TMI Tax Updates - e-Newsletter
July 30, 2018

Case Laws in this Newsletter:

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

Articles

• IGST RATE 28% ON GOODS AS ON 27.07.2018

Notifications

Customs

• 64/2018 - dated 27-7-2018 - Cus (NT)
  Levy of Fees (Customs Documents)Amendment Regulations, 2018

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Money Laundering

• F.No. P.12011/2/2009-ES Cell-DOR - G.S.R. 674(E) - dated 25-7-2018 - PMLA
  Seeks to amend Notification No. G.S.R.381(E), dated the 27th June, 2006

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SEZ

• S.O. 3610 (E) - dated 20-7-2018 - SEZ
  Central Government de-notifies an area of 5.58 hectares, thereby making resultant area as 13.92 hectares at Trans Thane Creek Industrial Area, MIDC, District Thane, in the State of Maharashtra

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• S.O. 3594 (E) - dated 18-7-2018 - SEZ
  Central Government de-notifies an area of 8.56 hectares, thereby making resultant area as 13.48 hectares at Hebbal Industrial Area, District Mysore, in the State of Karnataka

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Highlights / Catch Notes

GST

• Levy of GST - Classification - composite supply - EPC Contract - standalone contract for transportation of Equipment for which separate consideration is received - same is liable to tax as a works contract as per provisions of section 2(119) of the GST Act.
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• Return of seized documents to petitioner - search and seizure under GST - Because of that declaration that the petitioner has no other records to be produced, the department may give copies of the documents to the petitioner at the petitioner’s expense, except the contents of the pen drive, for the pen drive contains what the petitioner's system has stored.
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Income Tax

• Deemed dividend addition u/s 2(22)(e) - power of ITAT u/s 254 - enhancement of tax liability of the assessee - ITAT was right and within its jurisdiction in directing the examination of the fair market value of the shares bought back by it during the previous year.
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• Chit fund as not a money lending business - Tribunal treating moneys not paid by the prize chit winners as bad debts ? - relationship of creditor and debtor between the assessee and the subscribers to the chit to warrant the treatment of default in payment by them as bad debt? - Claim of bad debts allowed.
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• Violation of principles of the natural justice by the lower authority - reliance on the statement of employees - the statement is stated to have been recorded at the time of inspection and one can easily perceive the mood in which the employee would have been.
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• Exemptions u/s 11 - Charitable activity - Merely because while carrying out the activities for the purpose of achieving the objects of the Trust, certain incidental surpluses were generated, would not render the activity in the nature of trade, commerce or business.
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• Exemption u/s 10(10C) claim in the revised return - When the Income Tax Department has the power to demand payment of tax, where there is a deficit, it is equally a bounden duty to refund the payment of excess tax also.
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• Approval u/s 80G(5) eligibility - applicant has not commenced significant charitable activity as per its objects - since there is no allegation of failure to fulfill the obliction u/s 80g(5), CIT directed to grant approval.
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• MAT - book profit adjustments - the methodology adopted by the assessee to prioritise set off of unabsorbed loss regardless of unabsorbed depreciation being lower is not in tune with the aim and object of Clause (iii) to Explanation 1 of Section 115JB of the Act.
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• CIT was not justified in invoking section 263 in holding that income from growing of mushroom is an agricultural income. However, no fault can be found with the order of the ld. CIT in directing the Assessing Officer to verify the quantum of income from growing of mushroom.
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Central Excise

• Valuation - inclusion of packing material supplied by customer in assessable value - in terms of section 4 read with Rule 6 of valuation Rules, 2000, the packing material supplied free of cost by the customer is includable in the transaction value (Assessable Value) and the same will be chargeable to excise duty.
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• Valuation - transmission towers - inclusion of value of nuts and bolts in assessable value - The transaction of the nuts and bolts is clearly a trading activity on which neither the duty can be demanded nor the value thereof can be included in the value of transmission towers.
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Case Laws:

• GST

• 2018 (7) TMI 1747
  Release of detained goods - Held that:- Pending adjudication, the first respondent will release the detained goods on the petitioner's providing the bank guarantee for the amount covered by Ext.P4 series orders - petition disposed off.

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• 2018 (7) TMI 1746
  Input tax credit - failure to upload FORM GST TRAN-1 within the stipulated time - case of petitioner is that though he attempted to upload it within the time, he failed because of some system error - Held that:- Not only the petitioner but also many other people faced this technical glitch and approached this Court. Both the learned counsel submit that this Court on earlier occasions permitted the petitioners to apply to the Nodal Officer for the issue resolution. In this case also, the petitioner may apply to the the Nodal Officer. The petitioner applying, the Nodal Officer will look into the issue and facilitate the petitioner’s uploading FORM GST TRAN-1, without reference to the time-frame. Petition disposed off.

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• 2018 (7) TMI 1745
  Bail application - grounds taken for relaxation is that the condition enshrined in the order is very severe condition and next impossible for the petitioner to comply with the condition - Held that:- The provisions as shown to this are undoubtedly very very stringent nittigrity of laws of the provision in this Act - even the provision under Sub- Section (2) of Section 138 which deals with compoinding of offences, is also very stringent. It appears that the allegation against the petitioner Sanjay Kumar Bhawalka is that of evasion of ₹ 27 crore as of now, similarly, the evasion of GST as alleged against Neeraj Jain is a sum of ₹ 12 crore. Therefore, the condition for enlargement of bail to the petitioner on deposit of ₹ 39 crore to the Government Exchaquer through the competent authority is modified to the extent that Sanjay Kumar Bhuwalka the petitioner on condition shall deposit 50% of the evaded amount of ₹ 27 crore - Similarly, the petitioner Neeraj Jain would deposit ₹ 6 crore being the 50% of evaded amount of ₹ 12 crore as a condition to obtain bail - also, the condition of furnishing bond be modified to the sum of ₹ 10 lakh each which can be furnished by way of personal bond to be executed by the petitioners. Bail applications disposed off.

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• 2018 (7) TMI 1744
  Return of seized documents to petitioner - search and seizure under GST - case of petitioner is that unless the Department provides copies of all the documents seized, the petitioner cannot proceed any more in the inquiry - the Department apprehends that once it hands over the copies of the seized documents, the petitioner will fabricate records as if they had existed from the beginning - Held that:- The Department's apprehension seems well placed. But the petitioner went on record declaring that it had no other records to produce, except those that had been seized - Because of that declaration that the petitioner has no other records to be produced, the department may give copies of the documents to the petitioner at the petitioner’s expense, except the contents of the pen drive, for the pen drive contains what the petitioner's system has stored - petition disposed off.

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• 2018 (7) TMI 1743
  Input tax credit - failure to upload FORM GST TRAN-1 within the stipulated time - case of petitioner is that though he attempted to upload it within the time, he failed because of some system error - Held that:- Not only the petitioner but also many other people faced this technical glitch and approached this Court. Both the learned counsel submit that this Court on earlier occasions permitted the petitioners to apply to the Nodal Officer for the issue resolution. In this case also, the petitioner may apply to the the Nodal Officer. The petitioner applying, the Nodal Officer will look into the issue and facilitate the petitioner’s uploading FORM GST TRAN-1, without reference to the time-frame. Petition disposed off.

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• 2018 (7) TMI 1742
  Release of detained goods - Section 129 of the Central Goods and Services Tax Act as also the Kerala State Goods and Services Tax Act - Held that:- An identical matter has been disposed of by a Division Bench of this Court in THE COMMERCIAL TAX OFFICER AND THE INTELLIGENCE INSPECTOR VERSUS MADHU. M.B. [2017 (9) TMI 1044 - KERALA HIGH COURT], directing expeditious completion of the adjudication of the matter and permitting release of the goods detained pending adjudication, in terms of Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017 - the writ petition is disposed of directing the competent authority to complete the adjudication provided for under Section 129 of the statutes.

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• 2018 (7) TMI 1691
  Levy of GST - Classification - composite supply - EPC Contract - standalone contract for transportation of Equipment for which separate consideration is received - procurement and supply of goods, transportation of goods from vendor, assembly and erection and commissioning - appellant is not a goods transport agency (GTA) as he is not issuing any consignment note - Whether transportation charges received by the applicant are liable to GST, especially when the applicant is not a goods transport agency (GTA)? - N/N. 12/2017 Central Tax (Rate) dated 28/06/2017. Held that:- From the co-joint reading of the clauses of the agreement, it can be safely concluded that the contract is a single contract. As such this agreement for Engineering Procurement and construction of Solar Power plant constitute composite supply in the nature of Works Contract. Thus impugned Supplies constitute Works Contract - It has been categorically observed that the attachment of the plant to the foundation at which it rests does not fall in the third category attached to what is imbedded for the permanent beneficial enjoyment of that to which it is attached], for the reason that an attachment to fall in the third category it must be for permanent beneficial enjoyment of that to which the plant is attached. The intent of the person at the time of erecting and operationalizing a structure/plant is to be seen and if the intent is to establish it as an immovable property at the time of setting it up, then it is to be treated as an immovable property even if later on due some exigency it is required to be dismantled or removed. Ruling:- The question is answered in the affirmative and same is liable to tax as a works contract as per provisions of section 2(119) of the GST Act.

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• Income Tax

• 2018 (7) TMI 1739
  Permission to file Income Tax returns for AY 2017-2018 without complying with the condition of providing Aadhar Card registration number or Aadhar Card Enrolment number - Held that:- Similar direction as in the case of Mukul Talwar (2018 (5) TMI 1741 - DELHI HIGH COURT) is warranted in this case. Accordingly, the petitioners shall be permitted to file their returns, for AY 2018-2019, without any insistence of linkage of their Aadhar and their PAN numbers and without instance of production of their proof of Aadhar enrolment. In case the returns are filed within the time prescribed by law, without such linkage, they shall be processed in accordance with law and in accordance with CBDT circular dated 27.03.2018 as extended on 30.06.2018. This court is of the opinion that at least for the period till 31.03.2019, the CBDT shall issue an appropriate direction, and also create a platform by amending the digital form of substituting them properly to enable “opt out” from the mandatory requirement of having to furnish Aadhar Registration or Aadhar linkage, for the duration, the exemption subsists i.e. till 31.03.2019.

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• 2018 (7) TMI 1738
  Deemed dividend addition u/s 2(22)(e) - examination by the Assessing Officer of the fair market value of the shares bought back and application of Section 2(22)(e) of the Act if the consideration for buy back of shares was in excess of the fair market value of the shares - Whether the Income Tax Appellate Tribunal has power under Section 254 of the Income Tax Act, 1961, to give directions for fresh enquiry into the aspects of the subject matter of appeal filed before it either suo motu or on any grounds raised by either party to the appeal which have not been investigated or enquired into by the lower Authorities earlier and which may result in enhancement of tax liability of the assessee? - Held that:- Section 254 of the Act, in our opinion, does not have any narrower scope to put fetters on the powers of the Tribunal as is sought to be canvassed before us that the Tribunal could not have exceeded the grounds raised before it by the Appellant Assessee. The Appellant may be either Assessee or Revenue before the Tribunal and the Tribunal has also powers to allow fresh ground of appeal or allow the other party to the appeal to file its cross objections and even suo motu pass appropriate Orders 'thereon' and therefore the words 'as it thinks fit' in our opinion, confer wide powers upon the Income Tax Appellate Tribunal to pass such Orders on the subject matter of appeal 'as it thinks fit' whether the issue is raised by either party to the appeal or not. What the learned Tribunal has done is merely to ask the Assessing Authority to hold an enquiry as to whether the abnormally high price paid for buy-back of shares from almost a single shareholder only, viz., the Mauritius Company, a Holding Company which held 99.99% of the share holding of the Assessee Indian Company so as to ascertain the fair market value of the shares which can certainly be determined with the relevant data and evidence available with the Respondent Assessing Authority. Since the shares are not listed on the Stock Exchange, therefore, fair market value of the shares on a particular date of transaction was not ascertainable otherwise readily and the said aspect of the matter was not admittedly looked into by the Authorities below before the appeal was decided by the learned Tribunal. Therefore, even though the some findings were given by the Tribunal in favour of the Assessee that the said pay-out for buy-back of the shares at an abnormally high price was not taxable under Section 115-O or Section 115-QA read with its Explanation and Section 2(22)(d) of the Act as per the contention raised by the Assessee before the Tribunal, the Tribunal was perfectly justified in directing an enquiry into the fair market price of the share of the Assessee Company which could have an implication of taxability under Section 2(22)(e) of the Act or otherwise. Thus the present appeal filed by the Assessee deserves to be dismissed and the substantial question of law framed in the present appeal is answered in favour of the Revenue and against the Assessee and it is held that the Income Tax Appellate Tribunal (ITAT) has the power to give directions for fresh enquiry into the aspects of the subject matter of appeal filed before it either suomotu or on any grounds raised by either party to the appeal which have not been investigated or enquired into by the lower Authorities earlier and which may result in enhancement of tax liability of the assessee and in the present case, the Appellate Tribunal was right and within its jurisdiction in directing the examination of the fair market value of the shares bought back by it during the previous year relevant for the AY 2011-12 in question.

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• 2018 (7) TMI 1737
  Deemed registration under Section 12A - whether Tribunal is right in deeming the application as being condoned and in directing the CIT to condone delay and to grant registration under Section 12A of the I. T Act? - mandatory provision of consideration of application - Held that:- Section 12AA(2) specifically provides that on an application, an order granting or refusing registration shall be passed before the expiry of the six months of the date on which the application was received. We also directed the revenue to produce the files, which are before us. We see from the files that the application was filed on 10. 10. 2006. A report was called for from the Income-Tax officer which was submitted only on 24. 07. 2007, after almost nine months. The communication of the Commissioner of Income-Tax based on which such report was made also is seen to be dated 12. 01. 2006 referred to in the report of the Income-Tax Officer. The Income-Tax Officer has recommended the registration under Section 12AA(2). However an adverse report is seen authored by the Joint Commissioner of Income-Tax dated 31. 07. 2007 addressed to the Commissioner of Income-Tax. There has been some adjournments later and eventually the order impugned before the Tribunal dated 29. 11. 2007 was passed. We cannot but notice that there was unreasonable delay insofar as complying with the mandatory provision under Section 12AA(2). The officers of the Department are necessarily bound by the directions so issued by the CBDT; which in the present case is a reiteration of the mandate statutorily prescribed. In the present case, we see failure to comply with the mandatory provision as provided under section 12AA(2); the circular having come later to the impugned order. - Decided in favour of assessee

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• 2018 (7) TMI 1736
  Addition u/s 68 - bogus loan received from a paper company - Held that:- Tribunal was right and justified in relying on the judgments of the Supreme Court in CIT v. Durga Prasad More, (1971 (8) TMI 17 - SUPREME COURT) and Sumati Dayal v. CIT, (1995 (3) TMI 3 - SUPREME COURT), to reject mere paper work and look at the reality behind a facade created to hoodwink and deceive. Merely because the transaction was squared in the next financial year would not establish that the transaction was genuine and not bogus. Assessing Officer has rightly rejected the assessee's contentions on the ground that Shri Rajendra Bubna was confronted with only a sample of companies and was asked to confirm if he used these companies to provide accommodation entries, which was answered by him in positive - Decided against assessee

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• 2018 (7) TMI 1735
  Eligibility of depreciation on trucks - ownership of trucks - Held that:- In the instant case, the Assessing Officer doubted the very genuineness of the transaction and also as to whether the vehicles were in existence and the assessee had acted only as a financier. However, for the subsequent year, the details were verified and it was recorded by the tribunal that the vehicles were registered in various States and it is wrong on the part of the Assessing Officer as well as the CIT (Appeals) to hold that no assets are involved in the lease transaction. We find from the order passed by the Tribunal that, the Tribunal had gone through the copies of the sub-lease agreement, the relevant purchase bills for the vehicles and other connected papers including bank documents and registration certificate, etc., and rendered such finding. Thus, the issue has been factually concluded by the tribunal and the case of the assessee is also fully supported by the decision in the case of I.C.D.S. Ltd. [2013 (1) TMI 344 - SUPREME COURT], which decision the Revenue does not dispute. Carry forward business losses can be set off against dividend income - Held that:- It is not in dispute that the transaction was identical and the Tribunal considered the submissions and held that the assessee's plea that the investments were business investments and the interest on borrowings made for these investments have to be allowed under the head 'business income'. If in substance investments are business investments, the interest on borrowings made for those investments have to be allowed irrespective of the fact that income from dividend has to be assessed under a separate head. The Revenue did not dispute that the transaction was identical, neither before the Tribunal nor before us. Therefore, the case on hand stands covered by the decision of the Tribunal in the assessee's sister concern [Shriram Investments [2014 (11) TMI 55 - MADRAS HIGH COURT] Chit fund as not a money lending business - Tribunal treating moneys not paid by the prize chit winners as bad debts ? - relationship of creditor and debtor between the assessee and the subscribers to the chit to warrant the treatment of default in payment by them as bad debt ? - Held that:- This issue is squarely covered in the assessee's own case in Commissioner of Income Tax vs. M/s.Shriram Chits & Investments Ltd [2012 (4) TMI 630 - MADRAS HIGH COURT] as held Going by the obligation of the foreman arising under ss. 21 and 22 of the Chit Funds Act to make good the default to the successful bidder on the subsequent day transaction, the claim was rightly considered by the Tribunal as one allowable under s. 36 of the Act. - Decided against revenue

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• 2018 (7) TMI 1734
  Application for settlement u/s 245(D)(4) rejected - there was failure to make a full and true disclosure of its income on the part of the petitioner - Held that:- We interfere with the orders of the Settlement Commission only when it is contrary to law, perverse or the decision making process is flawed. In this case, we are of the prima-facie view that the basis of rejection is contrary to law laid down by this Court. The failure to disclose was essentially on account of Retention money, Purchase of steel, Sub- contracting and Sales Commissions. We prima-facie find that, on all the aforesaid heads, the petitioners had made a full and complete disclosure of primary facts. It is on the above undisputed facts, that a bonafide claim was made leading to the disclosed income. Non-acceptance of the claim would not ipso-facto lead to making the application for settlement bad for failure to make full and true disclosure of income. Infact this Court in Principal Commissioner of Income- Tax V/s. Income-Tax Settlement Commission, [2017 (2) TMI 861 - BOMBAY HIGH COURT] has held, that to establish there was failure to make a full and true disclosure of income as required under Section 254(C)(1) it would be necessary for the Revenue to prove that there was a non-disclosure of primary facts and not merely non-acceptance of certain claims made before the Commission. Moreover, in the present facts, so far as, retention money is concerned, the claim was made by the petitioners on the basis of the decision of this Court in Commissioner of Income-Tax V/s. Associated Cables Pvt. Ltd, [2006 (8) TMI 135 - BOMBAY HIGH COURT].

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• 2018 (7) TMI 1733
  Claim for deduction made by the assessee u/s 80IB - petitioner/appellant is not engaged in any manufacturing activity and instead, it was only doing trading of mushroom powders in capsules - Held that:- Tribunal came to the conclusion that the activity does not bring any new article or product and the mushroom powder even after capsulation remains the same and if it is removed from the capsule, the mushroom powder emerges out of it. It is not known as to how the Tribunal rendered such a finding as there was no material available before the Tribunal that there is no change in the composition of the drug on capsulation. As already pointed out, the Tribunal gave a finding wholly unsubstantiated by any material that the bulk form of the drug can be nakedly consume without putting them in an enclosure such as gelatine capsule. It is relevant to note that the agreement between the assessee and the International parent company dated 26. 4. 2004 states that the Indian Company (assessee) has set up a factory at Pondicherry with an intent to manufacture similar products and has requested the foreign company to make available the know-how to the Indian Company and after negotiations, the foreign company has agreed to make available the know how on the terms and conditions set out in the agreement. The agreement specifically states that the foreign company shall supply to the Indian company all materials such as know how of materials, such as process sheets, calculation sheets, standards and other information as is necessary to understand the utilisation of the said know how and to implement the same in the manufacture of the said product. The factual matrix clearly demonstrates that what has been done by the assessee is manufacture. In the assessee s case, the product which emerges after the process of manufacture is commercially a distinct commodity, can be of consumption as such containing a requisite amount of ingredients in the appropriate percentage, preserved in proper form as contained in the licence issued under the authorised enactments as well as the technical logo shared by the foreign company. - decided in favour of assessee Denying the claim under Section 43B - Held that:- ITAT proceeded on a slightly different angle, not on the ground that the petitioner had not filed the revised return that being entitled to the claim of the benefit under Section 43B, i. e. , to say, on the ground that while the assessee is not in a position to spell out the nature of the liability, and it was making only verbal argument without stating the nature of expenditure and that the assessee has not produced any order of the Excise Department, through which the liability stated to have emerged and it also opined that, to avail deduction, the payments are required to be actually paid within the time stipulated to the proviso to Section 43B of the Act. In the previous paragraphs, we have noted the admitted facts recorded by the Assessing Officer, which clearly shows the assessee has availed the CENVAT credit and paid the excise duty. That apart, the assessee won the case for the subsequent year 2009-2010 - Decided in favour of assessee Violation of principles of the natural justice by the lower authority - Held that:- In the absence of any proof produced to show that the statement obtained from the employee has caused prejudice to the assessee, the Tribunal has to only justify the decision taken by the Assessing Officer and CIT(A). We further hold at best that the statement given by the former employee of the assessee is not conclusive and it would not bind the assessee. Furthermore, the statement is stated to have been recorded at the time of inspection and one can easily perceive the mood in which the employee would have been. - Decided in favour of the Revenue

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• 2018 (7) TMI 1732
  Exemptions u/s 11 - Charitable activity - Applicability of proviso to section 2(15) - activity of breeding milk cattle; to improve the quality of cows and oxen and other related activities - AO observed that, considerable income was generated from the activity of milk production and sale - Held that:- In case of Sabarmati Ashram Gaushala Trust (2014 (1) TMI 1539 - GUJARAT HIGH COURT), under somewhat similar background held that the objects of the Trust clearly establish that the same was for general public utility and for charitable purposes - Profit making was neither the aim nor object of the Trust - Merely because while carrying out the activities for the purpose of achieving the objects of the Trust, certain incidental surpluses were generated, would not render the activity in the nature of trade, commerce or business - As clarified by the CBDT in its Circular No. 11/2008 dated 19th December 2008 the proviso aims to attract those activities which are truly in the nature of trade, commerce or business but are carried out under the guise of activities in the nature of ‘public utility’ - The facts and circumstances of each case are different - Decided against Revenue.

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• 2018 (7) TMI 1731
  Exemption under Section 10(10C) denied - Exemption claimed in revised return - Held that:- Benefit applicable to all the public sector and other companies' employees is applicable to the petitioner also. Section 10(10C) of the Act and Rule 2BA of the Income Tax Rules, 1962, do not specifically apply to RBI alone. Therefore, the benefit is applicable to the petitioner also. Further, the revisional authority has condoned the delay in filing the revised return. Circular No.14(XL35) of 1955, dated 11.04.1955 mandates that the tax payers have to be guided by the assessing officers in the matter of claims and reliefs. Only because an assessee files a return and pays excess tax, it is incumbent on the officials of the Income Tax Department much less the Assessing Authority to inform the reliefs entitled to the assessee. When the Income Tax Department has the power to demand payment of tax, where there is a deficit, it is equally a bounden duty to refund the payment of excess tax also. In such circumstances, the order refusing to refund the excess tax paid by the assessee is not sustainable. Accordingly, the impugned order passed by the first respondent in C.No.407/01/CIT-I/2009-10, dated 18.02.2011, is set aside and the respondents are directed to refund the excess amount, which the petitioner is entitled to, as per Section 10(10C) of the Income Tax Act, 1961.

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• 2018 (7) TMI 1730
  Exemption under Section 10(10C) - Voluntary Retirement Scheme issued by the ICICI Bank - Held that:- The impugned notice specifies the sum of ₹ 1,95,600/- for the assessment year 2004-2005. As per Section 10(10C) of the Act, the individual is entitled to exemption upto ₹ 5,00,000/-. The Hon'ble Supreme Court as well as Bombay High Court have categorically held that the employees are eligible for exemption under Section 10(10C) of the Act. Rule 2BA of the Income Tax Rules, 1962, cannot exceed the provisions of the Act. Therefore, the demand made by the Income Tax Department is per se illegal and is not sustainable any further As discussed above, the matter has attained finality in Commissioner of Income Tax vs. Koodathil Kallyatan Ambujakshan (2008 (7) TMI 259 - BOMBAY HIGH COURT) and the same stands confirmed by the Hon'ble Supreme Court in Chandra Ranganathan Ors. vs. Commissioner of Income Tax, Chennai[2009 (10) TMI 498 - SUPREME COURT OF INDIA] - Decided in favour of assessee

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• 2018 (7) TMI 1729
  Approval u/s 80G(5) - eligibility - applicant has not commenced significant charitable activity as per its objects - Held that:- As per Rule 11AA(5), The Commissioner may reject the application for approval, after recording the reasons for such rejection in writing, where he satisfied that one or more conditions laid down in clauses (i) to (v) of Sub-section (5) of Section 80G are not fulfilled. From the above statutory provisions it is clear that the Commissioner can reject the application for approval if he is satisfied that one or more conditions laid down in clauses (i) to (v) subsection (5) of section 80G are not fulfilled. In the present case, Ld. CIT has not recorded any reason that the assessee has failed to fulfill the conditions laid down in clauses (i) to (v) of sub-section (5) of section 80G are not fulfilled. Under these undisputed facts, we are unable to affirm the view of the Ld. CIT, therefore, we direct him to grant approval u/s 80G(5) of the Act. - decided in favour of assessee

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• 2018 (7) TMI 1728
  Additional sum towards value of bitumen short supply - Maintainability of the review application - patent error apparent on record - Whether appellant s case confirmation of addition u/s 69A is legal and valid? - substantial question answered against the assessee - Held that:- Review literally and even judicially means re-examination or reconsideration. Basic philosophy inherent in it is the universal acceptance of human fallibility. Yet in the realm of law the courts and even the statutes lean strongly in favour of finality of decision legally and properly made. Exceptions both statutorily and judicially have been carved out to correct accidental mistakes or miscarriage of justice A review is by no means an appeal in disguise whereby an erroneous decision is reheard and corrected but lies only for patent error apparent on record. Much emphasis was laid by learned counsel for the review petitioner that the appellate tribunal, in separate appeals filed by the review petitioner itself, however, for the different assessment years has taken a different view in both the appeals. It is stated that for the assessment year 1996-97, on the same set of facts, it has allowed the appeal on the same date, whereas, for the year 1995-96 it has remanded back the matter to the assessing officer. However, the question would be whether the fact that the appellate tribunal had passed another order correctly or incorrectly, the same may have any effect rendering the judgment of the tribunal passed in present matter to be erroneous despite the same having been upheld in appeal by this Court? Answer has to be in negative. For the assessment year 1995-96, matter has attained finality as the Division Bench has already accepted the view of the appellate tribunal to be correct in [2009 (3) TMI 501 - PATNA HIGH COURT ]. The view of the same Tribunal or the same Bench of the Tribunal was correct or incorrect for a different assessment year was not the subject matter of the appeal. If one of the views of the appellate tribunal is in favour of the assessee that does not mean that the said view would be correct and the view taken in the present case was incorrect. The view formed by the revenue in the present case for the assessment year 1995-96 has been scrutinized not only by the appellate tribunal but also by the Division Bench of this Court and the same has been found to be correct. Thus, in our view, that cannot be held to be a patent error on the face of the record, thus, the same would not come to the help of the review petitioner. We could not be persuaded to reverse the finding recorded by the Division Bench for the reason that for the same assessee but for the different assessment year, same Bench of tribunal has accepted their plea regarding short supply of bitumen as it is not within the knowledge as to whether that case travelled in appeal before this Court or not, whereas, the decision rendered by the appellate tribunal for the assessment year 1995-96 travelled up to this Court. The substantial questions were formulated and all of them have been answered against the assessee.

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• 2018 (7) TMI 1727
  TPA - Comparable selection - Held that:- The assessee provides ancillary management services to Six Continents Hotels, Inc. It also renders service to Indian franchises of its foreign affiliates, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Addition on account of project and consultation fee and on account of advertisement and sales promotion - Held that:- As decided in assessee's own case we find that the expenditure on advertisement was in print and electronic media and for hosting / sponsoring certain conventions and conferences and similar other expenditure on calendar printing, posters etc. We note that the total expenditure works out approximately 1.9% of the total expenditure. We are in agreement with the Ld. Commissioner of Income Tax (A) that there is no element of brand building or acquisition of brand by incurring such expenses. The concerned brands were not owned by the assessee, but it belongs to the assessee's overseas group entity, assessee has been reimbursed the entire advertisement and sale promotion expenses by the overseas group entity on cost plus basis. Under the circumstances, we do not find any infirmity in the order of me Ld. Commissioner of Income Tax (A) in holding that these expenses are revenue in nature.

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• 2018 (7) TMI 1726
  Grant of registration u/s 12AA - applicant society is non-cooperative and did not furnish the required information/details - Held that:- As decided in case of Om Shiva Education & Welfare Society [2017 (12) TMI 1165 - ITAT DELHI] AO in earlier Assessment Year has also admitted the same fact & had allowed exemption u/s u/s 10(23C)(iiiad) and by accepting the claim of Assessee the genuineness of its activities has also been accepted. Therefore, the factum of carrying charitable activities as also the genuineness of activities is established. Therefore, both conditions for getting satisfaction u/s 12AA are met with and therefore assessee is eligible for registration u/s 12AA of the Act Also in the present case there is no allegation of utilizing the land for commercial purposes and also there is no allotment of land at concessional rates. It is an admitted fact that the assessee was engaged in charitable activities. In view of the above facts and circumstances of the case, the Ld. CIT(E) is directed to grant registration to the assessee u/s 12AA of the Act - Decided in favour of assessee.

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• 2018 (7) TMI 1725
  Addition u/s 14A r.w.r. 8D - Held that:- Requirements of section 14A requires assessee to explain and bring on record complete modus operandi of the operations carried out by it with respect to its investments activities and the persons/cost associated with same which in the instant case are not brought on record by the assessee. Thus in view of submission of the assessee that there are no expenses incurred in connection with the investment activity and earning of an exempt income prompted the AO to trigger the invocation of Rule 8D of the 1962 Rules but the AO was required to record satisfaction having regard to the accounts of the assessee which in the instant case was not recorded by the AO . In all fairness to both the parties, the matter need to be restored to the file of the AO for fresh adjudication and the assessee is directed to furnish complete details of its modus-operandi and operational details .

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• 2018 (7) TMI 1724
  Revision u/s 263 - limiting the claim of the assessee for reduction in book profit as computed under section 115JB by the amount of loss brought forward or unabsorbed depreciation whichever is less, as per books of account to ₹ 18,43,991/- as against the claim of the assessee for ₹ 55,01,780/- - rectification of mistake u/s 154 - Held that:- Without going into arithmetical accuracy of working of carry forward of set off losses etc., we are of the clear view that the methodology adopted by the assessee to prioritise set off of unabsorbed loss regardless of unabsorbed depreciation being lower is not in tune with the aim and object of Clause (iii) to Explanation 1 of Section 115JB of the Act. The decision rendered in the case of Eli Lilly [2011 (3) TMI 267 - DELHI HIGH COURT] relied upon by assessee does not provide answer to the controversy in issue. The Hon’ble Delhi High Court merely found that mistake, if any, is not in the nature of apparently mistake and thus not susceptible to rectification under s.154 of the Act. The issue raised by the assessee is therefore decided in negative on principle. Assessee has simultaneously pointed out certain factual errors such as quantum of carry forward loss of ₹ 3,00,78,787/- as on 01.04.2010 as per the method adopted by the AO as against the loss at ₹ 2,12,22,430/- as per the books of accounts of the assessee. We do not propose to go into arithmetical accuracy of quantum of carry forward and restrict ourselves to adjudicate the issue on the first principles. The factual aspects are thus remanded back to the file of the AO for determination of quantification of set off as per the aforesaid principle after giving proper opportunity to the assessee in this regard. Therefore, the issue is remanded back to the file of the AO for limited purposes of applying the principles narrated above and for re-determination of quantum of unabsorbed loss/depreciation available for set off in current year and succeeding year. - Decided against assessee

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• 2018 (7) TMI 1723
  Bogus purchases - profit estimation - Held that:- Hon’ble High Court of Gujarat in the case of CIT Vs. Simit P. Sheth (2013 (10) TMI 1028 - GUJARAT HIGH COURT) after deliberating at length on the profit element that would be involved in making of purchases by an assessee from the open/grey market, had adopted the same at 12.5% of the aggregate value of such bogus purchases. We are oblivious of the fact that in the absence of supporting documentary evidence the determination of the discounted price at which the goods would have been procured by an assessee from the open/grey market, as in comparison to the price for which the same would be available in the regular market and booked by the assessee in its books of account, would have to be subjected to a process of estimation. In all fairness the extent of inflation of the purchase price by the assessee by procuring bogus purchase bills from the aforementioned parties, as held by the Hon’ble High Court of Gujarat in the case of Simit P. Sheth (supra), can safely be taken at 12.5%.

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• 2018 (7) TMI 1722
  Rectification of mistake u/s 154 - MAT credit allowed by revenue, while processing the return u/s 143(1), is not in accordance with law - Held that:- The amount of advance tax and TDS etc. rank pari passu with the amount of MAT tax credit available u/s 115JAA. Secondly, the amount of tax payable for the year is determined after reducing the amount of advance tax, TDS and MAT credit. Thirdly, the resultant amount arrived at after making such deductions is the amount of tax, which the assessee is liable to pay. Fourthly, the amount of interest payable under any provision of this Act is calculated on the resultant amount. This shows that the amount of interest under the Act is liable to be paid on the amount of tax payable determined after deducting, inter alia, the amount of MAT tax credit. We, therefore, hold that the amount of the MAT tax credit, inclusive of surcharge and education cess etc., if any, should be reduced from the amount of tax determined on the total income after adding surcharge and education cess, etc. Only the resultant amount payable will suffer interest under the relevant provisions of the Act. Since the amount of MAT tax credit is uncertain, we set aside the impugned order and remit the matter to the file of the AO for ascertaining the correct amount of MAT tax credit available with the assessee inclusive of surcharge and education cess etc., if any, and then allow tax credit as indicated above. - Decided in favour of assessee for statistical purposes.

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• 2018 (7) TMI 1721
  Disallowance of proportionate interest - sufficiency of interest free funds - Held that:- In so far as the revenue does not disprove the contention of the assessee that they had interest free funds in their hands over and above the loans are advances given to the Directors as on such date, inasmuch as such interest-free funds are sufficient to advance such loans to the Directors, the presumption is that the loans would be out of the interest-free funds available with the assessee. Further the impugned order reveals that the business expediency was also pleaded before the authorities below besides demonstrating that the total amount of interest debited to profit and loss account amounting to ₹ 1,47,51,794/- was pleaded to different the bankers/lenders. The impugned order does not commented anything adverse on this aspect. Thus the disallowance of proportionate interest cannot be sustained. - Decided in favour of assessee Depreciation claimed in respect of the asset comprised of land and building components integrally - Held that:- except the year under consideration, for all remaining years from purchase of the asset to its sale, depreciation was allowed on the total value of the asset without resorting to any bifurcations of the asset into the land component and building complaint, but is only for the year under consideration such a view is taken by the Assessing Officer - the rule of consistency demands that the consistent view had to be taken in similar matters of the same assessee over a period of time and to discriminate the issue for a single year is not permissible. Following the decision of the Hon’ble Apex Court in the case of Radhasoami Satsang (1991 (11) TMI 2 - SUPREME COURT) find it difficult to sustain the disallowance of depreciation and the consequential addition. We therefore, direct the assessing officer to delete the disallowance - Appeal of the assessee is allowed.

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• 2018 (7) TMI 1720
  Revision u/s 263 - income from growing of mushroom is an agricultural income - Held that:- If a point is debatable and the two views are prevalent on a particular point and the Assessing Officer adopts one view, whereas the CIT considers the other view to be more plausible, it cannot be said that the assessment order is erroneous so as to clothe the CIT with the power to revise the assessment order. Since there was a cleavage of judicial opinion on the point as to whether or not income from growing of mushoroom is agricultural, which issue has now been settled in favour of the assessee by virtue of the Hyderabad Special bench of the tribunal, we hold, in principle, that the ld. CIT was not justified in not approving the stand of the Assessing Officer that income from growing of mushroom was agricultural income. Impugned order is set aside pro tanto. Adverting to the facts of the instant case, as is also palpable from the impugned order, that it is not the case of the assessee that the CIT did not give opportunity of hearing in this regard. Thus, no fault can be found with the CIT in directing the AO to verify the quantum of the income from the growing of mushroom. We, therefore, approve the view of the ld. CIT in so far as the second aspect is concerned, namely, the Assessing Officer failed to make proper verification of the quantum of income arising from growing of mushroom, etc., claimed by the assessee as exempt agricultural income. The impugned order is upheld to this extent. We hold that the ld. CIT was not justified in invoking section 263 in holding that income from growing of mushroom is an agricultural income. However, no fault can be found with the order of the ld. CIT in directing the Assessing Officer to verify the quantum of income from growing of mushroom. - Decided partly in favour of assessee

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• 2018 (7) TMI 1702
  Denial of exemption u/s 11 - since the application of income was more than 85%, in terms of Section 11 (1) of the Income Tax Act, 1961, the question of denying the exemption to the Assessee does not arise? - Held that:- Special Leave Petition is dismissed both on the ground of delay as well as on the ground that the tax effect is low, leaving the question of law open.

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• 2018 (7) TMI 1701
  Deductible / Exempted income u/s 10(29) - depreciation to be excluded from the income or not - CIT(A) allowed the computation after excluding depreciation as part of the expenditure and taking gross receipts from warehousing and Inland Container Depot/ Container Freight Station (‘ICD/CFS’) - Held that:- Special Leave Petitions are dismissed both on the ground of delay and merits. Pending applications, if any, stand disposed of.

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• 2018 (7) TMI 1700
  Steps to file the process fee - Despite three opportunities since 2nd June, 2016, the Revenue has not taken any steps to file the process fee - Held that:- There is a delay of 337 days in filing the Special Leave Petition which is not satisfactorily explained. The Special Leave Petition is dismissed on the ground of delay.

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• 2018 (7) TMI 1697
  Validity of assessment under Section 153A/143 - materials on record concluded that the so called incriminating materials, which were sought to be the basis for bringing the amounts to tax, were not really so - Held that:- Delay condoned. Leaving the question of law open, this special leave petition is dismissed on the ground of low tax effect.

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• 2018 (7) TMI 1696
  Unexplained foreign exchange forward contract - Tribunal holding that the notional loss on unexplained foreign exchange forward contract was in the nature of stock in trade capable of being valued at cost or market price - Held that:- Leaving the question of law open, this special leave petition is dismissed on the ground of low tax effect.

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• 2018 (7) TMI 1695
  Addition to the profit on sale of the Pent House - block assessment under Section 158BB - Held that:- Delay condoned. Leaving the question of law open, this special leave petition is dismissed on the ground of low tax effect. Pending application(s), if any, shall also stand disposed of.

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• 2018 (7) TMI 1694
  Addition on account of long term capital gain - disallowing the claim u/s 54F as the assessee was having more than one residential house as on date of transfer of the original asset - merely an agreement or booking of flat is not the property ownership, it is only a claim over the property - Held that:- Special Leave Petition is dismissed on the ground of low tax effect leaving the question of law open.

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• 2018 (7) TMI 1693
  Grants receipt from the Govt. of NCT of Delhi for meeting revenue expenses, i.e. by way of ex-gratia payment upon voluntary retirement - Assessing Officer (AO) treated this receipt as income and sought to tax it - CIT(A)’s interpretation of the payable entry with respect to this was that it was an outstanding liability vis-a-vis Govt. of NCT of Delhi and the Pension Trust vis-a-vis the assessee - Held that:- Special Leave Petition is dismissed both on the ground of delay as well as on merits.

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• 2018 (7) TMI 1692
  Entitlement to deduction under Section 80-IC - whether an “undertaking or an enterprise” (Unit) established after 7th January, 2003, carrying out “substantial expansion” within the specified window period, i.e. between 7.1.2003 and 1.4.2012, would be entitled to deduction on profits @ 100%, under Section 80-IC? - Held that:- We do not find any ground to interfere with the impugned order in exercise of our power under Article 136 of the Constitution of India. The special leave petitions are, accordingly, dismissed.

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• Insolvency & Bankruptcy

• 2018 (7) TMI 1741
  Winding up petition - Company Court jurisdiction while dealing with the winding up petitions to stay the proceedings before the NCLT in respect of revival or resolution issue - Held that:- The general legal principles of interpretation of statute state that the general law should yield to the special law. In the context of the present statute i.e. IBC 2016, we are of the view that the Companies Act 1956 could be treated as general law and IBC, 2016 to be a special statute to the extent of the provisions relating to revival or resolution of the company as per provision under Chapter II of the IBC. Even if the Companies Act and the IBC 2016 are considered as special statutes operating in their respective field, we are of the view that the IBC 2016 being later enactment and in view of the statement and objects and the purpose for which it was enacted, the provisions relating to revival/resolution of the company incorporated under Chapter II will have to be given primacy over the provisions of the winding up proceeding pending before the Company Courts which are referred as saved petitions. We are of the considered opinion that the Company Court while dealing with the winding up petitions (saved petitions) shall have no jurisdiction to stay the proceedings before the NCLT in respect of revival or resolution issue. We may further state that in case the forum under the IBC, 2016 i.e. NCLT fails to revive or successfully implement the resolution plan, then the Company Judge seized with the winding up petitions (saved petitions) would deal with the petition in accordance with law. We are of the view that allowing both the forums i.e. Company Court and the NCLT to go ahead with the liquidation proceedings/winding up proceedings simultaneously would not serve any purpose. There is likelihood of creation of confusion and complexity. To harmonize this likely situation, we observe that the Company Judge, in saved petitions, would exercise jurisdiction in case revival efforts by NCLT fails. We find that the learned Single Judge approached the issue in its proper perspective and harmoniously considered various provisions of the relevant enactments keeping in view the object behind the special statutes. We do not find any error or perversity in the view adopted by the learned Single Judge.

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• 2018 (7) TMI 1740
  Corporate Insolvency Resolution Process - Initiation of corporate insolvency resolution process by financial creditor - Held that:- As evident from the perusal of documents [Annexure R(l)(Colly)] & Annexure R(2) filed by the Financial Creditor along with the rejoinder that the shareholders of the Respondent Company are also the members of the Association, and thus fall under the same management. It is further obvious that the affairs of the Association being managed by the persons who are holding key managerial position and 99.83% of the shareholding in the Respondent Company. As further seen that Mr. Joginder Singh is the Director and Joint Secretary in the Respondent Company and Association respectively, who has executed and signed each of the documents including loan agreement as well which were required for the purpose of granting loan. Moreover, it does not lie in the mouth of the respondent to raise such an argument once respondent itself is in default. Therefore, admission of the petition cannot be successfully resisted on such a flimsy ground. Thus, we have no hesitation to reject the argument raised on behalf of the Corporate Debtor. Another argument that the petitioner has failed to adhere to the provisions of the Bankers Book Evidence Act, 1891 while submitting the Statement of Accounts, which is a mandatory provision as per the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 has also lost its sheen because vide Diary No. 669, dated 07.02.2018 an additional affidavit has been filed by Mr. Puneet Gogia along with a certificate in accordance with the Banker’s Books Evidence Act, 1891 [Annexure-B (Colly)]. The filing of the aforesaid certificate completely answers the said objection The office is directed to communicate a copy of the order to the Financial Creditor, the Corporate Debtor and the Interim Resolution Professional at the earliest but not later than three days from today

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• Service Tax

• 2018 (7) TMI 1719
  Relevant date for issuance of SCN - filing of returns - Extended period of limitation - proviso to Section 73(1) of the Finance Act, 1994 - Held that:- The due date for filing ST-3 becomes the relevant date and in the case of the ST-3 Return due for the period April to September, 2011, the last date was extended repeatedly from 25th October, 2011 to 6/01/2012 - the relevant date is to be considered as 06/01/2012 and hence even within the normal time limit of 18 months, the demand covering the period April to September 2011 will also get included in the demand - appeal allowed - decided in favor of Revenue.

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• 2018 (7) TMI 1718
  Refund of Service Tax - rejection on the ground of time limitation and unjust enrichment - Section 11B of CEA - Held that:- The services rendered by the appellant to the Padampat Singhania University by way of catering were not liable to Service Tax during the period when such Service Tax was paid. The refund claimed through claim dated 24/04/14 is partly hit by time bar and the lower authority rejected the claim of ₹ 6,36,943/- this merits no interference and is upheld. Unjust enrichment - Held that: - From the certificate dated 10/07/2014 issued by their CA, it is evident that the refund amount has not been retained by the appellant. The University has also confirmed having recovered the amount back from the appellant - he appellant has succeeded in convincing that the amount claimed as refund is not hit by unjust enrichment. Appeal allowed in part.

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• 2018 (7) TMI 1717
  GTA Service - benefit of abatement - consignment notes in which the appellant could not produce the certificate as prescribed under CBEC Circular dated 27.05.2005 - benefit denied on the ground that the appellant is not a GTA but is liable to pay Service Tax as consignor/consignee - Held that:- The appellant has expressed the difficulty in procuring the certificates as per CBEC Circular on dates which are subsequent to the actual dispatch of the consignments. Reliance was placed in the case of CST AHMEDABAD VERSUS M/S CADILA PHARMACEUTICALS LTD. [2010 (2) TMI 237 - CESTAT, AHMEDABAD], where it was held that the requirements prescribed by the Board as per circular cannot be mandatory and cannot be used for denying substantive rights. It is not the case of the Revenue that the appellants have not received the service or service tax has not been paid. The demand of Service Tax in respect of those consignment notes where the certificates could not be produced is not justified - appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 1716
  Renting of Immovable Property Service - appellant has not rendered the service tax liability for the amount of rent being received by him - demand of tax with Interest and penalty - Held that:- It is apparent that the moment the liability of the appellant under Section 65 (90a) was brought to his notice, the appellant, despite his tenants did not cooperate and denied to pay the service tax on the rent, paid the sum of ₹ 6,41,984/- on 18.10.2012 for the period 01.06.2007 to 31.03.2012, i.e. before the impugned Show Cause Notice was received by the appellant (which was received on 19.10.2012). This particular fact makes it clear that there is no contumacious conduct for deliberate violation of the provisions of service tax laws on part of the appellant - penalty is to be waived by invoking section 80. Demand of Interest - Held that:- Interest as per Section 75 of the Act is liable to be paid since service tax has been paid with delay - demand of interest upheld. Appeal allowed in part.

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• 2018 (7) TMI 1708
  Refund claim - Section 11B of Central Excise Act - appellant paid the Service Tax liability in cash without making use of credit available in the Cenvat Credit - Held that:- This appears to be an omission on their part which was attempted to be made good by submitting the revised ST-3 returns as provided under Rule 7B of the Service Tax Rules - Once the revised returns have been filed, in which the entire Service Tax liability has been shown as discharged with available CENVAT Credit, any excess Service Tax paid in cash will be eligible for refund subject to relevant refund claim satisfying all the conditions prescribed under Section 11B of the Central Excise Act. The lower authorities do not appear to have examined the claim with reference to the provisions of Section 11B properly - matter is remanded for de novo decision - appeal allowed by way of remand.

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• Central Excise

• 2018 (7) TMI 1715
  Bail Application - cognizable offence or not? - petitioner abetted in fabricating the documents on the basis of which AAPL has claimed/ availed irregular CENVAT Credit under the CENVAT Credit Rules, 2004 - Held that:- In view of the judgment passed in the case of Om Prakash [2011 (9) TMI 65 - SUPREME COURT OF INDIA], this anticipatory bail application is not maintainable as the offences are bailable in nature. This anticipatory bail application is hereby disposed of with a direction that the petitioners will appear before the court below within six weeks and shall file regular bail application and the court below shall consider the bail application in the light of the judgment passed in the case of Om Prakash - application disposed off.

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• 2018 (7) TMI 1714
  Refund claim - adjustment of Bank Guarantee with refund amount - unjust enrichment - Held that:- It is apparent that the amount of ₹ 3,23,195/- does not stand paid to Revenue and therefore, it needs to be adjusted against the admissible refund of ₹ 12,65,209/-. Consequently, the appellant are entitled to refund of an amount of ₹ 9,42,015/- as adjudged by original adjudicating authority. Principles of unjust enrichment - duty is secured against the bank guarantee - Held that:- The decision in the case of Saheli Synthetics Pvt. Limited vs. CC & CE, Surat [2001 (9) TMI 141 - CEGAT, MUMBAI] squarely covers the issue where it was held that bank guarantee furnished by an assessee in compliance with a Court order is in the form of a security or deposit and cannot be held as payment of duty attracting the provisions of unjust enrichment. Interest on refund amount - Held that:- As the appellant were liable to pay duty only on the job work charges. Subsequent proceedings in 1983 onwards, the appellant were required to pay duty not only on the job charges but also on the cost of material and consequently the amount deposited by them were a differential amount required to be deposited against the duty liability and thus it was not a case of pure refund - appellant is therefore, entitled for refund of ₹ 9,42,015/- along with interest as prescribed under the Act. However, while granting the said interest, the interest for the period for which the entire amount was refunded to them in 1983, and 75% of which was recovered from them in 1990, needs to be adjusted. Appeal allowed in part.

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• 2018 (7) TMI 1713
  Valuation - inclusion of packing material supplied by customer in assessable value - overriding effect of rule 6 of Valuation Rules on Rule 4 - whether the value of packing material supplied by the customer should be included in the assessable value of the goods manufactured by the appellant? - Held that:- The value of packing material consumed in the production of goods shall be included in the transaction value - The packaging of goods is carried out only after the final product is manufactured. The packaging material cannot be consumed and loses its identity in the manufacture of final product, therefore, the term used 'consumed' in the production means only for 'packing of final product' - the contention of appellant that the packing material which supplied by customer free of cost was used after the manufacture of final product i.e. Metal Container and not consumed in the manufacture is incorrect. Whether Rule 6 can overriding the effect on the section 4? - Held that:- The authority of Rule 6 is flowing from section 4(1)(b) only, therefore, it cannot be said that Rule 6 has overriding effect on the section - in terms of section 4 read with Rule 6 of valuation Rules, 2000, the packing material supplied free of cost by the customer is includable in the transaction value (Assessable Value) and the same will be chargeable to excise duty. Appeal dismissed - decided against appellant.

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• 2018 (7) TMI 1712
  Valuation - transmission towers - inclusion of value of nuts and bolts in assessable value - case of the department is that the nuts and bolts are parts of transmission tower - appellant submits that the nuts and bolts are not used in the manufacture of their final product i.e. transmission towers. Nuts and bolts are bought out items and the same is traded by supplying the same directly from the supplier’s to the site of the buyer of transmission towers. Held that:- It is not in dispute that the nuts and bolts are bought out items and the same is not part of the manufacturing activity of the appellant. The said nuts and bolts were not brought into factory of the appellant. Hence the same is not taken part in the activity of manufacturing of transmission towers. The said nuts and bolts were supplied directly from supplier to site of the buyers. The goods manufactured and cleared by the appellant is the transmission towers in unassembled form which is only goods subject to assessment and the appellant have correctly discharged the duty on the said goods. The transaction of the nuts and bolts is clearly a trading activity on which neither the duty can be demanded nor the value thereof can be included in the value of transmission towers. The very same issue has been considered time and again by various forums such as this Tribunal, High Court and Supreme Court and consistently the bought out items supplied directly at site for erection installation commissioning of excisable manufactured goods the value of bought out items neither can be included in the value of such machine or even leviable to duty independently. Reliance was placed in the case of COLLECTOR OF CENTRAL EXCISE, BARODA VERSUS DODSAL PRIVATE LTD., BARODA [1986 (1) TMI 259 - CEGAT, NEW DELHI], where it was held that the activity would not come under the purview of a manufacture and ‘the transmission towers which were erected at the site from the structural material would be permanent structures and would not admit of the definition or description of the goods. The nuts and bolts supplied directly to the supply of the supplier being out of the part of manufacturing of appellant is not liable for duty - Since the matter is decided on merit, there is no need to address the issue on limitation. Appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 1711
  CENVAT Credit - moulds and dies - credit denied on moulds and dies cleared to job workers without reversal of Cenvat Credit - Held that:- The moulds and dies were cleared to the job workers without reversal of Cenvat Credit. If appellant had reversed the Cenvat Credit, the said job worker was entitled to take the Cenvat Credit and the said Cenvat Credit would have been used by the job workers for payment of duty of job worked goods on which the appellant has paid duty. Therefore, whole exercise is Revenue neutral - appellants are not required to reverse the Cenvat Credit on moulds and dies cleared to the job worker - credit allowed. CENVAT Credit - subsequent reduction in price of inputs by the supplier by issuance of debit notes - Held that:- It is not the case of Revenue, in debit notes the supplier had reduced the duty component of said reduced price. In terms of Rule 3 of Cenvat Credit Rules, 2004, the assessee is entitled to take Cenvat Credit of duty paid on inputs - credit allowed. CENVAT Credit - old capital goods which were cleared after use on payment of duty - Held that:- Admittedly, the capital goods in question has been put to use by the appellant and after use of the capital goods, the said capital goods has been cleared by the appellant on payment of duty on transaction value - the reversal of Cenvat Credit is not required. CENVAT Credit - inputs which has been scraped - Held that:- The said inputs are not usable by the appellant, therefore the same has been cleared as scrap on which the appellant had paid duty - the appellant is not required to reverse the Cenvat Credit. Penalties are not warranted and is set aside. Appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 1710
  CENVAT Credit - credit was denied in terms of Rule 11(3) of Cenvat Credit Rules, 2004 - Held that:- As per Rule 11(3)(ii), if the final goods is exempted absolutely then the whole of the credit lying in Cenvat Credit shall lapse - Admittedly, in the case in hand, the product manufactured by the appellant is exempt conditionally as Notification No. 04/2006 dated 01.03.2006 at Sr. No. 90 exempts the goods manufactured by the appellant upto 3500 MT. Therefore, the exemption under the said notification is not absolute - the provisions of Rule 11(3)(ii) of the Rules are not applicable to the facts of this case and the condition of Rule 11(3)(i) of the Rules has been complied with by the appellant - credit allowed - appeal allowed - decided in favor of appellant. CENVAT Credit - time limitation - the Cenvat Credit has been utilized by the appellant in the month of June, 2010 for payment of duty of the said month - Held that:- The SCN issued to the appellant on 03.08.2011 is barred by limitation, as the availment of Cenvat Credit was well known to the Department in advance. Therefore, the extended period is not invokable - appeal allowed. Appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 1709
  Manufacture - the appellant put the imported goods into plastic bins and putting label on the plastic bins showing the description, part number and quantity etc., and clearing to the same to OEM - whether the activity amounts to manufacture? - Time limitation - Held that:- In this case if it is held that activity undertaken by the assessee as the manufacture then assessee is entitled to avail Cenvat credit of ₹ 26.11 crores whereas duty payable by the assessee is only ₹ 20,77,60,576/- which is much less than the Cenvat credit available to the assessee - no mala fides are attributable to the assessee - also, it is a Revenue neutral situation. Admittedly, the show cause notice has been issued by invoking the extended period of limitation as show cause notice has been issued on 30/05/2011 for the period June, 2006 to December, 2009. In that circumstances, the demand is barred by limitation. Appeal dismissed - decided against Revenue.

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• 2018 (7) TMI 1707
  CENVAT Credit - inputs/capital goods - MS Bars, MS Channels, MS Joists & MS beams etc. - inorganic chemicals compound stabilizers of rubber - whether MS Bars, MS Channels, MS Joists & MS beams etc. and inorganic chemicals compound stabilizers of rubber as used by the appellant for erecting a foundation as a base for its blending machine to manufacture the product called Deoxidized Soya Bean can be called as capital goods / Inputs so as to entitle appellant to avail credit there upon? Held that:- Apparently, the articles on which the credit has been availed do not fall under any of the Chapters as mentioned in clause (i) of capital goods definition. Admittedly and apparently they fall under Chapter heading 72, and under Chapter heading 2824 & 3812 of Central Excise Tariff Act respectively, which cannot be categorized as capital goods - However, Clause (iii) and (vii) thereof includes i.e. anything which may be a component spare and accessory of the goods as specified in the Chapters under clause (i) of the said definition they can also be rightly classify as the capital goods. Whether the inputs in question can be the components spare or accessory or the fixture in clause (iv) of the definition of capital goods? - Held that:- Inputs means anything essentially used in manufacturing process - When Chartered Engineer Certificate is there to explain the articles in question to be the integral part of manufacture, the same be relied to extend benefit of Cenvat Credit - This particular certification is sufficient to hold that the MS Bars, MS Channels, MS Joists & MS beams etc. are very much the integral component/spare part of the machine meant to yield output hence can well be classified as capital goods and the inputs as mentioned in the above definitions. Credit allowed - appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 1703
  Area Based Exemption - taking over a non-functional unit - it was alleged that the respondent had taken over M/s. Stanley Controls only for the purpose of getting relief/exemption under the notification in question - Held that:- The learned Tribunal has not dealt with the said aspect of the matter despite the categorical findings recorded by the adjudicating authorities i.e. primary and appellate authority - the matter should be remanded to the learned Tribunal for a reconsideration of the said question - appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2018 (7) TMI 1706
  Scope of Trade Circular No.3T of 2018 dated 16th January 2018 - Recovery of Value Added Tax in excess of 3% - The prayer is that notification No.VAT­1517/C.R.136(A)/Taxation­1 dated 13th October 2017 should be given effect to and operated from 24th August 2017 - Inter-state Purchase. Whether the petitioners can seek the Writ of mandamus and the direction claimed by them? Held that:- The Trade Circular dated 16.01.2018 says that the Maharashtra Goods and Services Tax Act was introduced with effect from 1.07.2017. Accordingly, the Maharashtra Value Added Tax Act, 2002 was amended from 01.07.2017. After the amendment to the MVAT Act, the definition of the term 'goods' cover only six goods, petroleum crude, high speed diesel, motor spirit, natural gas, aviation turbine fuel and alcoholic liquor for human consumption. This Circular also invites the attention of all concerned to Section 16(6A) in the MVAT Act. According to this Circular, sub­section (6A) is inserted in Section 16 of MVAT Act to provide for the deemed cancellation of the registration, with effect from 01.07.2017, of the dealers who have not effected any sales of the aforesaid six goods during the period 2016­2017. Therefore, only those dealers who are effecting the sales of these goods remain registered dealers under the MVAT Act. Until the Government intervened to bring about the parity or equality, there could not have been any assumption or inference as is drawn by the petitioners before us. The petitioners are not challenging the notifications. The Circulars, at best, are for internal guidance or clarification of queries of the Trade and officials, but their language cannot control the substantive notifications. The notifications amending the schedule would enjoy the same status as that of the rules under the Act. In the circumstances, we do not think that relying upon these circulars, the petitioners can claim the benefit in the intervening period, more so, when both dealers were not included under the earlier notification. The petitioners are not right in their contentions based on which the reliefs have been claimed. The relief claimed is that we should quash the Trade Circular dated 16.01.2018. That Trade Circular No.3T of 2018 is but clarifying the position resulting from issuance of these two notifications, namely, of August and October 2017. We cannot see how we can hold that the State Government intended to grant the benefit by circular to a taxable person registered under the MGST Act when he was not within the purview of the substantive law, MVAT. In other words, a taxable person registered under the MGST Act by virtue of the amendment to the MVAT Act went out of the purview of the MVAT Act. It is obvious from a reading of the subsequent notification dated 13th October 2017 that both the goods and taxable person under the MGST Act have been brought within the purview of Schedule­ B and Entry ­16. In such circumstances by any interpretative process or by resorting to the exercise suggested by the petitioners, we cannot bring in the goods as defined under the MGST Act and the taxable person registered under the MGST Act in the Schedule­B as amended - The benefit will have to be granted only from the date from which it is extended, namely, w.e.f. 14.10.2017. Petitions are dismissed.

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• 2018 (7) TMI 1705
  Evasion of tax - Section 6(1)(f) of the KVAT Act - case of Revenue is that the entire contract amount had to be disclosed in the turnover and tax paid at 12.5% after eligible deductions as available in Rule 10, whereas the assessee having paid only the scheduled rate of those goods, which were incorporated in a works contract - Held that:- There occurs a sale from the awardee to the awarder on incorporation or accretion of such goods to the works contract. Such sale when involved in a works contract, the tax liability would be different from the liability imposed by the Schedule on the separate goods. The works contract is liable to tax at a uniform rate for the transfer of goods by way of accretion in the works contract; on the total contract receipts after exemptions provided under Rule 10 Hence, there is a suppression in the return leading to tax evasion. The Tribunal was not correct in relying on U.K.Monu Timbers [2012 (6) TMI 795 - KERALA HIGH COURT] which found that the power of best judgment conferred on the Assessing Officer is not available to the officer proceeding for imposition of penalty under Section 67 of the KVAT Act - In the present case, there is no best judgment assessment made and the Intelligence Officer has merely taken the total contract receipts including the deduction made by the awarder for supply of goods, which the assessee disclosed in the returns as a mere sale. Hence, there is no best judgment or estimation carried out by the Intelligence Officer and the turnover found to have been suppressed is from the total contract amount received by the awardee-assessee. Whether in computing the tax evaded there has to be deduction of the input tax credit which could be claimed by the assessee? - Held that:- When the awarder purchases goods and supplies it to the awardee, and then deducts the purchase price from the total contract amounts, the purchase made is on behalf of the awardee. There would hence be 'zero' tax liability on the awarder at the time of supply to the awardee. But, the subsequent sale in the present case is by accretion of goods into the works contract and the value addition insofar as the execution of the works contract is concerned, has to be taxed at the rate of 12.5% after allowing the deductions under Rule 10 of the KVAT Rules. At this point, definitely the awardee would be entitled to claim input tax credit being the tax originally paid by the awarder at the time of purchase - However, the claim can be raised only in assessment proceedings and there could be no deduction made of such probable claim, in computing the tax sought to be evaded. Revision allowed - decided in favor of Revenue.

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• 2018 (7) TMI 1704
  Whether the Tribunal was correct in deleting the addition made on the strength of a cancelled issue voucher of gold, on the ground that the Intelligence Officer has not summoned the goldsmith and also not verified the stock register; when burden of proving that there is no attempt to evade tax is squarely on the assessee as statutorily prescribed under Section 67 of the Kerala Value Added Tax Act, 2003? - Held that:- In the context of the burden being squarely on the shoulders of the assessee, it was for the assessee to seek summoning of the artisan and enable verification of the stock register. The assessee has not filed any application before the Intelligence Officer to summon the artisan. The assessee also did not produce the stock register and specifically point out the entry made to absolve himself from the liability. The burden stands undischarged - the Tribunal erred insofar as casting the burden on the Intelligence Officer; contrary to the statutory prescription. Whether the Tribunal was correct in directing the penalty levied on sale of fixed assets to be deleted on the ground that the sale was reflected in the books of accounts, especially when under the KVAT Act there is no regular assessment contemplated wherein the Assessing Officer is mandated to look into the books of accounts before regular assessment? - Held that:- The burden to prove that the artisan had refused to take the gold as per the issue voucher which led to its cancellation was that of the assessee. The assessee ought to have sought for summoning the artisan to be examined before the Intelligence Officer; which the assessee failed to do. The assessee also failed to discharge its burden by enabling verification of the stock register, by producing it and pointing out the specific transaction which stood cancelled; recovered by the Intelligence Officer - deletion of penalty set aside. Whether the penalty imposed on sale of fixed assets could be deleted when the regime under the KVAT Act contemplates self assessment, which stands completed unless the Assessing Officer invokes the provisions in Section 25? - Held that:- The assessee had filed an incorrect return and had not returned the sale of fixed assets nor paid tax in accordance with that. Even after issuance of notice on penalty, the assessee filed an annual return without showing the aforesaid liability. A revision of the annual return was carried out and only then the liability satisfied - penalty affirmed - With respect to the quantum of penalty on the sale of fixed assets, since the assessee had filed revised return, paid tax and also interest from the due date, the same can be reduced to the actual amount of tax sought to be evaded. Revision allowed in part.

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• 2018 (7) TMI 1699
  Levy of Entertainment tax - gate receipts of the musical program - Section 3 of the Gujarat Entertainments Tax Act, 1977 - Held that:- Section 3 of the Act is the charging section whereas Section 3A of the Act makes certain forms of entertainments non-taxable. If a form of entertainment is not taxable under Section 3A of the Act we do not see how the requirement of exemption and necessity to conform to the requirement of exemption can apply to a non-taxable form of entertainment. All kinds of musical programmes, without any qualification, have been sought to be taken out of the purview of the charging section by incorporation of Section 3A. If that is so, there is no no substance in the arguments advanced on behalf of the State; neither it can be agreed with the reasoning of the High Court. The High Court could not have imposed the requirement of the entertainment to be for educational, cultural or charitable purpose when the form of entertainment in question is included in Schedule III to the Act - appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 1698
  Condonation of delay in filing appeal - power to condone delay - applicability of Section 5 of the Limitation Act, 1963 - Held that:- Section 27 of the Act, 2002 provides a limitation of 120 days, with effect from the date of the Order appeal against, for filing an appeal to the High Court. No power of condonation of any delay that may have occurred is provided for under the Act - Section 80 of the Act, 2002, however, provides that in computing the period of limitation laid down under Sections 25, 26 and 27 of the Act, 2002 the provisions of Sections 4 and 12 of the Limitation Act, 1963, so far as may be, apply. Section 5 of the Limitation Act is expressly excluded by Section 80 of the Act. The order of the High Court condoning the delay in filing the appeal filed by the respondent-herein under Section 27 of the Act, 2002 must be held to be legally infirm - appeal allowed - decided in favor of appellant.

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