TMI Tax Updates - e-Newsletter
June 21, 2018

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

TMI SMS

• Penalty - availing Input tax Credit (ITC) - fake & false invoices - burden of proving is squarely upon the Assessee not on Revenue

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News

1. CCI approves the acquisition of Monsanto by Bayer AG under Section 31(7) of the Competition Act, 2002, subject to modifications/remedies to address the anti-competitive effects resulting from the said acquisition

2. Minutes of the Monetary Policy Committee Meeting June 4-6, 2018 [Under Section 45ZL of the Reserve Bank of India Act, 1934]

3. Response Format for Public Comments on Draft National Guidelines,2018

4. Invitation for public comments on Draft National Guidelines on Social, Environment & Economic Responsibility of Business, 2018

5. Suggestions invited on the draft chapter on Cross Border Insolvency

6. Amendment in Rule 10CB of Income-tax Rules, 1962 in respect of computation of interest income pursuant to secondary adjustment made under section 92CE of Income-tax Act, 1961 – Comments and suggestions

7. RBI Reference Rate for US $

Notifications

Companies Law

1. F.No. 17/151/2013-CL-V - dated 18-6-2018 - Co. Law

Companies (Accounting Standards) Amendment Rules, 2018

GST - States

2. 23/2018-State Tax - dated 22-5-2018 - Chhattisgarh SGST

Amendment in notification no. 16/2018- State Tax, no. F-10-15/2018/CT/five (30) dated 23rd March, 2018

3. 3/2018 - dated 15-6-2018 - Delhi SGST

notified that the no e-Way Bill in respect of movement of goods originating and terminating

4. G.O. Ms. No. 67 - dated 13-6-2018 - Tamil Nadu SGST

Goods and Services Tax - Tamil Nadu Goods and Services Tax Act, 2017 - Perishable or hazardous goods to be disposed of after seizure under section 67(8) of the Tamil Nadu Act 19 of 2017 - Notification - Issued.

5. G.O. Ms. No. 66 - dated 13-6-2018 - Tamil Nadu SGST

The Tamil Nadu Goods and Services Tax (Fifth Amendment) Rules, 2018.

6. G.O. Ms. No. 64 - dated 11-6-2018 - Tamil Nadu SGST

Goods and Services Tax - Tamil Nadu Goods and Services Tax Act, 2017 - Constitution of the TamilNadu Authority for Advance Ruling - Notification - Issued.

7. G.O. Ms. No. 61 - dated 28-5-2018 - Tamil Nadu SGST

Goods and Services Tax - Tamil Nadu Goods and Services Tax Act, 2017 - Reverse charge on certain specified supply of goods - Amendments - Notification - Issued.

8. II(2)/CTR/448(f)/2018. - dated 14-5-2018 - Tamil Nadu SGST

Notification under the Tamil Nadu Goods and Services Tax Act. (G.O. Ms. No.56 CT and R (B1), 14th May 2018)

9. 11/2018 - dated 4-6-2018 - Telangana SGST

Extension of Time limit for filing FORM GSTR-6

10. 10/2018 - dated 30-5-2018 - Telangana SGST

Notified the National Academy of Customs, Indirect Taxes and Narcotics, Department of Revenue, Ministry of Finance, Government of India

11. 456/2018/9(120)/XXVII (8)/2017 - dated 23-5-2018 - Uttarakhand SGST

Regarding appointment of Shri Anil Singh , Joint Comm. State Tax , HQ, Uttarakhand as member of the "Uttarakhand Authority for Advance Ruling".

12. 859/CSTUK/GST-Vidhi Section/2018-19/CT-23 - dated 19-5-2018 - Uttarakhand SGST

Amendment in serial no. 1 of table in notification no.6237(i) dated 23/03/18.

13. 414/2018/4(120)/XXVII(8)/2018/CT-21 - dated 10-5-2018 - Uttarakhand SGST

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

14. 523/CSTUK/GST-Vidhi/2018-19 - dated 2-5-2018 - Uttarakhand SGST

Manual Procedure for Filing Appeal.

15. 26/2018-State Tax - dated 13-6-2018 - West Bengal SGST

Seeks to amend West Bengal Goods and Services Tax Rules, 2017. (Fifth Amendment, 2018)

16. 11/2018-State Tax (Rate) - dated 12-6-2018 - West Bengal SGST

Seeks to amend notification No. 1128-F.T., dated 28.06.2017 so as to notify levy of Priority Sector Lending Certificate (PSLC) under Reverse Charge Mechanism (RCM)

Income Tax

17. 28/2018 - dated 18-6-2018 - IT

Central Government specified the “Indian Railway Finance Corporation Limited 54EC Capital Gains Bond” issued by Indian Railway Finance Corporation Limited u/s 193 (iib)

18. 27/2018 - dated 18-6-2018 - IT

The Central Government specified the “Power Finance Corporation Limited 54EC Capital Gains Bond” issued by Power Finance Corporation Limited u/s 193 (iib)

Circulars / Instructions / Orders

SEZ

1. F.5/6/2016-SEZ - dated 7-5-2018

Proposals regarding manner of fencing and number of entry exit points in the IT/ITES/EH/Biotechnology SEZs

FEMA

2. 32 - dated 19-6-2018

Liberalised Remittance Scheme – Harmonisation of Data and Definitions

Highlights / Catch Notes

GST

• Final Report Filing Extension for FORM EWB-03: Up to 3 Additional Days Allowed for GST Inspection Verification.

  Act-Rules : Inspection and verification of goods - time for recording of the final report in Part B of FORM EWB-03, may be extended for a further period not exceeding three days.
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• Transporters with multiple State registrations can get a unique GST number using FORM GST ENR-02 for centralized registration.

  Act-Rules : Centralized registration in case of GTA - GST - a transporter who is registered in more than one State or UT having same PAN, may apply for a unique common enrolment number by submitting the details in FORM GST ENR-02
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Income Tax

• Long-Term Capital Loss from Relinquishing Capital Asset Rights: Taxable as Capital Gains under IT Act Sections 2(14), 2(47), and 45.

  Case-Laws - AT : Long term capital loss - Right as a capital asset created by MOU duly registered and the allotment letter, within the meaning of section 2(14) therefore when this right got relinquished the consideration received thereof will be consideration for transfer of capital asset as relinquishment falls within the definition of 'transfer' u/s 2(47) and is, therefore, chargeable to tax u/s 45 as capita gain.
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• Court Allows Foreign Travel Expenses Claim; Expenses Not Proven for Personal Use or Solely for Dividend Earnings.

  Case-Laws - AT : Disallowance of foreign travel expense - these expenditure has not been stated to be incurred for the personal expenditure of the directors it was also not shown before us by revenue that such expenditure is only for the purpose of the earning of dividend - claim of expenditure allowed.
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• Assessing Officer Confirms Charitable Status for Assessee Supporting Artisans and Women in Enterprise and Skill Development.

  Case-Laws - AT : Charitable activity - relief of the poor - AO has himself accepted that the assessee to have been working with poor, marginal artisans and women crafts producers assisting them in enterprise development, skills and technical upgradation as well as in providing them market access for their corresponding products - Conditions of Charitable activity satisfied.
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• Donations for Next Fiscal Year Not Considered Current Year Income per Case Law on Conditional Donations.

  Case-Laws - HC : Accrual of income - Unspent amount of donations - The donation which pertains and to be used and spent during the next F.Y. cannot be treated as the income of the year under consideration when there is a specific condition as desired by the donor
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• Clear Charges Essential in Tax Penalty Cases u/s 271(1)(c) for Transparency and Understanding in Legal Proceedings.

  Case-Laws - AT : Penalty u/s 271(1)(c) - need for specification of charge - When the charge is to be framed against any person so as to move the penal provisions against him, he/she should be specifically made aware of the charges to be leveled against him/her.
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• Court Questions Validity of Assessment & Special Audit u/ss 153C & 142(2A) Due to Non-Speaking Order.

  Case-Laws - AT : Validity of assessment u/s 153C - scope of the special audit u/s 142(2A) - non speaking order - Since the extended period was taken under the guise of Special audit, which is held without proper jurisdiction, the time so taken cannot be counted and the period does not get extended
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• Special Audit Order u/s 142(2A) Lacks Clarity; Needs Explicit Reasons Beyond CIT Approval.

  Case-Laws - AT : Special audit u/s 142(2A) - order is silent as to on what basis and on what grounds, the accounts proposed to audit u/s 142(2A) were considered complex - Mere reference to a prior approval of CIT does not satisfy the precondition of a "Speaking order" containing reasons for invoking the provision of section 142(2A) of the Act.
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Customs

• Customs Act Section 112(a) penalty on CHA partner overturned due to lack of clear evidence of involvement.

  Case-Laws - AT : Penalty u/s 112(a) of the Customs Act, 1962 on partner of CHA - The adjudicating authority himself is not sure about the involvement of the appellant in the modus operandi of the importer - the entire finding is based on assumption and presumptions and on that basis the appellant cannot be punished.
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• Appellant Cleared of Duty-Free Fraud Allegations; Section 114A Penalty Not Applicable Due to Lack of Involvement.

  Case-Laws - AT : Misappropriation of duty free goods - The appellant have not involved themselves in sale or diversion of goods. In fact they have themselves been a victim of a fraud. In these circumstances, the allegation of suppression, misdeclaration etc. to invoke extended period of limitation cannot be sustained - the penal provision under Section 114A cannot be sustained.
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Corporate Law

• Secret Sale of Company Allegedly Violates Appellant Group's Rights, Raising Serious Oppression and Mismanagement Concerns.

  Case-Laws - AT : Oppression and mismanagement - it was not a mere handover of running of the business but the business itself had been sold behind the back and without the knowledge of the Appellant group which is serious act of oppression.
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Service Tax

• Debate on Classifying Sub-Contracts Under Advertising Services for Tax; Alternative Classifications and Liability Issues Discussed.

  Case-Laws - AT : Classification of services - sub-contract - advertising agency service or not - Fitment within an alternative classification suffices to erase the proposal in the notice but cannot crystallise liability unless the alternative was also proposed in the notice.
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• No Service Tax on Complimentary Convention Facilities Provided with Room Rentals, Court Rules.

  Case-Laws - AT : Convention Service - liability of service tax - complimentary convention facility being provided along-with renting of room service - since use of convention room is complementary therefore no service tax can be charged on the same.
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• Reverse Charge on Imported Services: Legal Services by M/s. Pinsent Masons Exempt from Tax Before September 1, 2009.

  Case-Laws - AT : Reverse charge - import of services - Management consultant service or Legal services - M/s. Pinsent Masons are a law firm registered with “Solicitor’s Regulation Authority”. Thus, they are not business consultants and is a legal firm. - Legal services have become taxable only with effect from 01.09.2009.
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Central Excise

• Repacking and labeling activities, including MRP and "HONDA" stickers, deemed manufacturing under Central Excise Act, Section 2(f)(iii).

  Case-Laws - AT : Whether repacking, inspection, labeling, affixation of MRP without price revision, affixation of “marketed by” label, affixing “HONDA” tape/sticker would be activities that could be brought within the ambit of manufacture as defined under section 2(f)(iii) of Central Excise Act, 1944? - Held Yes
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• Guest Room Control Systems with Thermostats Classified Under Chapter 9032.11; Parts Under 9032.91, Not 8538.00.

  Case-Laws - AT : Classification of goods - Guest Room Control Systems (GRCS) - the said product has temperature control device i.e thermostat attached to it is classifiable under chapter heading 9032.11 and Parts of the said control system would be classifiable under chapter sub heading 9032.91 instead of 8538.00.
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• Three Companies Deemed "Related Persons" u/s 4(3)(b) Due to Management by Clause Relatives for Excise Valuation.

  Case-Laws - AT : Valuation - Related Person - Although a company, Partnership firm, Body Corporate, HUF, trust cannot be a relative of the others, but since the three companies in the present case are run/ managed by clause relatives, therefore the concept of “Related Person” of Clause of Section 4 (3)(b) is satisfied.
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• Revenue Fails to Prove Movability of Site-Fabricated Fired Heater; Demand Dismissed Under Excise Law.

  Case-Laws - AT : Excisability/movability - 'Fired Heater' fabricated at site - Since Revenue has failed to produce any evidence regarding movability and marketability of the said fire heater, demand do not sustain.
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VAT

• Penalty Imposed for Availing ITC on Fake Invoices u/s 70(2)(a) of KVAT Act, 2003; Burden of Proof Failed.

  Case-Laws - HC : Penalty u/s 70[2][a] of the KVAT Act, 2003 - availing ITC on he basis of fake and false invoices - burden of proving that the claim of input tax credit is correct, is squarely upon the Assessee who never discharged the said burden in the present case. - Penalty levied.
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Case Laws:

• Income Tax

• 2018 (6) TMI 971
  Additions u/s 68 - statements made by the assessee's Directors in the course of search under Section 132 cannot be used against the assessee because his statement was recorded behind the back of the assessee and the assessee was not allowed any opportunity to cross-examine him - assumption of jurisdiction under Section 153A qua the Assessee herein was not justified in law - Revenue appeal against the HC order - [2017 (8) TMI 250 - DELHI HIGH COURT] Leave granted - Tagged with SLP(C) No. 12126 of 2018

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• 2018 (6) TMI 970
  Scope and interpretation of Section 44BB - Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils - inclusion of amounts received for mobilisation/demobilisation to the gross revenue to arrive at the “profits and gains” for the purpose of computing TAX u/s 44BB by AO - Review petition against order [2017 (11) TMI 78 - SUPREME COURT] wherein it was held that, "When it is found that the amount paid or payable (whether in or out of India), or amount received or deemed to be received in India is covered by sub-section (2) of Section 44BB of the Act, by fiction created under Section 44BB of the Act, it becomes ‘income’ under Sections 5 and 9 of the Act as well." Held that:- Applications for hearing in open Court are rejected. We have perused the review petitions and the connected papers. No merit in the review petitions and the same stand dismissed.

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• 2018 (6) TMI 969
  TPA - Selection of comparables to determine the ALP - functional dissimilarity - Held that:- Assessee is engaged in providing Software Solutions and Back Office Operations thus companies dissimilar with that of assessee need to be deselected from final list of comparable - M/s. Kals Information System Ltd., is engaged in developing Software Products while assessee is engaged in the activities of providing software services. M/s. Compucom Software Ltd., was excluded from the list of comparable since it was was not only engaged in running of software development services but also sale of software products end to end mobile solutions as infrastructure services etc. and hence functionally dissimilar with that of assessee. Their is huge turnover difference between M/s. Infosys BPO Ltd. and the assessee, and hence being dissimilar cannot be treated as comparable. M/s. Cosmic Global Ltd. was also excluded from the list of comparable to determine the ALP since had a business model of subcontracting its work to others while providing services - while the business model of the Assessee was an inhouse business model - thus the appeal of revenue is dismissed.

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• 2018 (6) TMI 968
  Accrual of income - Unspent amount of donations - assessment year selection - Assessee showing part of the donations under the head ‘current liabilities’ - Whether donations received by the Assessee, Akshaya Patra Foundation in the mid of the Financial Year with the stipulation from the donors that part of the said money may be utilized for the specified charitable purpose in the next financial year can be treated as the income for year of receipt of the donation or not? - Held that:- Tribunal in his order supported CIT(A) view regarding the issue where it is said that when the assessee is complying with the specific condition of utilizing the amount of donation for a particular purpose and for a particular period of time, then it cannot be given a different treatment which is contrary to the conditions of donation. The treatment of the assessee only a portion of the donation which has to be spent and used for a particular period and for a specified purpose as income of the year under consideration is proper and as per the conservative accounting policy. The donation which pertains and to be used and spent during the next F.Y. cannot be treated as the income of the year under consideration when there is a specific condition as desired by the donor. No substantial question of law arises in these present appeals filed by the Revenue and the findings and reasons assigned by the two Appellate Authorities below in this regard are justified and in accordance with the consistent accounting practice followed by the assessee - thus appeal is dismissed.

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• 2018 (6) TMI 967
  Notice of Motion for recalling the order - condonation of delay of 374 days in taking out the application and for setting aside the order passed by the Prothonotary and Senior Master under Rule 986 of the Bombay High Court (Original Side) Rules rejecting the Revenue's appeal - Held that:- As relying upon the judgement of Commissioner of Income Tax (Exemptions) Vs. Maharashtra Industrial Development Corporation [2017 (1) TMI 931 - BOMBAY HIGH COURT] where it is held that in any case, even if for the purposes of this application, we ignore the fact that we had passed orders earlier, the present application would still be liable to be dismissed - thus this is for the reason that the genesis of the present Notice of Motion is the order dated 9th February, 2017 passed by the Prothonotary and Senior Master which has granted time to remove office objections on or before 9th March, 2017 failing which the petitioner appeal was to stand rejected for non removal of office objections. The applicant Revenue failed to remove office objection resulting in the appeal itself being rejected by the Prothonotary and Senior Master. Hence we see no reason to condone the delay of 374 days in taking out this application.

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• 2018 (6) TMI 966
  Revision of orders prejudicial to revenue u/s 263 - valuation of property without considering the report of Valuation Officer u/s 55A - Held that:- AO has made inquiry about the fair market value of property as at 01.04.1981, it cannot be said that he has not made any inquiry - thus that does not make the order of the AO erroneous and prejudicial to the interest of revenue. Perhaps that could have given an option to the AO to reopen the proceedings u/s 147 as there was some tangible material - but the revision u/s 263 is not legally sustainable - order of the ld CIT also does not suggest what further inquiry the ld AO should have done - introduction of explanation 2 to section 263 introduced w.e.f. 01.06.2015 also does not come to the help of the revenue because it could not be shown that the order is passed without making enquiries or verification which should have been made - relief granted to the assessee is also after making some enquiry into the claim of the assessee - hence the order passed by the ld CIT u/s 263 is not sustainable and hence, quashed. - Decided in favour of assessee.

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• 2018 (6) TMI 965
  Income accrued in India - Fees for technical services - amount received by the assessee from its Indian customers - DTAA between India and United Kingdom - services made available to the Indian parties - Held that:- Assessee is foreign company resident of UK and is tax resident of UK - customers of the assessee in India appoints the assessee on a principal to principal basis to provide inspection and testing services - as per Article 13 of Double Taxation Avoidance Agreement the fees for technical services can be chargeable to tax in India only if such services are "made available" to the receipt of such services - according to us, the assessee has not at all made available any such services to the Indian entity but has merely provided the services in the ordinary course of its business - revenue has not brought on any material to show that subsequently the recipient of those services have performed these services on their own without the help of the assessee or any other similar service provider. Inspection and survey of imported/exported cargo and certifying in relation to the quality and price, provision of such services does not make available technical knowledge, experience, skill, know-how or processes to the recipient of the service - as per Article 13(4)(c) of the DTAA these services are not made available to the Indian parties - thus we held that 18772897/- received by the assessee is not chargeable to tax in India - Decided in favor of assessee. Initiation of penalty u/s 271(1)(c) - Held that:- Assessee is providing the services of technical nature - assessee is resident of UK and therefore, is eligible for benefit contained therein - assessee claim that services of the assessee are not made available to the Indian entities has been rejected - in AY 2014-15 that such services does not satisfy “make available” test under Article 13(4)(c) of the DTAA - hence it is said that it is merely the rejection of the claim of the assessee. It is not the case of the revenue that assessee has made any false claim - thus in view of the decision in case of CIT Vs Reliance Petro Products Ltd [2010 (3) TMI 80 - SUPREME COURT] it cannot be said that the submission or claim of the assessee is not accurate - hence we reverse the finding of the lower authorities and direct the AO to delete the penalty u/s 271(1)(c) - Decided in favor of assessee.

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• 2018 (6) TMI 964
  Exemption u/s 11 - Registration u/s 80G r.w.s. 12A - Charitable activity - “relief of the poor” - activities concerned in the nature trade, commerce or business or not - Held that:- Assessee-society is registered body with the Registrar of Societies, West Bengal since 18.03.1988 - as per CBDT’s Circular No.11/2008 it is clear that “relief of the poor” includes within its ambit any purpose such as relief to indigent artisans - AO has himself accepted that the assessee to have been working with poor, marginal artisans and women crafts producers assisting them in enterprise development, skills and technical upgradation as well as in providing them market access for their corresponding products - thus we observe the assessee to be covered under the specified category of “relief of the poor” as per Board’s beneficial circular issued u/s 119 of the Act. We therefore are of the view that Revenue’s sole grievance deserves to be rejected - Decided against the revenue.

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• 2018 (6) TMI 963
  Validity of assessment u/s 153C - scope of the special audit u/s 142(2A) - delegation of job of the AO to special auditor - non speaking order - extended period invoked - Held that:- Referring to ratio laid down in the case of Unitech Ltd. Vs. Addl. CIT (2016 (7) TMI 320 - ITAT DELHI) it is apparent that the order is non speaking order and gives no reasons for arriving at the conclusion that having regard to the nature and complexity of assessee's accounts and interest of the revenue, the AO was of the opinion that accounts are to be audited u/s 142(2A) - The order is silent as to on what basis and on what grounds, the accounts proposed to audit under section 142(2A) were considered complex and on what considerations it was arrived that it is in the interest of revenue to direct audit of accounts. Mere reference to a prior approval of CIT does not satisfy the precondition of a "Speaking order" containing reasons for invoking the provision of section 142(2A) of the Act. There is no reference to detailed replied furnished by the assessee during the proceedings. Order is bereft of any reason. It is stated here that reasons are heart and soul of an order, as they facilitate the process of judicial review and therefore in absence of any reason much less cogent, clear and succinct reasons order u/s 142(2A) of the Act is held to be bad in law and without proper jurisdiction. Since the extended period was taken under the guise of Special audit, which is held without proper jurisdiction, the time so taken cannot be counted and the period does not get extended. - Decided in favour of assessee

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• 2018 (6) TMI 962
  Determination of ALP for interest of loan - whether assessee had entered into international transaction with its associated enterprises in which Arm’s Length Price is applicable? - Held that:- TPO/Assessing Officer has grossly erred in applying notional interest @11% (i.e. cost of procurement of funds by assessee @5% + 600 basis points) whereas the cost of procurement of similar funds from third part was LIBOR + 600 basis points, which comes at 7.20%. ( that is, prevailing USD LIBOR rate, which was 1.2% plus 600bps). Therefore, we are of the view that the interest rate of 8% charged by the assessee from its AE should be at arm's length. That being so, we decline to interfere in the order passed by the ld CIT(A), his order on this issue is hereby confirmed and grounds of appeal raised by the Revenue is dismissed. Upward adjustment - TPO applying CUP method without assigning any reasons for rejecting the TNMM as the most appropriate method (MAM) - Held that:- Business strategies, market penetration, increase or save its market share are relevant and material factors determining prices and profit. All these factors have to be taken into consideration while eliminating the material effects which warrants some kind of reasonable accurate adjustments - thus selective application of CUP Method by TPO is ad hoc, and without any cogent basis, hence the entire approach followed by the Ld. TPO in rejecting the TP study memorandum of assessee for application of TNMM method is unjustified. For the reasons set out above, we find no infirmity in the order passed by the ld CIT(A). - Decided against revenue

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• 2018 (6) TMI 961
  Initiation of penalty u/s 271(1)(c) - disallowance of long-term capital loss - barred by limitation u/s 275 - additional evidences - Held that:- As per section 275(1)(a) AO was obligated to levy the penalty within one year from the end of the financial year in which order dated 26.10.2012 passed by ld. CIT (A) was received. More so, in case of penalty on account of disallowance of long term capital loss, no appeal was filed by the assessee before the Tribunal and in that case, limitation expired on March 31, 2014. In these circumstances, penalty order passed by the AO on 30.01.2015 is passed beyond the prescribed period of limitation. Validity of notice u/s 271(1)(c) - no proper notice has been issued to the assessee u/s 274 - Held that:- As per the notice issued u/s 274 AO himself was not aware as to whether he is issuing notice to initiate the penalty proceedings either for “concealment of particulars of income” or “furnishing of inaccurate particulars of such income” by the assessee rather issued vague and ambiguous notice by incorporating both the limbs of section 271(1)(c). When the charge is to be framed against any person so as to move the penal provisions against him, he/she should be specifically made aware of the charges to be leveled against him/her - reliance is placed on decision in case of CIT vs. Manjunath Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] where it is said that when the AO has failed to issue a specific show-cause notice to the assessee as required u/s 274 read with section 271(1)(c), penalty levied is not sustainable - thus in the present case AO has miserably failed to specify in the notice issued u/s 274 r.w.s. 271(1)(c) “as to whether the assessee has concealed the particulars of his income or has furnished inaccurate particulars of such income”, so in these circumstances, penalty levied by the AO and confirmed by ld. CIT (A) is not sustainable - Decided in favor of assessee.

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• 2018 (6) TMI 960
  Disallowance u/s. 14A r.w. r. 8D - Held that:- Audit fees and legal 9,45,104.00 is as inadmissible under section 14A relating to dividend income which would be eligible for addition while computing the book profit under section 115JB - Held that:- The apportionment of the expenses between the dividend income and the long term capital gain becomes relevant while determining the profit under section 115JB of the Act. Therefore we are inclined to reverse the order of Authorities Below. Case of M/s Maxopp Investment Limited (2018 (3) TMI 805 - SUPREME COURT OF INDIA) followed - Decided in favour of assessee

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• 2018 (6) TMI 959
  Disallowance of foreign travel expense - disallowance u/s 14A - expenditure incurred exclusively to earn dividend or not - Held that:- Foreign travelling expenditure has been incurred by the assessee for the purposes of the businesses of assessee as it is holding shares along with USA Company in another company from which the dividend income is received - it is the business concern of the assessee for which the directors of the assessee are undertaking foreign tour - these expenditure has not been stated to be incurred for the personal expenditure of the directors it was also not shown before us by revenue that such expenditure is only for the purpose of the earning of dividend - hence, these expenditure are incurred for the purposes of the business and hence they are allowable u/s 37(1) - hence we do not find any reason to confirm disallowance of any part of the expenditure out of the foreign travel expenditure - Decided in favor of assessee. Additions u/s 14A - Held that:- Certain expenditure has been incurred by the assessee for earning exempt income such as maintenance of accounts of the dividend etc - however no direct expenditure has been incurred by it for earning exempt income - assessee has also not given any details of the expenditure, which are incurred for earning exempt income - in absence of any such detail furnished by the assessee, it would be fair to estimate a reasonable sum for such disallowances - therefore in the interest of the Justice and looking to the facts of the case it is appropriate if the total disallowance on such expenditure which are been incurred in relation to earning of the exempting exempt income is restricted to 2 Lacs - hence AO is directed to disallow 2 Lacs under section 14A. Disallowance of bad debts - Held that:- Assessee has written off a sum of 50 Lacs advanced to one party by way of bill purchase - thus it is apparent that the business of the bill discounting is a financing business. Assessee is engaged in that business has not been disputed by the revenue - as the money has also been lent in the ordinary course of the business, it cannot also be held to be capital expenditure/loss - hence we reverse the finding of the Ld. CIT – A and directs the assessee to allow the above claim of bad debt of 50 Lacs - Decided in favor of assessee. Disallowance of interest on account of diversion of borrowed funds - Held that:- Interest on capital were not disallowed in earlier years the amount standing view on the 1st day of the relevant assessment year cannot be taken into account for the purpose of the disallowance. Further with respect to the advance given to Sak Consumer Retail Services Limited of 1.85 crores is an allotment money paid for purchase of the shares and same was allotted also therefore it was an investment. Also CIT has noted that the balance amount was also given out of its own funds and no interest-bearing funds were diverted. With respect to the advance given to Sonnet Trading Co he further noted that that once of these 14.29 Lacs was given for the purpose of the renovation of the building which was taken on rent by the appellant does that once was given for the purposes of business. The above finding of facts would not disputed by the Ld. departmental representative. Interest disallowance on the basis of the interest charged from the above company at the rate of 8% whereas he noted that assessee is receiving interest@ of 12.5% with others - Held that:- Assessee received interest from these parties at the rate of 8% whereas the AO noted that interest is being charged from other parties at the rate of 12.5%. The Ld. CIT – A has noted that the assessee is in the advance to the party out of the interest free funds and no interest-bearing funds been utilized for advancing the sum. The above finding of fact recorded by the Ld. CIT – A was not controverted by the revenue. This we do not interfere in the finding of the Ld. CIT – A and direct the assessing officer delete the disallowance on account of proportionate interest.

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• 2018 (6) TMI 958
  Disallowance u/s. 14A read with Rule 8D - Held that:- The impugned order of the Ld. CIT(A) in deleting the addition as made by the AO under Rule 8D(2)(ii) of the Rules. Coming to Rule 8D(2)(iii) of the Rules, we note that assessee had earned exempt income to the tune of 1.53 cr. However, the Ld. CIT(A) erred in relying on decision in Holcim India Pvt. Ltd. [2014 (9) TMI 434 - DELHI HIGH COURT] wherein it was held that when there is no exempt income, no disallowance u/s. 14A of the Act is called for. Therefore, we set aside the order of Ld. CIT(A) on this issue and direct disallowance @ .5% on the dividend earning scrip as held by Coordinate bench in the case of REI Agro Ltd. Vs. DCIT [2013 (9) TMI 156 - ITAT KOLKATA]. Addition of notional interest on sticky loan - Held that:- We note the issue is squarely covered in favour of the assessee by the decision in assessee’s own case as held addition of notional interest on sticky loans was not warranted by disregarding that the assessee followed mercantile system of accounting and as per accounting standard interest accrued should have been recognized on accrual basis Addition on account of depreciation on plant and machinery and other business assets purchased out of amount withdrawn from the credit available with NABARD - Held that:- We note the issue is squarely covered in favour of the assessee by the decision of Hon’ble jurisdictional High Court in assessee’s own case wherein d Tribunal very rightly confirmed the deletion of disallowance of the claim of the assessee to depreciation. Addition to the book profit computed u/s. 115JB of the Act on account of disallowance u/s. 14A - Held that:- It is reiterated that the disallowances made under the provisions of Sec. 14A r.w.s 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act. Therefore, the AO shall work out disallowances in terms of the clause (f) to Explanation-1 of Sec. 115JB of the Act independently after considering the expenses debited in the profit & loss account as mandated under the provisions of law. Accordingly, this issue of revenue’s appeal is allowed for statistical purpose.

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• 2018 (6) TMI 957
  Reopening of assessment u/s 147 - notice u/s 148 - additions made for unexplained credit - Held that:- The peak credit statement is prepared by the assessee on the basis of the entries found in the pen drive and accepted by the Tribunal in earlier years [2013 (7) TMI 30 - ITAT DELHI] therefore, same method shall have to be followed in assessment year under appeal - Tribunal has given benefit of opening balance of the earlier years and that assessee had paid tax on the peak credit for AY 2003-04 - therefore, such amount shall have to be reduced from the peak calculated by the assessee and benefit of the same shall have to be granted to the assessee - issue of the peak is, therefore, fully covered by the earlier years orders of the Tribunal - in earlier years also Tribunal has dismissed the ground of appeal of the assessee as regards reopening of the assessment u/s 148 of the Act. Therefore, these grounds of appeal of the assessee are dismissed - hence we direct the AO to make an addition of 1,36,42,861/- on account of peak credit

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• 2018 (6) TMI 956
  Long term capital loss - allotment of land - acquisition of right, title and interest acquired - builder failed to hand over the possession - Liquidated Damages received as compensation for loss of source of income - assessee in terms of cancellation of MOU relinquished its right, title and interest in the constructed area - AO treated 10 crs as Short Term Capital Gain while AO did not allow Long Term Capital Loss. - Held that:- As per the terms and conditions of the MEMORANDUM OF UNDERSTANDING, a right in the immovable property to be constructed has been created in favour of the assessee when the assessee has made payment of 40 crores and the specific area is allotted to the assessee vide letter dt 3.4.2007 - Right to acquire immovable property is a capital asset - Right in immovable property is a capital asset u/s 2(14) - the liquidated damages in our view is inextricably connected with the consideration received by the assessee for relinquishment of his right in the capital asset created by the allotment letter dt 3.4.2007 - thus we held that right as a capital asset created by MOU duly registered and the allotment letter, within the meaning of section 2(14) therefore when this right got relinquished the consideration received thereof will be consideration for transfer of capital asset as relinquishment falls within the definition of 'transfer' u/s 2(47) and is, therefore, chargeable to tax u/s 45 as capita gain. The capital gain has to be computed in accordance with the provisions of section 48 - The full value of consideration has to be taken to be 50 crores received by the assessee for relinquishment of right in the capital asset. The cost of acquisition of right in the capital asset in this case is 40 cr. We therefore set aside order of CIT(A) on both the issues and direct AO to recompute LTCG/Loss by reducing from total consideration of 50 cr the indexed cost of acquisition amounting to 40 cr in accordance with the provisions of section 48. MAT - Book adjustments u/s 115JB - Held that:- book profit disclosed by the assessee company in audited P 10 crores as part of the book profit by rewriting the audited P&L a/c of the assessee company. Disallowance u/s 35D in respect of share issue expenses and preliminary expenses - Held that:- assessee claims that these expenses were incurred after the commencement of the business in connection with the extension of its business of industrial undertaking. Since all these expenses are incurred in the formation of the company and extension of the business, the assessee claims l/5th of such expenditure every year and accordingly on the basis of the claims made in the earlier year, l/5th of said expenditure were claimed during the impugned assessment year - assessee is covered by the decision of this Tribunal in the case of Fine Jewellery Manufacturing Ltd v DCIT [2013 (11) TMI 897 - ITAT MUMBAI] - thus we allow claim of the assessee made u/s 35D - Decided in favor of assessee

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• 2018 (6) TMI 955
  Capital gain computation - addition on difference between the actual sale consideration and the fair market value estimated by the Departmental Valuation Officer - Held that:- Differnce being 11.04 per cent., which is marginal and well within the tolerance limit/band of 15 per cent. Referring to the case of Bimla Singh v. CIT [2008 (10) TMI 62 - PATNA HIGH COURT] wherein it was held that "that in valuation of the house property bona fide difference is bound to occur. In the absence of any statutory provision, no hard and fast rule can be laid down in regard to the percentage of difference which can be ignored. The difference between the assessee and the valuer was less than 15 per cent. Not only this, the construction of the house was spread over a period of seven years. In the facts of the present case the difference between the plea of the assessee on the issue on investment on house property and the valuer's report was so meagre that one could assume it to be bonafide difference fit to be ignored." - Decided in favour of assessee.

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• 2018 (6) TMI 954
  On the date of hearing, Ld Counsel for the assessee brought our attention to the letter filed by Shri B.G.V Krishna, Managing Director of the assessee-company and submitted that since the assessee is not interested to press the grounds raised in the appeal, the same may be dismissed as not pressed. On perusal of the assessee’s letter and after considering the no objection from the Ld DR, we dismiss the present appeal as withdrawn.

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• 2018 (6) TMI 953
  Validity of jurisdiction of AO under sec. 153A - Additions of income from undisclosed sources - Held that:- The issue raised in the present appeal is already covered in the co-investors' case of Subhash Khattar v. Asst. CIT [2016 (8) TMI 460 - ITAT DELHI] where it is said that a huge addition cannot be made in a casual manner without having corroborative evidence in support - it is a prevailing practice in the dealings of immoveable properties that cash amount, if any, out of the agreed consideration is paid during the course of execution/registration of the sale deed and admittedly in the present case no sale deed or other mode of transfer has been effected - thus in the present case merely the material seized cannot be a basis for arriving at a definite conclusion, in absence of corroborative evidence in support - since the issue raised in the present appeal is covered in the co-investors' case hence the appeal of the assessee is allowed.

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• Customs

• 2018 (6) TMI 946
  Refund of SAD - N/N. 102/2007-Cus. dated 14.09.2007 - Denial of refund on the ground that the sale invoices do not contain the words “no credit of additional duty of customs levied under Sub-Section (5) of Section 3 of Customs Tariff Act, 1975, shall be admissible against this invoice” - Held that:- Although the notification may have prescribed the words which should be included in an invoice, but the words are not magical in their scope since it is a procedural condition, as long as the intention is made clear, even by the use of other words, the assessee cannot be denied the benefit of the refund of SAD. The non-declaration of SAD in commercial invoice is an affirmation that no CENVAT credit thereof, shall be available and the same satisfies the condition of the notification. Hence the respondent is justified in claiming the refund. Appeal dismissed - decided against Revenue.

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• 2018 (6) TMI 945
  Misappropriation of duty free goods - Job-work - The appellants have argued that they are victim of a fraud by the job worker who misappropriated the goods and sold the same. Thus it cannot be alleged that the appellants have indulged in any fraud - Held that:- There is nothing in the statement of Shri Balkrishna Trivedi, who was the excise clerk of the job worker, which indicates the role of the appellant or its employees. In fact the statement of Shri Kuber Dutt Sharma, General Manager (Commercial) of appellant there is no admission regarding making of fake challan to show receipt of the goods back in their unit - The appellant have not involved themselves in sale or diversion of goods. In fact they have themselves been a victim of a fraud. In these circumstances, the allegation of suppression, misdeclaration etc. to invoke extended period of limitation cannot be sustained - the penal provision under Section 114A cannot be sustained. Interest u/s 28AB of CA - Held that:- The bond in the said notification relates only to the fulfilment of the export obligation condition. The obligation arising in the Act cannot be by passed by notification thus the appellants are liable to pay interest under Section 28AB. Appeal allowed in part.

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• 2018 (6) TMI 944
  SAD Refund - N/N. 102/2007-Cus dt. 14.09.2007 - rejection of refund on the ground that in the Balance Sheet for the year ending 31.03.2008 the importer have not made any provision for the refund of 4% additional duty of customs as receivable - Held that:- The main requirement is that the importer should not have charged SAD amount to their buyers which has not been disputed by the Appellate Authority. Further in Balance sheet for the year 2008 – 09, the said amount is appearing as “Refund received from Government” which is also not disputed - there is no reason to deny refund of 4% SAD to the Appellant as the requirement of the conditions for allowing refund stands complied with - refund allowed - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 943
  Import of restricted item - Stainless Steel Pipes Grade - appellant has submitted that the restriction were imposed during the period 21.11.2008 to 16.01.2009 as per which the goods were to be imported under import license; that in respect of goods which were though imported during the period of restriction, but the Bills of Entry was filed after 16.01.2009, the clearance was allowed without license. Held that:- Certainly the Appellant is at loss since the restriction was not applicable in case of consignments which though imported during restricted period but in respect of which Bills of Entry were not filed till 16.01.2009, such importers were eligible to import the impugned goods freely - the importers like Appellants who imported the goods during restricted period and also filed Bills of Entry during such period had to suffer the confiscation, redemption fine and penalties. The Appellant cannot be found faulted with. Quantum of redemption fine and penalty reduced - appeal allowed in part.

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• 2018 (6) TMI 942
  Forfeiture of Security Deposit - Misdeclaration of description of import goods - parts and accessories of Motor Cycle/Cycle/Carriage for disable person - Held that:- The declaration made in the Bills of Entry was found incorrect inasmuch as instead of parts of complete Motor Cycle in knock-down condition was found. There is no case against CHA can be made out on these facts as CHA can only operate on the basis of documents given to him by the importer. They cannot be expected to be aware of the exact nature of the goods being imported if the documents show otherwise. It cannot be expected that the CHA could have detected any flaw in the invoices when the entire investigation was not based on any defect in the document, but on the physical examination of the goods. Failure of the appellant for verifying the correct address of the importer - Held that:- The verification of importer’s antecedents is part of CHA’s duty. The address of the importer is part of antecedents that need to be verified by CHA - In the instant case, it was found that importer not only has fictitious address but has also the fictitious Mobile Number. This charge against the CHA for failure of diligently verifying the antecedents of the importer is proved. Appeal dismissed - decided against appellant.

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• 2018 (6) TMI 941
  Import of Restricted Item - hot rolled plates - N/N. 21/2002-Cus, Sr. No. 356 - failure to produce import License - Confiscation - Redemption fine - Penalty - Held that:- In case of goods covered by the Bill of Entries dt. 02.02.2009 and 04.02.2009, the DGFT vide policy Circular No. 83 (RE – 2008)/2004 – 2009 dt. 29.04.2009 has clarified that the goods imported for the period 21.11.2008 to 18.02.2009 shall be allowed to be imported without licence - the goods covered by aforesaid Bill of Entry are not liable for confiscation and therefore not liable for any redemption fine and penalty. As regard Bill of Entry dt. 21.02.2009, it is found that firstly the goods were contracted to be brought/ imported in India even before the restriction came into effect. Further the Appellant is Govt. of India undertaking and the goods could have been imported only after allotment of ship by the Ministry of Shipping. In such circumstances, it is not appropriate to impose such quantum of redemption fine in respect of said bill of entry No. 883767 dt. 21.02.2009 as the goods were not intended to be imported in violation of law. Appeal allowed in part.

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• 2018 (6) TMI 940
  Validity of assssement of Bill of Entry - valuation for the purpose of CVD - industrial consumers/institutional consumers or not? - Appellant has challenged the assessment on the ground that the goods can be assessed on RSP only when they are specified in notification issued under Section 4A (1); and (2) declaration of retail sale price on packages under the Standards of Weight & Measures Act, 1976 or under other law for the time being in force is mandatory which is only in case of retail sale - Held that:- Considering the nature and use of goods it cannot be said that the same are intended for retail sale. Therefore the goods has to be assessed on transaction value. The goods in question are sold by the Appellant to the hospital is sale to the institutional customer only - under the rules the importer is person responsible to comply with the Packaged Commodity Rules, 1977. Hence the importer has been treated at par with the manufacturer of goods. In such case for the purpose of levy of CVD the importer shall be responsible as manufacturer and eligible for exemption from complying with the provisions of RSP. The goods imported by the Appellant are liable for duty under Section 4 of CEA, 1944 - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 939
  Whether the Appellants imported old and used spares / parts in contravention of FTP provisions and liable for confiscation and whether the importer appellant liable for penalty? - Held that:- The Bills of Entries were filed by the appellants for the goods booster pump and spares / parts. There is no dispute as regards import of old and used spares. As per Para 2.17 of FTP all second hand goods, except second hand capital goods, shall be restricted for imports. Further, as per Para 2.33 of HOP import of second hand capital goods, shall be allowed on on production of a Chartered Engineers Certificate that such spares have at least 80% residual life of original spare. No such certificate from Chartered Engineer is appearing on record. The goods were imported in contravention of the FTP policy and liable for confiscation and the appellants are liable for Penalty - however, the quantum of redemption fine and penalty reduced. Appeal allowed in part.

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• 2018 (6) TMI 938
  Benefit of N/N. 21/2002–Cus dt. 01.03.2002 - Time Limitation for re-export of goods - Held that:- The only reason for the demand canvassed by the revenue is that the goods were not re-exported within the stipulated time. In this context, when the exemption notification does not prescribe any such condition of re-export of goods, in that case the delay in re-export of goods by the stipulated date endorsed by the Director General of Hydrocarbons would not result into denial of benefit of exemption Notification - Only for the reason that there has been delay in re-export of goods the benefit of exemption notification cannot be denied to the Appellant - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 937
  Misdeclaration of imported goods - secondary, defective/serviceable bars and rods of mild steel falling under CTH 7228.60 - principles of Natural Justice denied - neither the examination report was provided to the appellant nor the Bills of Entry which were used for the contemporaneous value was provided - Held that:- The appellants have declared the goods in accordance with the pre-shipment report and the description appearing in the supplier’s invoice, the charge of mis-declaration was made only after 100% examination of the goods. However, the vital documents i.e. examination report was not provided to the appellants as submitted by them. Moreover, the Bills of Entry, if any, relied upon for the purpose of enhancement of the value were also not provided to the appellant. There is a gross violation of principles of natural justice on the part of the adjudicating authority - matter remanded to the Commissioner for passing a fresh order after providing all the documents such as examination report, Bills of Entry, if any, of contemporaneous import - appeal allowed by way of remand.

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• 2018 (6) TMI 936
  Penalty u/s 112(a) of the Customs Act, 1962 on partner of CHA - The case against the appellant is that he facilitated with the IEC of Rudraksh Enterprises to the actual importer - Held that:- The appellant has acted as a CHA and filed bill of entry in respect of imports made on the basis of IEC of M/s Rudraksh Enterprises. Since CHA filed the bill of entry on the basis of documents produced to him by the importer and in such documents no discrepancy was pointed out, the undervaluation of the imported goods was determined only on the basis of independent investigation carried out by the customs authorities - CHA cannot be made responsible for undervaluation in the peculiar fats of the case. The adjudicating authority himself is not sure about the involvement of the appellant in the modus operandi of the importer - the entire finding is based on assumption and presumptions and on that basis the appellant cannot be punished. Penalty set aside - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 935
  Jurisdiction - power of Commissioner (Appeals) to remand the case - Held that:- After amendment in Section 35A(3) of the Central Excise Act, 1944, the Commissioner (Appeals) has not been vested with the powers of remanding the case to adjudicating authority. The Ld. Commissioner (Appeals) remanded the matter to the adjudicating authority on the ground that there is violation of principles of natural justice. Even if the Ld. Commissioner (Appeals) has no power to remand but if there is violation of principles of natural justice, there is no option except the matter to be reconsidered by the adjudicating authority by providing the personal hearing to the assessee. Therefore in any case the adjudicating authority has to relook in the entire matter. Appeal allowed by way of remand.

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• Corporate Laws

• 2018 (6) TMI 952
  Oppression and mismanagement - whether Appellant and his wife were given the concerned Notices of the Meetings for holding? - % of share holding - Held that:- Respondents 2 and 3 in both the Appeals and their group have transferred off all their shareholding to 3rd parties. When the Appellant was making grievances in the NCLT also and has claimed here also that he was kept out of the affairs of the Companies and he was making grievances that the properties of the Companies have been handed over to 3rd parties, the Respondents merely showed admissions in pleadings with regard to Notices issued for the Board Meeting dated 29.08.2015 and EOGM dated 8th October, 2015 with reference to Rudraksh but do not appear to have disclosed any other documents to support any of the other meetings on which they have now relied on to show that they have conducted the affairs of the Companies as per the Companies Act. It is clear case of oppression of the Appellant in both the matters. We find that NCLT wrongly and lightly ignored the grievances of the Appellant that the Respondents have handed over the properties of the Companies to 3rd parties – Devi Processors by saying that it was a business decision. NCLT accepted that the decision should have been taken in Board Meeting and Notice should have been given to Petitioner but it was not done so, but gave no weight to it saying that no loss was shown to Petitioner. We do not agree with such reasonings. When the only asset of the Nagina was the land and the only asset of Rudraksh was the factory/process house, if the whole of these assets had been handed over to Devi Processors and Appellant who was holding 32.66% share (with his wife) in Rudraksh and was holding 12.06% shareholding in the Company of Nagina, he had a right to know how these assets had been handed over by Respondents who were professing to say that they have been handed over only for running the business. Even if it was for only running the business, as a majority shareholder, he was entitled to know as to what was the decision, Board Meeting or General Body Meeting Resolutions under which the substratum of the Company had been handed over. As the documents now show, it was not a mere handover of running of the business but the business itself had been sold behind the back and without the knowledge of the Appellant group which is serious act of oppression. NCLT found that the Original Petitioner did not file any document to show that there is arrangements/understanding to give 50% of paid up share capital to Petitioner and his wife. NCLT found that Petitioner had made investments but did not prove that there was understanding to give 50% share capital to him and his wife. In 1st Petition also similar finding is there. We are not disturbing these findings. NCLT found that the grievance was raised only in September 2015 when petition was filed and Petitioner had been Director till 8th October, 2015. NCLT thus did not disturb the said allotment. Considering the delay in raising the dispute on that count, we are not disturbing this finding also. We direct the ROC not to accept such transfer of shareholdings from Respondents 2 and 3 and their group in both the Appeals as reflected in these Annual Returns and Financial Statements. We restore the shareholdings in both the Companies to the stage of filing of the petitions. On receipt of copy of this Judgement, we direct NCLT to immediately appoint (even if parties do not appear as is being directed infra) an Administrator who will handle the affairs of these Companies. NCLT, Ahmedabad is requested to immediately appoint an Independent Auditor/Audit Firm in both the Company Petitions to audit the accounts from the date of incorporation of the respective Companies. The Chartered Accountant/CA Firm shall file Audit Reports before the learned NCLT on date to be fixed by NCLT at the time of appointment. The NCLT may give further directions regarding fees to be paid to the Auditor/Audit Firm

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• 2018 (6) TMI 951
  Contravention of FEMA Regulations - excess shares allotted - Securities premium amount has been determined wrongly short and consequently paid up capital have been allocated of more amount than required - Held that:- This case deals where the CCDs have been converted into shares at a wrong share premium. The money has already been received by the company and the allocation of the same between paid up share capital and securities premium has to be done. It is noted that security premium account for all practical purposes is to be treated as if security premium account were the paid up share capital of the company as per Section 52 of the Companies Act, 1956. Securities premium amount has been determined wrongly short and consequently paid up capital have been allocated of more amount than required. Therefore, change in composition between the security premium account and paid up share capital will not amount to reduction in capital as both the components are treated as paid up capital. Further a reading of Section 100 of the Companies Act, 1956 shows that this case is not covered under any of sub-clauses (a), (b) and (c) of Clause (1). As the appellant has opted to unwind the excess shares allotted, therefore, this will make a case of rectification of wrongful calculation of share capital and securities premium and not reduction of share capital because the security premium account is also to be treated as paid up share capital. This is a case where security premium amount will be increased and equal amount of paid up capital will be decreased and there will be no change in the overall amount allocated to paid up share capital and security premium account. The appellant shall take steps and cancel the excess shares 219658 allotted to 1st respondent and the total amount received for issuing CCDs will be utilised for issuing 209761 shares of 10/- each at a premium of 54.22 as on 6.8.2013. The amount of premium will be transferred to security premium account in the books of accounts. The balance sheets filed after 6.8.2013 will be refiled duly certified by a chartered accountant. For this process the company will comply with all other legal formalities as per law and Companies Act, 2013. This order will not come in the way of RBI for taking any action for contravention of FEMA Regulations against the appellant company.

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• 2018 (6) TMI 950
  Oppression and mismanagement - validity of BOM - Held that:- As informed about the Meeting, the appellant No.1 cleverly chose to remain absent and the required quorum was present in the Meeting, Respondent No.2 was elected Chairman of the Board, R1 company and to give/change authority relating to execution of sale deed was validly given to Respondent No.2. Therefore, the appellant No.1 has no right to question about the resolution passed in the said Meeting. The appellant No.1 knowing fully well that his authority has been validly withdrawn still he continued to execute the sale deed. We observe from the record that the appellant No.1 has executed 12 sale deeds subsequent to Meeting dated 2.5.2013 and out of these 12 sale deed, he executed 7 sale deeds in his own name. Even if he has the authority to execute the sale deed and for executing sale in his own name/favour, he can only do after prior disclosure to all other Directors/Board of Directors as per Section 297 of the Companies Act, 2013. In this case his authority has been validly withdrawn by passing a valid resolution and he is continuing to execute sale deed, therefore, the conduct and behavior of the person is a relevant factor. The next point raised by the appellant is that the company petition was dismissed only due to FIR and the said FIR stands stayed by High Court in 2015. The point raised by the appellant is not acceptable. On going through the impugned order we observe that the company petition has dismissed on various points. The Tribunal has given his findings on each of the points raised by the appellants in the company petition. We observe from the record that proper notice was given to the directors for holding of Board Meeting on 2.5.2013 and the proof of despatch of the said notice has been placed at Page No.538 of the Appeal Paper Book. It appears that the appellant No.1 chose to remain absent in the Board Meeting held on 2.5.2013 as he was aware that proper procedure of law has been complied with and there is no tampering with the minutes of Respondent No.1 company. The appellant No.1 was very well aware of the Board Meeting held on 17.4.2017 and when he went to EOGM but left he got the opportunity but did not avail it before General Body. In view of above discussions, we are of the considered view that it is not a fit case to interfere in the impugned order dated 23rd November, 2017 passed by the National Company Law Tribunal, Ahmedabad Bench, Ahmedabad.

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• 2018 (6) TMI 949
  Name struck off from the Register of Companies - failure to file Financial Statements and Annual Returns - appellant wanted the company to be restored so that it could comply with the winding up procedure and the company could have an honourable exit - Held that:- If restoration of the name of the Company was to be allowed only for the purpose of winding up, it would defeat the very purpose of striking off the company. It also found that the appellant/petitioner had no assets other than nominal cash balance in the current liabilities and there was no justification for restoring the name of the company. It is not a case that the Company was carrying on business or was conducting its operations and default in filing took place. The object of Section 252 appears to be to safeguard companies which were carrying on business or were in operation so that they should get opportunity to be restored. We do not find that there would be justification to restore the name of the company only for the company to go through the process of winding up, or closure. As the appellant tried to submit that because of the striking off of the present company the directors have been affected due to DIN getting blocked and they are aggrieved because they are connected with other companies also. Learned counsel was unable to show that any such ground was taken before NCLT or in the Company Petition. As such we have not allowed the learned counsel to raise this new ground for the first time in the appeal. Again, it would also be no ‘just’ cause under Section 252(3) of the new Act. Appeal dismissed.

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• 2018 (6) TMI 948
  Application to Tribunal for relief in cases of oppression, etc. - Waiver under the proviso to Section 244(1) - Whether a person who is not a member is entitled to the waiver under Section 244(1) would also have to be determined - Whether NCLT is entitled to grant the said waiver under Section 244(1) even without determining whether a petitioner before it is a member or not? - Held that:- We observe that the Respondent No.1 and 2 have attended the Annual General Meeting of Nasik Diocesan Trust Association held on 28th November, 2014 and their signatures are on the attendance Sheet at Sl.No.4 and 5 at Page 66. The appellant has stated that certain directors stood automatically vacated of the office of directors by operation of law on account of non-filing of annual accounts and annual returns and thereby failing to discharge their duties as directors. We are of the opinion that there is provision in the Companies Act that a director can be removed but members are not normally removed. As per the claim of the appellant that respondents are not members and counter claim by the respondents that they are members. There are also some conflicting documents as some documents are showing that they are members of the company at some point of time and some documents are showing that they are not members of the company. Even if there is a provision in the Articles of Association for removal of the members, it may conflict with the provisions of law and if not so, strict compliance with the requirement for removal need to be placed on record so as to deny the membership right to a person who has been a member at one point of time or the other. This issue could be an exceptional circumstances, which may merit “waiver”. Looking to the nature of the company, location of the properties and the charity purpose for which the Association has been formed for the districts of Nashik, Aurangabad, Ahmednagar the shifting of the office from Nashik to Mumbai may be ground for Members of the company to be concerned. This seems to us exceptional circumstances for which waiver could be allowed to Members who have moved the company petition.Tribunal has rightly exercised its discretion and allowed the application for waiver. The appeal is dismissed.

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• 2018 (6) TMI 947
  Corporate Insolvency Resolution Process - ‘debt’ and ‘default’ on the part of the ‘Corporate Debtor’ - Held that:- It is not in dispute that the Appellant- (‘Corporate Debtor’) was developing an office complex by the name of Q-City Hyderabad. In the process of developing such office complex on 23rd October, 2017, the Respondent- (‘Financial Creditor’) acquired the majority of the shareholding of the Appellant- (‘Corporate Debtor’) for a total consideration of 162.73 Crores. Subsequently, in between 2007-2010, the ‘Financial Creditor’ granted interest free unsecured loan of 62.90 Crores to the Appellant- (‘Corporate Debtor’) for development of ‘Q-City’. Grant of loan and to get benefit of development is object of the Respondent- (‘Financial Creditor’), as apparent from their ‘Memorandum of Association’. Thus, we find that there is a ‘disbursement’ made by the Respondent- (‘Financial Creditor’) against the ‘consideration for the time value of money’. The investment was made to derive benefit of development of ‘Q-City’, which is the consideration for time value of money. We find that the Respondent- (‘Financial Creditor’) come within the meaning of ‘Financial Creditor’ and is eligible to file an application under Section 7, there being a ‘debt’ and ‘default’ on the part of the ‘Corporate Debtor’.

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• Insolvency & Bankruptcy

• 2018 (6) TMI 973
  Corporate insolvency process - whether appeal under Section 9 of the I & B Code was not maintainable against the second respondent, who was not the lessee or tenant of the Mahesh Madhavan (Operational Creditor)? - Held that:- Mr. Mahesh Madhavan’ (Operational Creditor) had not entered into any agreement with ‘M/s. Black N. Green Mobile Solutions Pvt. Ltd.’ (Corporate Debtor). The Agreement dated 3rd December, 2012 was reached between ‘Mr. Mahesh Madhavan’ (Operational Creditor) with one ‘M/s. Universal Power Systems Pvt. Ltd.’ and not with the Corporate Debtor in question. ‘M/s. Black N. Green Mobile Solutions Pvt. Ltd.’ (Corporate Debtor) is not in the occupation of the premises on the basis of aforesaid agreement dated 3rd December, 2012. A separate lease dated 27th March, 2015 was entered into between Mrs. Kaneez Fathima Khader and four others (Lessor) and M/s. Black N. Green Mobile Solutions Pvt. Ltd. (Lessee). Merely because ‘sub-tenant’ is occupying the premises does not mean of landlord tenant that Mr. Mahesh Madhavan is ‘Operational Creditor’ of M/s. Black N. Green Mobile Solutions Pvt. Ltd.. Sub-tenant has no liability to pay the rent to the original owner of the premises, but to the tenant with which it has executed the agreement. If part of the payment was made directly by the ‘sub-tenant’ to Mr. Mahesh Madhavan (Operational Creditor) it will not create the relationship of ‘Operational Creditor’ and the ‘Corporate Debtor’ between the aforesaid two persons. The Adjudicating Authority having failed to notice the aforesaid fact wrongly admitted the application and in absence of any relationship between ‘Mr. Mahesh Madhavan’ (Operational Creditor) and ‘M/s. Black N. Green Mobile Solutions Pvt. Ltd.’ as Corporate Debtor, the petition under Section 9 was not maintainable and was fit to be rejected.

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• 2018 (6) TMI 972
  Corporate insolvency process - existence of a pre-existing dispute inter-se the parties warranting rejection of application under Section 9 of the I&B Code - Respondent rights to file application - Held that:- Appellant does not appear to have either repayed the Operational Debt claimed by the Respondent or brought to his notice the existence of a dispute. In the given circumstances Respondent was within his rights to file application before the Adjudicating Authority for initiating Corporate Insolvency Resolution Process. As regards Appellant’s contention that the Respondent did not disclose the factum of buses being provided as security, be it seen that the transfer of buses was effected prior to the demand notice issued by the Respondent to the Appellant as has been claimed by the Respondent. It cannot be said that this fact had been willfully suppressed and non-disclosure thereof justified rejection of the application. Appellant has failed to demonstrate that he had within the period of 10 days of the receipt of the demand notice brought to the notice of the Respondent/ Operational Creditor existence of dispute or repaid the outstanding operational debt. Admittedly the buses given as security merely stood hypothecated with the Respondent. Such securities can, by no stretch of imagination, be counted towards payment of outstanding debt. If the Respondent has manipulated transfer of the vehicles on the basis of endorsements made in regard to hypothecation of these buses, it is for the Appellant to seek appropriate legal remedy. However, triggering of Corporate Insolvency Resolution Professional cannot be declined once there is default of a debt. The impugned order admitting respondent’s application under Section 9 of I&B Code does not suffer from any legal infirmity. The appeal being devoid of merit is accordingly dismissed.

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• 2018 (6) TMI 906
  Corporate insolvency process - Held that:- Mr. Mahesh Agarwal, learned Advocate accepts notice on behalf of 1st Respondent No. 1 - Ultratech Cement Limited. Mr. Sumant Batra and Ms. Puja Chakraborty accept notice on behalf of Respondent No. 3 – Bank of Baroda on behalf of the ‘Committee of Creditors’. They are allowed a weeks’ time to file their respective reply Affidavits. Rejoinder, if any, may be filed by the Appellant within 5 days thereof. In the meantime, let notice be issued on Respondent No. 2, through Resolution Professional, by Speed Post. Requisites along with process fee, if not filed, be filed by 07.05.2018. If the Appellant provides the e-mail address of Respondent No. 2, let notice be also issued through e-mail. Dasti service is permitted. The caveator if so required may file a fresh Caveat Petition in terms with the provisions of the order passed under Rule 104 of the NCLAT Rules, 2016 showing proper ‘Memo of Parties’ with proper prayer. If such application is filed by 07.05.2018, Office will accept the same along with Service Report Post the Appeal ‘for Admission’ on 22nd May, 2018

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• Service Tax

• 2018 (6) TMI 933
  Classification of services - Dredging and Land Reclamation Services or Supply of Tangible Goods Services? - The adjudicating authority has concluded mainly on the ground that the dredging vessel supplied by the appellants is required to be delivered with full complement of officers and crew who operate, control and supervise the dredging work - Held that:- If the services provided by the appellant indeed was only “dredging service”, the appellant would not have been able to bill DCI for such wear and tear charges. In our considered opinion, the activity of the appellants may possibly fall under supply of ‘Tangible Goods Service’, but surely not under ‘Dredging Service’. It is interesting to note that appellants have paid service tax amount of 57,03,661/- towards the services provided to DCI under the category of Supply of Tangible Goods Services. In these circumstances, that part of the impugned order confirming demand of service tax in respect of the services provided by the appellants to Dredging Corporation of India under the category of “Dredging Service” cannot sustain and will therefore have to be set aside. Dredging Service - supply of vessel and equipment to Dharti Dredging 4,95,471/- - services not taxable under the head Site Formation Service - demand set aside. Valuation - inclusion of reimbursable expenses in assessable value - Held that:- There was no obligation to carry out dredging on the part of the appellant under the contract either for Dredging International NV or of Gangavaram Port - the contract of the appellant with Dredging International NV was also only in the nature of a Charter Hire Agreement and not a contract for carrying “Dredging Services”. This being so,that part of the impugned order demanding service tax liability on the appellant under dredging service in respect of the “Gangavaram Project” cannot be sustained and is therefore set aside. Exemption for income on account of reclamation under N/N. 17/2005-ST and under N/N. 25/2007-ST - Held that:- It is not clear as to whether there were indeed three separate contracts for dredging, reclamation and soil stabilization or on the other hand, whether appellants were entrusted with a composite work for all the three related works . We do not find any clarity from the SCN or from the findings of the adjudicating authority or even from the documents submitted by the Ld. Advocate - The dispute concerning the activities done by the appellant in respect of Dhamra Port should be remanded to the adjudicating authority for deciding the issue afresh. Maintenance and Repair Services - import of services - Learned Advocate has requested that this matter may be remanded to the original Adjudicating Authority to enable the appellants to produce necessary evidence in support of this contention - Held that:- This issue is remanded to the Adjudicating Authority for de novo consideration, after giving sufficient opportunity to the appellant to produce supporting evidence. Manpower Supply Services - salary payments paid to the “expatriate” employees employed - Held that:- It is a usual practice to facilitate payment of the salaries of expatriate employees in foreign currency, to be payable in their home country. It is not the case that appellants had engaged services of a manpower service provider from abroad to have the services of these persons. It is also pertinent to note that drafts were drawn up by the appellants directly with their employees and not with any manpower supply provider abroad - the part of the impugned order which has confirmed service tax liability in respect of the employment of expatriate persons, cannot sustain and requires to be set aside. Management Consultancy Services - service charge liability on the professional services under business consultancy charges - Held that:- Both during the adjudication proceedings as also during the course of hearing, Ld. Advocate has produced invoices which point out that M/s. Pinsent Masons are a law firm registered with “Solicitor’s Regulation Authority”. Thus, they are not business consultants and is a legal firm. Legal services have become taxable only with effect from 01.09.2009. Thus, the demand raised in respect of services received from M/s. Pinsent Masons, U.K., cannot sustain under the reverse charge mechanism also and requires to be set aside. Insurance auxiliary services - consulting engineer services - In regard to advances received from customers also, it is contended that the appellant has discharged the service tax and that the Additional Commissioner has dropped the demand on the very same issue - Held that:- These aspects are not clear from the impugned order. We, therefore, deem it fit to remand these issues to the adjudicating authority. Appeal disposed off.

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• 2018 (6) TMI 932
  Commercial or Industrial Construction Service - appellant had not registered themselves with the department in order to file ST-3 returns periodically - non-payment of Service tax - demand of service tax alongwith Interest and penalty - Construction service for commercial concern during the period from April 2005 to December 2006 - Construction services provided to Common Effluent Treatment Plant (CETP) as sub-contracted to M/s. Enkem Engineers Pvt. Ltd. for the period April 2005 to September 2008 - Construction services provided to common effluent treatment plant directly for the period April 2005 to September 2008 - Works Contract Services. Held that:- It is seen that the department has given the benefit of abatement of 67% on the composite contract value. This establishes that the activities fall within the works contract service. Therefore, the period prior to 1.6.2007 cannot be subject to levy of service tax as laid down by the Hon’ble Supreme Court in the case of Commissioner of Central Excise Vs. Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] - demand for the period prior to 1.6.2007 set aside. Demand for the period after 1.6.2007 upto 30.9.2008 - case of appellant is that the activities / construction were for non- commercial purposes and hence not taxable - Held that:- Works contract service would cover all construction activities whether commercial or non-commercial if such construction activities fall within the definition of Section 65(zzza) of the Finance Act, 1994 - The service tax demand is on the appellant who is a contractor. Further, the ETP cannot be considered as non-commercial one, since the ultimate beneficiary is the dyeing units who are the polluters - the contention that CETP is not installed for commercial purpose and therefore would not fall within Commercial or Industrial Construction Service is not tenable. We also do not find any merit in the argument of the ld. counsel that Board Circular No.80/2004-ST dated 17.9.2004 is in support of the appellant and that construction does not fall within the category of commercial construction - The demand for the period from 1.6.2007 to 30.9.2008 is sustainable Time Limitation - Held that:- Since the appellant has not taken registration or paid the service tax even after being pointed out by the department, it is seen that the adjudicating authority has confirmed the demand for extended period also - The issue being interpretational one, the penalty requires to be set aside. Appeal allowed in part.

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• 2018 (6) TMI 931
  Convention Service - liability of service tax - complimentary convention facility being provided along-with renting of room service - benefit of N/N. 1/2006-ST dated 01.06.2006 as amended - Held that:- The appellants are not engaged in providing any Convention Service. The appellant had rented room and has discharged service tax liability whenever the service tax is applicable. Further, no separate charges for Convention Center have been charged and the use has been complementary. The demand has been computed on notional basis - since use of convention room is complementary therefore no service tax can be charged on the same. Demand do not sustain - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 930
  Classification of services - appellant contends that they had rendered ‘goods transport agency’ service for which the liability was limited and that the impugned order has wrongly classified the activity as ‘cargo handling service’ to extract the full tax from them - appellant further contends that the classification as ‘management, maintenance and repair service’ pertains to road upkeep under various contracts that should rightly fall under ‘works contract’ and that appropriate abatement should have been granted. Held that:- The adjudicating authority was deprived of the clarity afforded by the Hon’ble Supreme Court in Commissioner of Central excise any such contract that included supply of material was liable to tax only after the incorporation of ‘works contract service’ in section 65 of Finance Act, 1994. This is an aspect that requires scrutiny afresh. Appeal allowed by way of remand.

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• 2018 (6) TMI 929
  Manpower recruitment and supply service - Liability of tax - the lower authorities did examine the various contracts but had failed to consider that the contract with M/s Garware Industries Ltd. was one with lumpsum consideration and not based on number of personnel deployed - Held that:- It is found that while the recompense is specified so, a further provision makes any payment subject to furnishing of periodical bills indicating deployment. Therefore, these cannot be excluded from the liability to tax. We also take note that the terms of the remand order have been diligently complied with - the taxability of the consideration received by the appellants during the period in dispute is upheld. Benefit of cum-tax computation - appellants had discharged their tax liability before the issue of notice though not the interest liability - Held that:- Service tax is an indirect tax and macroeconomic theory has it that indirect taxes are recovered from the end consumer. We have no quarrel with the theory but tax collection is required to be in accordance with law. Finance Act, 1994 does not prescribe collection from the customer; nor does it authorize the provider of the service to act as an agent of the State. Though Service Tax Rules, 1994 does prescribe that tax component be separately indicated in the invoice, tax was for the relevant period was to be computed for collection only against receipts. In these circumstances, the option to bear the incidence of tax vests with the provider. Extended period of limitation - Held that:- There is no evidence of any suppression on the part of the appellants, which are proprietary concerns. The invoking of the extended period is not tenable. The penalties under section 78 of Finance Act, 1994 and the demands in excess of the amount appropriated by the original authority set aside. Appeal allowed in part.

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• 2018 (6) TMI 928
  Classification of services - sub-contract - advertising agency service or not - whether the proposed classification under which the tax was sought to be levied is applicable to the activities of the appellant? - Held that:- It is seen from the records that the appellant had registered themselves under Service Tax Rules, 1994 as provider of sound recording service. However, that by itself is not sufficient to operate as a conclusive ground of taxability. Levy under Finance Act, 1994 is not on the persona but on the activity; neither registration nor wherewithal for rendering the service can substitute for classifying the activity within the definition of the service. There is no dispute that the appellant produces an entire program which is then submitted to the client for further use. These may well be in the nature of sub-contract by an advertising agency but is, yet, an independent one. There is no proposal to tax the activity as provision of ‘advertising agency service’; the appellant is not required to choose between alternate classification as that is the responsibility of the tax collector. Fitment within an alternative classification suffices to erase the proposal in the notice but cannot crystallise liability unless the alternative was also proposed in the notice. We are, therefore, not required to test the activity of the appellant for fitment under a different classification. As the scope of contract, the consideration of which is sought to be taxed, extends well beyond sound recording in both the directions, we are of the opinion that the proposed classification would not be tenable for levy of the tax - appeal allowed.

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• 2018 (6) TMI 927
  CENVAT Credit - non-registered premises - denial on the ground that the different branches of the appellant that had not registered were not entitled to avail of CENVAT credit - Held that:- The branches, admittedly, were rendering services on behalf of the principal establishment in the absence of a contrary finding in the adjudication order or an allegation in the show-cause notice. There is nothing on record to indicate that tax liability was not being discharged on the taxable activity. There is no finding that the services procured were not used in the rendering of service - there is no reason to presume that the transfer of credit in accordance with the practice of centralized billing was violative of the provision for utilization of credit - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 926
  Construction of Residential Complex Service - construction of residential complexes for the police personnel in various places - period involved is from 16.06.2005 to 31.08.2007 - Held that:- TNPHCL engaged the appellant for construction of Police Quarters and the ownership of the houses constructed vested with the Govt. of Tamilnadu which is nothing but an extended arm of the Govt. Section 65 (91) (a) of the Finance Act, 1994 defines residential complex - similar issue decided in the case of SIMA Engineering Constructions & 3 Ors. [2018 (5) TMI 405 - CESTAT CHENNAI], where it was held that such activity is not liable to levy of service tax. The definition of residential complex specifically excludes construction undertaken for personal use and such personal use includes permitting the complex for use as residence by another person. The exclusion clause covers the construction activity undertaken by the assessee. Demand set aside - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 925
  Construction of residential complex - appellant is mainly engaged in promotion of residential complex - whether service tax is payable for the construction of residential complex service in respect of the dwelling units constructed by the assessee prior to 1.7.2010 i.e. before introduction of the Explanation to the Section 65(105)(zzzh) and thereafter? - Held that:- Though it is discussed in the order that the promoter / assessee has sold the USD in the land to a few prospective buyers, there is no document to substantiate the same - The permission certificate for construction of the complex as well as the completion certificate is issued in the name of the assessee. These documents therefore strongly indicate that the land belongs to assessee till the completion of construction. In the instant case, prior to 1.7.2010, the levy of service tax cannot sustain for the reason that the assessee is the land owner and the construction done by himself without engaging a contractor would amount to self-service. The amendment brought to effect a deeming fiction, that if any sum is received from the prospective buyer before grant of completion certificate would be construction of residential complex service. The said amendment is prospective in nature and would be effective only after 1.7.2010 - However, in the instant case, the completion certificate shows that the construction activity has been completed on 19.11.2008. The provision of service, which is the taxable event during the impugned period happened prior to 1.7.2010. Therefore, the said amendment cannot be pressed upon the assessee to demand service tax. Demand cannot sustain - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 924
  Penalties u/s 77 and 78 - GTA Service - non-payment of Service Tax - appellant had incurred certain expenditure towards outward transportation of finished goods to various buyers including the department of railway - Held that:- Appellant is engaged in the excisable activity as well as payment of service tax on inward GTA. Being organized manufacturer, it cannot be expected that they are not aware about the levy of service tax on outward transportation. There is no different law for levy of service tax on GTA either it is inward transportation or outward transportation, levy of service tax on GTA is under common law. Therefore, contention of the appellant that being outward transportation they were under bonafide belief that the service tax payable by the recipient of the goods has no force. The appellant could not make out the case of reasonable cause for non payment of service tax on outward transportation - penalties upheld - appeal dismissed - decided against appellant.

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• 2018 (6) TMI 923
  Rectification of Mistake Application - time limitation - Held that:- as regard limitation we have directed the adjudicating authority to consider the issue on limitation also - As regard the issue of taxability on the services related to International Finance Corporation, we find that though, the submission was recorded in para 3 of the order dt. 25.9.2017 but no finding was given. Therefore the adjudicating authority is also directed to reconsider the taxability on the service related to International Finance Corporation - application for ROM allowed.

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• Central Excise

• 2018 (6) TMI 922
  Excisability/movability - 'Fired Heater' fabricated at site - Held that:- The fire heater came into existences fixed to the ground 'in situ'. The impugned order does not deal with this assertion end presumes that the said fire heater was movable and marketable. There is no evidence brought forward by Revenue that the such fire heater was movable. Revenue has relied on the decision of the Hon'ble High Court of Patna in the case of Tata Iron & Steel Co. [1987 (3) TMI 127 - PATNA HIGH COURT]. The facts in the said case related to taxability of crane cleared in completely knocked down condition from one premises to another. The facts in the said case are totally different. Since Revenue has failed to produce any evidence regarding movability and marketability of the said fire heater, demand do not sustain - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 921
  SSI exemption - suppression of value of clearances - Clandestine removal - Held that:- It can be said that the data in the computer printout is reliable and the appellants had indulged in making same kind of duplicate invoices. Revenue has produced the data which shows that number of invoices does not match with dates and they have pointed out 13 such instances in their showcause notice. Apart from that the clearances recorded by the appellant did not match in the clearances recorded in the balancesheet. All the above facts put together point to a case of clandestine clearance. Revenue has substantially made out a case by relying on the balance-sheet, the computer printout, the data received from the buyers and it is up to the respondents to prove otherwise by producing the necessary records which they were unable to trace out earlier. The claim of the respondent that the records have been lost can only be held against them. Appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 920
  Scope of remand order - The Commissioner instead of limiting himself to the issue remanded, treated the CESTAT order as full remand order and has gone into the issue which were not referred to him in remand - Held that:- The only thing that the Commissioner was required to check was if the endorsement appears on those challans or not. There is no finding in the order of Commissioner regarding availability of endorsement on the challans pertaining to 14 lakhs of duty. He has gone into the entire show-cause notice and decided the issue afresh as a full remand. The impugned order is not sustained as it goes beyond the scope of remand. The matter is remanded to the Commissioner to decide the issue limiting himself to the scope of remand - appeal allowed by way of remand.

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• 2018 (6) TMI 919
  CENVAT credit - material rejected by their buyers which was brought back into the factory - Rule 16 of Cenvat Credit Rules - If the said goods were disposed of in terms of Rule 16 or not? - Held that:- The appellants were receiving goods rejected by their buyer and they were availing credit. The appellants have not maintained any record to show that the goods were processed and cleared on payment of duty after repairs. After the case was booked, the appellants have created a table on the basis of the memory as dictated by the CEO. The same cannot be admitted as any evidence - the appellants have not been able to establish that the goods on which credit was taken were processed and cleared on payment of duty - appeal dismissed. Penalty on Biravu Navin Rai - Held that:- It is noticed that he had tried to fabricate and introduce a chart as evidence in the proceedings. It is obvious that he was fully aware of the issue and therefore, his liability to penalty cannot be set aside - decided against appellant. Appeal dismissed.

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• 2018 (6) TMI 918
  Liability of Interest on duty paid during provisional period - whether the appellant is liable to pay interest in respect of duty paid during the period of provisional assessment and the assessment is finalized subsequently? - Held that:- The issue is no more res-integra and is decided in the case of COMMISSIONER OF C. EX., NAGPUR VERSUS ISPAT INDUSTRIES LTD. [2010 (10) TMI 178 - BOMBAY HIGH COURT], where it was held that looking to the provisions of Rule 7(4) it is clear that the appellant could not be held liable to pay the interest if the differential duty and the duty amount have been paid prior to the final assessment - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 917
  Vires of Rule 3 of Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules (HASITPACD Rules), 1988 - principles of Natural Justice denied - Held that:- All the judgments relied upon by the Ld. Counsel on the issue that Rule 3 of HASITPACD Rules, 1988 held ultra vires have not been considered by the adjudicating authority - Since this legal issue has not been considered by the adjudicating authority, it is in the interest of justice that the adjudicating authority first consider all the judgements cited by the Ld. Counsel as well as by the AR and pass a fresh order - appeal allowed by way of remand.

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• 2018 (6) TMI 916
  Remission of Duty - Recovery of CENVAT credit - inputs contained in finished goods, semi-finished goods and returned defective goods which was destroyed in fire - Held that:- Reliance placed in the case of UNIMERS INDIA LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, BELAPUR [2018 (1) TMI 357 - CESTAT MUMBAI], where on similar issue it was held that there is no requirement of reversal of credit - Demand of the Cenvat Credit does not sustain - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 915
  Benefit of N/N. 14/2002-CE - processed fabrics - procurement of raw material from the unit availing SSI Exemption - the raw material procured by appellants is admittedly exempted under SSI Exemption under N/N. 8/2001-CE and 8/2002- CE, whereby it attracts nil rate of duty, whether the final product manufactured by the appellant i.e. processed fabrics is eligible for exemption under N/N. 14/2002-CE? - extended period of limitation. Held that:- The condition no.5 of N/N. 14/2002- CE that the excisable goods as specified in the notification are exempted if made from textile fabrics on which the appropriate duty of excise leviable read with any notification has been paid - In the present case it is an admitted fact that the supplier of the raw material has manufactured and cleared the grey fabrics to the appellant without payment of central excise duty availing SSI exemption under N/N. 8/2001-CE & 8/2002-CE. - The Circular No.667/58/2002-CXdated 26.09.2002 clarified that when an exemption is extended subject to the condition that the “appropriate duty has been paid” on the raw material, then such exemption shall not be available when raw material is not liable to excise duty or such duty is nil. The raw material / grey fabrics are clearly known as non duty paid as the same has been cleared by manufacturer after availing SSI exemption. The clearance documents clearly show that no duty has been paid on grey fabrics. In such situation the Explanation –II is not applicable. If Explanation –II is applied in such situations, then the condition no. 5 will be redundant. Extended period of limitation - penalty - Held that:- The appellant was bound to follow the new circular immediately and in case of any doubt they could have approached the department. In absence of the same the allegation of suppression of facts sustain and penalty imposable. Appeal dismissed - decided against appellant.

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• 2018 (6) TMI 914
  Benefit of N/N. 88/1988-CE - Silky brand liquid hand wash/liquid soap - Resham brand bathing bars/soap - non-speaking order - Held that:- As per notification, if the items qualify to any of the description i.e. laundry and carbolic soap and to synthetic detergent, the exemption would be available - The Commissioner has ignored the reports of the two independent laboratories and simply relied on the report of the Chemical Examiner. Ideally the Commissioner should have examined the reports of the independent laboratory also. This is more so since the Chemical Examiner in his letter dated 19.10.2012 has clearly observed that the essential constituents are synthetic organic surface active agents or soaps or mixtures thereof and the same were found to be present in the sample. The subsidiary constituents like builders, boosters, fillers and ancillaries were missing. In these circumstances, it is felt that the Commissioner has simply ignored the reports of the independent laboratory. To that extent, the order of the Commissioner is not a speaking order. Resham Brand bathing bar/soap - Held that:- It is seen that the product has been described as a bathing soap and, therefore, the same need not be tested for the description laundry soap. The Chemical Examiner has ruled out the description carbolic soap and thus, the only claim of appellant which needs examination is whether soap is a detergent. Soap by definition cannot be a detergent as detergent is a carbolic compound whereas the soap are made from the fact and alkali - the exemption is not available to the Resham band bath soap since it does not fall under the category of laundry and carbolic soap and synthetic detergent. Quantification of duty - Held that:- It has been admitted by both sides that there is error in booking the figures. For the said purpose the matter is to be remanded for correct quantification in line with the figures obtained from the appellant or from the buyers. Appeal allowed by way of remand.

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• 2018 (6) TMI 913
  Valuation - clearances made to related units/ interconnected units - whether the sale by the appellant to PSSTL and BAI can be treated as sales to “Related Person” and if so whether invoking of extended period by the Department which has been confirmed in the impugned order, is justified? Held that:- Audited Balance Sheet and tax audit report itself discloses that all the three firms including the appellant are related parties and all the Directors/ partners for the said three firms are relatives among themselves and holding key managerial position. Therefore there is no doubt left that the appellant and PSSTL and BAI are interconnected undertakings and it has been admitted also - Although a company, Partnership firm, Body Corporate, HUF, trust cannot be a relative of the others, but since the three companies in the present case are run/ managed by clause relatives, therefore the concept of “Related Person” of Clause of Section 4 (3)(b) is satisfied. It is establish that all the three companies falls under the ambit “Related Persons”. Therefore, the contention of the ld. Advocate for the appellant that their transaction with PSSTL and BAI are not sales to “Related Person” is rejected - In the present case the price charged by the appellant from PSSTL and BAI was lower then the price charged from un-related buyers, and therefore, the appellant is liable to pay the demand on the basis of price charged to un-related buyers by resorting to Rule 11 read with Rules 4 of Valuation Rules. Extended period of limitation - Held that:- Since the unit has been subjected to audit periodically, the price declaration have been extensively scrutinized with the related documents and therefore the Department could not allege any suppression on the part of the Appellant and could not have invoked extended period of limitation for demanding duty - The malafide intention to evade payment or suppression also cannot be attributed to the Appellant - extended period of limitation cannot be invoked. The matter is remanded to the Adjudicating Authority for the limited purpose of re-calculating the demand for the period which is within limitation alongwith interest and penalty, if any, after hearing the appellant on this limited aspect - appeal allowed by way of remand.

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• 2018 (6) TMI 912
  Classification of goods - Guest Room Control Systems (GRCS) - It appeared to the revenue that the said systems works as Thermosystem to the Air Conditioner and is remote switch of Guest Room Control System, which controls the temperature of Air Conditioner by switching it on and off automatically and acts as a Thermostat switch - whether the goods are classified under chapter sub heading 85.37 or Chapter sub heading No. 9032.11 of CETA? - Held that:- The adjudicating authority has confirmed the demand on the ground that GRCS – Guest InnLink/ Maestro on its own is a power distribution unit, however it becomes a temperature control unit when attached to the temperature control device and its relevant classification will undergo a shift from chapter heading 8537.00 to 9032.11 of the CETA, 1985 held that the said product has temperature control device i.e thermostat attached to it is classifiable under chapter heading 9032.11 and Parts of the said control system would be classifiable under chapter sub heading 9032.91 instead of 8538.00. The adjudicating authority has passed the impugned order based upon the remand directions of the tribunal as wherever he found that thermostat was attached to the system he classified the same under chapter 90.32. The Appellant never challenged the remand order of the Tribunal and at this stage they cannot interpret the chapter subheading and find infirmity in Tribunal’s order - the adjudicating authority has rightly confirmed the demands. Time Limitation - Held that:- The Appellant never disclosed the fact to the department that the system is also used for temperature control either in classification list or otherwise - demand has been rightly made by invoking extended period of limitation. Appeal dismissed - decided against appellant.

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• 2018 (6) TMI 911
  Valuation - inclusion of value of the parts and accessories cleared along with machinery in assessable value - Held that:- The contention of the appellant is that they have included the value of parts and accessories when such parts are cleared along with machine in set. However when the parts and accessories were cleared as such in that case on the value of such parts the duty is not sustainable. On observation of the above impugned order, the Ld. Commissioner (Appeals) considered that the parts and accessories are cleared along with the machine. There is a contradiction in the finding given by the Ld. Commissioner and the submission made by the appellant in the grounds of appeal. In such a case the facts need to be verified that whether the parts and accessories are cleared along with machine if it is so the value should be included and if the parts and accessories cleared independently then no duty is demandable on such clearances on the parts. Appeal allowed by way of remand.

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• 2018 (6) TMI 910
  Refund of unutilized CENVAT credit - benefit o notification availed - rejection on the ground that the refund is admissible only in case where the credit could not have been utilized due to export of goods - Held that:- The refund claim was filed as the goods become exempted by virtue of N/N. 30/2007–CE dt. 09.07.2004. The Appellant thus became entitled for the refund of said credit lying unutilized - The issue on merits already stands decided by us in case of Suryalaxmi Cotton Mills [2016 (12) TMI 78 - CESTAT MUMBAI], where it was held that at the time of exemption N/N. 30/2004-CE came into effect, there was no provision for reversal of credit in respect of inputs contained in the said exempted goods or lying as such for the reason that credit was availed prior to issuance of the exemption notification and at the time of availment of credit there was no bar and the CENVAT credit availed was correct and legal - the Appellants are entitled for the refund of the cenvat credit lying in their books. Time limitation - Held that:- no findings has been given by the Appellate Authority on the issue of time bar - it is appropriate to remand back both the appeals to the Commissioner (Appeals) to look into the aspect of time bar and decide the appeals accordingly. Appeal allowed by way of remand.

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• 2018 (6) TMI 909
  Manufacture/Deemed Manufacture - Valuation - Affixation of MRP on packages - after import of items, the appellant affixes the MRP labels at port itself, adopted valuation under Section 4A and brought to warehouses or by stock transfer to their premises and then undertook activities of packing / repacking, affixing sticker / label such as “marketed by”, “HONDA” etc. without revising the MRP mentioned in the label affixed at the port. Whether repacking, inspection, labeling, affixation of MRP without price revision, affixation of “marketed by” label, affixing “HONDA” tape/sticker would be activities that could be brought within the ambit of manufacture as defined under section 2(f)(iii) of Central Excise Act, 1944? Held that:- Even a standalone activity of packing or / repacking of goods in a unit container would be deemed manufacture for the purposes of Section 2(f)(iii). So also, labeling or relabeling of containers would attract mischief; such labeling or relabeling could include the declaration or alteration of the retail sale price. There is yet another interesting “other than the above” category that would fall within the ambit of deemed manufacture, namely, “adoption of any other treatment on the goods” to render the product marketable to the consumer”. Rendering the product “marketable” is a catch-all phrase that in our view would include any treatment to make the product attractive to potential buyers and enhance its ‘marketability quotient. This could encompass many strategies e.g. replacing a dated packing / wrapper with a brand new one to ensure more eyeball display or affixation of a nationally or internationally known trademark or certifying mark. ( e.g. ‘3M’ product, ‘Intel’ Inside, ‘Apple’ compatible, ‘De Beers’ certified diamonds, Woolmark, Agmark, BIS hall mark etc.). As per section 2(f)(iii) ibid, one of the process which would result in “deemed manufacture” is labeling or relabeling of containers. There is no conditionality indicated therein that such labeling or relabeling should necessarily result in enhancement or alteration of price - affixation of the “Marketed By” label and especially the “HONDA” trademark label, enhances the marketability of these products. Trademarks are efficient commercial communication to capture customer attention. It speaks about the company, its reputation and products and services. An internationally known trademark like ‘HONDA’ will serve to allay any doubts on basic quality of the goods and make the goods more marketable. The processes carried out on the impugned goods received by the appellants from the port / other warehouses will amount to manufacture within the meaning of section 2(f)(iii) of the Act. Appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 908
  100% EOU - Effect of notification - Department was of the view that appellants cannot avail the concessional duty as under Notification 29/2004 and are liable to pay @ 8% as per tariff rate against CTH 63026000 of Central Excise Tariff Act, 1985 - Held that:- For calculating the duty of excise for the purpose of discharging CVD liability, any notification issued in respect of the goods cleared by EOU also has to be taken into consideration. The respondents have thus calculated the CVD on the basis of the concessional rate of duty as in notification 29/2004 or 30/2004. They have not directly claimed the benefit of concessional rate of duty of 29/2004 or 30/2004, instead they have adopted the concessional rate for the purpose of calculation of CVD for claiming exemption for clearances to DTA as per notification 23/2003. In UOI vs Plastic Processors [2005 (4) TMI 581 - SUPREME COURT], the hon’ble Apex Court has held that CVD was payable at effective rates and not at tariff rates on clearances made by 100% EOU into DTA. Demand set aside - appeal dismissed - decided against Revenue.

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• CST, VAT & Sales Tax

• 2018 (6) TMI 974
  Restoration of Penalty u/s 70[2][a] of the KVAT Act, 2003 - input tax credit availed by the Appellant-Assessee on the basis of fake and false invoices of the selling dealers who actually did not exist - Held that:- No question of law arises in the present appeal for consideration by this Court and essentially it is a finding of fact arrived at by the Assessing Authority as well as the Revisional Authority in the present case that the Appellant- Assessee claimed input tax credit on the basis of invoices issued by the non existent dealers. Thus, burden of proving that the claim of input tax credit is correct, is squarely upon the Assessee who never discharged the said burden in the present case. The first Appellate Authority was absolutely wrong in setting aside the penalty assuming such burden of proof to be on the Revenue. The Revisional Authority, was therefore, perfectly justified and within his jurisdiction to restore the order of penalty in these circumstances. It remains a finding of fact, not giving rise to any question of law for our consideration under Section 66 of the Act and we do not find any perversity in the order passed by the Revisional Authority in the present case - appeal dismissed - decided against appellant-assessee.

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• Wealth tax

• 2018 (6) TMI 907
  Proceedings u/s 23 of the Wealth Tax Act - Asset for the purpose of wealth tax - Commercial complex - whether it is an asset? - whether house property which has been let out to a tenant would be outside the ambit of wealth tax under section 2(ea)(i)(v) of the Wealth Tax Act? -Held that:- As decided in M/S. NAVIN VANIJYA PVT. LTD. VERSUS A.C.W.T., CC-IV, KOLKATA [2016 (10) TMI 278 - ITAT KOLKATA] wealth tax is not levied on productive assets - The subject mentioned property is a commercial complex and is a productive asset deriving rental income p.a. It is well settled from the Memorandum explaining the provisions in the Finance No. 2, 1998 under the head "incentives proposed under the wealth tax act" that wealth tax is not to be levied on productive assets. Hence we hold that the subject mentioned property shall be exempt u/s 2(ea)(v) of the Act and therefore outside the ambit of taxable wealth.

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• Indian Laws

• 2018 (6) TMI 934
  Non-payment of Cheque amount - Dishonor of Cheque - Offence punishable under Section 138 of the Negotiable Instruments Act - Held that:- The entire compensation amount, as deposited, before the learned trial Court, be released in favor of the complainant/respondent - appeal disposed off.

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