TMI Tax Updates e-Newsletter
Jan 10,2019

Classification of goods - P.P. Bags which are made from strips having width of less than 5mm - whether the aforesaid PP bags would classify under chapter heading 63 or chapter 39 of the GST Tariff and what shall be the rate of GST on the same? - Notification No. F-A3-33-2017-1V (42) dt. 29.06.2017.

Held that:- The issue of classification of PP/HDPE Bags or sacks, made of HDPE tapes and fabrics, has been dealt with at length by the Hon’ble High Court of Madhya Pradesh in case of M/s. Raj Packwell Ltd. Vs. UoI [1989 (9) TMI 120 - MADHYA PRADESH HIGH COURT], where it was held that HDPE strips or tapes fall under the Head. 39.20, sub-heading 3920.32 of the Central Excise Tariff Act and not under Head. 54.06, sub-heading 5406.90. Similarly the HDPE sacks fall into Heading 39.23, sub-heading 3923.90 - thus it can be concluded that the impugned goods viz. PP Woven Bags/Sacks shall be classifiable under chapter 39 of the GST Tariff and not under Chapter 63.

Ruling:- The goods in question shall be classifiable under Chapter 39 of the GST tariff as articles of Plastic and would attract appropriate rate prevailing at the date and time of supply.

Applicability of provisions of S.No.3 & 3A of Table of Notification No. 12/2017 dtd.28.06.2017 - distribution and supply of electricity in western Madhya Pradesh - Government Entity - composite supply - Held that:- The Applicant is a Government Entity and is definitely covered by the definition of Government Entity in terms of Notification No.32/2017 - The application that the Applicant has made a specific mention of Sr. No.3A to notification no. 12/2017, which provides NIL rate of GST for composite supply of goods and services where the value of supply of goods constitute not more than 25% of the value of composite supply provided to the Central government or state government etc. by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution - However, we do not find any specific mention of services in this context in the application. It is pertinent to mention here that applicability of Sr.No.3A will be supply specific and not supplier or recipient specific. Thus it is not possible to give nay ruling about applicability of Sr.No.3A to Applicant, particularly in absence of any specific mention of supply of goods or service or both.

The applicability of provisions of Sr.no.3 and 3A shall depend upon the nature of supply and no carte blanche ruling can be given to the Applicant without mention of specific service.

Ruling:- In view of insufficient information provided in the Application, and the nature of query being broadly generic, no ruling can be given on the Application.

Levy of GST - Transmission or Distribution of electricity by an electricity transmission or distribution of electricity utility with respect to the Delay Payment Charges recovered by the applicant from its consumers - Entry no. 25 of notification 12/2017- Central Tax (Rate) Dated 28/06/2017 - applicable rate of tax - HSN/SAC code for Delayed Payment Charges - Held that:- The Delayed payment surcharge is a part of Tariff prescribed by MPERC. The Company recovers the said charge at rates fixed by the Authority. The Delayed Payment Surcharge is billed to consumer when the bill is paid by the consumer after the due date mentioned in the bill. The Delayed Payment Surcharge may be mentioned in the bill as Surcharge on Outstanding Amount or Late Payment Surcharge. Thus the nature of the service is interest/ late fee/ penalty for delayed in payment of consideration.

As per the provision of Section 15(2)(d) of CGST Act, 2017 and MPGST it is clear that any amount recovered in the name of interest or late fee or penalty tor delayed payment of any consideration for any supply, than same shall be included in the value of such supply - the component of interest and delayed payment charges are obviously having a direct relation with the value of supply to which such interest/delayed charges relate. These are in fact components of the value of supply and do not have any independent status.

The applicant is recovering delay payment charges not only towards supply of electrical energy as goods, supply Transmission/distribution of electricity service as an electricity distribution utility which are exempted, but also towards charges like metering charges and others which are taxable as per Circular No. 34/8/2018-GST, Dated - 01st March 2018 - in the instant case the supply in question is set of both, exempted (i.e., distribution & Transmission, retail supply of Electricity) and taxable supply (i.e., the other services as per circular no. 34/8/2018- GST, dated - 01st March, 2018).

The Delayed payment surcharge cannot be treated as separate service and same shall be included in the value of initial service. Thus, portion of Delayed payment surcharge attributable to exempted supply shall be exempted and portion of Delayed payment surcharge attributable to taxable supply shall be taxable.

Ruling:- The Delayed payment surcharge/ Late Payment Surcharge/ Surcharge on outstanding amount (by whatever name called) cannot be treated as separate service and same shall be included in the value of initial supply to which such charges relate, and the portion of Delayed payment surcharge attributable to exempted supply will be exempted and the portion of Delayed payment surcharge attributable to taxable supply is taxable at the rate on which the corresponding supply is taxed.

Unable to upload FORM GST TRAN-1 within the stipulated time - input tax credit - Held that:- Not only the petitioner but also many other people faced this technical glitch and approached this Court - the petitioner may apply to the sixth respondent, 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.

Transfer of eligible transitional credit - case of petitioner is that the petitioner has moved the representations dated 21.5.2018, 3.8.2018 and 16.8.2018 (Annexure P-11 Colly) before respondent No.6, but no action has so far been taken thereon - principles of natural justice - Held that:- The petition by directing respondent No.6 to forward the representations dated 21.5.2018, 3.8.2018 and 16.8.2018 (Annexure P-11 Colly) to the IT Redressal Committee concerned within next fifteen days after verification by the GSTN and the Committee shall thereafter decide the same in terms of Clause 5.4 of Circular dated 3.4.2018 (Annexure P-9), in accordance with law by passing a speaking order and after affording an opportunity of hearing to the petitioner - petition disposed off.

Addition u/s 56(2)(viia) - reopening of assessment - CBDT (Central Board of Direct Taxes) Circular No.10/2018 dated 31st December, 2018, which pertained to the clarification issued in respect of applicability of Section 56(2)(viia) as well as another Circular No.2/2019 dated 4th January, 2019, vide which Circular No.10/2018 dated 31st December, 2018 has been withdrawn by the CBDT - Since these circulars are not part of the record, Mr. Tushar Mehta submits that the appropriate course of action is to file these circulars supported by an affidavit and also to state the purpose for which the circulars have been referred to and relied upon - Held that:- Mr. P. Chidambaram wants and is granted one week's time to file the affidavit along with documents. Response thereto can be filed within one week thereafter.

List on 29.1.2019. Interim order passed on 4.12.2018 to continue in the meantime.

Initiation of proceedings u/s 153C - issuance of notice under section 153C without recording satisfaction by the Assessing Officer - Held that:- Having regard to the submissions advanced by the learned advocate for the petitioner, issue Notice returnable on 04.02.2019. By way of ad-interim relief, the impugned notices under section 153C qua Assessment Years 2009-10 to 2012-13 are hereby stayed. In so far as notices for the remaining periods are concerned, the Assessing Officer may proceed further pursuant to the impugned notices; he, however, shall not pass the final order without the prior permission of this Court.

Levy of penalty u/s 271D - loan in cash was taken from near relatives and the same was accounted in the appellant's and relatives' books of accounts - Held that:- In the case on hand, the assessee had shown a cause for having received the amount in cash. Therefore, if the assessee had shown a cause, the burden shifts on the AO to establish that the cause shown is not a reasonable cause by examining the cause shown and establish that it lacks bonafides.

In the instant case, there is no such finding recorded by the Authorities below or for that matter by the Tribunal. Admittedly, the transaction in the instant case is between the assessee and her maternal uncle and aunt and there is nothing on record to show that the transaction lacks bona fides or the assessee came forward with a false case. The case on hand does not warrant levy of penalty under Section 271D - Appeal filed by the assessee is allowed

Provision for bad and doubtful debts - Held that:- Section 36(1)(vii) read with the proviso and Explanation would enable the assessee only to deduct amounts written off in excess of the deduction allowed as provision for bad and doubtful debts under Section 36(1)(viia). We see from the assessment order that the assessee had, as in the earlier year also claimed write off of ₹ 3,50,41,439/- in the A.Y. 1996-97 and ₹ 5,60,87,000/- in the A.Y. 1997-98 relying on Vithaldas H.Dhanjibhai Bardanwala v. C.I.T., [1980 (8) TMI 40 - GUJARAT HIGH COURT] as relied on by the assessee is no longer good law in view of the decision in Southern Technologies Ltd. v. Joint C.I.T., [2010 (1) TMI 5 - SUPREME COURT OF INDIA]. The very same Section 36(1)(vii) and (viia) came up for consideration before the Hon'ble Supreme Court. The Hon'ble Supreme Court noticed the Explanation brought in by THE Finance Act, 2001 with retrospective effect from 01.04.1989 and overruled the said decision. We, hence, answer that question of law in favour of the Revenue and against the assessee for the respective years.

Cost of compliments supplied to the share holders who attended the annual general body meeting of the appellant company - expenditure incurred wholly and exclusively for the purpose of the business - Held that:- Compliments given to the shareholders in the Annual General Meeting is to ensure participation of the members in the AGM. This brings in more transparency and ensures democratic decision making. In such circumstances, it was held to be a business expenditure.

Write off claimed of a bad investment - Held that:- the assessee bank in the subject assessment year was holding it as investment and by a resolution of the Board of Directors on 17.05.1999 the character of the investment was converted into stock-in-trade. The conversion was made in the financial year 1999-2000, which is the relevant previous year to the next assessment year ie: 2000-2001. The Tribunal also noticed that in the subsequent year the issue was remanded back for consideration to the Assessing Officer. However, in the subject assessment year, the assessee had been holding the portfolios as investments, there is no question of claiming write off of the loss said to have been occasioned.

Disallowance in the light of the rule introduced for the purpose of section 14A - Held that:- he Hon'ble Supreme Court in Commissioner of Income Tax v. Essar Teleholdings Ltd., [ 2018 (2) TMI 115 - SUPREME COURT OF INDIA] held that the provision would be applicable only from the assessment year 2007-08. Hence, the question is answered in favour of the assessee and against the Revenue.

Estimation of agricultural income - Tribunal confirming the estimation made by AO in respect of agricultural income at 25% on the agricultural income - Held that:- The documents have been produced on 31.12.2007. The order of the Assessing Officer was passed on 28.12.2007. There is even a noting in the order of the Assessing Officer that when the matter was listed on 18.12.2007, an adjournment was sought for upto 24.12.2007. That on 24.12.2007, neither the assessee appeared nor he complied with the requirements as per the communication dated 11.12.2007.

Secondly, the so-called material was not produced before the impugned order was passed by the Assessing Officer. He has since passed the order on 28.12.2007. Therefore, the Assessing Officer cannot be blamed for non-consideration of the material. The assessee has deliberately not appeared before the Assessing Officer or furnished the documents.

RTC produced was for the year 2007-2008, which was not relatable to the assessment year in question. Therefore, even if such material would have to be reconsidered, the same would not aid the appellant,under any circumstances.

No reason as to why an additional opportunity should be granted to the assessee at this stage. We have considered the question of remanding the matter. However, keeping in view the conduct of the assessee and the futility of reconsidering the material before us, the same would not serve any purpose.

We are of the view that the Tribunal was justified in confirming the estimation made by the Assessing Officer in accepting only 25% of the total ‘agricultural income’ declared by the assessee. - Decided in favour of revenue

Bad debts written off for non-rural branches claimed under clause (vii) of Section 36(1) - whether claim has to be allowed only in excess of the provision made for rural branches under clause (viia) of Section 36(1)? - Held that:- Issue has to be answered in favour of the assessee and against the Revenue, going by the decision in Catholic Syrian Bank Ltd. v. C.I.T. [2012 (2) TMI 262 - SUPREME COURT OF INDIA]. AO shall verify the computation, looking into whether there is any allowance granted for provision of bad debts in non-rural branches for the previous years. In which event alone, the allowance of written off of bad debts in non-rural branches will be confined to the excess allowed from the provision made, and deduction allowed, for non-rural branches. We make it clear that in making the computation, there can be no consideration of the provision for bad debts for rural branches as granted under clause (viia) of Section 36(1). - decided in favour of assessee.

Depreciation or loss on revaluation of securities - whether can be permitted on the basis of the market value or cost price, whichever is less, as stipulated by the Reserve Bank of India? - Held that:- The issue of revaluation of securities is covered in C.I.T. v. Nedungadi Bank Ltd. [2002 (11) TMI 29 - KERALA HIGH COURT] and C.I.T. v. Lord Krishna Bank Ltd [2010 (10) TMI 860 - KERALA HIGH COURT]. This Court had held that revaluation of securities can be only on the basis of market value or cost price, whichever is lesser, as stipulated by the Reserve Bank of India. The Tribunal's order to that extent is upheld. - Decided in favour of assessee.

Determining the provision for bad debts u/s 36(1)(viia) - has the non-rural branches to be determined on the basis of a revenue village and the population thereat? - Held that:- The issue stands covered in favour of the Revenue and against the assessee. In Lord Krishna Bank Ltd. [2017 (10) TMI 598 - KERALA HIGH COURT] this Court had held that the determination of non-rural branches shall be only with reference to the revenue villages and not solely on the basis of the population. This Court specifically noticed the anomaly insofar as even wards in municipalities being included for identification of rural branches, when the identification is on the basis of the population alone in wards of the local authorities. We hence answer the third question in favour of the Revenue

Accrual of income - interest accrued on securities, which are not yet matured has to be assessed as income for the year - Held that:- This question also stands covered in favour of the assessee as per the decision of this Court in C.I.T. v. Federal Bank Ltd. [2008 (1) TMI 195 - KERALA HIGH COURT]

Expenditure for purchase of gifts given to shareholders, who participated in the annual general meeting - permissible business expenditure under Section 37 - Held that:- A permissible allowance as business expenditure under Section 37.

Non application of Section 14A for the assessment year 2004-05 - Held that:- The Hon'ble Supreme Court in C.I.T. v. ESSAR Teleholdings Pvt.Ltd. [2018 (2) TMI 115 - SUPREME COURT OF INDIA] had found that the provision can be made applicable only from the assessment year 2007-08. Hence, for the assessment year 2004-05, Section 14A has no application. Hence, the said question is answered in favour of the assessee

Current investments written off - whether can be claimed as loss for the assessment year in which it has been written off ? - Held that:- On current investments written off, this Court in C.I.T. v. Lord Krishna Bank Ltd. (2017 (10) TMI 598 - KERALA HIGH COURT) followed the decision in Nedungadi Bank Ltd. [2002 (11) TMI 29 - KERALA HIGH COURT] and United Commercial Bank, Calcutta v. C.I.T., WB-II, Calcutta [1999 (9) TMI 4 - SUPREME COURT] to rule in favour of the assessee.

Enhancement made FAA u/s 14A - addition in view of the specific proviso prohibiting enhancement before the assessment year 2001-02 ? - Held that:- The issue has to be answered in favour of the assessee in view of the prohibition contained in the proviso to Section 14A, as also the decision of the Hon'ble Supreme Court in ESSAR Teleholdings Pvt.Ltd. [2018 (2) TMI 115 - SUPREME COURT OF INDIA].The prohibition is specific and there can be no application of Section 14A also in the assessment year 1998-99 in which the enhancement was attempted by the First Appellate Authority. Hence, the question is answered in favour of the assessee

Allowance of write off of an amount, which the assessee was entitled to, as dividend from another company, which was returned as income on receipt of a cheque, which subsequently got dishonoured? - Held that:- In the previous assessment year, the assessee had returned as income the dividend received from another company, when the cheque on that count was received. However, later the cheque presented got dishonoured. The assessee hence wrote off the said amount due to it as dividend and claimed for allowance under Section 36(1). The Tribunal allowed the same. We do not find any infirmity in the allowance, since if at all the assessee gets the dividend in a later year, it could be treated as income in that year. The write off on the ground of dishonour of cheque cannot at all be disputed and is evident from the books of accounts. We, hence, answer this question in favour of the assessee

Valuation of securities - valuation carried out by the Bank at the cost price - appreciation of trading assets and the manner in which the value has to be credited to the profit and loss account - assessee-Bank admittedly engages inter alia in making investments by way of purchasing securities also treated as trading assets of the Bank - the value to be taken when the securities appreciate in their market value

Held that:- The issue has been considered by this Court in CIT v. Nedungadi Bank Ltd. [2002 (11) TMI 29 - KERALA HIGH COURT] and CIT v. Lord Krishna Bank Ltd. [2010 (10) TMI 860 - KERALA HIGH COURT] with respect to the valuation of securities when there is a claim raised of depreciation or loss this Court had approved the measure adopted by the assessee-Banks following the stipulations made by the Reserve Bank of India. RBI had directed the security to be valued at market price or cost price, whichever is lower.

The stipulation was brought in force, to ensure that the Banks do not claim escalated book profits. Though in the present case a contrary situation has arisen, where there is an appreciation of the value of the security, the dictum squarely applies. Even when there is an appreciation of the value, it does not enure to the Bank as income and, hence, the valuation has to be made as stipulated by the RBI; at the market price or cost price, whichever is lower. Hence, the valuation carried out by the Bank at the cost price has to be accepted. The question of law is answered in favour of the assessee-Bank

Entitlement to deduction u/s 80IB - sales recorded in the separate books of Salem unit - consolidates sales - whether the turnover from outlets located in areas other than the place where the eligible unit is situated qualifies for deduction under Sec.80IB when the Sales account does not prove that the Sales from branches is turnover of the eligible unit? - Held that:- Sub-section (8) of Section 80IA indicates that where any goods or services held for the purpose of eligible business are transferred to any other business or where any goods held for the purposes of any other business carried on by the assessee are transferred to the eligible business, the consideration, if any, for such goods and services shall be computed, so as to correspond to the market value of such goods. In such circumstances, the provision recognizes transfer of goods and services between businesses and even if the sale is made from the retail centers of the assessee itself, it can be deemed to be the business of the eligible undertaking.

The Tribunal too has noticed the fact and specifically referred to the no. of units produced at Salem and what is actually sold from the undertaking and that sold through different branches. On a verification of the actual sale for the current year, the Tribunal has found that the claim for allowance made by the assessee is proper. We, hence, find that the Tribunal has gone into the facts and allowed the allowance claimed. The sale figures taken is obviously not the consolidated figure of the Salem and Hyderabad units and the question of law framed as (1) is not relevant. We do not find any infirmity in the findings of the Tribunal. We answer the question of law (2) in favour of the assessee

Payment for obtaining Power of Attorney with respect to a property - Held that:- No question of law arising and on facts it has to be stated that there is absolutely no explanation offered by the assessee. The assessee merely produced a letter of the person who executed the Power of Attorney showing that he had received the amounts from another. There were no bank details or the other party confirmation produced before the Department.

No infirmity in the order of the Tribunal. We answer the question as to perversity against the assessee and in favour of the Revenue.

Deemed dividend u/s 2(22)(e) - amount received by the assessee from his father - family settlement - Assessing Officer came to the view that the agreement is artificially created for the purpose of withdrawing money by the assessee from the accumulated profits of MEL. - Held that:- Sri K.P. Poddar, namely, the father of the assessee, who is aged 80 years, had given the money received in a commercial transaction to his son. Therefore, transfer of money from father to son is nothing unusual. Moreover, the Assessing Officer has not examined Sri K.P. Poddar. He accepted the transaction of refundable non-interest bearing security deposit for mines as a commercial transaction. Therefore, we of the view that appreciation of the material on record by the Tribunal is just and appropriate. Even otherwise, we are also of the view that the issue involved revolves around appreciation of facts.

We do not find that the order of the Tribunal suffers from any infirmity. There is no ground for any interference. Consequently, we hold that a sum of ₹ 17.50 crores received from MEL by Sri K.P. Poddar and transferred to the assessee, who was the shareholder, cannot be treated as dividend income of the assessee under Section 2(22)(e) of the Act. - Decided in favour of the assessee

Deemed dividend as per Section 2(22)(e) - family arrangements - The material on record indicated that MEL had paid a sum of ₹ 11.05 Crores to M/s. Solid Real Estate Private Limited (for short ‘SREL’) on various dates. Thereafter, SREL in turn paid a sum of ₹ 10.80 Crores to shareholder. - conclusions were drawn by the Assessing Officer, holding that SREL has no transaction other than those mentioned in the books of accounts and that the Directors of SREL were not aware as to what are the other transactions - Held that:- In the facts of the present case, the transaction between M/s.MEL and M/s.SREL being admittedly a business transaction, as is evident from the evidence on record, Section-2(22)(e) is not applicable.

Tribunal held that the same constitutes a business transaction and therefore, the provisions of Section 2(22)(e) would not be applicable. We do not find any reason to take a different view of the matter. The material on record would indicate that all transactions are routed through bank channels. Hence, it cannot be construed as mere journal entries and therefore, it is a business transaction between the assessee and M/s.SREL.

Hence, the second substantial question of law is held against the Revenue and in favour of the assessee.

Addition of donations as anonymous donation u/s 115BBC - donations were neither genuine nor voluntary - assessee is a society as granted registration u/s. 12AA - notices u/s 133(6) were returned unserved and the assessee did not produce the donors - AO proceeded to hold the donations as being fictitious and unexplained cash credits to be added u/s 68 in view the deeming provisions of Section 115 BBC - addition of depreciation

Held that:- Section 68 of the Act has no application to the facts of the assessee because the assessee has duly disclosed the donations as its income. There was, thus, a full disclosure of income by the assessee and also the application of the donations for charitable purposes. It is not in dispute that the objects and activities of the assessee are charitable in nature since it is duly registered under the provisions of section12A. Further, the AO has invoked provisions of section 115BBC to hold that the impugned donations were anonymous.

As in the case of DIT (Exemptions) vs. Keshav Social & Charitable Trust (2005 (2) TMI 84 - DELHI HIGH COURT) held as complete list of donors was not filed or that the donors were not produced, does not necessarily lead to the inference that the assessee was trying to introduce un-accounted money by way of donation receipts. As the assessee had disclosed the donation as income, the provisions of section 68 cannot be applied.

As in the case of M/s. Vaishnavi Educational Society Versus The Deputy CIT Central Circle, Tirupati [2014 (11) TMI 350 - ITAT HYDERABAD] held that where the names of the donors along with their addresses were furnished before the Investigation Wing of the department and were also recorded in the books produced by the assessee before the AO, such donations cannot be classified as anonymous donations as per the provisions of section 115BBC(3) of the Act. The only requirement u/s. 115BBC (3) is that the names and addresses of the donor should be maintained.

In the present appeal, the assessee had not only disclosed its donations, but had also submitted a list of donors. AO proceeded to treat the same as anonymous donations only for the reason that the notices u/s 133(6) were returned unserved and the assessee did not produce the donors when it was called upon to do so. However, since the donations were duly treated as income by the assessee, section 68 could not have been invoked. Further, the assessee’s case also does not fall in the mischief of section 115BBC because as per sub section (3), anonymous donations are those donations for which no details of the donors are maintained by the assessee.

If provision of section 115BBC cannot be invoked, the impugned addition cannot be sustained. Accordingly, we set aside the order of the Ld. CIT (A) on the issue and direct the AO to delete the addition.

Adding back of depreciation is concerned, we note that the averment of the Ld. AR is correct that depreciation has not been claimed as an application of income by the assessee and, therefore, there is no question of adding back the same to the income of the assessee. The assessee succeeds on this ground also and while setting aside the order of the Ld. CIT (A) on this issue, we direct the AO to delete this addition also. - Decided in favour of assessee

Denial of deduction u/s.80IA - initial assessment year - eligible for deductionu/s.80IA(4)(iv) on his business profit without setting off his earlier years’ business losses/unabsorbed depreciation which have already been set off against income from other business/sources - Held that:- Referring to case of Poonawal Estate Stud. & Agro Farm Pvt. Ltd. [2010 (9) TMI 1080 - ITAT PUNE] as been held that the provisions of section 80IA(5) are applicable only from the initial assessment year i.e. the assessment year in which deduction u/s.80IA(4) was first claimed by the assessee after exercising its option as per the provisions of section 80IA(2) of the Act. CIT(Appeal) had also referred to the CBDT Circular No.1/2016 dated 15.02.2016 which provides that the term ‘initial assessment year’ would mean the first year opted for by the assessee for claiming deduction u/s.80IA.

As per section 80IA(5) of the Act, it is evident that the matter regarding initial assessment year has now been clearly settled in favor of the assessee. As per both, the ITAT Co-ordinate Bench decisions,as well as the CBDT Circular, the assessee has an option to choose the initial assessment year for the purposes of deduction u/s.80IA. In the present case,the appellant has chosen the initial assessment year to be assessment year 2009-10 and the present assessment year is the fourth year of the claim under section 80IA.- decided in favour of assessee.

Addition on account of generation of scrap out of repairs and maintenance expenses - assessee has not maintained separate details of such expenses - Held that:- Since in the realm of welfare legislation specifically, the Income Tax Act, 1961,the quasi-judicial Authority i.e. Assessing Officer has to pass an order after proper reasons and verification. From the above, it is absolutely clear that there is neither verification nor any evidence brought on record to justify the said additions which therefore, can be safely termed as ad-hoc additions made on guess work and surmises which cannot be sustained. Accordingly,we find no infirmity in the findings of the Ld. CIT(Appeal) in deleting the addition - decided against revenue

Addition of undisclosed payments towards credit cards - Held that:- Deposit in one credit card is repaid by withdrawal from another credit card. Naturally, if the assessee has availed credit facilities in one credit card account to repay the other outstanding, it does not necessary lead to the additions merely because of the fact that the assessee is holding very large number of credit cards. Further the ld CIT(A) has also made the observations in para 8.13 about cash deposit in the bank accounts. The assessee was neither asked to show the source of the cash deposit and there is no mention of any notice issued by the ld CIT(A) for enhancement. In any case, as the lower authorities have not verified the whole transaction cycle carried out by the assessee of withdrawing from one credit card and depositing it in the second credit card, we set aside the whole matter back to the file of the ld AO with a direction to the assessee to substantiate the inter credit card transaction and also the deposit of cash in various bank accounts. The ld AO may verify the same and examine the whole issue afresh. Accordingly, ground of the appeal is set aside to the file of the ld AO with above direction.

Short term capital gain addition - Addition based on the information received from M/s. Multiplex Capital Ltd u/s 133(6) - Held that:- The claim of the assessee is that he has incurred the loss of ₹ 146160/- in trading of shares and ₹ 43851/- for future and option trading. It is further stated that he has also earned profit of ₹ 20632/- from the jobbing activities. As while calculating the income, the opening and closing stock of securities have not been considered by the AO, respect to different account of transactions entered into by the assessee for future and option as well as of jobbing, further, the claim of the assessee that he has incurred loss of ₹ 146160/- in trading of shares, we set aside the whole issue back to the file of the ld AO with a direction to the assessee to demonstrate before the ld AO about the amount of the profit earned by the assessee or loss incurred by the assessee in various transaction. The ld AO may examine the same and decide the issue afresh

Addition on account of payment by the assessee to M/s. Multiplexes capital ltd. - assessee failed to show the source of payment to the broker and hence additions was made - Held that:- The dispute here is that the revenue authorities have understood that the payment is made by the assessee to the broker but the assessee claimed that it is payment made by the broker to the assessee. The copy of the account at page No. 20 which is also ledger account from the books of broker shows that the above amount is credited to the account of the assessee. However, as the issue of profit or loss earned from the same broker is also set aside by us to the file of the ld AO vide ground No. 2 of the appeal, we also set aside this ground also the file of the ld AO for fresh verification.

Appeal of the assessee is partly allowed for statistical purposes.

Depreciation on computer peripherals - @ 60% OR @ 15% - Held that:- The issue stood covered by the judgment of the Hon’ble Delhi High Court in the case of BSES Yamuna Power Limited [2010 (8) TMI 58 - DELHI HIGH COURT]

Deduction u/s 10AA - computation mechanism of total income - Held that:- Deduction is to be allowed from the total income of the unit and not from the total income of the assessee under Chapter IV of the Act and not at the stage of total income under Chapter VI of the Act.

Addition pertaining to research and development expenses - Revenue or capital expenditure - Held that:- Commissioner of Income Tax (A) has given a categorical finding that the training charges and annual subscription charges for CAD validation were revenue in nature.

The inventory movement for R&D expenditure was in the nature of ‘Destructive Testing’ wherein the item/s were consumed and no inventory having commercial value was left. It has also been noted by the Ld. Commissioner of Income Tax (A) that no new asset had come into existence. The Ld. Sr. DR could not point out any infirmity in the findings of the Ld. Commissioner of Income Tax (A). We also note that while reaching his decision, the Ld. Commissioner of Income Tax (A) has placed reliance on the judgment of the Hon’ble Apex Court in the case of Empire Jute Co. (1980 (5) TMI 1 - SUPREME COURT).

AO directed to allow depreciation @60% on the customization charges for ERP amounting to ₹ 5,34,683/- and software for tool management

Advances written off - assessee claimed that the advanced in the course to build his carrier and there is a business exigency in advancing moneys to his wife - deduction u/s. 37(1) or u/s. 28 of the Act as business loss - submission of the assessee that till date the moneys advanced to M/s. Quest Films and also to Mrs. Ayesha Shroff could not be recovered and there is no possibility of recovery in near future - Held that:- We hold that the Ld.CIT(A) having held that the amount advanced by the assessee are business advances is wrong in holding that the said advances cannot be held as deduction as the assessee had written off advances suomoto. We are in agreement with the CIT(A) that the advances written off by the assessee are business advances and there is no challenge by the Revenue to this finding. Once the advances are held to be business advances they are allowable as deduction either u/s. 37(1) or u/s. 28 of the Act as business loss. Deduction cannot be denied on the ground that the assessee had suomoto written off the advances. Thus we reverse the finding of the Ld.CIT(A) to that extent and direct the Assessing Officer to allow the claim of write off of advances by the assessee as business loss u/s. 28 of the Act. - Decided in favour of assessee.

Revision u/s 263 - claim for deduction u/s 54 denied - whether the assessee has purchased within one year before the date of transfer one residential house? - Held that:- residential property sold on 24.08.2012. Although the agreement for the residential house at Andheri was entered on 22.07.2009, possession of the said house was given to the assessee on 27.08.2012 by the builder Kamla Landmarc Properties Pvt. Ltd.

In the instant case, as mentioned earlier, the payments have been made before one year of the transfer of residential property sold on 24.08.2012. The possession of the said house was given to the assessee on 27.08.2012 by the builder Kamla Landmarc Properties Pvt. Ltd.

We find that the ratio laid down in Smt. Beena K. Jain [1993 (11) TMI 7 - BOMBAY HIGH COURT] by the Hon’ble Bombay High Court squarely applies to the instant case. Following the same, we set aside the order u/s 263 - decided in favour of assessee

Penalty u/s 271(1)(c) - land in question is not an agricultural land - concealing or furnishing inaccurate particulars of income - Held that:- It is a common knowledge that in many areas, the Registration Department for the reasons best known to them, has classified the lands even though the classification in the revenue records stand as wet land or dry land. This Tribunal is of the considered opinion that if the land is classified as wet land, then there should be natural source of irrigation for cultivation. In case it was classified as dry land, the land may be cultivated by using rain or there may be artificial source of irrigation by way of well or borewell. These factors were not brought on record either by the Assessing Officer or by the CIT(Appeals). Moreover, a mere claim in the return of income as agricultural land cannot be considered to be furnishing inaccurate particulars of income or concealing any part of income.

No case of the Revenue that the assessee has not disclosed entire sale consideration. It is also not the case of the Revenue that the assessee has concealed any part of sale proceeds of the said land. The admitted case of the Revenue is that the assessee claims the gain arising out of sale of land as exemption on the ground that the land in question is agricultural land. This Tribunal is of the considered opinion that this claim of the assessee cannot be considered to be concealing any part of income or furnishing inaccurate particulars of income as held in CIT Vs. Reliance Petroproducts (P) Ltd. [2010 (3) TMI 80 - SUPREME COURT] - decided in favour of assessee.

Addition u/s 40A - expenses incurred in cash in excess of INR 20,000/- otherwise than by account payee cheques/ bank drafts - when the payments were made on bank holidays, when the payments were made to agent of the assessee namely M/s. Surya Marbles and other payments - Held that:- So far as the payments made in cash in excess of ₹ 20,000/- on bank holidays/ national holidays are concerned, Assessing Officer in the remand report has admitted that such payments have been made on bank holidays. The provision of rule 6DD(J) provides that provisions of section 40A(3) shall not be applicable where the payment was required to be made on a day on which the banks were not open on account of holidays or strike. Since the assessee in the instant case has admittedly made the payments on a day on which the banks were not open on account of holidays and the Assessing Officer has also admitted that such payments were made on bank holidays therefore under the facts and circumstances of the case we are of the considered opinion that provision of section 40A(3) are not applicable to the payments made in excess of ₹ 20,000/- on bank holidays. Thus set aside the order of the CIT(A) and direct the Assessing Officer to remove the above expenses from the purview of provision of section 40A(3) as these expenses are covered under Rule 6DD(J) of the IT Rules.

Payments made to the agent of the assessee M/s. Surya Marbles is concerned, we find from the copy of the agreement dated 01.04.2004 that there is an agreement between the assessee and Surya Marbles wherein Surya Marbles was appointed as agent for the assessee company. CIT(A) rejected the same on the basis of remand report of the AO who had stated that rule 6DD(K) is applicable in exceptional or unavoidable circumstances. Further he had reported that M/s. Surya Marbles was supplier of the assessee company and not an agent.

At no point of time either the agreement dated 01.04.2004 or the certificate dated 19.02.2013 are found to be false or untrue. The assessee in the instant case has demonstrated by documentary evidence that M/s. Surya Marbles was the agent of the assessee company. Under these circumstances when the payment was made to the agent of the assessee for the purchases of materials on behalf of the assessee, therefore, we are of the considered opinion that the provisions of section 40A(3) are not applicable, in view of Rule 6DD(K) which provides that where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person, following payments are covered under rule 6DD (K) and the provisions of section 40A(3) will not be applicable.

Balance expenses no merit in the arguments of assessee are that the provision of section 40A(3) are not applicable to such payments made in cash in excess of ₹ 20,000/-. Assessee could not satisfactorily substantiate as to why provision of section 40A(3)are not applicable to the above payments. Provision of section 40A(3) are applicable for the remaining payments. AO is accordingly directed to modify the order and recompute the disallowance to be made u/s 40A(3) on account of the remaining payments. - Decided partly in favour of assessee.

Penalty u/s 271(1)(c) - assessee had claimed bad debts deduction which stood disallowed in quantum proceedings being in the nature of an “NPA” provision only - Held that:- We make it clear first of all that hon'ble apex court’s landmark decision in CIT vs. Reliance Petroproducts Pvt Ltd. (2010 (3) TMI 80 - SUPREME COURT) held long back that quantum and penalty proceedings are parallel in nature wherein each and every disallowance / addition made in the course of the former does not automatically invite the latter penal provision.

We keep in mind the said fine distinction to revert back the facts in the instant case. The assessee had claimed bad debts deduction which stood disallowed in quantum proceedings being in the nature of an “NPA” provision only. It therefore appears a case of pure disallowance simplicitor on account of failure in fulfilling the mandatory condition and not an instance of concealment or furnishing of inaccurate particulars of income. The CIT(A) has taken into consideration all the relevant facts and circumstance to conclude that assessee’s impugned claim does not attract either of the two limbs u/s 271(1)(c). - decided against revenue.

Revocation of CHA license - time limitation for issuance of SCN - relevant date of filing Offence report - Maintainability of petition - alternative appellate remedy against the order under Regulation 22(7) of the CHALR 2004 - Held that:- Though normally, the writ court would not interfere with the issuance of show cause notice, as per the judgment of the Apex Court in UOI vs. Vicco Laboratories [2007 (11) TMI 21 - SUPREME COURT OF INDIA], where a show cause notice is issued either without jurisdiction or in abuse of process of law, the writ court can interfere with the same.

In the present case, perusal of Customs House Agents Licencing Regulations 2004 discloses that Regulation 20(1) of the CHALR 2004 provides for revocation of CHA licence granted to a CHA company after following the procedure prescribed under Regulation 22. Regulation 20(2) r/w 20(3) provides for immediate suspension of licence without following the procedures prescribed under Regulation 22. The proceeding under Regulation 20(1) and Regulation 20(2) are independent of one another by virtue of the non-obstante clause in Regulation 20(2). According to the petitioner, when any action is proposed under Regulation 20(1), then procedures prescribed under clauses (1) to (8) of Regulation 22 has to be necessarily followed and as per Regulation 22(1), the Commissioner of Customs shall issue a notice in writing to the Custom House Agent within 90 days from the date of receipt of offence report.

In the present case also, the offence report was dated August 2010 and admittedly, the impugned show cause notice was issued only 18.12.2012 and therefore, there can be no doubt that the said show cause notice was issued well beyond the period of limitation of 90 days as per Regulation 22(1) of CHALR 2004 and therefore, the writ petition is maintainable - petition allowed.

Jurisdiction - power of respondent nos.2, 3 and 4 to carry out investigation in terms of Section 212(3) of Companies Act, after expiry of the time period as provided in Section 212(3) Companies Act - illegal arrest - time limit to complete investigation by SHIO - applicability of judgment of a coordinate Bench of this Court in Rahul Modi v. Union of India & Ors. [2018 (12) TMI 1549 - DELHI HIGH COURT] - Held that:- Reliance by the petitioner on the said judgment may not be dispositive of the present case as there are certain issues which arise additionally in the present case, both factual and legal, which were not raised in that case and were accordingly not considered inter alia that the provisions of Sections 212(3) and 212(8) of the Companies Act operate in two different fields and the power of investigation and power of arrest are independent of each other; that the stipulation as to time-frame for investigation may not necessarily apply to the time period for which a person may be placed under arrest; that it is the prerogative of the SFIO to submit even an interim report at any stage of the investigation; that the petitioner in the present case is in Judicial Custody and not SFIO custody; that the Companies (Amendment) Act, 2015 making the offence of fraud under Section 447 of the Companies Act a cognizable offence may have retrospective application.

It is deemed appropriate that a formal notice is issued, calling upon the respondents to file a detailed counter-affidavit answering the various issues arising in the present petition - List the matter for hearing on 9th January, 2019 before the Roster Bench.

Oppression and mismanagement - transfer of shares approved but not updated in the Company's records - case of appellant is that the Diastar Inc. has initiated bankruptcy proceedings against itself and Respondent No.1 without initiating recovery proceedings has written off all its receivables from Diastar Inc. USA, and money has been siphoned, through Diastar Inc. - beneficial ownership of shares - Appellants argued that Respondent No.2 has misused the funds of the Company.

Held that:- The Respondents have mismanaged the Company affairs, which is facing proceedings in SARFAESI, and there is also material to show that investigation is necessary relating to loss of revenue to the Company with allegations of siphoning of money by diverting the funds to Diastar Inc. and then put Diastar Inc. into bankruptcy proceedings and write off dues in this Company - The non-responsive attitude of the Respondents to the Appellants and shareholders also amounts to oppression of the Appellants.

The Impugned Order is quashed and set aside - matter remitted back to the National Company Law Tribunal, Mumbai Bench - appeal allowed.

Liquidation of the Corporate Debtor viz., M/S. Ashok Magnetics Limited - permission to Liquidator to dispose of the assets of the Corporate Debtor as a “going concern” basis - Held that:- In view of the facts and circumstances recorded by Resolution Professional in MA/ 163/2018 filed in CP/55i/IB/2017, this Adjudicating Authority did not receive any Resolution Plan under Sub-section (6) of Section 30. Therefore, in exercise of powers conferred under Sub-Clauses (i) (ii) and (iii) of Clause (b) of Sub- Section (I) of Section 33 of the I&B Code, 2016, this Authority proceeds to pass Liquidation Order - The Liquidator is also permitted to continue the operations of the Corporate Debtor and allowed to liquidate and dispose of the assets of the Corporate Debtor as a “going concern” basis - application disposed off.

Inability on the part of Liquidator to take up the assignment - corporate insolvency resolution process (CIRP) - Interim Resolution Professional (IRP) - Mr. Agarwal filed an application dated 5th March, 2018 requesting the NCLT not to appoint him as liquidator for personal reasons - Held that:- The Disciplinary Committee, in exercise of the powers conferred under section 220 (2) of the Code read with sub-regulations (7) and (8) of regulation 11 of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016, hereby imposes on Mr. Agarwal a monetary penalty equal to one hundred percent of the total fee payable to him as IRP and as RP in the CIRP of Upadan Commodities Private Ltd. and directs him to deposit the penalty amount by a crossed demand draft payable in favour of the Insolvency and Bankruptcy Board of India within 30 days of the issue of this order - The Board in turn shall deposit the penalty amount in the Consolidated Fund of India - SCN disposed off.

Validity of demand of service tax - ex-parte order passed by the adjudicating officer - principles of natural justice - Held that:- Admittedly, the petitioner was issued with the show cause notice dated 13.01.2017, calling upon them to show cause within the time stipulated therein as to why the service rendered by them in relation to sale of space to products placement in the motion picture should not be classified as 'Services' under Section 65(B) read with 65B(51) and the services in relation to temporary transfer or permitting the use of enjoyment of copyrights should not be classified under 'copyright service'.

It is seen that the petitioner after receipt of the said notice did not file any reply. On the other hand, the record of personal hearing made by the Adjudicating Authority on 21.05.2018 clearly discloses that the petitioner though repeatedly asked for extension of time to file reply, had not submitted any reply, even though such time was granted. When such being the factual position I do not think that the learned counsel for the petitioner is entitled to contend that the Adjudicating Authority has not given sufficient opportunity to the petitioner - Neither Section 33-A of the Central Excise Act, 1944, contemplates the opportunity as expected by the petitioner herein.

The order of adjudication passed by the respondent cannot be questioned before this Court under a writ jurisdiction, by complaining as if the principles of natural justice is violated - this Writ Petition is disposed of, by granting liberty to the petitioner to file such statutory appeal before the Appellate Tribunal.

Repair and maintenance service undertaken for RINL - sub-contract - non-payment of service tax as sub-contractor - Held that:- The main claim of the appellant is that original contractor has discharged the tax liability - the ratio of the judgement of the Tribunal in the case of Power Mech Projects Ltd., [2016 (9) TMI 844 - CESTAT HYDERABAD] would apply if appellant is able to evidence that the main contractors has discharged the tax liability under the category of Management, Maintenance and Repair services post 16.06.2005 - Since, the evidences are not forth coming, we remit the matter back to the Adjudicating Authority to reconsider this part of the issue - matter on remand.

Non-payment of service tax - erection and commissioning service - GTA services - Held that:- The Adjudicating Authority will also look into this particular portion of the service tax when remand matter is taken up as indicated herein above.

Valuation - non-inclusion of free issue materials supplied by RINL - Held that:- The Adjudicating Authority will also look into this particular portion of the service tax when remand matter is taken up as indicated herein above - Matter on remand.

Time Limitation - Held that:- The issue left open to the Adjudicating Authority to reconsider it when is considering the portion remitted back to him.

Appeal allowed by way of remand.

Construction services - commercial or industrial construction services - construction of Onshore Terminal (OT) for the purpose of receiving, processing/purification and transportation of natural gas - exemption from payment of Service Tax - Section 65 (A)(2B) of the Finance Act, 1994 - extended period of limitation - Jurisdiction - Held that:- There are no merits in the appellants arguments, as they have themselves applied for and got Centralized Registration with Hyderabad Commissionerate-II, and the Commissionerate has jurisdiction to issue the demand even when the services are provided outside territorial jurisdiction of Hyderabad Commissionerate-II, which comes out clearly from statement of Mr. Udaybhasker, that they have been granted Centralized Registration even for A.P. & Chattisgarh. Further it is not in dispute that all the records and accounts relating to RIL project are maintained by appellant at its Hyderabad office - Thus the jurisdiction of Hyderabad Commissionerate cannot be questioned.

The contract awarded to appellant is a composite one involving construction, erection, commissioning and installation of plant equipment, structure, instrumental, electrical, etc.,; it is nobody’s case that services rendered under contract can be bifurcated activity wise for the tax implication; Revenue Authorities as well as the appellants were unanimous in their submissions that the entirety of the contract is to be taken as a single indivisible contract and taxability thereof or otherwise should be decided. In terms of contract, appellant was to construct a gas processing plant with certain alloyed facilities called as OT - The appellant was also to undertake the construction of certain common and infrastructure facility such as helipad; hanger; ATF refuelling facility; Radio room, portable water treatment system, permanent facilities like canteen building, office building, first aid centre; security control room; swipe and control access system; permanent warehouses; administrative buildings; accommodation buildings; health centre; construction of road; widening of road; construction of flyover as also construction of civil works for comprehensive protected water supply.

The submission of the appellant that the Act does not prescribe a mechanism for taking such composite contracts is not correct as, provisions of Section 65A of the Finance Act, 1994, provides necessary statutory guidelines for determining, not only specific taxable category, but also its classification as taxable or non-taxable services. The submission of the appellant on this point seeks to give the word “classification” an unduly narrow meaning. Thus, the conclusion as to non-taxability of a composite service can be arrived at only in a situation where it is established that essential character of composite contract is imparted. The argument of appellant, it seems, that essential character of composite contract is imparted by the CICS activities, which are taxable - the contention that entirety of the service provided by the appellant is to be regarded as non-taxable is rejected.

Whether demand for tax can be sustained under the category CICS? - Held that:- The Notice records the activity of appellant is not a WCS, as there is no transfer of property in goods. The reason for excluding the service from the head “Erection Commissioning or Installation Services”, was that the appellant was not a “Commissioning and Installation Agency”. The allegation in the notice is that activity of appellant is CICS, Strenuously challenged by appellant contending that the essential character of the composite service was that of ECIS services, we need to look in to that before coming to a conclusion.

It is clear that on standalone basis some of the services provided herein, were in the nature of ECIS services, while some others, again on a standalone basis, were either construction services falling under the head CICS or were non-taxable services as noted herein above. Since both sides are unanimous in contending that the contract is a composite contract and indivisible one, not amendable to being broken down in to its separate components attracting different tax classifications, it was necessary for the adjudicating authority to have examined which of the two taxable services i.e. ECIS or CICS imparted the essential character to the contract as a whole. It seems that no such exercise has been conducted by the adjudicating authority.

In a pure service contract which is based on cost plus model, as is in the instant case, the essential character of the service rendered can be derived from details of the man hours spent for each activity along with the cost of such manpower. This aspect needs consideration to determine the essential character of the service rendered under the composite contract on the aforesaid basis.

Extended period of limitation - Held that:- We are not examining this plea as the same would be relevant only if on remand the adjudicating authority comes to a conclusion that the services rendered were taxable under the head of CICS - the issue left open for determination by the adjudicating authority.

Appeal allowed by way of remand.

Valuation - Maintenance and Repair Services - Composite works contract - wrong availment of N/N. 12/203-ST - allowance of notional abatement of 60%/70% under N/N. 12/2003-ST - demand of service tax on GTA Services - applicability of the judgment of the Hon’ble Supreme Court in the case of Larsen & Toubro Ltd [2015 (8) TMI 749 - SUPREME COURT] before 01.06.2007 - Held that:- The contracts were indivisible works contracts involving both transfer of materials and rendition of services. The materials which they have used in this factual matrix are certainly not merely consumables such as gas, welding electrodes etc., but materials which have gone into the execution of the contracts. They have been asked to remove old steel sheets and replace them with new ones. Under such circumstances, the new steel sheets which they have installed can be deemed to have been sold to the service recipient as a part of the indivisible contracts - The exigibility of Service Tax was not argued before the adjudicating authority nor was considered by him in the impugned orders.

Related to this question, exigibility of the services rendered by the appellant post 01.06.2007 in terms of Sec.65(105)(zzzza) of the Finance Act, 1994 this is also an issue which was not examined by the adjudicating authority while passing the impugned orders. Hence, this needs to be examined before the appeal can be considered by this Bench.

Whether the appellant would be eligible for exemption N/N. 12/2003- ST? - Held that:- We agree with the learned department representative that any exemption notification should be strictly construed. The appellant had produced only documents to show that they have purchased materials but nothing to show that they have used the same in execution of the contracts and it is for this reason the adjudicating authority did not allow the abatement under this notification - Nevertheless when a demand of duty is being made in the show cause notice which cannot sustain if the services are not exigible to Service Tax at all and this issue needs to be examined.

This is a fit case to be remanded back to the original authority to enable them to examine the matters and pass a reasoned order, after following principles of natural justice - appeal allowed by way of remand.

Business Auxiliary service - Liability of Service Tax - service of Commission Agent to Indian Service Recipient i.e. Amway Enterprise in USA - appellant is a Non-Resident Indian - who is liable to pay tax, appellant or service recipient? - Held that:- An individual or a proprietor or a proprietorship concern cannot be charged service tax under BAS - There is no dispute that the appellant is an individual NRI in USA. During the relevant period this Tribunal has given various judgments wherein it was held that an individual and / or proprietorship concern is not considered as a commcerial concern, therefore, the service tax under BAS is not payable by such individual - reliance placed in the case of PRATAP SINGH JYALA VERSUS COMMISSIONER OF CENTRAL EXCISE [2015 (12) TMI 819 - CESTAT NEW DELHI] - appeal allowed - decided in favor of appellant.

Business Support service - appellant provides the basic infrastructure facilities and administrative support to the visiting doctors and specialist doctors - a part of the doctors visiting consultation fee is retained by the appellant in view of the consultant’s making use of medical facilities, such as, radiology, pathology and all diagnostic available with the hospital and other administrative facilities - whether classified as Business Support services or otherwise? - Held that:- The matter is no longer res-integra as this Tribunal in the case of M/s Sir Ganga Ram Hospital and others vs. CCE, Delhi – I and others [2017 (12) TMI 509 - CESTAT NEW DELHI], where it was held that There is no legal justification to tax the share of clinical establishment on the ground that they have supported the commerce or business of doctors by providing infrastructure - demand set aside - appeal allowed - decided in favor of appellant.

Classification of services - supply of tangible goods service or not - wagons given to Ministry of Railways on lease basis - Held that:- The matter is no longer res-integra as it has already been decided in the appellant’s own case vide this Tribunal’s decision in the case of M/S. ULTRATECH CEMENT LTD. VERSUS C.C.E. & S.T., RAIPUR [2017 (4) TMI 1176 - CESTAT NEW DELHI], where it was held that the right of position and effective control is with the Railways and as such, the tax entry has no application for the present transaction - appeal allowed - decided in favor of appellant.

Valuation - Commercial coaching or training Services - amount of concession in the name of scholarship given by the appellant to its various students - non-monetary consideration - Section 67 of the Finance act, 1994 read with Rule 3 of Service Tax Valuation Rules, 2006 - Held that:- The matter is no longer res-integra as decided in appellant own case M/S RESONANCE EDUVENTURES PVT. LTD., SHRI R.K. VERMA, MANAGING DIRECTOR, M/S ALIEN CAREER INSTITUTE VERSUS CCE & ST, JAIPUR [2017 (11) TMI 1276 - CESTAT NEW DELHI], where it was held that There are no reason to consider the concessional portion of fee which is as per the pre-declared publicity material, as part of non-monetary consideration requiring addition to the monetary consideration to arrive at the gross value - appeal allowed - decided in favor of appellant.

CENVAT credit - duty paying invoices - photocopy invoices - Rule 9 of Cenvat Credit Rules, 2004 - Held that:- There is no dispute regarding the receipt of duty paid inputs covered under the impugned invoices and their use in the manufacture of finished goods. Nor there is any allegation that the invoices are bogus.

Rule 9 of Cenvat Credit Rules, 2004 is relevant for the purpose which mandates the requirement of invoices issued by a manufacturer for clearance of inputs and capital goods from his factory as the prescribed documents for availing cenvat credit - From the perusal of rule 9, it is clear that there is no express mandate for such invoices to only be in original.

Since the verification and re-calculation based on the photocopies of invoices as are asserted to be available with the appellant for entitling him the credit of ₹ 1,68,766/- is required. It is opined that the matter be remanded back to the Commissioner (Appeals) for considering the photocopies of the invoices - appeal allowed by way of remand.

Condonation of delay in filing appeal - Non-Communication of Order - absence of any proof of service of either show cause notice or any subsequent notice of personal hearing upon the appellant - Section 37C of Central Excise Act - Held that:- The copy of Order-in-Original, apparently and admittedly, was received by the appellant only on 10th August, 2015. That too, it was not the certified copy. But still the Commissioner (Appeals) has held the appeal to be delayed for one year and 20 days. The period of limitation i.e. 60 days condonable by Commissioner (Appeals) for another 30 days has to reckon from 10.08.2015.

The appellant herein has filed an affidavit deposing that the order got communicated to him only on 10.08.2015 - reliance placed in the case of M/s. T. Prabhakara Rao vs. Commissioner, Central Excise, Hyderabad-III [2008 (8) TMI 327 - CESTAT, BANGALORE], wherein it was held that appellant can prove non-receipt of order by filing affidavit and that the same is not rebutted for want of the proof of dispatch by the Revenue for no acknowledgement produced, the Tribunal is empowered to condone the delay.

The delay is condoned - the Commissioner (Appeals) has dismissed the appeal in limini on limitation and has not given any findings on the merits of the appellant - matter remanded to Commissioner (Appeals) for adjudication on merits - appeal allowed by way of remand.

Short payment of service tax - erection, commissioning and installation services - works contract service - CENVAT Credit availed in excess - Held that:- This issue relates to examination of documents and thereafter to correlate as to whether there was any short payment of service tax during the impugned period w.e.f. July, 2012 to March, 2014 and as to whether the excess cenvat credit of ₹ 54,192/- has been availed by the appellant during the said period - there is no denial on part of the Department to the effect that the system of submitting return had a major change requiring the assessee to file the half yearly returns instead of the annual returns w.e.f. the year 2012. There is also no apparent denial of rebutting the failure in the software of the appellant as is mentioned by them.

Perusal of various documents also makes it clear that there is no intentional act on the part of the appellant to evade the duty.

Appeal allowed - decided in favor of appellant.

Restoration of appeal - appeal was dismissed for non-prosecution - Section 35G of the Central Excise Act, 1944 - substantial question of law - Held that:- Identical issue was considered by the Hon'ble Division Bench of this Court in the case of P.Ganesh, Commercial Director Vs. The Commissioner of Central Excise in CMA No.2055 of 2018 dated 19.09.2018. In the said case also the Tribunal dismissed the appeal for non-prosecution - this appeal is allowed and Substantial Questions of Law framed for consideration are answered in favour of the assessee - the matter is restored to the Tribunal for consideration of the appeal on merits.

Area Based exemption - Units in Kutch District of Gujarat - further investments which resulted in the addition - goods manufactured on such plant and machineries that were installed after cut-off date 31.012.2005 - expansion of the unit after cut-off date 31.12.2005 - restriction on exemption benefit - extended period of limitation - benefit of N//N. 39/2001-CE dated 31.07.2001 (as Amended from time to time).

Held that:- From the details of machineries installed after 31.12.2005 and process flow chart, it is clear that the machines were used for intermediate process of the final product i.e. made-ups articles namely, Terry Towels and Bed Sheets. It is also observed that there is no addition to enhance capacity of final product i.e. bed sheets and terry towels - The said machine had capacity to cut and hem 63 MT terry towel per day, the Gerber make machine installed in the plant make can lay 75000 bed sheet per day. The appellant did not make any further additions in the said department post 31.12.2005. It is observed that in the bed sheet sewing department, 266 manually operated sewing machines were installed prior to 31.12.2005 and 132 machine post that period. In respect of said two prodcuts, the same can be converted into terry towels and bed sheets respectively in the cutting department at this stage the finished goods take shape and emerge. It is undisputed that post 31.12.2005, the appellant did not install any new machine in the cutting department.

As regard adding of sewing machines in the bed sheet sewing department, it did not make the production thereof, since the capacity of production is determined at cutting stage, wherein the machines installed have a rated capacity - The capacity of the production of bed sheets cannot be linked to the sewing machines thus the installed capacity for manufacture of made-ups which is directly linked to the respective cutting machines has not undergone any change - thus, the appellant fulfilled all the conditions stipulated in the Notification No. 39/2001-CE (Supra) and therefore, have rightly entitled for the refund of Central Excise duty paid in their PLA for the disputed period.

If the observation of the department is considered that the appellant have made further investment in the plant and machinery after 31.12.2005, but as per the facts discussed above regarding details of machinery installed after 31.12.2005 it is found that all those machines were installed at intermediate stage whereas no addition was made at the stage of manufacture of final product, therefore, the production capacity of final product does not get affected or enhanced due to installation of machinery for the intermediate process - It is an admitted fact that the appellant were buying the intermediate goods from the outsiders. Even in that case, the final product manufactured out of the bought out intermediate goods were entitled for notification 39/2001-CE and the same has been allowed without any dispute by the department, therefore, there is no difference that whether the appellant manufactured final product out of bought out goods or from the goods manufactured in the appellant’s plant and machinery procured after 31.12.2005. In both cases, the exemption is available to the entire quantity of the final production produced and sold without any value cap or quantity cap.

The intention of the notification is very clear that if the initial civil work and installation of the Plant and machinery is completed and commercial production in such unit started before 31.12.2005, the exemption for 5 years irrespective of any of the amount of value or quantity is available.

It is clear that since assessee is required to make the declaration wherein a product on which the exemption is entitled to be availed must be declared. Any new product manufactured after 31.12.2005 shall not be eligible for exemption - In the facts of the present case, the appellant right from the beginning declared the final product i.e. bed sheets and terry towels they have not started production of any new product after 31.12.2005, therefore, as per the clarification of the Board given hereinabove the appellant cannot be denied the exemption on the product declared and the same were being manufactured throughout the period of exemption.

It is clear that irrespective of any addition or modification in the plant and machinery since the notification did not place a bar or restriction on such addition /modification, the exemption shall be available in 10 years as per the above referred notification - since the appellant have strictly followed the conditions of the notification no 39/2001-CE particularly completion of civil work and plant and machinery and commencement of commercial production before 31.12.2005, the exemption for 5 years is available.

Time limitation - Held that:- Since we decide the case in favour of the assesse on merit itself we are not going to address the issue of limitation.

The appellant is entitled for the exemption under Notification 39/2001-CE despite the fact that the appellant have installed additional machineries for manufacture at intermediary stage as the overall capacity of final product does not increase - appeal allowed - decided in favor of appellant.

Valuation - Job-work - value adopted as per M/s Ujagar Prints case [1989 (1) TMI 124 - SUPREME COURT OF INDIA] i.e. raw material cost + job charges - case of appellant is that the same goods were sold by the appellant to various buyers, when the sale price of same goods is available which is manufactured on job work basis, the sale price will apply instead of the value adopted in principle of M/s Ujagar Prints - allowability of transport cost - Held that:- The excise duty liability should be computed considering the sale value charged to the independent customers as the assessable value for the purpose of valuation of job worked goods. Since, the said value is in accordance with Section 4, the permissible deduction such as transportation is also available to the appellant.

CENVAT Credit - Held that:- The goods of the said invoices were admittedly used by the appellant for job work. The same has been endorsed by the department by taking cost of raw material from the same invoices. In this position merely because the name of the appellant is not appearing on the invoices, Cenvat Credit cannot be denied - credit allowed.

The valuation of job worked goods computed by the department on the basis of cost of raw material + job work charges is incorrect. Therefore, the adjudicating authority must re-quantify the duty on the value arriving on the basis of sale price of tin container applied to the independent buyer - ppellant is also entitled for deduction of transportation in accordance with law - CENVAT credit also allowed - appeal allowed by way of remand for the purpose of re-quantification of demand.

Adjustment of refund sanctioned towards the pending arrears in terms of Section 11 of the Central Excise Act, 1944 - liability of interest towards the delayed refund - relevant time for calculation of interest - Held that:- There were no arrears which are due to the Government, as the Order-in-Original which confirmed the demands raised against which the refund claims was adjusted towards arrears, was in appeal and appeal was held in favour of the appellant - The issue is no more res integra as Hon’ble High Court of Karnataka in the case of CCE, Bangalore-III Vs. Stella Rubber Works (Unit –II) [2013 (3) TMI 299 - KARNATAKA HIGH COURT] has categorically recorded that amounts cannot be appropriated towards the Revenue dues unless the provisions are followed - demand set aside.

Interest on delayed refund - Held that:- Nothing is recorded in the Tribunal’s order as to why and when in appeal No. E/926/2008 came to be restored and disposed of on 14.07.2016. Be that as it may, the appellant’s claim for the interest, if any, could arise only after the three months from date of the disposal of appeal vide which, demands has been held as unsustainable held in their favour.

Appeal disposed off.

Clandestine manufacture and removal - MS Ingots - unaccounted purchase of raw material and sale of finished goods - excesses and shortages of finished goods and stock - Held that:- Out of the total confirmed demand of ₹ 3,79,32,215/- Central Excise Duty of ₹ 3,39,36,175/- pertains to the supposedly received by the appellant quantity of M.S. Ingots clandestinely from M/s Pankaj Ispat Ltd. This amount of Central Excise Duty is purportedly have been evaded by the appellant No.1 on the quantities of their finished goods manufactured out of the total quantity of 9240.395 MTs of MS ingots received by the appellant from M/s Pankaj Ispat Ltd. It is an admitted fact that record of receipt of clandestinely removed M.S. Ingots was recovered in the form of private record maintained in the premises of M/s Pankaj Ispat Limited. - During the search in the premises of the appellant No.1, no record has been recovered to suggest any clandestine receipt of the raw materials, namely, MS Ingots from which they purportedly manufactured and cleared quantity of 8316.357 MTs of their finished goods i.e. angle, channel and bars.

There is no other evidence with respect of purported clandestine manufacture or clearance of 8316.357 MT of finished goods. The third party evidence can be considered as a mere starting point of investigation and cannot be considered as a reliable evidence without corroboration. The whole case against the appellant has been made merely on the basis of certain records found in the premises of M/s Pankaj Ispat Ltd. and a generalised confessional statement of Sh. Pankaj Aggarwal that the records found from his premises are correct. These records contained entries not only of the appellant but also many other parties. Record of removals and specific entries in the private records of Pankaj Ispat Ltd. pertaining to the appellant were not questioned. There is no corroboration to the same with any corresponding record of purchase in the appellants factory, manufacture, sale of finished goods, receipt of cash, electricity consumption by the appellant.

Sh. Girdhar Sahu denied the contents of the statements and stated that a computer typed statement was signed by him without reading the same and could not identify the signatures on material receipts. Sh. Radhey Shyam did not appear for cross examination. Thus, the veracity of their statements could not be tested in cross examination. Even Sh. Pankaj Aggarwal, Director of M/S Pankaj Ispat ltd. did not appear for cross-examination. These charges against the appellant cannot be upheld merely on the basis of third party documents and certain statements which could not be tested in cross-examination.

The revenue has failed to establish the charge of clandestine removal - the allegations of clandestine activities are serious allegations and are required to be arrived at on the basis of concrete evidences and not on the basis of assumption and presumption.

A similar issue of assumed manufacture on the basis of records of supply of raw materials found in the third party premises was examined in the case of RHINO RUBBERS PVT. LTD. Versus COLLECTOR OF CENTRAL EX., BANGALORE [1994 (4) TMI 196 - CEGAT, MADRAS], and it was held that it is not safe to rely only on the third party’s records evidence when no direct links of the transactions established. Other parameters like electricity consumption etc. should have been considered before demanding duty on the alleged clandestine manufacture and removal of goods.

Demand of ₹ 25,71,244/- in respect of “IN Slips” seized from the premises of the appellants - Held that:- The receipt of unaccounted materials against these IN slips has been admitted by the Director Sh. Bajrang Jain and he has also accepted to pay duty on the supposed manufacture of finished goods from these un accounted material - once the non accountal of these raw materials was accepted by the appellant, the onus lied upon him to prove that the same were not used in the manufacture of finished goods. Once this onus is not discharged upon, the presumption would always be that the same were used in the clandestine manufacture of finished goods - demand upheld.

Demand of ₹ 14,24,796, on shortage of 330.288 MTs, of 'cast iron ingot moulds' and 15.85 MT of M S Ingots and excess stock of 191.752 MT of MS channels/Angles - Held that:- The appellant was under a stautory obligation to properly account for all the cenvatable inputs and finished goods in the statutory records. The failure would meet with all the consequences of demand and penalties. A mere mathematical possibility that the shortage of CI moulds could have resulted in manufacture of excess finished stock of angles, channels etc. could not be accepted without respective entries in record. The claim is all the more not acceptable because the appellant has been found to be indulging in clandestine manufacture and clearance - Demand, interest, penalty and redemption fine are upheld.

The penalty of ₹ 39,96,040/- against the appellant is upheld out of total penalty of ₹ 3,79,32,215/- and rest is set aside. The redemption fine of ₹ 15,97,000/- imposed in the impugned order is upheld.

Appeal allowed in part.

CENVAT credit - capital goods - various items of iron and steel - Held that:- The Cenvat Credit disallowed vide the impugned order- in- appeal is following the ruling of the Larger Bench of this Tribunal in Vandana Global Ltd. V/s CCE [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)]. The said decisions stands reversed by Hon’ble Chhattisgarh High Court in M/S VANDANA GLOBAL LIMITED AND OTHERS VERSUS COMMISSIONER, CENTRAL EXCISE AND CUSTOMS, CENTRAL EXCISE [2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT] wherein it has been held that amendment to explanation 2 of Rule 2 (k) of CCR 2004 vide a Notification No. 16/2009-CE is not clarificatory but only prospective in operation.

In the appellant’s own case in the case of India Cement Ltd. Hon’ble Madras High Court in its judgement [THE COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX VERSUS M/S. INDIA CEMENTS LTD.] have held that a manufacturer- assessee is entitled to Cenvat Credit a supporting structures and structural items required for fabrication and or supporting of plant and machinery as without the said activity of fabrication no excisable goods can be manufactured.

Credit allowed - appeal allowed - decided in favor of appellant.

Valuation - inclusion of subsidy amounts in the value of the goods cleared by the appellants in assessable value - Section 4 of the Central Excise Act - Held that:- It appears that the identical issue has come up before the Tribunal in the case of Shree Cements Ltd. V/s CCE, Alwar [2018 (1) TMI 915 - CESTAT NEW DELHI], where it was held that There is no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans - appeal allowed - decided in favor of appellant.

CENVAT Credit - input - Cement - Respondent used cement for treatment and disposal of the hazardous industrial waste generated, i.e. Jarofix, by mixing cement and lime into said Jarofix at secured land fill during the zinc smelting operations - denial of credit on account of nexus - Rule 2(k) of Cenvat Credit Rules, 2004 - Held that:- The cement is used for treating the waste generated during the process of manufacture. Thus, though it is used at post manufacture stage but apparently this activity is a statutory mandate of Ministry of Environment and a precondition for the operation of plant. Thus, it becomes clear that manufacture of final product cannot take place unless the plant is operational.

Admittedly, in this case, the appellant has used cement for stabilization of hazardous waste jarofix as toxic effluent at secured land fill which is part and parcel of their manufacturing activity - treatment of effluents from a plant is an essential and integral part of the process of manufacture in the plant. The cement herein had admittedly been used to treat the affluent/waste called Jerofix.

Credit allowed - appeal allowed - decided in favor of appellant.

Classification of an item - Gypsum - RVAT Act - whether ‘gypsum board’ would fall within this Entry 56, and be taxed at 4%, for the relevant assessment years, or whether it would fall in the then residuary Entry 1 of Schedule V, to be taxed at 12.5%? - change of the Entry by a conscious decision of the legislature, whereby the Entry of mere ‘gypsum’ was changed to ‘gypsum in all its forms’ - original composition of gypsum - process of conversion into gypsum board.

Held that:- The amended Entry 56 of Schedule IV of the RVAT, read as ‘gypsum in all its forms’, would include ‘gypsum board’ under the term ‘all its forms’.

It can hardly be doubted that a meaning has to be given to the Entry made by the legislature, expanding the original Entry from ‘gypsum’ to ‘gypsum in all its forms’. If the object was to include only ‘gypsum’, then why would the Entry be changed to ‘gypsum in all its forms’? The corollary would also be as to what is meant by ‘in all its forms’, as it is not, as if mere geometrical alteration of a shape would form part of the Entry. In such a situation, the original Entry itself was comprehensive enough to have included it - In the present case, there is really no chemical change which occurs in the substance as dehydration only reduces the water content and thereafter, it is mixed with additives for the purpose of increasing bonding and other related purposes. Substantively, the character of ‘gypsum’ is not changed in the mechanical exercise of converting it into a board along with, of course, certain chemical processes of heating and mixing, to achieve an ultimate objective.

Wherever an expression ‘in all its forms’ is used, it has resulted in an expanded meaning, which is a logical corollary of such an expression being added to the original Entry. To take a view to the contrary in the given situation would amount to giving no meaning to the added expression as there are really not too many possibilities on what could have been included in such an expression.

Also, in terms of notification No.S.O.36.No.F.12(59)FD/Tax/2014-14 dated 14th July, 2014, the RVAT was amended to include, in Schedule V, a separate Entry under item No.19(viii) ‘gypsum board and other false ceiling material’. Thus, the legislature by a conscious decision in 2014, sought to create a separate Entry for gypsum board, which was not the case in respect of the assessment years in question - This, in our view, belies the endeavor to include gypsum board in the residuary Entry, before such specific inclusion as then there would have been no need for such an Entry. The obvious attempt is to exclude it from ‘gypsum in all its forms’ in Schedule IV of RVAT and create a separate Entry in Schedule V, whereafter it would naturally be governed by the tax rate applicable to the Entry in question.

Appeal dismissed.

Principles of Natural Justice - case of petitioner is that the impugned orders of assessment were passed without considering the objections raised by the petitioner - ITC reversal as per annual scrutiny cross verification report - ITC reversal on exempted sales - Held that:- Though the Assessing Officer extracted the whole reply in the assessment orders, has however, not dealt with in detail with his independent reasoning and finding as to how those objections raised by the petitioner are not sustainable. On the other hand, the Assessing Officer, simply rejected the objections by stating that copies of purchase invoices were not filed by the petitioner - this Court is of the view that the Assessing Officer can consider the matter afresh, more particularly, under the circumstances that the assessment orders came to be passed, without hearing the petitioner, by the new Assessing Officer, since the earlier personal hearing given was by the previous Officer - petition allowed by way of remand.

Principles of natural justice - ex-parte assessment - assessment notices not issued to petitioner - compliance with requirement of pre-deposit - Held that:- It is an admitted position that the proceedings before the Assessing Officer went ex-parte as the petitioner was not served with the assessment notices issued by the concerned authority. It may be that such notice could not be served on account of closure of the business of the petitioner, nonetheless, it is a matter of fact that the assessment was exparte. In these circumstances, this court is inclined to remit the proceedings back to the Assessing Officer for fresh consideration - petition allowed by way of remand.