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Showing 361 to 380 of 844 Records
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2020 (7) TMI 485
100% EOU - Goods cleared by the EOU for sale within India - duty-free inputs (both imported and indigenous) - Inputs not used for Manufacture of goods - Inputs used for manufacture of exempt goods - Claim of alternative benefit of exemption notification which is not the part of SCN - HELD THAT:- the noticee is not estopped from putting forth other grounds of defence and if he does so,fairness requires that they are also considered. We, therefore, find in favour of the appellant as far as the question as to whether the new exemption notifications not being the subject matter of the SCN can be raised as a point of defence at this stage of appeal. Evidently, if the goods are otherwise covered by another exemption notification and the appellant is entitled to such exemption notification, fairness requires that such benefit should be given to the appellant.
Benefit of exemption where the EOU is registered with Excise Department - Scope of CBEC circular given relaxation from registration - HELD THAT:- as far as the exemption notifications issued by the Government are concerned, they are clearly in the nature of sub-ordinate legislations. We do not think that a letter issued by the CBEC can enlarge the scope of the exemption notifications thereby truncating the scope of taxation levied by the Parliament. Even if it is presumed that CBEC had such power, these letters are not subject to scrutiny and review by the Parliament.
The exemption given by the CBEC by way of a letter was only to the extent of avoiding two registrations but no exemption has been given with respect to following remaining conditions of the Rules to be followed. In view of this, the appellant is not entitled to benefit of the exemption notification 24/2005-CUS or 132/2006-CUS in respect of the inputs procured by them.
Benefit of exemption notification 06/2006-CE dt.01.03.2006 - HELD THAT:- What is claimed is an exemption available for “parts consumed within the factory of production of such parts for manufacture of goods specified at Sl.No.1-20 above” (Sl.No.21, List-5 read with Sl.No.84 of the table). Clearly, there is no dispute with regard to the parts manufactured by the appellant and consumed within their factory. What is in dispute is that the parts which they have procured either by importing or from other indigenous suppliers, those are not consumed within the factory of production. There is no exemption for such parts. Therefore, the appellant is also not entitled to the benefit of exemption notification 06/2006-CE.
Imposition of penalties u/r 25 of the Central Excise Rules, 2002 - HELD THAT:- The learned Commissioner imposed penalties under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944 without specifying as to which particular clause of Rule 25 has been contravened by the appellant. None of the show-cause notices mentioned regarding the violation of particular clause of Rule 25 - the penalties imposed under Rule 25 which is pari materia to erstwhile Rule 173Q is set aside.
Imposition of penalties u/s 114A of the Customs Act, 1962 - HELD THAT:- In all the 4 show-cause notices issued to the appellant, penalty was proposed under Section 112 of the Customs Act, 1962 but while passing the impugned order, the learned Commissioner imposed penalty under Section 114A of the Customs Act by observing in para 5.12.5 of the impugned order that the provision of Section 114A of the Customs Act is more appropriate in the present case - it is settled law that any penalty not proposed in the show-cause notice cannot be imposed
Appeal allowed - decided in favor of appellant.
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2020 (7) TMI 484
Valuation - deductions in nature of discounts - manufacture of tyres under the brand name “CEAT” on job work basis - Rule 10A(ii) of Central Excise (Determination of price of excisable goods) Rules 2000 - HELD THAT:- The issue is no more res integra and is decided in their own case, in another period, COMMISSIONER OF CENTRAL TAX MEDCHAL – GST VERSUS ACE TYRES LTD., UNIT – II, EXEL RUBBER LTD. [2019 (11) TMI 377 - CESTAT HYDERABAD], this issue came up before this tribunal and this tribunal has held that the learned Commissioner (Appeals) has correctly assessed the goods and appellants are entitled for discounts as claimed - there are no infirmity in the order.
Appeal dismissed - decided against Revenue.
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2020 (7) TMI 483
Validity of assessment order - principles of natural justice - Order has been passed disregarding various documents submitted by the petitioner on different dates - HELD THAT:- Issue notice returnable on 27.07.2020.
Mr. Tirthraj Pandya, learned Assistant Public Prosecutor waives service of notice for the respondent-State.
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2020 (7) TMI 482
Rectification of mistake - typographical error - tax leviable on the services on which applicant has sough ruling would be 18% - HELD THAT:- After perusal of the said order it was found that there was error in para number 5 and the para number 8.1 in typing the entry number. Hence in exercise of the powers under Section 102 of GST Act a rectification is being made in the said order dated 02.06.2020.
In para number 5 and para number 8.1 for the words and number “under entry no. 26(ii)” read as “under entry no. 26(iv)” - Rest of the order/ruling will be same as in the original order.
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2020 (7) TMI 481
Classification of service - rate of tax - coal handling and distribution charges wherever supply of such services is intended to be made expressly to a customer - utilization of input tax credit - HELD THAT:- U/s 16(1) of CGST Act, every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person - U/s 49(4) of the Act, the amount available in the electronic credit ledger may be used for making any payment towards output tax under this Act or under the Integrated Goods and Services Tax Act in such manner and subject to such conditions and within such time as may be prescribed.
Thus, the coal handling and distribution charges will be taxable @ 18% and not 5% wherever supply of such services only is intended to be expressly made to a customer - the input credit availed as per the conditions specified in section 16 shall be allowed for discharging the liability towards supply of coal and supply of coal handling and distribution charges respectively.
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2020 (7) TMI 480
Classification of supply - mounting of Bus/ Truck Body by the job worker on the chassis supplied by the principle for which the applicant charged fabrication charges including cost of certain material that was consumed during the process of job work - whether classified as supply of service under HSN 9988? - Circular no. 52/26/2018-GST issued by Government of India, Ministry of Finance, Department of Revenue dated 9th August, 2018.
HELD THAT:- The supply towards provision of services in respect of activity of mounting/ fabrication of bodies on chassis provided by Customer should be treated as supply of bus or provision of services in respect of activity of mounting/fabrication of bus body on the chassis wherein the said activity of mounting/fabrication is outsourced to the Applicant by owner/provider of chassis, in no case the ownership of the chassis belongs to the applicant, hence in both the scenarios mentioned in the question will be taxable under SAC 998881 - “Motor vehicle and trailer manufacturing services” and under entry no. 26(ii) as “Manufacturing services on physical inputs (goods) owned by other” it is taxable @18%.
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2020 (7) TMI 479
Utilization of Input Tax credit - cancellation of debit entries in the Petitioner’s Electronic Credit Ledger maintained under the CGST Act - HELD THAT:- The petitioner has not approached the respondents at any point of time making such a request. He also does not dispute that the investigation which is going on can continue for further period of 18 months approximately and he also does not dispute the provision of Section 76 and 76(2) which is on a statute book reflecting the liabilities of taxes of the parties. Relying on various decisions, it is urged that without following the procedure prescribed under the statute and without any taxing event having taken place, no recovery is permissible.
Issue Notice returnable on 24.7.2020.
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2020 (7) TMI 478
ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Authority for Advance Ruling (AAR) pertain to the entitlement of input tax credit (ITC) under the Goods and Services Tax (GST) regime for a banking company in relation to GST paid on premium paid to the Deposit Insurance and Credit Guarantee Corporation (DICGC). Specifically: - Whether the applicant bank, engaged in banking and financial services, is entitled to avail input tax credit on GST paid on DICGC premium, which is a statutory requirement for deposit insurance?
- Whether the bank's exercise of the option under Section 17(4) of the CGST/SGST Act, 2017 to avail only 50% of eligible ITC on inputs, capital goods, and input services in a taxable period is lawful and proper in relation to GST paid on DICGC premium?
- What is the applicable legal framework governing the entitlement and apportionment of input tax credit for banking companies under the CGST/SGST Acts, particularly Sections 16, 17, and Rule 38 of the CGST Rules, 2017?
ISSUE-WISE DETAILED ANALYSIS Issue 1: Entitlement to Input Tax Credit on GST paid on DICGC Premium Legal Framework and Precedents: The relevant provisions are Sections 16 and 17 of the CGST Act, 2017, which govern eligibility and conditions for taking input tax credit, and the apportionment and blocking of credits. Section 16(1) entitles every registered person to take credit of input tax charged on supplies used or intended to be used in the course or furtherance of business. Section 17(4) provides a special option for banking companies and financial institutions regarding apportionment of credit. Rule 38 of the CGST Rules, 2017 prescribes the procedure for claiming credit by banking companies. Court's Interpretation and Reasoning: The AAR noted that the applicant bank is engaged exclusively in banking and related financial services, some of which are taxable and some exempt under GST. The bank pays GST on its outward taxable supplies and collects the tax accordingly. The premium paid to DICGC is a statutory obligation for deposit insurance on deposits accepted in the course of the bank's business. The Authority observed that the GST paid on the DICGC premium constitutes an inward supply used in the course or furtherance of business, thus prima facie eligible for input tax credit under Section 16(1). The bank's claim to avail credit on this inward supply is therefore justified, subject to applicable restrictions. Key Evidence and Findings: The applicant bank submitted that it pays GST on DICGC premium and avails only 50% of the eligible ITC in accordance with the option under Section 17(4). The bank's outward supplies include taxable and exempt services, necessitating the apportionment of ITC. Application of Law to Facts: The Authority applied Section 16(1) to confirm that input tax credit is available if the supply is used in the course or furtherance of business. Since deposit insurance is a statutory requirement linked directly to deposits accepted in business, the GST paid on DICGC premium is an input service used in business. Treatment of Competing Arguments: While the Authority did not explicitly record opposing arguments, the analysis implicitly addresses concerns about the proportionate credit allowed due to exempt supplies by referencing Section 17(4), which specifically provides an option for banking companies to claim 50% of eligible credit. Conclusion: The bank is entitled to avail input tax credit on GST paid on DICGC premium, subject to the restrictions and options provided under the GST law. Issue 2: Legality and Application of Section 17(4) Option for Banking Companies Legal Framework and Precedents: Section 17(4) of the CGST Act allows banking companies and financial institutions to either comply with the apportionment provisions under Section 17(2) or opt to avail 50% of the eligible input tax credit on inputs, capital goods, and input services every month, with the remainder lapsing. This option, once exercised, cannot be withdrawn during the financial year. Rule 38 prescribes the procedural compliance for availing credit under this option. Court's Interpretation and Reasoning: The Authority examined the applicant's exercise of the Section 17(4) option, noting that the bank avails 50% of eligible ITC monthly and does not claim the remainder, consistent with the statutory provision. The Authority emphasized that adherence to the procedure and conditions under Rule 38 is mandatory for the lawful exercise of this option. Key Evidence and Findings: The applicant bank's statement and filings confirm that it follows the option under Section 17(4) and complies with Rule 38 requirements. The bank claims 50% of ITC on inputs including GST paid on DICGC premium. Application of Law to Facts: The Authority applied the statutory provisions and rules, concluding that if the bank strictly follows the procedure under Rule 38, it is entitled to avail the benefit of Section 17(4) and claim 50% of the eligible ITC instead of undergoing the more complex apportionment under Section 17(2). Treatment of Competing Arguments: The Authority implicitly rejects any argument that the bank must apply Section 17(2) apportionment by affirming the validity of the Section 17(4) option, provided procedural compliance. Conclusion: The bank's exercise of the option under Section 17(4) to claim 50% of eligible ITC is lawful and proper, subject to strict compliance with Rule 38. Issue 3: Procedural Compliance under Rule 38 of CGST Rules, 2017 Legal Framework and Precedents: Rule 38 details the procedure for banking companies and financial institutions opting under Section 17(4), including conditions on non-business use, blocked credits, and credit admissibility. Court's Interpretation and Reasoning: The Authority underscored that the bank must follow the procedural requirements of Rule 38, including exclusion of credits on inputs used for non-business purposes and blocked supplies as per Section 17(5). The rule also mandates furnishing details in FORM GSTR-2 and crediting the electronic ledger accordingly. Key Evidence and Findings: The bank confirmed adherence to these procedural requirements in its application and submissions. Application of Law to Facts: The Authority held that strict compliance with Rule 38 is a precondition for availing the Section 17(4) option and the corresponding ITC benefits. Conclusion: Procedural compliance under Rule 38 is mandatory; upon such compliance, the bank's claim to ITC on GST paid on DICGC premium under Section 17(4) is valid. SIGNIFICANT HOLDINGS The Authority held: " / , 2017 38 / , 2017 17 (2) 17 ( 4 ) "
Core principles established include: - Input tax credit on GST paid on statutory deposit insurance premium is admissible as it is an inward supply used in the course or furtherance of business.
- Banking companies have a statutory option under Section 17(4) to claim 50% of eligible ITC monthly instead of apportionment under Section 17(2), provided they comply with Rule 38.
- Strict procedural compliance with Rule 38 is essential to lawfully avail the Section 17(4) option and corresponding input tax credits.
Final determinations: - The applicant bank is entitled to avail input tax credit on GST paid on DICGC premium.
- The bank's exercise of the 50% ITC option under Section 17(4) is valid and lawful.
- Compliance with Rule 38 procedures is mandatory for claiming such credit.
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2020 (7) TMI 477
Input Tax Credit - Blocked Credits - Purchase of Water Slides - Water Slides are made up of Strong PVC - Water Slides are installed on Steel and Civil Structure - Input goods and services used in construction of the support structure - Goods and services used for area development and preparation of land on which water slides are erected - Goods and Services used for construction of Swimming Pool / Wave Pool as water slides directly run into pools.
HELD THAT:- To set to rest the disputes regarding the definition of the Plant, in light of the fact that input tax credit of works contract services, goods and services received as input for construction of immovable property on own account has been specifically put under the Blocked Credit list with the rider that it shall not apply to plant and machinery, it was incumbent that there should be clarity regarding classification of buildings and civil structures that were hitherto been classified as ‘Plant - in the explanation relating to Plant and Machinery, beneath sub-section (6) of Section 17. while providing the meaning of the term plant and machinery, it has been clearly stated that Buildings and Civil Structures shall not be covered under the term Plant. However, while so clarifying, it has been accepted and understood that plant and machinery many a times requires support structure and / or foundation for installation and cannot work otherwise. Thus, civil structures and foundation as supporting structure for fastening of plant and machinery to earth has been included as part of plant and machinery.
Eligibility of ITC in case of Input Tax paid on Purchase of Water Slides - HELD THAT:- Water Slides shall fall within the meaning of the term apparatus, equipment and machinery and therefore, shall be eligible for claim of ITC.
ITC on Steel and Civil Structure on which the Water Slides are installed - HELD THAT:- The foundation and support structures which are used to fasten plant and / or machinery to the Earth is classifiable as ‘Plant and / or Machinery’ - In the instant case. slide are fastened to the Steel and Civil Structure are affixed to the Earth through these Steel an Civil Structures. Therefore, these Steel and Civil Structures shall form part of the Plant and Machinery. Accordingly. the credit of “Tax paid on Input goods and services used in construction of this support structure shall be available.
ITC - For Wave Pool, Machines have been installed - HELD THAT:- The foundation for these machines are eligible to be part of the Machines and the ITC shall be treated in a manner similar to that of the Machines. However, the Machine Room, which is a civil structure, erected for protecting machine is neither foundation nor civil structure for machine therefore, IT relatable to the construction of the room for Housing the machine shall not be eligible for ITC.
ITC on Goods and services used for area development and preparation of land on which water slides are placed - HELD THAT:- The area development and expenditure on preparation of land like site formation services are part of the cost of the land and thus are interminably bound with land. These expenses are liable to be capitalized under the head Land. Therefore, on account of the specific exclusion of Land from the meaning of ‘plant and machinery’. ITC related to Land Development, subject to its capitalization as per accounting principles shall not be available.
ITC on Construction of swimming pools / Wave Pool in which the water slides directly run into - HELD THAT:- Such Swimming Pools / Wave Pools are not support structure or foundation for a plant, but are independent items per se. Since they are not foundation or support structure on which slides are fasted for affixing them to earth and also on account they being Civil Structures. they are therefore excluded from the meaning of ‘plant and machinery’. Thus, the ITC related to the construction of the Swimming Pools and Wave Pools. subject to its capitalization shall not be available.
ITC on Inward supplies of goods or services involved in the construction of immovable properly which is a civil structure or building - HELD THAT:- The provision of facilities like transformers. sewage treatment plant. Electrical Wiring and Fixtures. Surveillance systems. D.G. Sets. Lilts. Air Handling Units etc. are sine qua non for a commercial mall and hence cannot he considered separate from the building or civil structure. The provision of these are either statutory for a building or defines the nature of the building as a commercial mall. Hence the input tax credit on the inward supplies of goods or services involved in the construction of immovable properly which is a civil structure or building is not available to the applicant and hence blocked.
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2020 (7) TMI 476
Input tax credit - Purchase of Lift - credit available to Hotel or not - it has been used in the course or for the furtherance of business - HELD THAT:- The lift becomes part of the building and is not a separate thing per se. A lift does not have an identity when removed from the Building. Therefore, the lift cannot be said to be separate from a Building. Also, it has to be borne in mind that a lift is not an item that is purchased an sold. It is a customized mechanism for transportation, designed to suit a specific building. Upon piece by piece installation, it becomes an integral part of the building.
In the explanation relating to Plant and Machinery, beneath sub-section (6) of Section 17, while providing the meaning of the term plant and machinery, it has been clearly stated that Buildings and Civil Structures shall not be covered under the term Plant. However, while so clarifying, it has been accepted and understood that plant and machinery many a times requires support structure and / or foundation for installation and cannot work otherwise. Thus, civil structures and foundation as supporting structure for fastening of plant and machinery to earth has been included as part of plant and machinery.
In the instant case, the lift has become part of the building and thus falls under the exclusion from plant and machinery and accordingly, we do not find any reason to interfere with the clear provisions of statute.
The input tax credit of tax paid on Lifts procured and installed in hotel building shall not be available to the applicant as the same is blocked in terms of Section 1 of the CGST Act 2017, become an integral part of the building.
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2020 (7) TMI 475
Classification of supply - Works Contract or Composite supply - principal supply - work relating to “supply, installation and fixing of customized furniture in a building” - applicable rate of GST - HELD THAT:- The supply, installation and fixing of furniture, customized or customized cannot be a works contract, as the items of furniture have been made or manufactured at the supplier's place which have been installed or fixed at the place of the recipient. Such installed or fixed items of furniture can be removed/ moved to any place without damage to the furniture. Thus, supply, installation and fixing of furniture cannot be covered under works contract, as it does not result in immovable property or it is not going to be part of immovable property - As per the view point and interpretation of law and facts of the case, the supply, installation and fixing of furniture, either customized or not customized, is not composite supply of works contract by way of construction etc of civil structure or other original works to the Government .and therefore, is not chargeable to concessional rate of 12% as per the Notification No.11/2017 dated, 28.06.2017.
The contract in questions i.e. work order relating to supply, installation and fixing of customized furniture in a building conform to the “COMPOSITE SUPPLY” as provided in section 2(30) of CGST Act, 2017. The supply made by the applicant to the Capital Project Administration consists of Two taxable supplies of Goods and Services, which are naturally bundled and supplied in conjunction with each others, where the supply of goods viz. Furniture is the principal supply. Thus, the work order in question shall merit classification under Chapter Head 9403 of GST Tariff and shall be liable to GST at the rate applicable at the time of supply.
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2020 (7) TMI 474
Levy of GST - amount recovered by the applicant from other government departments for doing research work and study, which help them make policies or understand its impact - Pure services or not - Services provided by the applicant to other government department - entry no 8 of Exemption Notification No. 12/2017 Central Tax (Rate) dated 28th June 2017.
HELD THAT:- The applicant has attached the list of works undertaken by it, mentioning the item no of respective Schedule of Constitution of India against the each work being executed, in relation to which the pure services are being provided by the applicant to other government departments or local authority or a Governmental authority or a Government Entity - the works of pure services undertaken by applicant are covered in clauses of the Eleventh and Twelfth Schedule referred in article 243G and 243W of the Constitution.
The of works being undertaken by the applicant is in relation to the functions entrusted to Municipalities under article 243W and to Panchayats under article 243G of the Constitution, and, therefore, it is exempt from tax being covered in Sr. No. 3 of Notification No. 12 of 2017-Central Tax (Rate), dated 28-6-2017 (as amended from time to time) issued under Central Goods and Services Tax Act, 2017 (CGST/Act), and corresponding notifications issued under Madhya Pradesh Goods and Services Tax Act, 2017.
Whether Services provided by the applicant to other government department are covered under the entry no 8 of Exemption Notification No. 12/2017 Central Tax (Rate) dated 28th June 2017? - HELD THAT:- Entry No. 8 prescribe for Services provided by the Central Government, State Government, Union territory or local authority to another Central Government, State Government, Union territory or local authority - this entry grants exemption to services provided by Central Government, State Government, Union territory or local authority only. Hence to qualify for the exemption granted under Entry No 8 service provider must be government or local authority.
The Word government has been defined under the GST laws and the definition government covers Central Government and State Governments only. Here it is pertinent to note that the application is a society registered under MP Societies Registrikaran Act 1973 and has its own governing body being presided over by Chief Minister of State of Madhya Pradesh. Hence the applicant does not fall within the definition of Government or local Authority - the applicant falls within the ambit of definition of Government Entity as defined under clause (zfa) of notification no 12/2017.
Entry no 8 of Notification no 12/2017 CT(R) covers services provided by government or local authority only however the applicant does not cover within the definition of Government or Local Authority hence Services provided by the applicant to other government department are not covered under the entry no 8 of Exemption Notification No. 12/2017 Central Tax (Rate) dated 28th June 2017.
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2020 (7) TMI 473
Classification of goods - Preparation of a kind used in Animal Feeding - Bio Processed Meal - whether fall under HS Code 23099090 and applicable rate of GST on said product shall be NIL as per Notification 02/2017 - CT (Rate) dated 28.06.2017? - errors in the order of Advance Ruling Authority - rectification of the mistake - HELD THAT:- Chapter heading 23099090 is exclusively meant for animal feed. The applicant has started their new unit at 112, Industrial Area No.1 Dewas for manufacture of the finished product “Preparation of a kind used in Animal Feeding - Bio Processed Meal” which will be used for animal feeding only. The applicant also submitted a detailed process as how the raw material soyabean meal will undergoes various processes in various section like inoculation and missing section, bio-processing section / fermentation section, drying section, milling and packaging section to achieve the goal of manufacturing the finished product - The applicant finally declared that the product Preparation of a kind used in Animal Feeding - Bio Processed Meal will only be used for animal feeding and not for in other purpose.
The said product i.e. Bio Processed Meal is only for specific use of Animal Feed, it is clear to us that the finished product being manufactured by the applicant will only be used for animal feeding and not for any other purpose and thus it should fall under chapter heading 23099090 - Serial No. 102 of Notification 2/2017-CT (Rate) dated 28.06.2017 and corresponding notification issued under MPGST Act speaks that the goods Aquatic feed including shrimp feed and prawn feed. poultry feed & cattle feed, including grass, hay & straw, supplement & husk of pulses, concentrates & additives, wheat bran & de-oiled cake falling under chapter heading 2302, 2304, 2305, 2306, 2308, 2309 are exempted from payment of GST.
The applicant is eligible to avail exemption on their finished products “Preparation of a kind used in Animal Feeding - Bio Processed Meal” from payment of GST under Notification 2/2017-CT (Rate) dated 28.06.2017 and corresponding notification issued under MPGST Act.
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2020 (7) TMI 472
Levy of Service Tax - banking and other financial services - foreclosure charges levied by the banks and non banking financial companies on premature termination of loans - matter referred to Larger Bench - HELD THAT:- Where service tax is chargeable on any taxable service with reference to its value, then such value shall be determined in the manner provided for in (i), (ii) or (iii) of sub-section (1) of section 67. What needs to be noted is that each of these refer to “where the provision of service is for a consideration”, whether it be in the form of money, or not wholly or partly consisting of money, or where it is not ascertainable. In either of the cases, there has to be a “consideration” for the provision of such service. Explanation to sub-section (1) of section 67 defines “consideration” to include any amount that is payable for the taxable services provided or to be provided, or any reimbursable expenditure, or any amount retained by the lottery distributor or selling agent - It is clear from the definition of “consideration” that only an amount that is payable for the taxable service will be considered as “consideration”. This apart, what is important to note is that the term “consideration” is couched in an “inclusive” definition.
A Larger Bench of the Tribunal in M/S BHAYANA BUILDERS (P) LTD. & OTHERS VERSUS CST, DELHI & OTHERS. [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] observed that “implicit in the legal architecture is the concept that any consideration whether monetary or otherwise, should have flown or should flow from the service recipient to the service provider and should accrue to the benefit of the latter.” In the said decision, the Larger Bench made reference to the concept of “consideration‟, as was expounded in the decision pertaining to Australian GST Rules, wherein a categorical distinction was made between “conditions‟ to a contract and “consideration‟.
The foreclosure of loan is, therefore, a material breach of contract as it curtails the loan service period unilaterally, which can prompt the promisor to claim damages. Damages can be determined by Courts or they can also be incorporated in the loan agreements and other commercial contracts so as to ensure certainty in dealings and also serve as a deterrent measure. This aspect of damage is known as liquidated damages - It would thus be seen that clauses relating to damages for foreclosure of loan are usually incorporated in contracts as an agreed measure of damages which can be enforced in the event there is a breach of contract with a view to bring about certainty in contracts. These clauses do not and cannot give rise to any “consideration”. These clauses also come into effect only after the contract comes to end.
A penalty is a sum of money so stipulated in terrorem, and liquidated damages are a genuine pre-estimate of damages. So far as the law in India is concerned there is no qualitative difference in the nature of liquidated and unliquidated damages, as section 74 eliminates the somewhat elaborate refinement made under the Common Law between stipulations providing for payment of liquidated damages and stipulations in the nature of penalty, which under the Common Law is stipulation in terrorem; a genuine pre-estimate of damages is regarded as liquidated damages, and is binding - It, therefore, clearly follows that foreclosure charges are recovered as compensation for disruption of a service and not towards “lending” services. In fact, the amount for processing charges and documentation charges or like charges are subjected to service tax because they are essential for the activity of lending and are treated as activities “in relation to lending”. Foreclosure is anti thesis to lending and, therefore, cannot be construed to be “in relation to lending”. The phrase “in relation to lending” cannot be so stretched so as to bring within its ambit even activities which terminate the activity.
The foreclosure charges should not be viewed as ‘alternative mode of performance’ of the contract because they arise upon repudiation of specified terms of contract and are intended to compensate the injured party banks and non banking financial companies. This is because ‘alternative mode of performance’ still contemplates performance, whereas foreclosure is an express repudiation of the contractual terms giving rise to the levy of foreclosure charges - merely because the clause relating to damage is featuring in a contract, it would be incorrect to conclude that the party has been given an option to violate the contract. Hence, to treat eventuality of foreclosure as an optional performance is incorrect. The contract cannot be understood to be providing an option to the parties to either perform or not perform/violate.
Foreclosure charges collected by the banks and non banking financial companies on premature termination of loans are not leviable to service tax under “banking and other financial services” as defined under section 65 (12) of the Finance Act.
The appeal may now be listed before the regular Bench for hearing.
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2020 (7) TMI 471
Principles of Natural Justice - legality and the validity of the assessment order - challenge is made essentially and predominantly on the grounds that, without assigning any reason or availing any opportunity and in complete breach of the principles of natural justice, the impugned order came to be passed by the respondent No.2 - HELD THAT:- In the instant case, since there is violation of principles of natural justice, more particularly, when the petitioner chose to approach the respondent-authority on 13.03.2020 and requested for relevant and vital documents, in response to the notice issued by it, without supplying the same, respondent-authority has imposed the petitioner with not only the heavy penalty but also interest by the order dated 24.03.2020, which is impugned in this petition, we, therefore, deem it appropriate to entertain this petition and at the joint request made by both the sides, matter deserves to be remitted, quashing and setting aside the impugned order of assessment.
The period prescribed for reassessment of five years has already been concluded on 31.03.2020. However, since, the petitioner has moved this Court questioning the action of the respondent authority and as it has submitted through the learned Sr. Advocate representing its case that no contention, with regard to period of limitation shall be raised, the same shall not be treated as a ground to hamper the proceedings before the tax authority for its fresh consideration of the show-cause notice issued to the present petitioner. It would be of utmost necessary for the adjudicating authority to independently examine the material, which has been/ shall be placed on record before it by the petitioner and assess the same, on the strength of the substantiating documents, rather than basing its decision, solely on the cancellation of the registration of M/s. Maa Oil Mills, ab initio from the year 2007.
This petition succeeds and is PARTLY ALLOWED - The impugned order dated 24.03.2020 is QUASHED and set aside and the matter is REMANDED to the competent authority for its consideration afresh, on merits, the case of the petitioner of ITC, after availing due opportunity to the petitioner, herein.
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2020 (7) TMI 470
Principles of Natural Justice - Jurisdiction - Power of Respondent of Re-opening of self assessment after expiry of statutory time limit - section 25A to KVAT Act - HELD THAT:- The matter in issue is covered in favour of the petitioner as per Ext.P3 judgment in the case in Philips India Ltd. Vs. Assistant Commissioner & Others [2016 (10) TMI 814 - KERALA HIGH COURT] as well as by Ext.P4 judgment passed by this Court on 02/02/2017 in WP(c) 35493/2016. Ext.P3 judgment has been upheld by the Division Bench of this Court. Further petitioner has got a specific case that Ext.P2 order is an ex-parte order and the notice dated 26/09/2019 has not been served on the petitioner.
The impugned Ext. P2 ex-parte order will stand quashed - Petition allowed by way of remand.
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2020 (7) TMI 469
Re-opening of assessment - suo motu review proceedings - Levy of purchase tax - return of empty bottles from unregistered dealers - section 12(1) of the WB VAT Act, 2003 - HELD THAT:- The assessment order has been passed after hearing the petitioner under section 46(1) of the VAT Act. The petitioner had produced the books of account and necessary records which were duly examined by the respondents. The petitioner was assessed for tax liability on the best judgment basis for various expenses as reflected in final accounts and also for tax on sale of plastic crates. Purchase tax under section 12 was also levied upon the petitioner and the petitioner was made liable to pay a sum of ₹ 59, after giving credit for tax paid/tax deducted at source during the concerned financial year. It also appears that the petitioner did not dispute the said liability and the assessment order had attained finality.
The orders passed in the suo motu revisional proceedings on December 21, 2018, cannot be set aside on the point of law that the petitioner is not liable to pay tax on return of bottles from the dealers. Since report of Bureau of Investigation has been independently considered by the respondent authorities while undertaking suo motu revision, we are of the considered view that the said report of bureau of investigation cannot also be set aside.
Application disposed off.
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2020 (7) TMI 468
Disallowance of repairs and maintenance - Disallowance made on account of repairs and maintenance by holding that assessee had already given flat deduction @30% of rental income towards repairs under head ‘income from house property’ and no further deduction is eligible to the assessee - HELD THAT:- We find that the rental income offered by the assessee in the sum of ₹ 57,500/- was only in respect of 100 sq.ft of premises let out for five months. Hence, the corresponding flat deduction @30% towards repairs under the head ‘income from house property’ was also given only for a period of five months. No deduction for the remaining 7 months has been given, in terms of the provisions of Section 38(2) of the Act. We find that assessee is entitled for proportionate deduction for the remaining period of seven months of these repairs and maintenance in respect of 100 Sq.ft of property.
TP Adjustment - Addition made on account of manning services fee being the arm’s length price adjustment - HELD THAT:- The facts relating to the disputed issue being identical in A.Y.2003-04, in our considered opinion, the decision taken by this Tribunal in assessee’s own case for the A.Yrs. 2002-03, 2004-05 and 2005-06 would squarely apply to this assessment year also and accordingly, we dealt the addition made towards manning services fee on account of transfer pricing adjustment. We find that the ld. CIT(A) had already granted relief to the extent of ₹ 2,14,48,677/- in this regard and had confirmed only the remaining sum of ₹ 5,00,47,881/-. At the time of hearing, both the parties informed that no appeal was preferred by the revenue against such relief granted by the ld. CIT(A). Accordingly, the ground No.4 raised by the assessee is allowed.
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2020 (7) TMI 467
MAT Computation - Addition on account of subsidy received on the Technology Upgradation Fund (TUF) - computation of book profit under Section 115JB - HELD THAT:- Proposition that book profit is not to be tinkered with is duly supported by Hon'ble Jurisdictional High Court decision in M/S. BHAGWAN INDUSTRIES LTD. [2017 (8) TMI 32 - BOMBAY HIGH COURT], AKSHAY TEXTILES TRADING AND AGENCIES P. LTD. [2007 (10) TMI 251 - BOMBAY HIGH COURT] AND ADBHUT TRADING CO. P. LTD. [2011 (7) TMI 716 - BOMBAY HIGH COURT]
Hon’ble Supreme Court in the case of ACIT vs Saurashtra Kutch Stock Exchange Ltd [2008 (9) TMI 11 - SUPREME COURT] has expounded that non-consideration of jurisdictional High Court decision can render a decision of the Tribunal suffering from mistake apparent from record.
We note that honourable Supreme Court in the case of Kapurchand Shrimal v CIT [1981 (8) TMI 2 - SUPREME COURT] had expounded that it is the duty of the appellate authority to correct the errors in the orders of the authorities below and remit the matter, with or without directions for their consideration, unless prohibited by law.
In our considered opinion, this issue needs to be remitted to the file of learned CIT(A). The learned CIT(A) is directed to consider this issue de novo after taking into account the aforesaid Hon’ble Jurisdictional High Court decisions. Needless to add, the assessee should be granted adequate opportunity of being heard.
Disallowance u/s 14A of the Act read with rule 8D(2)(ii) - HELD THAT:- We find that it has not been denied by the Assessing Officer that assessee has sufficient interest free funds. However, the Assessing Officer has held that assessee has not submitted the cash flow statement. CIT(A) is correct in holding that if assessee has sufficient interest free funds, no disallowance under Section 14A of the Act on account of interest for funds utilised for earning the exempt income needs to be done. See HDFC BANK LTD. [2014 (8) TMI 119 - BOMBAY HIGH COURT].
Disallowance with respect to employees contribution to the Provident Fund under Section 36(1)(va) - HELD THAT:- The issue is squarely covered in favour of the assessee by the decision of Hon’ble Bombay High Court in CIT vs Ghatge Patil Transports Ltd. [2014 (10) TMI 402 - BOMBAY HIGH COURT] that the said contributions made before the due dates of return or grace period is allowable. Hence, we uphold the order of ld. CIT(A) in this regard.
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2020 (7) TMI 466
TP Adjustment - adjustment made on account of advertisement, marketing and promotion (AMP) expenses - internatinal transaction - HELD THAT:- Referring to decision of the Hon'ble Delhi High Court in Martuti Suzuki India Ltd. [2015 (12) TMI 634 - DELHI HIGH COURT] it has to be concluded that the AMP expenditure incurred by the assessee in India cannot come within the purview of the international transaction. Hence, the Transfer Pricing Officer has no jurisdiction to determine the arm's length price of AMP expenditure. - Decided against revenue.
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