TMI Tax Updates - e-Newsletter
June 6, 2018

Case Laws in this Newsletter:

GST Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax

News

1. XVFC holds productive interaction with Sh. Piyush Goyal, Minister of Railways; Chairman, Railway Board and other officials

2. RBI Reference Rate for US $

Notifications

Customs

1. 48/2018 - dated 4-6-2018 - Cus (NT)

Exports by Post Regulations, 2018

GST

2. F. No. 31013/16/2017-ST-I-DoR - G.S.R. 524(E) - dated 4-6-2018 - CGST

Goods and Services Tax Settlement of Funds (Second Amendment) Rules, 2018.

Circulars / Instructions / Orders

GST - States

1. 1761/GST-2 - dated 4-6-2018

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

2. 17T of 2018 - dated 2-6-2018

Clarifications on issues related to refund.

3. 08/2018 - dated 30-5-2018

Clarifications on refund related issues- regarding

4. 1645/GST-III, 1646/GST-III, 1647/GST-III - dated 25-5-2018

Regarding Guidelines for Refund Processing under the HGST Act -Standard Operating Procedure for manual application and processing.

5. GSL/S.5(1)/B.18 - dated 24-5-2018

Delegation of power for revocation of registration

6. I/2018 - State Tax - dated 28-3-2018

Extension of date for submitting the statement in FORM GST TRAN-2 under rule 117(4)(b)(iii) of the Gujarat Goods and Service Tax Rules, 2017

DGFT

7. Trade Notice No. 15/2018 - dated 4-6-2018

Doing away with the requirement of DSC for online/digital payment through e-MPS

Customs

8. F.No.476/02/2016- LC - dated 4-6-2018

Clearance of goods through FPOs-reg.

9. 14/2018 - dated 4-6-2018

Procedure for e-commerce exports through Post and clarification on personal imports-reg.

Highlights / Catch Notes

Income Tax

• Depreciation Rate Set at 25% for 20-Year License to Run Container Trains as Capital Asset.

  Case-Laws - AT : Rate of depreciation on intangible asset of licence for running container trains - commercial rights for 20 years - such rights would amount to capital asset - claim of depreciation allowed @25% - AT
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• Confessional statements u/s 133A require additional evidence for tax additions; unsupported admissions are insufficient.

  Case-Laws - AT : Addition relying on the confessional statement in pursuance to survey u/s 133A - Merely on the basis of admission/confession, the assessee could not have been subjected to such additions unless and until, some corroborative evidence found in support of such admission.
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• Penalty u/s 271(1)(c) not justified; no concealment or inaccurate particulars by assessee. Exemption denial due to opinion change.

  Case-Laws - AT : Penalty levied u/s. 271(1)(c) - The assessee had not concealed any income or furnished inaccurate particulars of income. The exemption u/s. 11 of the Act was denied to the assessee on a mere change of opinion - No penalty
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• Assessing Officer Failed to Issue Draft Assessment Order u/s 144C, Issued Show-Cause Notice Instead.

  Case-Laws - AT : AO has failed to follow the mandate of the provisions of section 144C whereby he was required to pass a draft assessment order - the issuance of a show-cause notice cannot be equated and treated as a draft assessment order.
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• Hedging Losses in Business: Not Speculative for Non-Foreign Exchange Assessees Engaging in Normal Activities.

  Case-Laws - AT : Nature of loss - speculative transaction - When the assessee is not dealer in foreign exchange and as a part of his normal business activity, enters into hedging contracts of foreign exchange, the loss in question is normal business loss and cannot be held a “Speculation Loss” - AT
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• Employee Housing Benefits Taxable; Society Staff Not Equal to Central Government Employees in Tax Matters.

  Case-Laws - AT : Valuing perquisites of the accommodation, provided to employees of the assessee society - Taxability - Employees of the society cannot be equated with the employees of the Central Government - AT
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Customs

• CBIC Introduces New Procedures for E-Commerce Exports via Postal Services; Clarifies Personal Import Guidelines to Boost Compliance.

  Circulars : Procedure for e-commerce exports through Post and clarification on personal imports - CBIC issues clarification and prescribes new procedures.
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• DC Motor Classification: Functions as Motor and Wheel; Classified as Electric Motor for Customs After Tire Mount.

  Case-Laws - AT : Classification of DC Motor which is performing dual function i.e. of DC Motor and of rear wheel - It become rear wheel only after mounting the tyre and without tyre, it cannot perform as part of e-bike. - to be classified as electric motor - AT
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• Anti-dumping duties imposed on Vitamin C, excluding Sodium Ascorbate imports not classified as Vitamin C by end use.

  Case-Laws - AT : Imposition of ADD on Vitamin C and its synonyms - import of Sodium Ascorbate - only the end use of the impugned good i,e Sodium Ascorbate does not make it fall under the category of Vitamin C.
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Service Tax

• Service Tax Demand on 'Serve to Win' Scheme Contested: Not Reimbursement for Free Warranty Services Provided to Buyers.

  Case-Laws - AT : Demand of service tax - amounts received from the manufacturer under ‘Serve to Win’ reward scheme it is not correct to conclude that it is reimbursement for three free warranty services provided by the appellant to the buyers of the vehicles.
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• Electricity distribution services performed as an agent are exempt from tax; upheld under Notification No. 32/2010-ST.

  Case-Laws - AT : Exemption to taxable service provided for distribution of electricity - services performed as an agent on behalf on the principal - benefit exemption N/N. 32/2010-ST dated 22/06/2010 cannot be denied to the appellant. - AT
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Central Excise

• Sewing Machine Classified Under Heading 84.52 Based on Principal Function as Per HSN Explanatory Note 7 to Chapter 84.

  Case-Laws - AT : Classification of stitching machines - the machine in question is sewing but they can do ordinary embroidery sewing - as per HSN Explanatory Note 7 to Chapter 84, the principal function of the machine is sewing - to be classified under heading 84.52 - AT
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• Appellant faces confirmed demand for undervaluation after selling goods above declared MRP, affecting central excise duty.

  Case-Laws - AT : Undervaluation - goods sold over and above MRP Declared - The appellant has shown MRP at ₹ 675/- and paying duty after claiming abatement thereof, but charging ₹ 830/- per stove from their buyers - demand confirmed - AT
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Case Laws:

• GST

• 2018 (6) TMI 172
  GST portal issues - Redressal of grievances - Migration to GST Act - Held that:- similar issue decided in the case of Sare Realty Projects Private Limited Vs. Union of India & others [2018 (5) TMI 366 - DELHI HIGH COURT] - we dispose of the present petitions by granting liberty to those petitioners who have not filed any representation to file detailed and comprehensive representations raising all the pleas as raised in the present writ petitions before the Nodal Officer within a period of five days from the date of receipt of certified copy of the order - petition disposed off.

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• 2018 (6) TMI 171
  GST portal issues - Claim of refund / provisional refund - Grievance mechanism set up in terms of Circular No. 39/13/2018-GST dated 03.04.2018 - the grievance is claimed to be ineffective for the normal reply given is that the problem has been resolved though in fact the problem persists - non credit/payments of electronic cash ledger - rectification of mistake by GSTN portal Revenue stated that petitioner in spite of repeated e-mails have failed to furnish information and details. Our attention is drawn to Annexure-7 to the status report. Held that:- The petitioners must immediately respond to Annexure-7 by sending e-mails within 7 days, on each issue or else it will be taken that the issue has been resolved and settled. - Matter to be relisted again on 3-8-2018

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• Income Tax

• 2018 (6) TMI 170
  Revision u/s 263 - allowability of Forward Contract Loss - Held that:- AO in his order passed u/s 143(3) has not held that the “Forward Contract Loss” claimed by the assessee is to be treated as Speculative loss. The AO accepted the expenditure of the assessee. Under these circumstances, it cannot be said that there was non-application of mind by the assessing officer to this issue or that the order was passed without making adequate enquiries or verification which should have been made or that the order was passed allowing relief without enquiring into the claim. It is also not a case where the AO has not examined this issue in the manner it has to be examined. Thus the order in question passed by the assessing officer u/s 143(3) on 24.02.2015, on this issue of ‘Loss on Forward Contract’ is neither erroneous nor prejudicial to the interest of revenue. Whether transaction in question can be called a speculative transaction? - Held that:- As decided in BADRIDAS GAURIDU (P.) LTD. [2003 (1) TMI 61 - BOMBAY HIGH COURT] when the assessee is not dealer in foreign exchange and as a part of his normal business activity, enters into hedging contracts of foreign exchange, the loss in question is normal business loss and cannot be held a “Speculation Loss” as covered by Section 43(5) - The loss in question is allowable as a normal business loss during the year and this loss is not “Speculation Loss”. In view of the above discussion we allow this appeal of the assessee

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• 2018 (6) TMI 169
  TPA - comparable selection - functional dissimilarity - MAM - Held that:- The assessee is engaged in business of procuring/importing lubricants in bulk from its parent company G. S. Caltex Corporation, South Korea which holds 100% shares of the assessee company and selling in India to its customers after repacking in small packs of 910 ML to 210 ltrs, thus companies functionally dissimilar with that of assessee need to be deselected from final list - the matter need to be set aside and restored to the file of the AO/TPO for re-adjudication by re-computing ALP for benchmarking international transactions of the assessee for import of lubricating oils from its AE on merits in accordance with law in accordance with our directions as outlined in this order.

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• 2018 (6) TMI 168
  Disallowance of professional charges - Held that:- For the expenses for which there is no material/evidence on record that these are incurred wholly and exclusively for the purposes of business have been disallowed. The assessee fails on this addition. Applicability of provisions of Section 36(1)(vii) - sum written off - Held that:- We are accepting this claim of the assessee as sale invoice value as raised by assessee in favour of ‘Tropicana Properties’ is included for computing income. Thus,in nut-shell we are allowing claim of the assessee towards write off of sundry balance of 29,967/- recoverable from Tropicana Properties keeping in view provisions of Section 36(1)(vii) of the 1961 Act. The assessee succeeds on this addition. Sundry balance write off of minor /fractional amount of in-significant value of 0. 59 being written of - Held that:- Keeping in view that amount involved is insignificant and is merely short/excess being fractional amount of paise fifty nine only written off,the same is allowed. The assessee succeeds on this addition Write off of sundry balance recoverable from ‘Akash Overseas Company’ - Held that:- There is no sales made to said party by assessee. Hence,it could not be shown by assessee that the said amount constituted income which was included while computing taxable income of the assessee. Thus,based on material on record,the claim of the assessee cannot be allowed within the parameters of Section 36(1)(vii) of the 1961 Act and hence claim of the assessee is rejected Write off of sundry balances to M/s Ganesh Stone Company - Held that:- It is for the assessee to have brought on record reasons as to why large receipts post sales cannot be appropriated towards sales. No such evidences are brought on record and this is second round of litigation. Under these circumstances there is no valid justification for allowing this amount of 93862. 80 as write off of sundry balances as no justification/ business exigency is shown. In the absence of proper explanation/evidences on record,the assessee claim cannot be allowed. Write off with respect to ‘Pacific Marbles Private Ltd.’ it is shown vide ledger account and sales invoices that sales have been made to the tune of 3,46,000/- on 09. 09. 2005 ,out of which 2 lacs was recovered on 05. 10. 2005 and the balance amount of 1,46,000/- was written off. In view of evidences brought on record ,keeping in view provision of Section 36(1) (vii) deduction while computing income of the assessee to be allowed.

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• 2018 (6) TMI 167
  Notice u/s 143(2) in the name of deceased - validity of assessment - information of death to the department - liability of legal heirs - Held that:- AO was never informed about the death of the assessee before the issuance of the notice under section 143(2) of the Act. After issuance of the notice under section 143(2) of the Act, the legal heirs of the assessee started appearing along with their authorised representatives and joined the proceedings before the AO. Therefore, the ratio laid down in this case will not apply to the facts of the present case. In other cases also, the AO was timely informed about the death of the assessee. Despite having knowledge of the death of the assessee, the AO has continued with the proceedings against the deceased person. No legal infirmity in the assessment order. Claim of deduction u/s 54F denied - investment made in the new property -proof of residential house construction within a period of one year from the date of sale of immovable property- Held that:- Assessee could not place the evidence for construction of residential house within a prescribed period before the sale of immovable property. Rather, he could not place any evidence to demonstrate that he has incurred such expenditure in construction of properties either in the form of bills and vouchers or agreement with the contractor. In the absence of any documentary evidence, the contention of the assessee cannot be accepted that he has constructed the residential house within a period of one year from the date of sale of immovable property. Therefore, we find ourselves in agreement with the observations of the CIT(A) that assessee is not entitled for deduction under section 54F - Assessee appeal dismissed

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• 2018 (6) TMI 166
  Additions made u/s 68 as unexplained credit - Held that:- The affidavit filed by the assessee was not examined by the lower authorities - it is incumbent upon the lower authorities to examine the deponent therein and thereafter, accept or reject the same. It is not appropriate to overlook the affidavit filed by the assessee without examining the deponent therein - thus we remit this issue to the file of the AO for consideration of the affidavit in accordance with law after giving opportunity of hearing to the assessee - partly allowed for statistical purposes. Additions u/s 68 - Held that:- The facts of this issue are similar to the facts in the assessment year 2009-10 the issue is remitted to the file of the AO for the purpose of examining the affidavit filed by the assessee. Addition made towards investment as advance for purchase of land - Held that:- The letter filed by the assessee stating that the assessee has not invested in the company M/s. Parathode Granites Pvt. Ltd. does not borne out of records and thus the letter is a self serving document, not corroborated by any evidence and this letter cannot be acted upon - hence addition made by the AO is to be confirmed.

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• 2018 (6) TMI 165
  Eligibility of deduction u/s 80P(2)(a)(i) on interest income on investments made with Sub-Treasuries - whether assessment under the head “income from other sources” or “income from business” - Held that:- Assessee had made investments with sub-treasuries in the course of its business of banking / providing credit facilities to its members - entitled to deduction u/s 80P(2)(a)(i) u/h “income from business” - Decided in favor of assessee.

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• 2018 (6) TMI 164
  Transfer pricing addition - comparable selection criteria - functional similarity - Held that:- The assessee is a public company engaged in the business of manufacture and sale of electrical automobile components such as starters, alternators, wiper motors, fan motors, magnetos etc. for four wheelers and two wheelers, thus companies functionally dissimilar with that of assessee need to be deselected from final list. We find that the comparables have not been analysed by the Ld. TPO in light of the submissions of the assessee which have been simply disregarded without analysing the claim of the assessee and without passing a reasoned order. Accordingly, in such a situation, we have no other option but to restore the entire issue of the selection of the comparables to the file of the TPO for making a fresh comparability analysis after duly considering the evidences and submissions of the assessee in this regard. The assessee shall be given due opportunity to present its case by the TPO. We, however, also direct that the assessee will not be at liberty to pray for inclusion of any other new comparables except the 6 comparables which it has already requested for inclusion before the TPO. Working capital adjustment - Held that:- As seen that the TPO has not allowed working capital adjustment to be made to the results of the companies selected by him on account of differences between the working capital requirements of the assessee vis-à-vis these companies. The TPO is directed to allow working capital adjustments to the assessee as per law while carrying out the fresh comparability analysis which has been restored to him Allow the assessee the benefit of proportionate adjustment to the assessee as per law and restrict the adjustment only in respect of international transaction. Calculation of operating margins of the assessee vis-a-vis the comparables selected by the TPO. These grounds are also restored to the file of the TPO for being adjudicated a fresh after duly considering the submissions of the assessee as well as the evidences being filed in support of the same. Disallowance of royalty and disallowance pertaining to provision for bad and doubtful debts - Held that:- This issue is covered in favour of assessee in assessee’s own case by the judgment of the Hon’ble Delhi High Court in CIT vs. Denso India Ltd.(2015 (1) TMI 824 - DELHI HIGH COURT) wherein it was held that the royalty paid by the assessee to its parent company was revenue expenditure and could not be treated as capital expenditure. The TPO has disallowed the impugned amount being 25% of royalty payment by observing the same as being capital in nature. However, the issue is clearly covered in favour of the assessee in assessee’s own case by the judgment of Hon’ble Delhi High Court as aforesaid and accordingly we direct that this disallowance to be deleted. As far as the issue of disallowance pertaining to provision for bad and doubtful debts is concerned, it is seen that the assessee had filed an application for additional objections vide letter dated 01.07.2010 before the Ld. DRP. However, the Ld. DRP has not considered/ adjudicated this issue. Therefore, it would be in interest of justice if this issue is restored to the office of the Ld. DRP for considering the objections of the assessee and passing speaking order on the same.

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• 2018 (6) TMI 163
  Penalty u/s 271(1)(c) - additions due to difference in rate of interest - Held that:- There is no denial of the fact that the assessee has incurred the interest expenditure which has been claimed as a deduction. Perusal of the chart showing details of loan availed and loan advanced appears that there is linkage between loan availed and loan advanced. Though, the assessee has ultimately offered the disallowed amount as income in a return of income filed under section 153A however, penalty under section 271(1)(c) being a separate and independent proceeding, the facts and evidences have to be considered and looked into afresh to find out whether the conditions of the penalty provision are satisfied or not. In any case of the matter, it is a case of deduction claimed by the assessee which has been disallowed by the Assessing Officer. That being the case, there is no concealment of income Addition of deemed dividend under section 2(22)(e) - Held that:- The assessee has advanced loan to M/s. Green Bird Developer Pvt. Ltd. and has received interest from the said company. In the aforesaid circumstances, the charge of concealment of income as made by the Assessing Officer is not established. That being the case, learned Commissioner (Appeals) was justified in deleting the penalty imposed under section 271(1)(c) of the Act in respect of the addition of deemed dividend under section 2(22)(e) of the Act. Addition of interest - assessee has availed loan from different persons at a higher rate of interest ranging between 12% and 18% it has charged interest on loan advanced @ 12% and 9% - Held that:- Assessing Officer has restricted the interest paid on loan availed at 12% resulting in the addition. Thus, from the facts on record it is very much clear that Assessing Officer has made the addition only on the basis of reasonableness. Thus, in effect, it is a notional addition and the assessee has not concealed any part of its income. That being the case, the provisions of section 271(1)(c) of the Act cannot get attracted to such addition even though the assessee might have accepted such addition. - Decided in favour of assessee

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• 2018 (6) TMI 162
  Valuing perquisites of the accommodation, provided to employees of the assessee society - Taxability - whether the employees of assessee-society are employees of Central Government or not? - bonafide belief - Held that:- Once the employees of the society are treated as employees of the Central Government for the purpose of evaluating perquisites of rent free accommodation, rules prescribed under clause (i) or clause (ii) of table 1 of rule 3 are to be adopted - in the present case we hold that the employees of the society cannot be equated with the employees of the Central Government - also no factual foundation is laid as to how the assessee has entertained a bona fide belief that its employees can be treated as Central Government employees - therefore, no relief can be granted based on bald assertion without any actual foundation - appeal of assessee is dismissed.

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• 2018 (6) TMI 161
  Additions made u/s 11(3)(c) - accumulation of income / funds - whether the unutilized amount transferred from capital fund to income and expenditure account is deemed income - Held that:- As per section 11(3) assessee was to utilize the fund within the period of 5 years or or in the next year immediately following the expiry of the specified period - here the fund was utilized by the assessee for the specified purpose in the previous year immediately following the expiry of the year upto which the fund was accumulated, therefore assessee was entitled for claiming the deduction u/s 11 - Decided in favor of assessee.

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• 2018 (6) TMI 160
  Suppression of production leading to the suppression of sale as well as determination of gross profit on estimated basis - statement u/s 133A was recorded on 21-01-2015, wherein, the excess production loss was observed - Held that:- The addition was solely made on the basis of the statement furnished by the production manager of the assessee at the time of survey. The lower authorities have not brought any iota of evidence suggesting that the assessee has suppressed the production leading to suppressed sale out the books. Here it is pertinent to note that the CBDT has discouraged to its officers to make the addition on the basis of the statements and without bringing any tangible materials for any addition/disallowance. Keeping in view the guidelines issued by the CBDT from time to time regarding the statements obtained during search and survey operation, it is undisputedly clear that the lower authorities have not collected any other evidence to prove the suppressed production other than the statement. - Decided against revenue

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• 2018 (6) TMI 159
  Disallowance of payment for employees contribution towards PF and ESIC after the due date - Held that:- Following the judgment of Jurisdictional High Court in case of COMMISSIONER OF INCOME TAX II VERSUS GUJARAT STATE ROAD TRANSPORT CORPORATION [2014 (1) TMI 502 - GUJARAT HIGH COURT] as held sums were not credited by the respective assessee to the employees 'accounts in the relevant fund or funds on or before the due date as per the Explanation to section 36(1)(va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees' contribution to the employees account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act - Decided against the assessee. Disallowance of depreciation - whether the rented out machinery is used for the business purpose - Held that:- The use of capital asset by the assessee being owner is not mandatory but use of business purpose - since assessee has offered rental income from the machinery under the head business or provisions, therefore he is entitled to claim depreciation corresponding to the rental income derived from the letting out of machinery u/s 32 - Decided in favor of assessee. Disallowance u/s 194J for non deduction of TDS - expenses under the head legal and professional fees - Held that:- The case of the assessee falls after the enhancement of threshold limit - where the payments exceeds limit of 30,000/-, TDS is required to be deducted - in case Shri Sanjiv Khurana assessee is not in default - in case of R. M. Modi, there is lack of documentary evidence, thus case is remitted back to the file of the AO - decided for statistical purpose.

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• 2018 (6) TMI 158
  TDS u/s 194H - Default u/s 201(1) - non deduction of TDS on discount coupons - whether there is commission element embedded or not in sale of prepaid SIM cards /prepaid vouchers/recharge coupons? - Held that:- Following the judgement of High Court in BHARTI CELLULAR LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-57, KOLKATA [2011 (5) TMI 590 - CALCUTTA HIGH COURT] all the relevant issues involved herein including that of principle to principle relationship stands adjudicated in hon’ble jurisdictional high court against the assessee Whether the roaming charges liable for TDS deduction u/s. 194J being in the nature of royalty? - Held that:- mere use of an equipment not in assessee;’s control without any right vested in it for using standard services does not amount to royalty - the amendment u/s 9(1)(vi) cannot be held applicable retrospectively as per doctrine of impossible compliance. See Asia Satellite Telecommunications Co. Ltd vs. DIT [2011 (1) TMI 47 - DELHI HIGH COURT]- - Decided against revenue

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• 2018 (6) TMI 157
  Rate of depreciation on intangible asset of licence for running container trains - commercial rights for 20 years - depreciation claim was allowed in original assessment u/s 143(3) but disallowed in the rectification proceedings u/s 154/147/143 (3) - Held that:- Commercial right acquired by assessee by way of this license for earning enduring benefit for a period of 20 years would amount to capital asset - following the decision of Hon’ble Delhi High Court in the case of Areva T&D India Ltd. vs. DCIT [2012 (4) TMI 79 - DELHI HIGH COURT] assessee is eligible for depreciation @ 25% u/s 32(1)(ii) - Decided in favor of assessee.

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• 2018 (6) TMI 156
  Assessment u/s 153A - Disallowance u/s 80IB - Disallowance u/s 40A(3) - Additions made u/s 68 for genuineness of the transactions - Proof of incriminating material found during the course of search - Held that:- Without any incriminating material found during the course of search, no additional income can be brought to tax in the assessment u/s 153A of the Act even where earlier assessments were concluded u/s 143(3) - following the judgement in case of COMMISSIONER OF INCOME TAX (CENTRAL) -III VERSUS KABUL CHAWLA [2015 (9) TMI 80 - DELHI HIGH COURT] the assessments u/s 153A for all the A.Ys are not sustainable and they are accordingly set aside - thus Revenue’s appeals against the relief granted by the CIT (A) u/s 80IB(10) are dismissed.

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• 2018 (6) TMI 155
  Exemption u/s. 54F - computation of eligible exemption claim - Held that:- The total cost of the new house claimed by the assessee is to the tune of 16,81,77,850/- as against 16 crore noted in the orders of the lower authorities. In our view, if the assessee is able to satisfy that spending of 81,77,850/- is also within the stipulated period and meets the other conditions prescribed u/s. 54F, the same deserves to be considered for computing the eligible exemption. Since this involves appreciation of factual aspects, for this purpose, we deem it fit and proper to restore the matter back to the Assessing Officer, who shall examine the said limited plea of the assessee and, thereafter compute the eligible exemption u/s. 54F of the Act as per law

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• 2018 (6) TMI 154
  Disallowance of difference between the interest received and interest paid of Interest u/s 57(iii) - allowance only to the extent of interest received by the appellant - Held that:- Neither the AO nor the Ld. CIT(A) has examined the contentious issue in the light of judgement of COMMISSIONER OF INCOME-TAX VERSUS AMRITABEN R. SHAH [1999 (4) TMI 73 - BOMBAY HIGH COURT] - thus we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to make a fresh assessment - assessee must be given reasonable opportunity of being heard - allowed for statistical purposes.

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• 2018 (6) TMI 153
  Determination of arm's length price - selection of comparables - Held that:- The matter is restored to the file of Ld. TPO for re-characterization of profile of the assessee and making fresh selection of comparables functionally similar to the assessee and then decide the arm’s length price of the international transaction accordingly - also assessee should be given adequate opportunity of being heard - allowed partly for statistical purposes. Disallowance u/s 40(a)(i) for non-deduction of tax at source on inter-company fee payments - Held that:- Ld. DRP has confirmed the disallowance without any detailed reasoning and taking into account the documentary evidences of deposit of tax - thus it is decided to restore this issue to the file of the Ld. AO for deciding afresh after providing adequate opportunity of being heard to the assessee - allowed for statistical purposes.

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• 2018 (6) TMI 152
  Disallowance of exemption u/s 54F on sale of second flat against the investment in new flat - Held that:- Assessee made investments in two new residential flats for commercial reasons as there was no justification brought on record by the assessee for making investments in two different flats located at different locations - following the judgement in case of INCOME-TAX OFFICER, WARD 19 (3) -4, MUMBAI. VERSUS MS. SUSHILA M. JHAVERI. [2007 (4) TMI 289 - ITAT BOMBAY-I] we are of view that under such circumstances no exemption can be allowed u/s 54 for making investment in the second flat - thus appeal of the assessee lacks merit and hence dismissed.

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• 2018 (6) TMI 151
  Disallowance of liability on account of worker's retrenchment compensation and other benefits - Held that:- The retrenchment compensation is admissible as per Labour Law and has been so debited in the accounts on accrual basis but disbursed to the labours only on receipt of funds on various dates for which necessary documents were produced with the name of labours, dates of retrenchment and amounts calculated - following the judgement in case of BHARAT EARTH MOVERS VERSUS COMMISSIONER OF INCOME-TAX [2000 (8) TMI 4 - SUPREME COURT] no addition is required on this issue - thus this is an admissible deduction. - Decided against revenue.

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• 2018 (6) TMI 150
  Addition relying on the confessional statement in pursuance to survey u/s 133A - Held that:- Merely on the basis of admission/confession, the assessee could not have been subjected to such additions unless and until, some corroborative evidence found in support of such admission, therefore we are unable to find any justification on the part of the lower authorities to make the addition of 15 lac on the basis of confessional statement, loose sheet of ledger and General Power of Authority (found from the premises of third party). Even there is no reason not to disbelieve the retraction made by the Assessing Officer and explanation duly supported by the evidence. Hence, the addition made by the AO and uphold by the Ld. CIT(A) is not sustainable and is liable to be deleted, ordered accordingly. The material on record only shows the assessee to have been engaged in the property dealing along with others during the year 2002. No asset from the said earnings can be said to have been found by the Revenue for it to invoke ss. 69/69A for the current year. - Decided in favour of assessee.

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• 2018 (6) TMI 149
  Assessment u/s 153A - addition on account of income of ‘Moets Retreat Club' - application of real income theory as the assessee appellant earned no income and so no tax is leviable on him - Held that:- The list, which is a seized document, has to be relied upon totally and not partially, unless there is some other corroborating evidence supporting the view of the assessing officer are also found. The documents has to be read as a whole and not in part and it cannot be said that one part of the document to be correct and another as incorrect. CIT (Appeal) has rightly accepted the list of members and the amount shown from seized annexure as the amount is clearly depicted against each member and rightly rejected the amount calculated/estimated by the AO. As the ld OA has not made any reference to any other evidences which shows the receipt of the membership fees higher than what is computed by the ld CIT (A), we donot find any infirmity in the orders of the ld CIT (A) in computing the membership fees which is showing the numbers of the members as well as the fees received from them. The amount of money has already been deducted by the Agent when the sum is received in cash from member and only net amount is received by the assessee. We therefore hold that commission claimed by the assessee in each year cannot be disallowed especially when the subscription fees is included in the gross receipt chargeable to tax. Further the above sum is payable according to the agreement on receipt of the membership fees by the assessee. When the membership fees has been fully charged to tax, the enhancer has confirmed the receipt of the full commission, there is no dispute about the non-payment of any commission to that party, there is no justification for restricting the allowance of the commission paid by the assessee partially. Therefore the Ld. assessing officer is directed to allow the commission to the assessee is an expenses paid to M/s Enhancer network as the full commission income has been charged to the tax by the AO Disallowance of expenditure - CIT(A) restricted the disallowance of expenditure by giving reasons of absence of certain vouchers of the specific ledger mentioned by him. We do not find any infirmity as far as this disallowance is concerned in this year as he disallowed one-third of expenses of 1,12,000/- for which no vouchers were produced. As regards disallowance in other years, the ld CIT(A) has not given any specific reasons but confirmed disallowance on adhoc basis to 1,50,000/- in AY 2003-04 and 2004-05 on the reasoning that in absence of all the vouchers the above disallowance is reasonable , while in AY 2005-06 whole of the expenditure was allowed by him. But in AY 2006-07 the CIT(A) stated that AO has not pointed out any vouchers of expenses which were not produced but still disallowance has been upheld to the extent of 40% on adhoc basis. We restrict the disallowance in all these years to 50000/-for each of the assessment year i.e. AY 2003-04, 2004-05 and 2006-07. We find that Moets Retreat Club was made as per supplementary agreement with LP Hospitality who were the owners of the land and building. The infrastructure and the assets built thereon by the assessee have already become the property of the owners now. In fact, another company JS Hospitality is presently running the club who has taken over the liabilities assigned on the assessee. The expenditure incurred by the assessee relates to kitchen equipments, swimming pool, scooter, sports and gym equipments and banquet hall. The banquet hall was already built by the owners and only renovations by way of tiles, painting etc. were made which amounted to 6,00,000/- only in AY 2004-05 because club members were not satisfied about the conditions of the building of the banquet hall. This expenditure is only in the nature of renovation of the building and therefore is required to be allowed totally. The kitchen and sports equipments are also not in the nature of enduring benefits as all the aforesaid equipments are required to be replaced from time to time. However, expenditure incurred on swimming pool and scooter cannot be allowed as revenue expenditure. The depreciation on these two assets is rightly allowed by the ld. CIT(A). Whether assessee cannot retract later once income was surrendered during search that too on the basis of document found during search and subsequent denial has no meaning? - Held that:- During the course of search there were no evidences found except the release of the paper where there are no details of the loans given by the assessee as well as the amount of interest are. It is also interesting to note that the balance sheet of the assessee assessee has borrowed from various parties therefore also it is unusual that assessee for also from other parties and also gives loan to other parties. It is also interesting to note that there is no interest element involved in these loans which is been added by the assessing officer. Therefore the decision relied upon by the revenue does not apply on the facts of the case before us. Estimation of the gross profits with respect to several restaurants business carried on by the assessee - Held that:- CIT(A) has given very detailed order and come to the conclusion by adopting 15% GP Rate in most of these years except AY 2003-04 so far as business of Moets Catering Services is concerned, but it is true that in the year AY 2002-03 the assessee was engaged in the new business of developing a club at the same premises and so GP Rate adopted @15% in that year as against 6.06% declared by the assessee is not justified, and therefore same needs to be scaled down. In the interest of the justice, AO is directed to adopt at 8%. With respect to the other years the Ld. authorized representative could not show was any reason to deviate from the finding of the Ld. CIT (A). Departmental representative also could not show that how the decision of the Ld. CIT (A) is not justify where he has followed the order of the coordinate bench in case of a group concern. In AY 2003-04 assessee himself declared GP Rate of 17.16% which was more than 15% adopted in other years, thus the adoption of 20.53% in this year is also not justified the GP Rate in this year is rightly declared and the same be adopted. However, in other years the GP Rate of 15% adopted by the CIT(A) seems to be justified and is therefore upheld. In other businesses, also, the GP Rate adopted by the CIT (A) seems to be justified and no interference is called for.

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• 2018 (6) TMI 148
  Penalty levied u/s. 271(1)(c) - Exemption u/s. 11 denied as held that business of publishing newspaper itself cannot be said to be an object of general public utility entitled for exemption as a charitable institution - Held that:- We notice that in some of the years it has been held that the assessee is entitled for Exemption u/s. 11 of the Act. The stand of the assessee was that the claim for exemption u/s. 11 of the Act was a bonafide claim. Further, we notice that penalty was levied on similar circumstances in the Assessment Years 2007-08, 2008-09 and 2010-11 and the Ld.CIT(A) deleted the penalty which was confirmed by the Tribunal The assessee had not concealed any income or furnished inaccurate particulars of income. The exemption u/s. 11 of the Act was denied to the assessee on a mere change of opinion. The issue of whether the assessee trust is entitled for exemption u/s. 11 of the Act is highly debatable. The claim made u/s. 11 of the Act was also appears to be bonafide claim and there is no concealment of income or furnishing inaccurate particulars - No penalty to be invoked - Decided in favour of assessee

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• 2018 (6) TMI 147
  Penalty u/s 271(1)(c) - deemed rental value when treatment of the addition in assessment order was confirmed by himself as concealed income - Bonafide belief -Held that:- On the basis of conflicting views of two benches of the Tribunal on the issue under consideration, it could safely be concluded that as the issue under consideration was not free from doubts and debates, thus the assessee could not be subjected to levy of penalty under Sec. 271(1)(c) for adopting one of such view As the claim raised by the assessee was clearly backed by a bonafide belief on his part, that the notional income of the villa was not liable to be taxed in India, therefore, on the said count too no penalty under Sec. 271(1)(c) could have been validly imposed on the assessee - No penalty under Sec. 271(1)(c) of the Act could have been imposed on the assessee in respect of the addition of an amount made by the A.O towards notional income of the villa owned by the assessee at Dubai. The order of the CIT(A) deleting the penalty imposed by the A.O under Sec. 271(1)(c) is upheld. - Decided in favour of assessee Addition made towards Long Term Capital Gain on sale of structured product, viz. 0% debentures - Held that:- Raising of an incorrect claim in law cannot be construed as furnishing of inaccurate particulars of income. As it remains an admitted position that no information given by the assessee in its return of income in respect of either the amount of sale proceeds or the cost of acquisition of the structured product, viz. 0% debentures of Deutsche Investments India Pvt. Ltd. is found to be incorrect or inaccurate, therefore, the wrong computation of the LTCG can by no means be characterised as furnishing of inaccurate particulars of income by the assessee. We find that our aforesaid view that where no information given in the return of income was found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars, for the reason that he had on the basis of said facts made an incorrect claim in law, is fortified by the judgment of the Hon’ble Apex Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd [2010 (3) TMI 80 - SUPREME COURT] - Decided in favour of assessee

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• 2018 (6) TMI 146
  Validity of corrigendum issued to the order passed u/s 144C - AO instead of passing a provisional order or a draft assessment order, has passed a final assessment order - Whether the AO has failed to forward a draft of the proposed order of assessment to the company and thereby not following the procedure laid down in Section 144C - Held that:- There is an omission on the part of the AO to follow the mandatory procedures prescribed in the Act, such an omission cannot be termed as a mere procedural irregularity and it cannot be cured - AO has failed to follow the mandate of the provisions of section 144C whereby he was required to pass a draft assessment order - thus the final assessment order passed by the Assessing Officer u/s 143(3) is without jurisdiction - also the issuance of a show-cause notice cannot be equated and treated as a draft assessment order - we quash and set aside the impugned assessment order - Decided in favor of assessee.

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• 2018 (6) TMI 145
  Reopening of assessment - approval u/s 151 from the CIT before issuing notice u/s 148 - casual approach in granted approval - unexplained cash credit u/s. 68 - non application of mind by the Additional Commissioner before granting the approval - Held that:- United Electrical Co. Pvt. Ltd. Vs CIT [2002 (10) TMI 86 - DELHI HIGH COURT] has held if the Additional Commissioner had cared to go through the statement of the said parties, perhaps he would not have granted his approval, which was mandatory in terms of the proviso to sub-section (1) of section 151 of the Act as the action under section 147 was being initiated after the expiry of four years from the end of the relevant assessment year. The power vested in the Commissioner to grant or not to grant approval is coupled with a duty. The Commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case there has been no application of mind by the Additional Commissioner before granting the approval. In the present case Commissioner has simply mentioned “approved” to the report submitted by the concerned AO. In the light of the ratios/observations of the Hon’ble High Court mentioned hereinabove, we have no hesitation to hold that the reopening proceedings vis-à-vis provisions of Sec. 151 are bad in law and the assessment has to be declared as void ab initio. Ground No. 1 of assessee’s appeal is allowed.

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• 2018 (6) TMI 144
  Addition of depreciation on valuation of investments - whether fall in value of investment of securities shown as investments in the books of account can be allowed as deduction? - Held that:- An identical issue was dealt with by us threadbare in the case of Canara Bank vs. JCIT [2016 (4) TMI 429 - ITAT BANGALORE] we hold that the CIT(A) was correct in law in allowing fall in value of investment as business loss. Addition u/s 14A - Held that:- An identical issue was decided by us in the case of Canara Bank [2014 (1) TMI 1586 - KARNATAKA HIGH COURT] wherein it was held that resort to disallowance under section 14A can be made only in case where the Assessing Officer recorded satisfaction as to how the claim of the assessee that no expenditure was incurred to earn exempt income is incorrect. Addition made on broken period interest - Held that:- This issue is no longer res integra as following THE COMMISSIONER OF INCOME TAX VERSUS THE BANK OF RAJASTHAN LTD., [2010 (4) TMI 217 - BOMBAY HIGH COURT] Addition made on account of bad debts written off - Held that:- In the present case facts relating to this issue have not been brought out by the Assessing Officer. Therefore we remand this issue back to the file of the Assessing Officer for the limited purpose of verifying that the amount of claim under section 36(1)(vii) should be limited to the amount written off in the books of account i.e. provision for bad debts debited to P and L account and reduced from sundry advances account. It may not be out of place to mention here that the provisions of section 36(1)(vii) and 36(1)(viia) are independent of each other and the assessee is entitled to deduction u/s 36(1)(vii) in addition to the amount of deduction for provision for bad and doubtful debts u/s 36(1)(viia) of the Act. Appeal filed by the revenue is partly allowed for statistical purposes Non deduction of tds - whether the assessee is liable for tax deduction at source on the charges paid to National Financial Switch and Cash Tree Consortium for use of ATM of other banks by its customers - disallowance u/s 40(a)(ia) - Held that:- Hon'ble Supreme Court in the case of Kotak Securities [2016 (3) TMI 1026 - SUPREME COURT] held that consultancy managerial services involving services rendered by human efforts where services are made available to all customers and there is nothing special, exclusive or customer service charges, it does not par take character of managerial or Technical Services. In the light of this decision we hold that the assessee bank is not liable for tax deduction at source on these payments. We direct the Assessing Officer to delete addition on account of technical service. MAT - Assessee-bank is not liable for tax under section 115JB for the year under consideration. Provisions of section 36(1)(vii) and 36(1)(viia) are independent of each other. We remit this issue back to the file of the Assessing Officer to compute the amount of allowance in accordance with the provisions of section 36(1)(viia) after affording a reasonable opportunity of being hard to the assessee.

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• Customs

• 2018 (6) TMI 143
  Valuation of imported goods - enhancement of value on the basis of earlier import made by appellant - market inquiry conducted without informing the appellant - Held that:- With regard to the earlier import made by the appellant, the matter travelled before this Tribunal and has held that the value of imported goods shall be the transaction value and the same is required to be accepted. Therefore, in the earlier import wherein the Revenue sought to enhance the value has already been set aside by this Tribunal, therefore, the same cannot be the ground for enhancing the value, the import made in question. Enhancement of value on the basis of market enquiry conducted by the Revenue - Held that:- Admittedly, it was conducted at the back of the appellant without informing the appellant and secondly on the face of it the market enquiry seems to be of a fabricated one as it was neither obtained from any dealer, distributor and these persons did not come forward for cross examination and therefore, this evidence cannot be relied upon to enhance the value of imported goods. The Revenue has failed to give concrete evidence for mis-declaration of the goods, in that circumstance, the assessable value of the imported goods cannot be enhanced - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 142
  Import of old and used Digital Multifunction Printers / Devices with Accessories and Attachment - violation of Foreign Trade Policy (FTP) - The invoice did not contain details like year, country of manufacture, whether reconditioned or refurbished etc. - Imposition of redemption fine - penalty - Held that:- The amendment made in the FTP on 28/02/2013 has mandated that these impugned items can only be imported after obtaining a licence and in the present cases the appellant had not obtained the licence for importing the impugned goods - As the import is after the amendment and therefore the import is in violation of the FTP and therefore there is no infirmity in the impugned orders imposing redemption fine and penalties - decided against appellant.

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• 2018 (6) TMI 141
  Classification of imported goods - DC Motor which is performing dual function i.e. of DC Motor and of rear wheel - main principal and dominant function of the imported goods - Whether the DC motor imported classifiable under tariff item 8501 3119 as claimed by appellant or under tariff item 8714 1090, as held by Revenue? - Whether appellant entitled for benefit of N/N. 21/2012-Cus (Serial No. 7), N/N. 06/2006-CE (Serial No. 35A) or N/N. 12/2012-CE (Serial No. 274, 296)? Held that:- The main principal and dominant function of the imported goods shall be classifiable as per essential character of the said goods - As the impugned goods, having the essential character of motor, the same has the principal function of electric motor as rotor is fixed on the electric motor. It become rear wheel only after mounting the tyre and without tyre, it cannot perform as part of e-bike. In that circumstances, the main dominant and principal function of the impugned goods is electric motor. Therefore, the same merits classification in tariff item 8501 3119 as classified by the appellant. Benefit of N/N. 21/2012-Cus (Serial No. 7), N/N. 06/2006-CE (Serial No. 35A) and N/N. 12/2012-CE (Serial No. 274, 296) - Held that:- As per the description of excisable goods, DC Motor is covered under the said notifications and exempted from payment of duty on following the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. Admittedly, the appellant has complied with the conditions and goods were allowed to be cleared by giving benefit of the said notifications - benefit of notifications allowed. Appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 140
  100% EOU - debonding of unit - Duty on depreciated value of capital goods at applicable rates at the time of debonding - Import of goods without payment of duty - imported goods not used in manufacture - case of the Revenue against the appellant is that they have never started any manufacturing activity and being 100% EOU, imported capital goods as well as inputs without payment of duty - Held that:- The Revenue cannot claim that the appellants have never used the imported goods for discharging their export obligation. Admittedly, the appellant could not fulfil export obligation and therefore, they applied for de-bonding with the Development Commissioner and the same has been allowed to them. The appellant was required to pay duty on capital goods at applicable rates at the time of payment of duty - appellant has rightly paid duty on depreciated value of capital goods at applicable rates at the time of debonding. Penalties u/s 112 of CA - Held that:- No penalties are imposable on the appellants as proceedings against the appellants has already been closed by the Development Commissioner and no specific provision has been provided for imposing penalties under Section 112 of the Customs Act. Appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 139
  Imposition of ADD on Vitamin C and its synonyms - import of Sodium Ascorbate - determination/ classification based on end-use - N/N. 159/2003 – Cus dt. 26.10.2003 - case of Revenue is that goods in question were imported when there was Anti Dumping duty in force on Vitamin C and its synonyms imported from China - Held that:- The revenue in their appeal has merely relied upon the end use of the imported goods as stated by Dy. CC. However the fact remains that only the end use of the impugned good i,e Sodium Ascorbate does not make it fall under the category of Vitamin C - sodium ascorbate imported from China being neither Vitamin C nor the synonyms, does not fall in the purview of the N/N. 159/2003 - imposition of ADD do not sustain - appeal dismissed - decided against revenue.

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• 2018 (6) TMI 138
  Recovery of duty foregone on goods at the time of import - N/N. 204/92-Cus dated 19th May 1992 - imported goods deployed for the purpose other than mentioned in notification - appellant contends that MODVAT credit attributable to inputs used in the export had been surrendered - Held that:- The obtaining of redemption certificate from the licensing authority is merely a technical formality. We take note that the redemption certificate has been issued, albeit subsequently, without casting any doubts on the exports claimed to have been effected by the appellant in their application to the licensing authority for redemption certificate. Nor is there any evidence from Revenue that the exports claimed to have been fulfilled are questionable - there can be no controverting that the export obligation has been fulfilled, in substance, at the time of utilization of imported raw material. We are convinced that the appellant had taken steps to reverse the MODVAT credit. Whether the reversal did occur or not is still an open to question; despite the specific directions of the Tribunal vide order dated 23rd October 2017, Commissioner (Exports), Mumbai-II has not been able to illuminate us with a specific report. Remand the matter back to the original authority with the following specific directions: a) To ascertain within a period of forty five days, whether the reversal of MODVAT credit has taken place by encashment of the cheque. b) In the event of a determination that the MODVAT credit has not been reversed, to give an opportunity to the appellant to do so within a further forty five days, and, upon either contingency being confirmed, the demand shall stand dropped along with penalties.

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• Service Tax

• 2018 (6) TMI 137
  Penalties u/s 76, 77 and 78 - Business Auxiliary Service - matter under litigation during the disputed period - bonafide belief - Held that:- The service tax was levied on Business Auxiliary Service w.e.f. July 2003. Therefore, the contention of the appellants that they were under bonafide belief, due to the said service being new, that job work which they got done from outside small workshops/mechanics was not liable to service tax, is correct - also the service tax with interest paid on being pointed out before issuance of SCN - penalties u/s 76, 77 and 78 set aside by invoking section 80 - Appeal allowed.

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• 2018 (6) TMI 136
  Activity of laying underground cable on behalf of the BSNL - Erection, Commissioning and Installation services or not? - levy of service tax - CBEC Circular No. 123/5/2010-TRU dated 24.05.2010 - Held that:- Assessee produced the agreement against which they executed the work and as per the agreement, the cable was to be laid down under foot path/roads/trenches. In that circumstances, there is no requirement to sent the matter back to the authority below as facts of the case are available before us. Admittedly, as per the said circular dated 24.05.2010, Erection, Commissioning and Installation the activity of laying underground cable has been exempted from levy of service tax, the assessees are not required to pay service tax on their activity. Appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 135
  Leviability of service tax on the free warranty service - amounts received from the manufacturer M/s. Hindustan Motors Limited under ‘Serve to Win’ reward scheme for the free services provided by them - The department took a view that the appellant had received this amount in lieu of free services provided by them to the buyers of the vehicles - Extended period of limitation - Held that:- The appellant are providing three free services during the warranty period. Admittedly, the entire cost of free service is borne by the appellant and no reimbursement is being received from the manufacturers or is being charged to the customers. The free services are being provided in pursuance to the obligation cast on the appellant by the manufacturer of the vehicles. It is not disputed by both the lower authorities that the scheme is discretionary in nature and is in the form of incentive to improve the quality of pre-delivery inspection, of three free services and for maintenance of complete control system. Hence, it is not correct to conclude that it is reimbursement for three free warranty services provided by the appellant to the buyers of the vehicles - demand set aside. Invocation of Extended period of limitation in case of second SCN - Held that:- The judicial discipline mandated that Department should not have invoked extended period in second SCN dated 26.02.2007 when the same issue had come to its notice already while issuing first SCN dated 13.04.2006 - extended period of limitation. Appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 134
  Refund of unutilized CENVAT credit - 100% EOU - denial of credit due to various reasons - it was contended by the appellant that proper observations were not made by the original authority - Held that:- The impugned order set aside and cases remanded back to the original authority with the observation to pass a de novo order after considering the submissions put forth by the appellant - The original authority will also consider the e-BRCs which could not be produced before him earlier and which have been obtained subsequently by the appellant from the DGFT clearly showing the receipt of FIRCs - appeal allowed by way of remand.

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• 2018 (6) TMI 133
  Reversal of Cenvat Credit - Cenvat Credit availed on inputs, capital goods and input services denial on the premises that services provided by the appellant during the impugned order are exempted from payment of service tax - Held that:- Whatever service tax paid by the respondent amounts to reversal of Cenvat Credit availed by them on inputs, input service and capital goods. Therefore, the payment of service tax on the said services although not taxable shall be reversal of Cenvat Credit availed by the respondents on input, input service and capital goods - appeal dismissed - decided against Revenue.

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• 2018 (6) TMI 132
  Exemption to taxable service provided for distribution of electricity - services performed as an agent on behalf on the principal - appellant is a distribution licensee or not? - Benefit of N/N. 32/2010-ST dated 22/06/2010 denied - sole ground for denial of benefit of exemption N/N. 32/2010-ST dated 22/06/2010 is that the appellant is not a distribution licensee or distribution franchisee or any other person authorized under the Electricity Act for distribution of electricity - Held that:- Admittedly, the appellant is providing the services of distribution of electricity on behalf of DHBVN & UNBVN, who are the distribution licensees. Therefore, it is to be seen that whether the appellant got the right for transmission of electricity from their principals. Admittedly, the appellant has provided these services on behalf of the distribution licensee, who are having license to distribute the electricity. In the case of Canara Bank [2012 (6) TMI 274 - CESTAT, AHMEDABAD], this Tribunal got an occasion to examine the issue whether a person, who is providing services on behalf of the principal is entitled to the benefit of notification or not, and it was held that an exemption to the principal would be available to agent also. As the appellant is providing services on behalf of the principal, who is having a license as distribution licensee to distribute electricity under the Electricity Act. Therefore, the benefit exemption N/N. 32/2010-ST dated 22/06/2010 cannot be denied to the appellant. Appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 131
  Exemption on services provided in SEZ - deemed exports - Composition Scheme - Works Contract - Single Composite service - Whether the respondent is entitled for exemption of services provided in SEZ during the period April 2000 to March 2010 in terms of Provisions of Section 26 of SEZ Act, 2005 or not? Held that:- Services provided to a SEZ or unit in the SEZ is deemed as export as per the provisions of Section 2 (m) (ii) of the SEZ Act, 2005 and as per Rule 31 of the SEZ Rules, 2006, the appellants are entitled for exemption from payment of service tax on the services which are used or provided to a unit in the SEZ. The respondents is entitled for exemption on services provided in SEZ - appeal dismissed - decided against Revenue.

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• 2018 (6) TMI 130
  Refund of service tax paid erroneously - rejection of claim as time barred - period of limitation - appellant has discharged the service tax liability on the amounts disbursed to the Managing Director as salary - no service involved, employer-employee relationship - Held that:- It is an admitted fact that the appellant has discharged the service tax liability on the amounts disbursed to the Managing Director as salary. Adjudicating authority in the order-in-original has clearly recorded that this amount which has been disbursed to the Managing Director would not fall under the category of services, as there exists an employer-employee relationship between the appellant and the Managing Director. If that be so, provision of section 11B would not be attracted. Reliance placed in the case of Parijat Construction v. CCE [2017 (10) TMI 659 - BOMBAY HIGH COURT], where it was held that the provision of section 11B of Central Excise Act, 1944 will not be applicable, as service tax liability does not arise. Appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 129
  Construction of service - Composite Contracts - Construction of residential complex in Hydel power project colony for the power generation company which they use for residence of their staff working on the said dam - Construction of peripherals of construction of hydro electricity dams - Supply of Construction equipments/machinery to be used in construction of dams and residential complex - Penalty - Held that:- The residential complex which has been constructed by the appellant is for the personal use of the staff of the services recipient, therefore, in the light of decision in the case of Mall Enterprises [2015 (11) TMI 333 - CESTAT MUMBAI] as residential complex has been constructed for the personal use, the demand of service tax is not sustainable - demand set aside. Construction of peripherals of construction of hydro electricity dams - Held that:- The construction and residential construction for items namely: Hydel tail/tunnel, approach road, construction of cooling water sump desilting tank, power channel and water conductor and construction of hydel project are in respect of dam and the same is exempt from payment of service tax - demand set aside. Supply of Tangible goods - Supply of Construction equipments/machinery to be used in construction of dams and residential complex - Held that:- The appellant is required to pay service tax on the said supply of tangible goods under the category of supply of tangible goods, therefore, demand in respect of supply of tangible goods is confirmed - further, the appellant has not recovered any amount towards service tax, therefore, the payment received by the appellant on supply of tangible goods shall be treated as cum tax price and the appellant is entitled for the benefit of the same - A demand of 2,33,756/ on account of supply of tangible goods is confirmed but the appellant shall be entitled for the benefit of cum tax. Penalty - Held that: - As the appellant was under bona-fide belief that the supply of tangible goods is used in respect of dam, therefore, they are not liable to pay service tax. In that circumstances, benefit of section 80 of the Finance Act, 1994 is given to the appellant - penalty set aside. Appeal disposed off.

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• 2018 (6) TMI 128
  Scope of SCN - details of income head not provided in SCN - Short payment of service tax - banking and financial services - Held that:- The SCN was issued on the basis of Profit and Loss account of the appellant but total taxable value shown in the SCN is 7,12,46,826/-, however the SCN has not given any bifurcation of this consolidated amount. It is obvious that appellant being a provider of banking and financial services providing taxable and exempted service. Therefore it is necessary to show the individual account head and the amount of such account before ascertaining that whether all such accounts heads are on account of taxable service or otherwise. It is clear that the appellant in the reply seeking the detail of income head considered for taxable value is legitimate and without such detail neither show cause notice is justified nor it is on the principles of natural justice - The adjudicating authority directed to first provide the break–up of amount of 7,12,48, 826/- under various account head and the same may be put to notice to the appellant - appeal allowed by way of remand.

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• Central Excise

• 2018 (6) TMI 127
  Classification of goods - uncoated paperboard - electrical grade insulating pressboard - insulating fittings as known as spacers - Held that:- Products merits classification as, namely, (i) uncoated paperboard under heading 4805 (ii) electrical grade insulating pressboard under heading 4810 and (iii) spacers under heading 8547.9090 of Central Excise Tariff Act - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 126
  CENVAT credit - inputs used in the export - manufacturing goods chargeable to nil duty - finished goods were chargeable earlier which later on became exempted - Held that:- Admittedly, in the case in hand, the goods which became exempted has been exported by the appellant, therefore, the appellant is not required to reverse the Cenvat credit in terms of Rule 11. Similar view has been taken by the Hon’ble Himachal Pradesh High Court in the case of CCE vs. Drish Shoes Limited [2010 (5) TMI 334 - HIMACHAL PRADESH HIGH COURT] wherein Hon’ble High Court has held that an assessee, manufacturing goods chargeable to nil duty, is eligible to avail CENVAT credit paid on the inputs under the exception clause to Rule 6(1), as contained in Rule 6(5) of CENVAT Credit Rules, 2002 and Rule 6(6) of CENVAT Credit Rules, 2004, used in the manufacture of such goods, if the goods are exported. Appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 125
  Classification of stitching machines - machines manufactured by respondent No.1 under brand namely, Usha Magic Master, Merritt Designer, Luxmi & Aristo and respondent No.II under the brand name “Usha Flora” - Case of the Revenue is that the embroidery is the primary function of the impugned goods and hence, these goods are classifiable as "embroidery machines" under CTH 8447 of the Tariff Act - benefit of Sl. No. 201 of N/N. 6/2002-CE dated 1.3.2002 and under Sl. No. 15 of N/N. 6/2006-CE dated 1.3.2006. Whether the machines are sewing machines or embroidery machines and the same having merit classification under heading 8452 or 8447 of the Tariff Act? Held that:- As per Note 7 to Chapter 84, a machine is used for more than one purpose is, for the purposes of classification, to be treated as it its principal purpose were its sole purpose - On going through the HSN Explanatory Notes to Chapter heading 8447, the heading does not cover sewing machines capable of doing simple embroidery in addition to ordinary sewing under 8452. Further as per HSN Explanatory Note to heading 84.52 states that the machines designed to do embroidery work only under heading 84.52. Admittedly, in the case in hand, the machine in question is sewing but they can do ordinary embroidery sewing. In that circumstance, as per HSN Explanatory Note 7 to Chapter 84, the principal function of the machine is sewing , in that circumstance, it is held that held that the machine in question are sewing machines having merit classification under heading 84.52 of the Tariff Act and are also entitled for the benefit of notification. Appeal dismissed - decided against Revenue.

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• 2018 (6) TMI 124
  Undervaluation - goods sold over and above MRP Declared - value in terms of Section 4A of the Central Excise Act, 1944 - Held that:- The appellant has shown MRP at 675/- and paying duty after claiming abatement thereof, but charging 830/- per stove from their buyers, which shows that the appellant has undervalued the assessable value. MRP shown on the stove has no relevance for payment of duty - the duty has rightly been demanded by the Revenue under Section 4A of the Act ascertaining the fact that the goods have been sold by the appellant over and above MRP declared - appeal dismissed - decided against appellant.

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• 2018 (6) TMI 123
  CENVAT credit - denial on the ground that goods cleared clandestinely and cleared under the guise of job-work challan for use of manufacturing goods in unit No.2 - revenue neutrality - Extended period of limitation - Held that:- The appellant has cleared the goods under job-work challan to their Unit No.2 during the period 01/08/2004 to 14/04/2007 and unit No.2 has cleared the goods after completion of payment of duty - In that circumstances, it is a revenue neutral situation as the appellant has suffered duty on the said goods cleared by them to Unit No.2 without payment of duty or reversal of Cenvat Credit. Extended period of limitation - Held that:- Considering the fact that it being a revenue neutral situation, therefore no malafide can be attributable against the appellant for non-reversal of Cenvat Credit - extended period not invocable. Appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 122
  Clandestine Removal - undervalutaion of goods - cross-examination of witnesses not done - contention of the appellant is that the appellant has done trading activity and to that effect they have produced purchase invoices and sale invoices with regard to the trading activity, the same has not examined by the adjudicating authority properly and in haste concluded that the appellant has undervalued the goods. Held that:- In the remand proceedings, the adjudicating authority was directed to cross examine the witnesses whose statements have been relied upon. Despite the directions, the adjudicating authority chose not to give cross examination of the witnesses on the ground that they have never retracted their statements recorded during the course of investigation. The charging of clandestine removal is not sustainable, in the absence of any corroborative evidence except the statements. Moreover, the statements of the witnesses are to be tested in terms of Section 90 of the Central Excise Act, 1944 which specifies that first examination-in- chief is required to be conducted all the witnesses and thereafter the adjudicating authority has to confirm with the statements recorded is correct and over cross examination of the same to the assessee - in the absence of any cross-examination or corroborative evidence, in support of the statement relied upon, the charge of clandestine removal of goods is not sustainable against the appellant. Under-valuation of goods - Held that:- The demand on account of under valuation of goods to the tune of 1,03,21,612/- is not sustainable on the basis of merely computer printout recovered during the course of investigation without any corroborative evidence thereof - demand set aside. Appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 121
  CENVAT credit denied - activity undertook by the appellant does not amounts to manufacture - Held that:- Admittedly, these aluminium sheets have been cleared by the appellant on payment of duty. Therefore, the duty paid shall amount of reversal of Cenvat Credit. Therefore, Cenvat Credit cannot be denied to 49,05,525/- - credit allowed. CENVAT credit - denial on the ground that there was abnormal delay in delivery and vehicles not authorized to go outside Chattisgarh and also vehicle number not mentioned in the invoices - Held that:- It has not been investigated by the revenue, the mode of transportation explained by the transporter as well as the supplier. In that circumstances, Cenvat Credit cannot be denied to the appellants - credit allowed. CENVAT credit - denial on the ground that vehicle owner denied having transported the goods - Held that:- The cross-examination of Shri Dinesh Kumar is not allowed. Moreover, he was not driving the vehicle and he has given the statement on the basis of his memory since he was not maintaining any records. In that circumstances, merely on the basis of presumption and assumption, the Cenvat Credit cannot be denied. CENAVT credit - denial on the ground that vehicle owner denied having transported the items and vehicles were actually at some other destination - Held that:- Merely on the basis of the statements of the Manager and the Managing Director, who are not well conversant with the day-to-day working of the transport company, Cenvat Credit cannot be denied to the appellant in the absence of any cross-examination thereof. CENVAT credit - denial on the ground that the vehicle is actually a scooter - Held that:- The vehicle number, which involved in transportation of goods is HR- 29-J-7449, whereas the revenue has investigated the vehicle No.HR-29-J-7949, which never transported the goods. Therefore, the case of the Revenue is only on the basis of assumption and presumption - credit cannot be denied. Penalty not imposable. Appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 120
  Valuation of free supply of medicines - Trade discounts - discounts allowed to customers - P & P medicaments - some quantities are given to their buyers as discount/free supply on which they are not paying duty, and MRP also not mentioned on those units - Held that:- The Ld. Commissioner (Appeals) has correctly observed that discounts in this case were extended on purely commercial considerations to the unrelated buyers and price was the sole consideration for sale in these transactions and hence denial of deduction on discounts not sustainable - Ld. Commissioner (Appeals) has examined the issue in detail and allowed the trade discount, and there is no infirmity in the observation - appeal dismissed - Decided against Revenue.

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• 2018 (6) TMI 119
  SSI Exemption denied - duty demand - using the brand name of third party - exemption denied on the premises that the appellant is using the brand name ‘Kohli’ owned by M/s RSV Industries (India) under the proprietor of Shri. Rajinder Kumar Kohli - Held that:- The brand name being surname of the partner used by the appellants - See case of Pethe Brake Motors (P) Ltd [2015 (5) TMI 491 - SUPREME COURT] wherein as held the respondent assessee was not using the branded name of another person and the name used was the surname of the Director of the assessee Thus appellant is entitled for benefit of SSI exemption under N/N. 8/2003-CE dated 01.03.2003 - appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 118
  Clandestine manufacture and removal - Non payment of duty - shortage of raw materials and finished goods - demand also on the basis of electricity consumption - Held that:- There was shortage of raw materials and finished goods during the course of investigation. No physical verification of stock has been produced by the Revenue in the form of weightment slips or weighment chart and how weighment was done during the short span of time in a single day for both the units. In that circumstance, the allegation of shortage of raw materials and finished goods against the assessee M/s. M/s.BSRML and M/s. BSPL is not sustainable - demand on this count set aside. Demand on the basis of electricity consumed during the impugned period - Held that:- On perusal of comparative figures of production and electricity consumption per MT, it reveals that there was no abnormal consumption of electricity during the impugned period, the average consumption of electricity is more or less is same. Therefore, no demand is sustainable for the period March, 2005 to February, 2006 and further March, 2007 to June, 2007 - Moreover, the Revenue has not come forward with any corroborative evidence how raw material was procured and how the goods were transported. In that circumstance, the demand against the assessee sought to be confirmed on the basis of assumptions and presumptions - As no corroborative evidence brought on record, the demand against M/s.BSRML is not sustainable and is set aside. Demand raised against M/s. BSPL on account of shortage of inputs and finished goods - Held that:- Stock verification was done by eye estimation. Neither any physical verification carried out nor weighment slips nor weightment chart were prepared to arrive at actual shortage. In that circumstance, the demand raised on account of shortage of raw material and finished by eye estimation is not sustainable. Penalty on Shri Amarjeet Singh Bedi, Director - Held that:- As no demand raised against the main assessee M/s.BSRML and M/s.BSPL on account of shortage or clandestine removal of goods, no penalty is imposable on Shri Amarjeet Singh Bedi, Director. Appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 117
  Valuation - inclusion of value of bought out items (supplied free of cost) - Demand of Duty on the basis of MRP on the bought out staple pins cleared in separate master cartons from the factory of the appellant, supplied free of cost with the stapler manufactured by the appellant - whether the value of staple pins is not required to be included in the value of stapler? - inclusion of value of staple pins on the assessable value of stapler - multipiece package or not - CBEC Circular No.673/64/2002-Cx dated 20.10.2002 - extended period of limitation invoked Held that:- The multipiece package means a package containing two or more individual packaged or labelled pieces of the same commodities of identical quantity, intended for sale - Admittedly, stapler and staple pins are different commodities and the staple pins were given free along with staplers, in that circumstance, it cannot be termed it as two or more individual packaged or labelled pieces of the same commodity or identical quantity are packed in the present case. In fact, stapler and staple pins even not cleared in single package or unit container and these are also not cleared together in single carton. In that circumstance, it cannot be said that these goods cleared in multipiece package - para 4 (ii) of CBEC circular No. Circular No.673/64/2002-Cx dated 20.10.2002 is not applicable to the facts of this case. The staple pins are not manufactured by the appellant but these are bough out items and it is a fact on record that the appellant has not manufactured staple pins and these staple pins are supplied by the appellant free of cost - the value of bought items (supplied free of cost) shall not form the part of assessable value of staplers. Extended period of limitation - Held that:- As the issue is debatable in nature, the extended period of limitation is not invokable. Appeal allowed - decided in favor of appellant.

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• 2018 (6) TMI 116
  CENVAT credit - non-receipt of inputs - some of the vehicles found non existence and not capable of transportation of goods are other than tankers - main reason to issuance of the show cause notices to denial of the cenvat credit to the assessee is that the trasnport vehicles are not entered at ICCs, therefore, it was alleged that the assessee has not received the inputs. Held that:- A similar issue came up before this Tribunal on the same investigation in the case of M/s Adhunik Alloys Ltd. [2016 (5) TMI 894 - CESTAT CHANDIGARH] wherein this Tribunal has held that merely, the vehicles in question were not entered at ICC does not dis-entitle to the appellant to avail cenvat credit on the inputs in question. As the appellant has produced the certificate issued by Excise 1,75,350/- that has been confirmed on the basis of the statement of Shri. G.C. Arya of M/s APPL - Held that:- The said statement was retracted by Shri. G.C Arya at first available opportunity and no cross examination was granted to the asssessee of Shri. G.C. Arya, therefore, the statement recorded of Shri. G.C. Arya have no relevance to deny cenvat credit as the same has not been tested by way of cross examination - demand set aside. Demand confirmed on the ground that the vehicles which have been mentioned in the invoices are not capable of transportation of goods in question as the vehicles are not tankers - Held that:- Admittedly, without tankers, the impugned goods cannot be transported and the appellant has failed to come up with any supporting explanation to the allegation. In that circumstances, the demand of 1,01,048 is confirmed - penalty also not imposable. Appeal allowed in part.

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• 2018 (6) TMI 115
  Penalty u/r 15(2) read with Section 11AC of the CEA 1944 - reversal of CENVAT Credit of various input services which were considered as ineligible to be availed - whether the first appellate authority was correct in setting aside the penalty imposed by the adjudicating authority on the respondent herein? - Held that:- It is undisputed that the respondent-assessee has paid all the demand with interest before the issuance of SCN on being pointed out by Revenue authorities. It is also undisputed that the records of the respondent-assessee’s were audited by the audit party regularly during the period in question - if the respondent-assessee discharged the demands as pointed out by the authorities during verification of the records with interest, provisions of section 11A(2B) would get attracted and SCN should not have been issued to respondent-assessee. The first appellate authority was correct in setting aside the penalty imposed and the impugned order does not require any interference - appeal dismissed - decided against Revenue.

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• 2018 (6) TMI 114
  CENVAT credit - service tax paid on various input services - hired labourers supplied to canteen service for cleaning of utensils and for renovation and setting up the factory - out of pocket expenses in respect of administrative charge in relation to accounting etc - denial also on the ground that the bill numbers and date were not pre-printed - Held that:- Pre-printing of serial number on the bill as issued by the service provider is not mandatory requirement in respect of service providers - Revenue charges have not disputed that the service tax liability discharged by the service providers on these documents is accepted by the Revenue authorities having jurisdiction over the service providers. If that be so, find that denial of CENVAT Credit to the appellant on this ground is incorrect - credit allowed. Supply of manpower which was utilized in the canteen of the appellant - Held that:- There is no dispute that the supply of manpower was in the factory premises of the appellant and he had deployed few work man in the canteen which is within the factory premises - Credit cannot be denied. The service tax liability discharged by the service providers on drinking water equipment maintenance, designing of antibiotics visual aid, antibiotics brand card, antibiotics bookmark, antibiotics posters/notepad and installation of modular partition, misc dismantling, demolishing, waterproofing work and validation autoclave would be eligible for availment of CENVAT Credit as these are in relation to the manufacturing of final goods of the appellant. Various services used in Renovation of factory - Held that:- These services are for renovation of the factory premises wherein pharmaceutical goods are manufactured and since they are being in relation to the manufacture of final products, the impugned order denying CENVAT Credit is incorrect. CENVAT credit - input services - Charges of photocopy - Out-of pocket Expenses - Fixing of ceramic Stone - Hiring of outside Vehicles for Transportation of Employees after 1.04.2011 - Servicing of Company cars - Held that:- the CENVAT credit are ineligible - credit denied. Appeal allowed in part.

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• 2018 (6) TMI 113
  Refund in cash of amount debited in CENVAT credit account - closure of unit - whether refund can be granted in cash when the assessee unit is closed or otherwise? - Held that:- The issue is no more res integra as the Hon’ble High Court of Rajasthan in the case of Luv Kush Textiles v. Commissioner of Central Excise, Jaipur – II [2017 (5) TMI 1021 - RAJASTHAN HIGH COURT] was considering an identical issue and held that there are no express provisions of Rule 5 in debarring refund of such amount in cash - refund allowed in cash - appeal dismissed - decided against Revenue.

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• CST, VAT & Sales Tax

• 2018 (6) TMI 112
  Appeal rejected as time barred - telecommunication services - taxability of rentals of the basic telephone as well as the supply of SIM cards - Held that:- When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. The judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so. The Court finds that while passing the judgment and order dated 13.12.2017 in Defective Appeal the Tribunal has committed gross illegality in not considering the ratio of the judgments referred and has dismissed the appeal as time barred - it is well established that the impugned judgment and order dated 13.12.2017 suffers from manifest error of law and is hereby set aside. Matter restored before the tribunal.

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