank u/s 133(6) - Held that:- When the assessee has denied having filed any such return and apparently when such return is also not found on the record of revenue, there cannot be any reason to uphold an addition based on such unverified documents. Unexplained source of cash deposit in banks - Held that:- As found that cash is deposited from regular cash book of the assessee. Assessee produced regular cashbook as well as bank statement of the bank in which cash is deposited - cash deposits is also disclosed in the bank account in the books of accounts and same tallied with the bank statement - thus no additions can be made - Appeal of revenue is dismissed.
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2018 (6) TMI 611
Levy of penalty u/s 271D and 271E - transaction of advance and its receipt back in cash in excess of ₹ 20,000/- - Assessee contended that it is trade advance and 269SS and 269T did not apply to a trade advance - advance, which was received back as the film for which it was given did not run - Held that:- the question of his being paid a booking advance by the movie theatres arises only where he is, as claimed, working as a booking agent, of which there is nothing on record to suggest, much less establish. On the contrary, he is admittedly working as a manager with a business house in the film trade. It is perhaps for this reason that he is known to the assessee; a transaction of lending or advancing could materialize only between parties known to each other; rather, having mutual trust – the assessee working through its partners The claim of the amount loan/deposit being a trade advance, is, as found by the Revenue, wholly unproved (if not disproved). On the contrary, the conduct and the surrounding facts and circumstances point to the contrary, i.e., to it being not so. The same is the assessee’s only explanation for the contravention of sections 269SS and 269T. No reasonable cause for the same has been shown, much less proved, for us to consider the application of section 273B in the facts and circumstances of the case. No reason for interference and, accordingly, confirm the levy of impugned penalty u/s. 271D and 271E - Decided against the assessee.
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2018 (6) TMI 610
Initiation of penalty u/s. 271(1)(c) - assessee had deliberately claimed a deduction under the head “Investment Depreciation Reserve” without routing the same through the P & L account - Held that:- Assessee is a co-operative bank which held various government securities - the assessee in the return of income has claimed deduction on account of depreciation in value of the securities - thus the claim of deduction by the assessee cannot be said to be a subject matter of levy of penalty u/s. 271(1)(c), just because assessee has accepted the quantum disallowance - assessee has duly disclosed all the necessary materials - just because assessee has not routed the same through profit and loss account does not by itself said to be a contumacious conduct warranting levy of penalty u/s. 271(1)(c) - hence, the assessee cannot be held to be guilty of either concealment of income of furnishing of inaccurate particulars of income - Decided in favor of assessee.
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2018 (6) TMI 609
Additions on account of undisclosed investment - Addition been done suddenly on the basis of admission of ex-partner of the firm before the Investigation Wing - Held that:- The statements of the ex-partner cannot be said to be a conclusive evidence of the firm having made a payment of ₹ 53 lacs through undisclosed means for acquisition of sand ghat - also the statement has been obtained from an ex-partner of the firm who is no longer partner in the firm for the last many years - CIT(A) has relied upon the CBDT Circular No. 286/2003/IT dated 10.03.2003 which states that efforts should be made by revenue official to obtain credible evidence and obtaining admission de hors evidence should be avoided - thus additions should be deleted. Additions towards income earned from undisclosed investment - Held that:- The addition of income earned from the investment is also solely based upon the admission by the ex-partner with no credible evidence - thus applying the same basis the addition by the AO here also is not sustainable - Decided in favor of assessee.
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2018 (6) TMI 608
Income from sale of property - Transfer of property u/s 2(47) - joint development agreement and hand over possession to the developer - business income or short term capital gains - Held that:- There can be no transfer without registering the document signifying the transfer following the judgement in case of CIT vs. Balbir Singh Maini [2017 (10) TMI 323 - SUPREME COURT OF INDIA] - lower authorities was considering assessee’s case they did not have the benefit of the judgment of Hon’ble Apex Court in the case of Balbir Singh Maini (Supra) - thus unless and until a careful examination of the joint development agreement entered with the M/s. S&S Scapes Pvt. Ltd is made and compared with the joint development agreement considered in the case of Balbir Singh Maini (supra), we are of the opinion that the question whether any income arose to the assessee, cannot be addressed - hence we set aside the orders of the lower authorities and remit the issue back to AO for consideration - Revenue appeal allowed for statistical purpose.
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2018 (6) TMI 607
Denial of registration u/s 12AA - object of Trust is for educational purposes - charitable nature of trust u/s 2(15) - whether assessee’s activity will fall within the last limb of “charitable purpose’’ which is advancement of general public utility? - Held that:- Imparting financial education to the general public through programmes sponsored by Goldman Sachs, ICICI, Tata, Reliance Life etc, will clearly show that pursuing such object would not come within the meaning of “education’’. In fact none of the objects as contained in the main object clauses of the MOA, will fall within the meaning of “education - assessee was not collecting any fees from any of the participants but admittedly, it was collecting substantial amount as sponsorship fees from various sponsors. Further, almost all of these sponsors were from private sector and not from any Department of Government. Since assessee’s activity was imparting financial skills, through programme sponsored by various companies and this in our opinion was nothing but rendering services in relation to trade, commerce or business carried on by such companies - also just because assessee was registered u/s 25 of the Companies Act, 1956 would not ipso facto make it eligible for registration u/s 12AA - thus unless the dominant activity show altruistic thought and action which reflects selflessness, we cannot say it involves any “charity’ - hence assessee is not carrying any charitable activity within the meaning of Section 2(15) - Decided against the assessee.
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2018 (6) TMI 606
Income derived from letting out of the properties - Income from House Property or Business Income - Held that:- Following the judgement in assessee’s own case KNIGHT RAJ PROPERTIES P LTD. VERSUS ITO 10 (1) (4) , MUMBAI [2018 (2) TMI 349 - ITAT MUMBAI] wherein it is held that it is undisputed that assessee company's only source of income is from letting out of properties. This is duly supported by the P&L account submitted by the assessee - hence assessee's receipts should be considered as business income - Decided in favour of assessee. Disallowance the entire expenses debited to P&L a/c - Held that:- In view of our decision as above, this issue is remitted to the file of the AO to decide the issue in accordance with above decision - allowed for statistical purpose. Disallowance u/s 40(a)(ia) for management consultancy fees - Held that:- The issue is remitted to the file of the AO - AO is directed to consider the issue afresh in light of the additional evidence submitted by assessee after giving adequate opportunity of being heard - allowed for statistical purpose. Treatment of loan borrowed as unexplained cash credit u/s 68 - Held that:- the issue is remitted to the file of the AO - AO is directed to consider the issue afresh in light of the additional evidence submitted by assessee after giving adequate opportunity of being heard - allowed for statistical purpose.
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2018 (6) TMI 605
Taxability in India - consideration for conducting Training programs and providing access to CRS, Property Management Systems and Other Systems were towards reimbursement of expenses incurred by the assessee - Held that:- As the assessee had failed to substantiate on the basis of any clinching evidence that the consideration received for the services rendered by it to the Indian Hotels were in the nature of reimbursement of expenses incurred by the assessee and there was no mark up or profit made by rendering the said services, therefore, its claim that the same not being in the nature of income was not liable to be taxed in India cannot be accepted. We thus reject the aforesaid claim of the assessee. The Ground of appeal No. 1 is dismissed. Consideration received for conducting training programs - held by the CIT(A) as FTS in its hands - whether training programs conducted by the assesses did “make available” technical knowledge? - India- Netherland DTAA - Held that:- The consideration received by the assessee for the managerial/leadership training provided to the employees of the Indian Hotels cannot be held as FTS under Article 12(5)(a) of the India- Netherland tax treaty. As neither the training services rendered by the assessee to the Indian Hotels could be held to be technical services, nor the same could have been characterised as “ancillary and subsidiary” services as per Article 12(5)(a), hence the consideration received by the assessee for rendering the training services could not be held as FTS in its hands. We thus, not being persuaded to subscribe to the view taken by the CIT(A) that the consideration received for providing training services to the Indian Hotels was chargeable as FTS in the hands of the assessee, set aside his order. The Ground of appeal No. 2 is allowed in terms Whether amounts received by the assessee for providing access to the international CRS, Property Management Systems and Other Systems was ancillary and subsidiary to the enjoyment of the right “Marriott” and hence, taxable as FTS under the India-Netherland tax treaty, as well as under the Act? - Held that:- As the access to CRS, Property Management System and Other Systems provided to the Indian Hotels by the assessee were common facilities provided to the members of the Marriott chain of hotels across the world by the assessee, and were not tailor made services to suit their specific requirements, thus the said facility could not be construed as ‘technical services’. As neither be held to be technical services, nor the same in terms of our aforesaid observations could have been characterised as “ancillary and subsidiary” services under Article 12(5)(a), hence the consideration received by the assessee for rendering the said services/facility could not be held as FTS in its hands. We thus, set aside the order of the CIT(A) holding that the consideration received by the assessee for providing of access to CRS, Property Management Services and Other Systems was chargeable as FTS in the hands of the assessee. The Ground of appeal No. 3 is allowed Interest under Sec. 234B - Held that:- Now when a duty is cast upon the payer to deduct and pay tax at source, then on the payers failure to do so interest under Sec. 234B could not be imposed on the payee assessee. We find that the said issue is squarely covered by the judgment of the Hon’ble High Court of Bombay in the case of DIT (Intl. Taxation) Vs. NGC Network Asia LLC (2009 (1) TMI 174 - BOMBAY HIGH COURT). ‘Tax rate’ provided in the India-Netherland tax treaty by a further amount of surcharge, education cess and secondary and higher education cess - Held that:- We find that the issue that the of rate of tax provided in the tax treaty cannot be enhanced by including surcharge and education cess separately, is covered by an order of a coordinate bench of the Tribunal in the case of Capgemini SA vs. DCIT (Intl. Taxation)-2(10(1), Mumbai (2016 (7) TMI 712 - ITAT MUMBAI).Direct the A.O not to enhance the rate of tax provided in the tax treaty by including surcharge and education cess separately.
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2018 (6) TMI 604
Reopening of assessment - change of opinion - huge anomaly in the percentage of profit ratio apportioned - absence of live link between the reasons recorded and the factual matrix of the case. - Held that:- Re-assessment proceedings are purely based on change of opinion and not attributable to the failure on the part of the assessee to disclose fully and truly all material information. Even under the amended provisions, we are of the firm opinion that the notice issued by the AO cannot be said to have been based on “reasons to believe that income chargeable to tax has escaped assessment”. He has proceeded mainly on the ground that there is a “huge anomaly in the percentage of profit ratio apportioned” which implies that there is a subjective approach and not objective approach on the part of the Assessing Officer. AO has not satisfied the pre-conditions specified in section 147 in order to assume jurisdiction for reopening of assessment, and accordingly the notice issued u/s 148 deserves to be quashed and, we hold accordingly. “Reasons to suspect” rather than “reasons to believe” which fact was impliedly accepted by the Learned Commissioner wherein he has attributed the issuance of notice on the ground that “excessive deduction claimed may be sufficient for formation of requisite belief to initiate proceedings u/s 147 of the Act”. Re-assessment proceedings are not valid and consequently the additions / disallowance made therein do not stand in the eye of Law. R & D expenditure and ESOP expenses - apportionment of cost to the units which claimed exemption u/s 10B, 80IB and 80IC - Held that:- both AO as well as CIT (A) have proceeded on presumption that R & D expenses will benefit the exempted units in the long run overlooking the fact that there is nothing on record to show that all the R & D inventions / patents were never sold in outside market but only captively utilised in the exempted units. Respectfully following the decision in Bush Boake Allen (India) Pvt Ltd vs. ACIT (2003 (12) TMI 10 - MADRAS HIGH COURT), we are of the view that the Revenue has not made out a case for apportionment of R & D expenditure and ESOP cost to the exempt units. In the result, we hold that the Tax Authorities were not justified in apportioning R & D expenditure and ESOP cost to the units which claimed exemption u/s 10B, 80IB and 80IC of the Act. Appeals filed by the assessee are allowed.
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2018 (6) TMI 603
Disallowance u/s 14A on account of dividend income - as submitted that the dividend received by assessee from OMIFCO, Oman is chargeable to tax in India under the head ‘income from other sources’ - rebate of tax has been allowed to assessee from the total taxes in terms of S.90(2) r.w. Article 25 of Indo-Oman DTAA - Held that:- As observed that it is a recurring issue from the preceding A.Ys and it has been remitted to Ld.AO to examine and verify the average value of investments after excluding the investment in OMIFCO, Oman under Rule 8D(2)(iii). We therefore do not find any infirmity in the observations of CIT(A) and the same is upheld. - Decided in favor of assessee.
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2018 (6) TMI 602
Allowable expense u/s 37(1) - Disallowance of contribution to Energy Conservation Fund - Held that:- Following the decision of this Tribunal in assessee’s own case [2018 (6) TMI 538 - ITAT JAIPUR] as held disallowance on account of contribution to energy conservation fund made by the Assessing Officer is directed to be deleted as held contribution to the fund set up for products which was also the business of the assessee has direct nexus to the advancement of the assessee business - Decided in favour of assessee
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2018 (6) TMI 601
TDS u/s 194C - Disallowance u/s 40(a)(ia) - non-deduction of TDS on labour charges - liability of individual assessee with Tax Audit Obligation u/s 44AB - Held that:- Assessee submitted Income Tax Return on 29.11.2007 for Financial year 2006-07 and offered Gross total Income of ₹ 3,20,675/- (8.34% of ₹ 38,45,650/-) under Section 44AD and thus assessee offered profit more than the deemed profit of 8 percent. Therefore, Assessee is not liable to Deduct TDS u/s 194(C)(1) for the FY 2007-08 in respect of labour charges paid to the contractor as it was the first year of the assessee where the provisions of section 40(a)(ia) is made applicable to him - therefore, the provision of Section 40(a)(ia) for making disallowance of expenditure for no-deduction of TDS will not apply - Decided in favor of assessee. Taxability of amount on which TDS credit has been claimed - receipt of advances - Held that:- Where assessee receives an advance, then it would be liability for him, that is, an obligation for him and he will show this obligation in liability side of the Balance Sheet - in some case out of great caution some companies/assesses deduct TDS on advance payment for safe side, to avoid the future consequences etc, but this does not mean that advance is an income of the assessee, it will be an obligation/liability till the related work/service gets executed as per terms and conditions of the parties - thus we are of the view that as the assessee has claimed TDS on the advance, hence the TDS amount is deemed to be the income received during the year - addition should be restricted to the TDS amount to the extent of 1,37,931/- - hence appeal filed by revenue is dismissed.
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2018 (6) TMI 600
Genuineness of expenditure - Additions made on carriage inward charges / loading unloading expenditure - Cash payments - allegation of split of transactions artificially - Held that:- The AO as well as CIT(A) take note the fact that the assessee has made payment to more than 700 persons within all the specified limits an attempt to steer itself clear of relevant provision contained u/s. 40A(3) as well as prescribing TDS deduction in Chapter-XVIIB of the Act. We do not agree to this reasoning in entirety. Assessee’s business of iron and steel dealership and trading requires of such kind of routine business expenditure - neither the AO nor the CIT(A) draws any comparison of the impugned expenditure with corresponding figures in preceding or succeeding assessment year(s) so as to highlight any excessive element therein the assessee has also not substantiated all of its payees’ relevant details for the purpose of carrying out a random verification even - thus we deem it proper in these peculiar facts and circumstances that a lump sum disallowance @ 6% instead of 15% under challenge would be just and proper - hence AO is directed to recompute the impugned disallowance @ 6% afresh - Partly allowed in favor of assessee.
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2018 (6) TMI 599
Penalty u/s 271B on failure to get accounts audited - Held that:- Assessee under consideration gets the accounts audited on 25.09.2013, that is, before the due date of filing audit report, which is 30.09.2013 - CBDT has extended time of uploading of audit report to 31.10.2013 - taking note of the extended period of one month, the Chartered Accountant, though accounts were audited on 25.09.2013, filed it manually on 08.10.2013 - Since the assessee got the audited accounts before 30.09.2013 and the income tax return has been filed in time and, therefore, there is no prejudice caused to the Revenue - thus for technical and venial breach on the part of Chartered Accountant of the assessee, the assessee cannot be penalized - hence penalty imposed by the AO and confirmed by the CIT(A) needs to be deleted - Decided in favor of assessee.
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Customs
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2018 (6) TMI 598
Principles of Natural Justice - petitioner had asked for cross-examination of few witnesses which were not granted - Held that:- The right of cross-examination, is one of the ingredients of the principles of natural justice and ought to be adhered to during an adjudication proceedings. In the facts of the present case, it does not appear that, the prosecution had offered the petitioner herein an opportunity to crossexamine the witnesses produce on their behalf - the impugned order stands vitiated by breach of principles of natural justice - petition allowed.
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2018 (6) TMI 597
Conversion of free shipping bills into drawback shipping bills - rejection on the ground that the assessee has not given the details on the shipping bills as regards the description, quantity and such other particulars as are required for claiming the drawback - appellant case is that the required details are already available in the said shipping bill. If that be so, the appellant request for conversion should not have been denied in view of the settled law - Held that:- matter remanded to the adjudicating authority for examination of the appellant claim for availability of all the requisite details in the shipping bills itself and to redecide the issue based upon the verification of the said fact - appeal allowed by way of remand.
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2018 (6) TMI 596
Refund of Customs Duty paid - rejection on the ground that it was filed without challenging the final assessment order - Held that:- Reliance placed in the case of MICROMAX INFORMATICS LTD. VERSUS THE PRINCIPAL COMMISSIONER OF CUSTOMS (AIR CARGO) , THE ASSISTANT COMMISSIONER OF CUSTOMS (REFUNDS-AIR) [2017 (7) TMI 551 - MADRAS HIGH COURT], where The applications were returned on the ground that there was no order on record modifying or reviewing the rate of duty determined via the self-assessment mode. This conclusion of the second respondent, in view of what is stated above, is, clearly, wrong - the impugned order upholding rejection of the refund claim on the ground that the assessment order has not been challenged, cannot sustain and is set aside. The original authority is directed to process the refund claim on merits - rejection of refund do not sustain - appeal allowed.
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2018 (6) TMI 595
Penalty u/s 114 (i) of the CA 1962 as also under 114 AA of the CA 1962 - mis-declaration of export goods - violation of the provisions of Foreign Trade (Development & Regulation) Act, 1992 as also of the Fertilizer Control Order, 1985 - Held that:- Admittedly the goods tried to be exported was potassium chloride and not sodium chloride, as declared by the exporter, thus calling for penalty under the provisions of Section 114 (i) of the Customs Act, 1962 - appreciating the appellant's stand that they were not aware of the export restriction and appreciating that the goods have not been redeemed by them, the penalty reduced from ₹ 10.00 Lakhs to ₹ 7.00 Lakhs. Penalty u/s 114AA - Held that:- Tribunal in the case of Arya International vs. CC, Kandla [2016 (1) TMI 834 - CESTAT AHMEDABAD] laid down that in case of mis-declaration of export goods, penalty is imposable u/s 114 (i) of the CA 1962 and there is no justification of imposition of penalty under Section 114 AA ibid - penalty imposed u/s 114 AA of the CA 1962 set aside. Penalty upon Managing Director, Shri Premkumar Mohan - Held that:- The exporter i.e., M/s. Point 2 Point Logistics India Pvt. Ltd., has already been penalized and in the absence of any separate role of the Managing Director, imposition of penalty upon him may not be justified - penalty set aside. Appeal allowed - decided in favor of appellant.
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2018 (6) TMI 594
Project import - import of "Turbine" with its accessories for setting up of a Power Generation Project, as part of establishing a new sugar factory - denial of benefit on the ground of violation of import condition - case of appellant is that that though the imported goods were used to set up a power plant within the factory of the appellant, only a small percentage of the power was captively used and the bulk of the power was exported to the grid - Whether the imported turbines would be eligible for the benefit of N/N. 21/2002 for the concessional rate of duty under project import regulations? Held that:- The appellants are manufacturers of sugar and to meet the additional power requirement of the new sugar factory, they have decided to set up a power generation project. There is no dispute to the fact that the power plant has been installed at the sugar factory of M/S Kothari Sugars and is meant to supply power to the sugar manufacturing factory. As per the energy projects agreement with TNEB, the appellant is allowed to sell surplus power to TNEB. It is obvious that the power generation plant where the turbine has been used is set up in the appellant's sugar factory which cannot be considered as a power generation project - the appellant will not be eligible for the benefit of the notification. Appeal dismissed - decided against appellant.
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Service Tax
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2018 (6) TMI 593
Classification of services - respondents herein received commissions from container liners for providing services to them - case of Revenue is that the services fall under the head Business Auxiliary Services w.e.f. 09.07.2004 - whether the services are classified under the head Business Auxiliary Services or under the head Steamer Agent Services? - Held that:- In view of the statutory definition given to the Steamer Agent Services under the Service Tax Act, it is not found that the services rendered to container lines can also be included under this definition - the services falls more correctly under the business auxiliary services - also, the instruction of CBEC dated 17th August, 2011 specifically excludes classification issued and hence does not cover the present issue - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 592
Penalty u/s 78 - Held that:- Till date the amount of service tax and interest confirmed by the order-in-original and Commissioner (Appeals) has not been deposited by the appellant and, therefore; the appellant's request for waiver of penalty cannot be acceded to - appeal dismissed - decided against appellant.
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2018 (6) TMI 591
Rectification of Mistake - error apparent on the face of record - GTA service for transport of agricultural produce - ROM application has been filed against the decision in the case of CST, DEHRADUN VERSUS BALAJI ACTION BUILDWELL [2018 (2) TMI 1263 - CESTAT NEW DELHI] - Held that:- The decision in the case of CST, DEHRADUN VERSUS BALAJI ACTION BUILDWELL is a detailed speaking order and has been passed after taking note of all the written and oral arguments raised - The Hon'ble Supreme Court of India in the case of Asstt. Commissioner of Income Tax, Rajkot Vs. Stock Exchange Ltd, [2008 (9) TMI 11 - SUPREME COURT] has laid down the ratio as to what can be considered as an error apparent on the face of the record. When the ROM is considered in the light of the Apex Court's decision, it cannot be said that there is an error apparent on the face of record. In the name of ROM review of the appeal is not permissible - ROM application dismissed.
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2018 (6) TMI 590
Service Tax collected but not deposited to Government - benefit of N/N. 11/2010-ST dated 27/02/2010 as well as the succeeding notifications - Held that:- The appellant is not liable to payment of Service Tax since the activity stands exempted by various notifications during disputed period. However, the Service Tax has been recovered by the appellant and hence the same is required to be deposited into the Government account. There appears to be confusion about the total amount of Service Tax recovered by the appellant and credited to the Government subsequently. The appellant also have paid under the wrong head which was not taken cognizance by the Adjudicating Authority. Matter remanded to the Adjudicating Authority for passing de novo orders - appeal allowed by way of remand.
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2018 (6) TMI 589
Business Auxiliary Services - service of “On Line Mail Marketing” - export of services - Held that:- The said issue has been discussed by the Tribunal in the case of Alpine Modular Interiors P. Ltd. V/s Commissioner of Service Tax, New Delhi [2014 (4) TMI 489 - CESTAT NEW DELHI], where Following decision of M/s GAP International Sourcing (India) Pvt. Ltd. vs. CST, Delhi [2014 (3) TMI 696 - CESTAT NEW DELHI] and Paul Merchants Ltd. vs. CCE, Chandigarh [2012 (12) TMI 424 - CESTAT, DELHI (LB)] it was decided in favor of assessee. Certain facts will need verification before extending the benefit of the decisions. It is to be verified whether the entire demand is covered by the decision of the Tribunal cited above or whether a part of the demand is pertaining to the similar services rendered to domestic customers. Matter remanded for de novo consideration - appeal allowed by way of remand.
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2018 (6) TMI 588
Clearing and forwarding activity - Inclusion of reimbursable expenses received over and above the commission, by their principal - Held that:- Such amounts have been received by the appellant towards activities which are unconnected with the clearing and forwarding services rendered. Hence, such inclusion of such reimbursable expenses as part of the consideration is without justification. The issue regarding inclusion of reimbursable expenses have been settled in favour of the appellant by the Hon’ble Delhi High Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. Vs. Union of India [2012 (12) TMI 150 - DELHI HIGH COURT] - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 587
Cargo handling services - transportation of coal in terms of an agreement entered into with M/s.Western Coal Fields - Held that:- The activities of the transportation of coal from pithead to railway siding has been held to be an activity falling under GTA service, by the Apex Court in the case of Singh Transporters [2017 (7) TMI 494 - SUPREME COURT] - demand set aside - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 586
Man Power Recruitment of Supply Agency Service - the respondents have supplied manpower to M/s. SCPL during the period 2007-08 to 2011-12 but they neither registered with the Department nor paid Service Tax - Held that:- It is settled principal that where the service is only relating to supply of manpower then the said manpower shall work under the supervision to whom the manpower has been supplied - But this is not the case here because in the instant case the manpower remained in control of the respondents and M/s. SCPL has not having any control/ supervision on the said manpower. Appeal dismissed - decided against Revenue.
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2018 (6) TMI 585
Validity of second SCN - Invocation of Extended Period of Limitation - Held that:- Present SCN is issued for the same service provided by the same appellant, for which earlier SCN was issued which was adjudicated also. Further, the present SCN is issued with invocation of extended period - The law does not allow issue of demand on the same service, from the same assessee, for the same period, for more than one time - impugned SCN not sustainable - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 584
Banking and Other Finance Services - appellants are a registered Trust as a Federation of Women in Micro Credit providing loans to Women’s Self Help Groups (SHG) engaged in micro finance - demand of service tax liability under Section 65 (12) ibid is only on the allegation that the appellants are a “financial institution” - scope of SCN - Held that:- As it has already been found that the appellants would not fall within the ambit of ‘banking company or financial institution’ for the purposes of Section 65 (12) ibid, that allegation in the SCN and its confirmation in the impugned order cannot then be sustained - the SCN has clearly proposed the demand of service tax only on the ground that appellants are a financial institution and not on a charge that their services are taxable since they have been done ‚by any other person‛. This being so, this argument of the Ld. A.R is therefore outside the scope of the SCN and hence cannot be raised at this stage. Taking into account that appellants are only a Charitable Trust and have already paid up remaining demand pertaining to Rent-a-cab service amounting to ₹ 1,46,260/-, we also set aside any penalty in respect of that demand - the impugned order confirming the tax liability along with interest and penalty against the appellant on ‘Banking and Other Financial Services’ will require to be set aside - appeal allowed in part.
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Central Excise
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2018 (6) TMI 583
Clandestine removal - clearance of goods had not been recorded in their RG-1 - the main evidence on which the case of the Revenue finds support is the data printed out from the laptop - Held that:- On the date of the search, soon thereafter, the laptop has been opened and certain details of production and dispatch for the period 1-7 July, 2011 was printed out in the presence of Shri Kailash Agarwal, Director. In the statement recorded soon thereafter, he also admitted these figures and further has paid the duty liability in respect of 445.590 MT alleged to have been clandestinely cleared - The forensic examination of the laptop does not appear to have been conducted in the presence of Shri Kailash Agarwal, Director. Neither Shri Kailash Agarwal nor Shri Manoj Agarwal, Director admitted to the truth of such data. In fact Shri Manoj Agarwal, in his statement has claimed that the deleted data (subsequently printed out) did not reflect the correct figures of production and clearance. It is also seen that Revenue has failed to carry out any further investigation into the allegation of clandestine clearance. Apart from the print out, no evidence has been brought on record regarding the unaccounted procurement of raw materials. No suppliers have been identified or investigated. Absolutely no investigation is on record regarding the buyers of such clandestinely cleared goods or transporters. It is settled position of law that clandestine clearance is a serious charge and such allegations have to be proved by Revenue with reliable and tangible evidence. Revenue has not succeeded in establishing the charge of clandestine clearance and consequently, the demand of Central Excise duty set aside - the penalty imposed on Shri Kailash Agarwal is reduced. Appeal allowed in part.
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2018 (6) TMI 582
Interest on refund of pre-deposit - penalty for self credit of education cess and higher education cess denied - Held that:- The appellant has paid the said amount of penalty to file the appeal before the ld. Commissioner (A), therefore, the same is to be treated as pre deposit as in the case of J.M. Baxi [2010 (12) TMI 995 - GUJARAT HIGH COURT], as it is the amount of pre deposit - On the amount of pre deposit, the provisions of Section 11B of the Central Excise Act, 1944, are applicable. The assessee is entitled to interest on the refund of the pre deposit amount of penalty - appeal dismissed - decided against Revenue.
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2018 (6) TMI 581
CENVAT credit - Works Contract - input services - service tax paid on Railway Siding Track Laying/maintenance work rendered by a contractor - Held that:- When works contract services are availed for painting, laying of floor tiles, etc., in the nature of completion of finishing services, these would generally be in the nature of modernisation or repair/renovation of existing structures. Such services would be eligible for credit. Only when works contract services are used for construction of a building or civil structure or a part thereof or laying of foundation or making of structures for support of capital goods, they are not eligible for credit. The laying of railway tracks does not fit into sub-clause (a) or (b) of exclusion Part (A) in the definition of input service. Thus the disallowance of credit, alleging that these services are excluded from the definition, is without any legal basis - credit allowed - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 580
Rectification of Mistake - It has been argued that the order allows revenue's appeal on the ground that there is revenue neutrality while the impugned order clearly holds that during proceedings before lower authority they had pointed out that they were reversing the credit attributable to trading activities - Held that:- The Tribunal order dated 05.12.2017 in para 5.1 and 5.2 deals with the aspect of revenue neutrality and it also points out that the order of Commissioner (Appeals) is silent on the aspect of applicability of Rule 7 of the Cenvat Credit Rules to the facts of the case. In view of the assertion made by the applicants - the applicants before the lower authorities have made out a case that they have been reversing the cenvat credit on the trading activities. Moreover, the aspect of Rule 7(c) of the Cenvat Credit Rules have not been examined by the lower authorities. The order is therefore modified by rectifying the mistake - ROM Application allowed.
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2018 (6) TMI 579
Scope of remand order - it was the contention of the appellant that the remand order required the original authority to restrict itself to ascertainment of the genuineness of the certificate and not the veracity of the contents therein which was beyond the competence - Clandestine manufacture and removal - unit located in rural area - Held that:- The terms of the remand order are very clear. Eligibility to manufacture branded goods under the exemption notification was available to such small scale units as are situated in a rural area. The definition of 'rural area' does not envisage an interpretation on the part of the adjudicating authority or the appellate authority, the State Government alone is empowered to classify and segregate its territorial jurisdiction into urban and rural area for various purposes of administration The scope and work of the competent authority of the State Government cannot detract from the content of the certificate which, in this case, is categorical - the lower authority was misguided in denying the benefit of notification on the ground that the said area was urban and hence liable to duty - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 578
Penalty - erroneous availment of CENVAT credit - trading activity or not? - the particle boards are first cut and then drilled, tapped, assembled and disassembled - Held that:- The scope of applicability of definition of manufacture to prefabricated structures/creations is not in doubt. Nevertheless, there is no evidence to substantiate the claim of the appellant that the goods that were cleared by them had, at some stage, been assembled into complete creations and thereafter disassembled for the purpose of transportation. However, the eligibility for availment CENVAT credit may well have been erroneously presumed but without deliberate intent to evade duty - penalty not warranted - appeal disposed off.
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2018 (6) TMI 577
Penalty - Section 9 of the CEA 1944 - Held that:- The allegation of failure to discharge duty liability by the supplier against the supplementary invoice is still open for a decision as an appeal is pending before the Tribunal - the impugned order is liable to be set aside for the matter to be remanded and the final position of the proceedings initiated against the supplier of the appellant to be ascertained and, after giving an opportunity to the appellant to take a further decision - appeal allowed by way of remand.
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2018 (6) TMI 576
CENVAT credit - input services - clearing and forwarding agency services - expenses incurred beyond the place of removal - Held that:- CENVAT credit is the mechanics by which the cascading effects of taxation are eliminated. Necessarily, if tax paid on output has not excluded any cost of input/input service, then the tax availed on such input service should not be excluded from entitlement to CENVAT credit - As the price of goods at the place of removal is subject to levy of excise duty, the objective of CENVAT credit mandates that all such heads of costs which go into such price should not be excluded from eligibility to credit. Considering the nature of expenditure, therefore, the tax paid thereon would have to be neutralized - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 575
Penalties - SSI Exemption - clubbing of clearances - Revenue neutrality - Held that:- Both the units of the same company had been registered under Central Excise and had been paying central excise on clearance of their final products. Duty payable by Unit-I on clearance of kraft paper to Unit-II was available as Cenvat credit to Unit-II. In these circumstances there cannot be any intention to evade payment of duty and the situation is completely revenue neutral - the present case is squarely covered by the decision of Division Bench in the case of Hindustan Zinc Ltd. [2008 (7) TMI 214 - CESTAT NEW DELHI], where it was held that the entire excise is revenue neutral as neither the assessee stands to loose anything by paying higher duty nor the Revenue stands to gain anything by the appellant’s adoption of lower assessable value - penalty u/s 11AC set aside - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 574
Valuation - sale from depot - It appeared to Revenue that M/s Prajapati Chemicals & Allied Ltd. & M/s Orient Micro Abrasives Ltd. should pay duty on goods manufactured by Job Workers on the price at which M/s Kanoria Chemical & Industries was selling the goods from their own depots to the independent buyers - Held that:- The issue is no more res-integra in view of the order passed by Single Member Bench of this Tribunal in appellants’ own case, [2017 (11) TMI 1503 - CESTAT ALLAHABAD] wherein it was held by relying on the ruling of Hon’ble Supreme Court in the case of Ujagar Prints & Others Versus Union of India & Others [1988 (11) TMI 106 - SUPREME COURT OF INDIA] has held that the manufacturer is liable to pay duty and ownership of the goods is not deciding criteria for liability of Central Excise duty. In the present case the liability to pay duty was on M/s Prajapati Chemicals & Allied Ltd. & M/s Orient Micro Abrasives Ltd. & that M/s Kanoria Chemical & Industries, who was not the manufacturer of the goods did not have liability to pay any Central Excise duty - SCN not sustainable - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 573
Restoration of appeal - appeal was rejected relying on the proviso to Section 35B which permits Tribunal to exercise its discretion in refusing to admit the appeals to dispute involving duty less than ₹ 2 lakhs - Held that:- Reliance placed in the case of M K Trading Co. [2018 (1) TMI 1268 - BOMBAY HIGH COURT], where it was held that Once the appeal was admitted in this case and kept pending, then, no useful purpose is served by dismissing it at the final hearing on the ground of maintainability - the order is recalled and the appeal is restored to its original number - application for restoration of appeal allowed.
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2018 (6) TMI 572
Rectification of mistake - case of appellant is that there is a mistake in para 5 in recording their averment - Held that:- It is found that a clerical mistake has occurred in the 9th line of para 5 of the order. In the 9th line of para 5, the words "non-relation" may be replaced by "in relation." - ROM Application allowed.
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2018 (6) TMI 571
Rectification of Mistake - appellant asserts that a data of non-utilisation of CENVAT credit was not considered in the Tribunal order no. A/90982/17 dated 29.11.2011 - Held that:- It is found that the said data has been correctly considered in order in para 5 thereof - ROM application dismissed.
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2018 (6) TMI 570
Rectification of Mistake - applicant submits that in para 8 of the said order, an error apparent on the face of record as occurred by mentioning "25% duty" instead of "25% penalty" as Section 11AC of Central Excise Act, 1944 provides for option to pay 25% penalty and not 25% duty - Held that:- the applicants are factually correct - in para 8, 6th line of the order, the words "25% duty" may be replaced by "25% penalty" - ROM Application allowed.
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2018 (6) TMI 569
Rectification of mistake - reduction in the quantum of penalty - Held that:- The applicants are factually correct - the order is rectified as: The words “Rs.1,50,000/- (Rupees one lakh fifty thousand only)” may be replaced by “Rs.5,000/- (Rupees Five Thousand only).” - ROM application allowed.
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2018 (6) TMI 568
Rectification of mistake - Held that:- The mistake is rectified as follows:- (i) in the para 2.1, the words "Ld. AR" may be read as "Ld. Counsel" in the first line; (ii) In the third line of para 3, the words “appellants” may be read as “respondents”; (iii) In the last line of para 3, the words "appeal is allowed" may be read as "appeals are dismissed" - ROM application allowed.
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2018 (6) TMI 567
Rectification of mistake - Held that:- The mistake is rectified as follows:- (i) In the para 2 El, the words "Ld. AR" may be read as "Ld. Counsel" in the first line.; (ii) In the third line of para 3, the words “appellants” may be read as “respondents”; (iii) In the last line of para 3, the words "appeal is allowed" may be read as "appeals are dismissed" - ROM application allowed.
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2018 (6) TMI 566
Rectification of Mistake - certain clerical errors - Held that:- the order has been corrected as follows:- i) in para 3, the words "grounds of review" may be read as "impugned order."; ii) In para 5, the words "the appeal is dismissed" may be read as "the appeals are allowed." - ROM application allowed.
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2018 (6) TMI 565
CENVAT credit - duty paying invoices - Rule 9 (1) (b) of CCR, 2004 - approach to Settlement Commission - Undervaluation of imported goods - Held that: - The imports were made by the appellant from their related person located in Korea and admittedly, the value of the goods was not reflected in the invoices. It was only packing and logistics cost, which was raised in the invoices placed before the Customs for the purpose of assessment and calculation of customs duty. These facts stand admitted by the assessee in their own letter referred in the SCN - the said modus operandi was adopted by the appellant with the malafide intention to evade payment of customs duty in respect of the value of the second hand capital goods. If that be so, their subsequent approaching the Settlement Commission is sprinkled with suppression, mis-statement, fraud and collusion etc. The provision of Rule 9 (1) (b) of Cenvat Credit Rules debar taking of Cenvat credit of duty paid by supplementary invoices - credit not allowed - appeal dismissed - decided against appellant.
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2018 (6) TMI 564
Exemption to Intermediate goods - N/N. 67/1995-CE dated 16.03.1995 - intermediate product, sugar syrup, captively consumed, in the manufacture of biscuits - Demand of Central Excise Duty - Held that:- The Co-ordinate Bench in the case of Rishi Bakers Pvt. Ltd., Kanpur [2015 (4) TMI 893 - CESTAT NEW DELHI] has held that there was no evidence to prove that ‘sugar syrup’ captively consumed is classifiable under Tariff Item No. 17029090, nor there is any evidence to prove that the goods in question, in the form in which they come into existence in the appellants’ factory, are marketable. The sugar syrup coming into existence during manufacture of biscuits and captively consumed, does not attract Central Excise duty for the reason that there is no evidence that the same is marketable - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 563
Valuation - MRP Based valuation - sale of Refrigerators with Washing Machines & Colour Television with DVD Player in combo packs - Section 4A of the Central Excise Act, 1944 - Held that:- In the appellant’s own case for the earlier period the Hon’ble Apex Court in CCE, PONDICHERRY VERSUS M/S ICON HOUSEHOLD PRODUCTS (P) LTD. [2016 (11) TMI 309 - SUPREME COURT OF INDIA] has held that goods packed in combo which is being MRP on which the duty has been paid in terms of Section 4A of the Central Excise Act, 1944 after availing abatement, in that circumstances, the assessee is not required to pay duty on the separate MRP of the said goods - impugned order not sustainable - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 562
Valuation of Colour Television Sets - clearance to another company for distributing the same to general public for free of cost under a government policy - Transaction value u/s 4 or MRB based value u/s 4A of CEA? - Held that:- Coordinate Bench of this Tribunal in the matter of M/s PG Electroplast Ltd. Vs. Commissioner of Central Excise, Noida [2014 (7) TMI 575 - CESTAT NEW DELHI], has held that the activity of free distribution of CTVs among poorer section of the population of Tamil Nadu on behalf of the Govt. of Tamil Nadu, cannot be called service industry as it is not a commercial activity thus they are not ‘institutional consumers’ and hence the valuation of goods was held to be correct under Section 4A of the CEA, 1944 - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2018 (6) TMI 561
Clarification on the rate of Tax - Centrifugal Monoblock Pumpset, Submersible Pumpset - Held that:- Entry 26 of Part-B of the First Schedule to the TNVAT Act, 2006 reads as under: (a) Centrifugal and Monoblock submersible pumpsets for water handling and parts thereof - 5% (Commodity Code 2026); (b) Pumpsets of 3 HP and 5 HP - 5% (Commodity Code 2026). It is clarified that "Centrifugal and Monoblock Submersible Pumpsets" for water handling are taxable @ 5% as per Entry in SI.NO. 26(a) of Part-B of the First Schedule to the TNVAT Act, 2006".
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