TMI Tax Updates - e-Newsletter
January 17, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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GST:
Notified supplies, when the supply of goods shall be treated as deemed export under GST e.g. supplies against Advance Authorisation - Notification amended to submit certificate from CA in certain cases.
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Income Tax:
Allowable expenditure u/s 37(1) - The assessee at the initial stage could not file any reply on this issue. The DRP has given a specific finding that this amount have been incurred on salary advance and other payments which are neither in the nature of trading loss nor the bad debts.
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Income Tax:
Loss on foreclosure of loans - Whether equivalent to write off of an asset which is capital in nature and not allowable u/s. 37(1) since it is not a Revenue write off? - the assessee satisfies all the conditions of allowabaility of this sum as deduction u/s 36(1) (vii) rws 36(2).
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Income Tax:
Penalty u/s 271(1)(c) - Merely because an addition is made by disbelieving her capacity to lend the loan.Such a fact, ipso facto, does not lead to the levy of penalty.
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Income Tax:
Condonation of delay - delay of 362 days - the main cause of delay was difference of opinion between the two Officers and ultimately legal opinion was taken and it was decided to file the appeal - delay condoned.
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Income Tax:
Disallowance of payment of commission - The fact that the amount was transferred at the fag end of the financial year in the accounts of these parties and immediately thereafter was withdrawn again shifting the burden on the assessee to prove the claim of expenditure.
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Income Tax:
Grant of deduction u/s 80P(2)(d) - if such deduction is not claimed in computation of income, then no disallowance be made to the total income of the assessee.
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Income Tax:
Nature of expenditure - expenditure for re-place of flooring and purchase of air conditioner, dish washing machine, and audio/video equipments in the pub etc. - Held as revenue expenditure allowable as deduction u/s 37.
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Income Tax:
TDS u/s 195 - fees for technical services u/s 9 (1) (vii) - Assuming that Licensor, rendered services as defined u/s. 9(l)(vii) Explanation 2 of the Act, yet it does not satisfy tire requirement of technical services as contained in India-UK DTAA.
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Customs:
Principles of natural justice - suspension of CHA License - Regulation 11(2) can be invoked for suspending the license only when the Commissioner of Customs feels and comes to a conclusion that immediate action is necessary to suspend the license - in the absence of such findings, order quashed.
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Customs:
Power of the Central Government to regulate marine trade, especially Foreign Trade Policy - export of shark finning - What is the best is not always discernible, the wisdom of any choice may be disputed or condemned. Mere errors of Government are not subject to our judicial review.
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Customs:
Maintainability of Refund claim - assessment order not challenged - the refund claim under section 27 is not maintainable unless the order of assessment is modified in the appellate proceedings.
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DGFT:
Amendment in policy condition of Nicotinic Acid & Nicotinamide (Niacinamide/ niacin) under HS Code 29362920 of ITC (HS) 2017, Schedule - I (Import Policy)
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Service Tax:
Applicability of Service Tax on Asian Development Bank (ADB) and International Finance Corporation (IFC)
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Service Tax:
Refund claim - export of service - intermediary - place of provision of service - the appellant is not acting as a bridge between the overseas group entities and supplies made to their customers in India and accordingly, it cannot be said that the appellant has provided intermediary service.
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Service Tax:
Refund claim - Since registration of premises is not a pre-requisite condition for claiming input tax credit, denial of the refund benefit on such ground is not legally sustainable.
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Service Tax:
Valuation - as the issue stands settled that reimbursable expenses cannot form part of the gross value of the services being provided by the service provider, we find no reasons to include the E.S.I./P.F./W.C.P. amount in the assessable value of the services, inasmuch as the same are admittedly reimbursable to the persons concerned.
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Service Tax:
CENVAT Credit - The input service availed by the appellant before the stage the paint becomes marketable, the appellant is entitled to avail cenvat credit on Repair & Maintenance Service of Automatic Dispensing Machines which enables their product marketable consequently excisable
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Central Excise:
The petitioner having opted for settlement is not permitted to dissect Settlement Commission's Order to accept what is favourable and reject what is not.
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Central Excise:
Clandestine removal - Exemptions can be conditional or absolute, yet it is an exemption. Therefore, strict interpretation is to be given and a person, who is charged of clandestine removal with sufficient evidence has to establish his innocence, having failed to discharge the burden cast on them and cannot be heard to say that despite all the charges against them, they are still entitled for exemption.
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Central Excise:
Classification of goods - power bank/ portable mobile charger - although the Ministry has issued the clarification to the Respondent regarding the classification of ‘power bank’ as the ‘accumulator’ but the same cannot be treated as a circular issued by the Board - power bank is a kind of mobile charger - Benefit of exemption allowed.
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Central Excise:
Refund Claim - In the present case the appellants are the consumer of the goods and have utilized the said goods in creation of Konkan Rail Project, for which the adhoc exemption order Of 1994 and the 2002 issued - the bar of unjust enrichment as in Section 11B is not a absolute bar but a rebuttable presumption - refund allowed.
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VAT:
Valuation - includibility - deduction on freight and pumping charges shown separately in the invoice disallowed - the delivery is ex-RMC Works - The Tribunal committed a serious error in deciding the questions against the assessee
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2019 (1) TMI 763
Transitional credit - consideration of Form TRAN-1 and Form TRAN-2 - lack of clarity in the new transitional provisions under the GST Act - Held that:- The writ petitioner shall submit their application in accordance with the circular dated 03.04.2018 within a period of two weeks from the date of receipt of a copy of this order to the Assessing Officer/Jurisdictional Officer/GST Officer - The Nodal Officer in consultation with the GSTN shall take note of the grievance expressed by the petitioner/Assessee and forward the same to the grievance Committee, which in turn would take appropriate decision in the matter as expeditiously as possible, in any event, within a period of six weeks thereafter.
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Income Tax
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2019 (1) TMI 761
MAT - benefit of tax credit to the assessee of the surcharge and education cess paid to the assessee whose income for the purpose of tax is computed in terms of section 115JB - Held that:- Special Leave Petition is dismissed on the ground of low tax effect, leaving the question of law open.
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2019 (1) TMI 760
Charitable activities - Grant of registration to the respondent u/s 12-A - Held that:- Delay condoned. The Special Leave Petition is dismissed.
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2019 (1) TMI 759
Reopening of assessment - Claim of the deduction u/s 80IA[4] - eligibility of reasons to believe - doctrine of merger - Held that:- Special Leave Petition is dismissed on the ground of low tax effect, leaving the question of law open.
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2019 (1) TMI 752
Loss on foreclosure of loans - Whether equivalent to write off of an asset which is capital in nature and not allowable u/s. 37(1) since it is not a Revenue write off? - Held that:- As decided in assessee's own case [2015 (11) TMI 1670 - ITAT DELHI] admittedly the assessee is a non banking fiancé company and engaged in the business of money lending and therefore the amount of debt represents the money lent in the ordinary course of business of money lending. Further according to section 36(1)(vii) of the act any bad debt or part of the bad debt if written off in the books of accounts as irrecoverable, same shall be allowed to the assessee as deduction. It is admittedly written off in the book of accounts of the assessee as “loss on foreclosure of loan assets”.
Thus the assessee satisfies all the conditions of allowabaility of this sum as deduction u/s 36(1) (vii) rws 36(2). As the sum is written off in the books of accounts by writing of the loan amount of the borrower on negotiation cannot be called a future or probable loss but ascertained and accrued loss in the business of financing. In case of CIT V CITI CORP Maruti Finance Limited [2010 (11) TMI 802 - Delhi High Court] has held that even loss on repossessed vehicle sold is also allowable to the assessee u/s 36(1) r.w.s 36 (2) of the act. Honourable Delhi High court also held that such deduction was also covered in favour of the assessee. - Decided in favour of assessee.
Write off of recoverable - Held that:- In order to claim the aforesaid amount either as loss u/s. 28, or as bad debt u/s. 36(1)(vii) read with section 36(2), the onus was on the assessee to produce the party-wise details alongwith their complete addresses, PANs, TANs so as to enable the Assessing Officer to make verification as to the correct nature of amount claimed by the assessee. It is also made clear that once the assessee proceeds to set off the receivables (TDS) from the total tax liability, the nature of such receivables no more remains in the nature of bad debts/receivables. On perusal of year-wise details of irrecoverable TDS, we find that such irrecoverable receivables are shown to have been pending since assessment years 1997-98 to 2007-08, but the assessee has not been able to furnish Form 16A from the parties who deducted TDS nor could he prove that any efforts were made by the assessee to recover the impugned of TDS amount so as to claim its credit.
The amount of TDS has to be deposited in the government treasury by the deductors on behalf of the deductee for which the Income-tax law provides procedure to furnish TDS certificate by the deductee for claiming its credit, which the assessee failed to do here. Once the TDS was deducted by the deductors and the assessee was not in possession of TDS certificates, he should have made a request to verify the same from the parties who deducted the TDS, but the assessee has also failed to do so as he did not furnish even the details of the deductors before the Assessing Officer. In these peculiar facts of the case on hand, the decision relied by the assessee are not found applicable due to disparity of facts. We accordingly, conclude that the ld. CIT(A) was not justified in giving relief to the assessee u/s. 37. Accordingly, ground No. 2 of appeal deserves to be allowed.
Bad debts written off - Held that:- Legal position that emerges is that in the case of a NBFC so long as the debt represents money lent in the ordinary course of money lending business; interest has been consistently assessed as income from money lending business; the debt has been written off as bad debts by the Appellant in its books of accounts, the claim of the appellant should be allowed as deduction under section 36(1)(vii) read with section 36(2). Accordingly, the addition made is deleted and the grounds of appeal is allowed.
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2019 (1) TMI 751
Assessment framed u/s 153A - Held that:- Assessments framed u/s 153A of the Act are without jurisdiction and the order deserves to be quashed.
Addition u/s 69C - Held that:- The assessee must have incurred some expenditure but there is nothing to show that the expenditure was, in fact, incurred by the assessee. The assessee had denied having incurred the expenditure and it was on the Revenue to prove that the assessee had paid kickbacks by participating in the oil for food programme. No such evidence has been brought on record except Volkar Committee Report.
The Volkar Committee was constituted by the United Nations for a special purpose.
In the case of International Forest Company [1974 (12) TMI 33 - JAMMU AND KASHMIR HIGH COURT] has held that even if it is to be taken that the Income tax authorities are not bound by strict rules of evidence, report of Iyengar Commission could not be referred to and relied upon by the Appellate Tribunal unless it had not only invited the attention of the assessee to the passages which it intended to rely but had also given opportunity to the assessee to explain those passages and to adduce evidence against the truth of recitals contained therein.
We hold that the Revenue grossly failed in discharging the onus u/s 69C of the Act without bringing any cogent direct material evidence on record. The additions so made cannot be sustained and accordingly directed to be deleted. - Decided against revenue
Computation of claim of deduction u/s 80HHC as originally filed and claimed in its return of income - Held that:- The findings of the CIT(A) are based upon the judgment of the Hon'ble Supreme Court in the case of Sun Engineering Works [1992 (9) TMI 1 - SUPREME COURT] and Chettinad Corporation Pvt. Ltd [1993 (1) TMI 72 - SUPREME COURT] and the direction for computing the claim of deduction u/s 80HHC as per original return filed calls for no interference. - Decided against revenue
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2019 (1) TMI 750
Disallowance of loss foreseeable on project - Held that:- Assessee merely submitted that assessee has given treatment in the accounts as per Accounting Standard-7 issued by ICAI. Assessee was not able to rebut the findings of the DRP in this regard. It is not in dispute that the claim was made on mere estimate. It was also not disputed that the loss have not actually been crystallized during the assessment year under appeal.
It is also not explained as to how the foreseeable loss have been calculated and what was the justification. It is well settled law that if assessee would have incurred actual loss, then the same would be allowed in the year when such loss have been incurred and crystallized. DRP has specifically noted that even the loss have not taken place in assessment year under appeal. These findings of the authorities below have not been rebutted by the assessee through any evidence or material on record. Therefore, mere making a claim on account of foreseeable loss on estimate is not an allowable deduction under the Act. We, therefore, confirm the findings of the authorities below and dismiss Ground of the appeal of assessee.
Disallowance of relation to sundry balances written off during the year, even though the same is allowable under section 37(l) - Held that:- The draft order was sent to assessee-company. The assessee-company filed its objections before the DRP, but the Order of the A.O. was confirmed on the reasons that the amount is incurred on salary advance and other payments. Therefore, same are not in the nature of trading loss and also of bad debts. Tribunal restored the matter back to the file of DRP for considering the issue afresh. The DRP noted in their findings that amount have been incurred on salary advance and other payments which are neither in the nature of trading loss nor bad debts, therefore, Order of the A.O. was found correct. No merit in this ground of appeal of assessee. The assessee at the initial stage could not file any reply on this issue. The DRP has given a specific finding that this amount have been incurred on salary advance and other payments which are neither in the nature of trading loss nor the bad debts. Learned Counsel for the Assessee have not been able to point-out any infirmity in the findings of the DRP - decided against assessee.
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2019 (1) TMI 749
Penalty u/s 271(1)(c) - failure to prove that loan was taken - dis-allowance of certain expenditures - estimation of GP rate - Held that:- On appreciation of the facts including the GP rate declared for the earlier years, Ld. CIT(A) thought it fit to adopt the GP rate of 9% giving some margin for the increase in turnover and on that premise, CIT(A) deleted the addition to the extent of ₹ 6,57,641/-and confirmed the addition to the extent of ₹ 2,87,543/-.
All this is subjective exercise done by the authorities and as a matter of fact, as rightly observed by the 1st appellate authority in the quantum appeal there is no basis for the learned Assessing Officer to estimate the GP rate at 12%. At the same time CIT(A) also sustained a portion of the addition by adopting the GP rate at 9% by making reference to the GP rate in the earlier years, increase in the sundry creditor or liability and also in the turnover. All the circumstances suggest that the addition has no relation either to concealment of income or furnishing of inaccurate particulars thereof. In order to attract the provisions of Section 271(1)(c) there must be an allegation that there was concealment of income or furnishing of inaccurate particulars thereof, in the absence of which we find it difficult to sustain the penalty on this score. No penalty could be levied on the difference resulted due to adoption of different GP rates made on estimate basis.
Coming to the levy of penalty on account of confirmation of addition of loan received from Smt. Bindu Sharma who was drawing salary from the assessee company and the wife of the director, is concerned there is no dispute as to the identity of Bindu Sharma and the learned Assessing Officer never doubted the same. Addition was made on the ground that the source of Bindu Sharma was not proved. Insofar as the identity and genuineness of Smt. Bindu Sharma is not in dispute.Merely because an addition is made by disbelieving her capacity to lend the loan.Such a fact, ipso facto, does not lead to the levy of penalty.
We find it difficult to sustain the penalty levied in respect of the additions made either on estimate basis, or by disallowing some expense, or on the ground that this source of the capacity of the creditor was not proved. We, therefore, find that the levy of penalty cannot be sustained and the same has to be quashed. We, accordingly, direct the learned Assessing Officer to delete the penalty. - Decided in favour of assessee.
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2019 (1) TMI 748
Long Term Capital Gain and on account of deposits in the bank account - Held that:- Shri Mohan Dhingra, who was actual owner of the property, was also show caused regarding sale of this property and a copy of notice dated 09/01/2018 is placed the reply of Shri Mohan Dhingra is placed and the copy of return along with computation of income and copy of letter written by Income Tax Officer, Ward-1(3) accepting the claim of Shri Mohan Dhingra that he had included the Long Term Capital Gain on the sale made through his power of attorney holder Shri Yogesh Malhotra, was rightly declared in his return of income.
All these facts need factual verification. Therefore, we deem it appropriate to remit the issue back to the Assessing Officer who should pass a fresh assessment order after ascertaining the entire facts and circumstances.
Other addition with respect to deposits in bank accounts is also remitted to the AO as it is also related to the sale made by the assessee as power of attorney holder. AO should co-relate the sale consideration and date of receipt of sale consideration and deposit in the relevant bank account and then withdrawals from this bank account to the real owner of the property. The assessee will be provided reasonable and sufficient opportunity of being heard. - Appeal of the assessee stands allowed for statistical purposes.
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2019 (1) TMI 747
Penalty u/s 271(1)(c) - non specification of limb of section 271(1)(c) under which the assessee was charged - Held that:- Notice under section 271(1)(c) is not specific as it did not mention specifically as to which limb penalty under section 271(1)(c) of the Act is imposed upon the assessee by the Assessing Officer. Notice for imposition of penalty u/s 271(1)(c) of the Act issued in the case of the assessee is bad in law, invalid and, therefore, liable to be quashed. - Decided in favour of assessee.
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2019 (1) TMI 746
Accrual of income - Assessment of income of coupons and corresponding expenses - existence of element of profit - as during assessment year 2007-08 the assessee had already claimed TDS but the corresponding receipt was not incorporated in the income - allowing income aspect in earlier year and not allowing corresponding expenses in the same year - CIT(A) has held that the deductor Idea had duly deducted TDS and had issued credit notes in favour of the assessee, however noted that the assessee had duly claimed the recharged coupons as expenses when these were distributed by him in the next year - Held that:- CIT(A), in his findings, has ignored the fact that assessee, on the one had had claimed expenses in the next year against the recharged coupons and therefore, there was no wrong on the part of the assessee in declaring the corresponding income in the next year.
As find from the copy of ledger account,assessee had credited the income on account of coupons on 04/04/2007 to 05/04/2007 and has also claimed free of cost recharged coupons as expenses. The entries passed by the assessee in the succeeding year relate to recording of income as well as expenses. The action of authorities below by taking only the income aspect in earlier year and not allowing corresponding expenses in the same year is not justified. The addition, if sustained, will result into double addition as the assessee himself during succeeding year has credited the same amount in the books of account and therefore, the action of authorities below in making and sustaining the addition in the year under consideration is not justified. - Decided in favour of assessee.
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2019 (1) TMI 745
Penalty u/s 271(1)(c) - exemption claimed u/s 11 has been denied - Held that:- In the present case, the simple fact is that the exemption claimed by the assessee u/s 11 has been denied, which denial has been confirmed by the CIT also. Now, denial of exemption claimed cannot, by any stretch of imagination, be said to amount to either concealment of particulars of income or furnishing of inaccurate particulars thereof. Department has not been able to refute this position. CIT(A) cannot be said to have erred in observing that denial of exemption cannot be considered within the purview of Section 271(1)(c). Accordingly, finding no error in this regard in the impugned order, the same is confirmed and the grievance sought to be raised by the Department is rejected as without merit. - Decided against revenue.
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2019 (1) TMI 744
Assessment u/s 153A - Unaccounted manufacturing of goods - unaccounted turnover between assessee and Balaji Marketing - purchases from open market - Held that:- Assessee was subjected to excise duty on the goods manufactured by it. CIT(A) has also held that excise duty was being imposed on the assessee on the basis of deemed production based upon number of machines installed and their capacity. The assessee being engaged in excisable goods was not found to have manufactured goods in excess of capacities of machines. No documentary evidence was available in the seized material which established any unaccounted turnover between assessee and Balaji Marketing.
Further during course of search, no document related to unaccounted manufacturing of goods was found. We find that proprietor of Balaji Marketing had accepted its unaccounted turnover and he had also stated that he had purchased the goods from open market to meet out the increased demand. In view of the above facts and circumstances, we do not find any infirmity in the order of learned CIT(A).
Admission of additional evidence - Held that:- We find that the so called additional evidence is a copy of letter exchanged by ACIT, Circle-1 to Jt. CIT, Central Circle, a copy of which is placed at pages 72 to 76 of the paper book and the contents of which have also been reproduced by learned CIT(A) in his order from para 4(10)(i) of his order. The assessee had filed this letter during appellate proceedings and the case of the Revenue is that this letter was not confronted to the Assessing Officer. CIT(A) has not allowed relief to the assessee on the basis of this letter only and in his earlier paragraphs he has already decided the issue in favour of the assessee. The said letter, being part of the official record of the Revenue, cannot be said to be a document to which the Assessing Officer had no access. In this letter, which is claimed by the Revenue to be additional evidence, the Assessing Officer has only expressed its opinion on the addition made by the Assessing Officer and has written to Jt.CIT that the additions were not sustainable. CIT(A) has not much relied on the letter and has in fact already decided the issue in favour of the assessee
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2019 (1) TMI 743
TDS u/s 195 - fees for technical services u/s 9 (1) (vii) and fees for included services under Article 12 of the DTAA between India and USA - non deduction of tds - proceedings barred by limitation - Held that:- Facts of the case in hand are in parity with the facts of Bharti Airtel [2016 (12) TMI 1601 - DELHI HIGH COURT], respectfully following the findings of the Hon’ble Jurisdictional High Court (supra) we hold that the order dated 28.03.2013 for A. Y. 2006-07, 2007-08 and 2008-09 are barred by limitation wherein held that the court was conscious of the absence of any limitation period in respect of payments to non-residents, for the purpose of Section 195 read with Section 201. Yet, it was held that proceedings could be initiated within reasonable time.
Payments made by the assessee to GX Technology of America - On perusal of the ‘Master Geophysical Data-Use License’ between M/s. GX Technology Corporation (Licensor) and the assessee (Licensee) show that GXT has agreed to grant to the assessee to use certain data from time to time. And data means geophysical and geological the information, derivatives. It is specifically mentioned that the ownership lies with a licensor. As can be seen from the mentioned clauses what is provided by the licensor is the data relating to the geophysical and geological information about the coast of India and is not responsible for the accuracy or usefulness of such data. Thus it is clear that licensor have only made available the data acquired by them and available with them but are not making available technology available for use of such data by the assessee.
It has to be understood that 3D seismic is an exploration technique use in the search for oil and gas underground structure. This technique is analogues to ultrasound technology used in the medical field. The maps / designs are nothing but a way to interpret the data and cannot be equated to development and transfer of technical maps and designs as contemplated by the Assessing Officer / CIT (A).
The revenue could not prove that there was transfer of Technology to the assessee nor it has been proved that the impugned transactions have made available technical expertise skill or knowledge by processing the data provided by the assessee. Nor it has been proved that the assessee can apply independently and without assistance and undertake such survey independently in future.
Assuming that Licensor, rendered services as defined u/s. 9(l)(vii) Explanation 2 of the Act, yet it does not satisfy tire requirement of technical services as contained in India-UK DTAA. We set aside the findings of the Id. CIT(A) and direct the A.O to delete the impugned addition - decided in favour of assessee
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2019 (1) TMI 742
Penalty proceedings u/s 271(1)(c) r.w.s. 274 - non specification of charge - Held that:- AO has initiated the penalty for concealment of particulars of income or furnishing of inaccurate particulars, which is contrary to the provisions of law. Also of the view that assessment order issued by the AO is bad in law as it does not specify under which limb of section 271(1)(c) the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars.
Therefore, the penalty in dispute is not sustainable in the eyes of law. See CIT & Anr. Vs. M/s SSA’s Emerald Meadows – [2015 (11) TMI 1620 – Karnataka High Court] - Decided in favour of assessee.
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2019 (1) TMI 741
Grant of deduction u/s 80P(2)(d) - assessee has not claimed any deduction in the computation of income - Held that:- The assessee has not placed on record copy of computation of income. Though, the assessee is possessing acknowledgement which was produced before us, but from this acknowledgement, complete details of the income computed by the assessee for the purpose of taxation are not discernible. Therefore, we deem it appropriate to set aside the issue to the file of the AO for verification.
AO shall examine computation of income and if it reveals that no deduction under section 80P(2)(d) qua this interest income is claimed by the assessee, then there could not be any disallowance because that will amount to double disallowance. Once the assessee has not claimed; twice the AO himself has carved out this amount and made addition. In case if such deduction is not claimed in computation of income, then no disallowance be made to the total income of the assessee. The AO shall decide the issue in accordance with law. - Appeal of the assessee is allowed for statistical purpose.
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2019 (1) TMI 740
Claim of deduction u/s 80P(2) - appellant is a Co-Operative Bank or not - interest income earned by the appellant out of the deposits kept in the in the Banks - all monies belong to the members of the appellant society - Karnataka State has notified Karnataka Co-operative Societies Act, 1959 as well as the Karnataka Souharda Sahakari Act, 1997 and even at present both the Acts are in force simultaneously - Held that:- As decided in assessee's own case [2018 (8) TMI 1063 - ITAT BANGALORE] assessment order was passed in the name of Udaya Souharda Credit Co-operative Society Ltd., whereas no certificate of registration was placed before us in the name of Udaya Souhardha Credit Co-operative Society ltd. Therefore, we are unable to understand how the assessee can claim it to be the co-operative society in the absence of proper registration under the Karnataka Co-operative Societies Act.
Creation of Co-operative Society under the co-operative societies Act is doubtful. Thus the claim of deduction under section 80P cannot be allowed.
Since all these new points have been raised during the course of hearing before us and according to us all these points goes to the root of the case, we are of the view that proper adjudication of the issues is required by the AO - Matter remanded back. - Decided in favour of assessee for statistical purposes.
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2019 (1) TMI 739
TPA - assessee a wholly owned subsidiary of Virtusa Inc. USA, and derives income from providing software development and maintenance services to its parent company - comparable functionally - Held that:- The assessee is having turnover of 90.24 crores and turnover of Infosys Technologies Ltd. was ₹ 6860 crores, which is 76 times of assessee’s turnover. The comparison has to be on level playing. The basics of comparison are that of apple to apple, not apple with watermelon. Further, it has brand value and has also engaged in development of various niche products. Therefore we uphold the order of CIT(A) in directing to exclude big companies like Infosys Technologies Ltd. as comparable to the assessee company and accordingly, dismiss the grounds raised by the revenue in this regard. Appeal of the revenue is dismissed.
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2019 (1) TMI 758
Condonation of delay - delay of 362 days - reasons for delay - Held that:- As per the High Court, the said delay is not satisfactorily explained. We have, however, gone through the application for condonation of delay which was submitted before the High Court. It appears that the main cause of delay was difference of opinion between the two Officers and ultimately legal opinion was taken and it was decided to file the appeal.
Having regard to the importance of the matter, we are of the opinion that the High Court should hear the appeal on merits. We, thus, set aside the impugned Order.
The respondent can be compensated by award of cost. We condone the delay in filing the appeal in the High Court, subject to payment of cost of Rupees one lakh, to be paid by the appellant to the respondent within a period of four weeks. The matter is remitted back to the High Court. The High Court shall decide the appeal on merits.
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2019 (1) TMI 757
Disallowance of interest being the interest referable to interest free loans and advances given to subsidiary companies - interest free fund available to the assessee is sufficient to meet its investment - Held that:- The issue raises a pure question of fact. The High Court has noted the finding of the Tribunal that the interest free funds available to the assessee were sufficient to meet its investment. Hence, it could be presumed that the investments were made from the interest free funds available with the assessee. The Tribunal has also followed its own order for Assessment Year 2002-03. In view of the above findings, we find no reason to interfere with the judgment of the High Court in regard to the first question. Accordingly, the appeals are dismissed in regard to the first question.
Claim of depreciation - optional and could not be thrust on the assessee, if it had not claimed it - Held that:- Isuue to be governed by the decision of this Court in Plastiblends India Limited Vs. Additional Commissioner of Income Tax, Mumbai and Another [2017 (10) TMI 423 - SUPREME COURT OF INDIA]
Pre-operative expenses incurred in connection with creation of plant & machinery in units which have not commenced production - allowable revenue expenditure - deduction under Section 80M - transfer pricing adjustment - Held that:- As High Court has failed to independently evaluate the merits of the departmental appeals. Hence, we consider it appropriate that the aforesaid questions are considered afresh by the High Court. In order to facilitate a fresh exercise being conducted in relation to the aforesaid four questions (Question Nos.2,3,4 and 5), we allow the appeals and set aside the impugned judgment of the High Court. The appeals stand restored to the file of the High Court for that purpose.
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2019 (1) TMI 756
Addition u/s 68 - AO issued notice u/s 142(1) - Held that:- The burden is on the assessee to prove that the credits availed by him from 87 persons are genuine. It may be true that mere production of the PAN details, confirmation letters from some of those creditors by itself will not tantamount to discharging the burden of proof. But nevertheless, when these details are furnished, that too, after the Assessing Officer issued notice u/s 142(1) verification is required to be done. It is a common knowledge that those persons who had given confirmation letters would not readily volunteer and appear before the AO to depose.
A departmental verification or atleast a sample verification should have been done to examine the genuinity of the stand taken by the assessee. In fact the Department themselves understood the matter in such a way that is why they had raised the ground before the Tribunal stating that the CIT-A atleast ought to have remanded the matter.
A verification can be done by the AO on the materials placed before him. The learned counsel for the assessee submits that tax has also been deducted at source and documents are available which will prove the genuinity of the transaction. It is well open to the assessee to place all material before the AO.
Appeal filed by the assessee is allowed, the impugned order is set aside and the matter is remanded to the Assessing Officer for fresh consideration. AO shall verify all the documents produced and the assessee shall also endeavour to produce atleast a few of the creditors before the Assessing Officer to show his bonafide and make out a case before the AO.
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2019 (1) TMI 755
Stay petition - CIT(A) rejected the appeal - Held that:- In this case, they have gone before the Principal Commissioner viz., the first respondent herein and sought for stay, who unfortunately rejected the petition by a single line order, without stating any reason or finding as to why the application is liable to be rejected. Therefore, find that the said order of the first respondent cannot be sustained. However, this Court is not inclined to remit the matter back to the first respondent for considering the petition once again, since the petitioner is entitled to file such stay petition before the Commissioner of Income Tax (Appeal) himself, where the appeal is admittedly pending.
Accordingly, this writ petition is allowed and the impugned order is set aside. Consequently, the petitioner is directed to file a stay petition before the Commissioner of Income Tax (Appeals) in the pending appeal within a period of two weeks from the date of receipt of a copy of this order. If any such application is filed, the CIT (A) shall take up the same and dispose at first instance on merits and in accordance with law within a period of four weeks thereafter. Till such decision is taken by the Appellate Authority, no coercive action shall be taken against the petitioner.
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2019 (1) TMI 754
Disallowance of interest on borrowed funds u/s 36(1)(iii) - proof of direct nexus between the borrowed funds and the investment in the sister concerns, which were made only out of share capital reserves and surpluses - commercial expediency - Held that:- AO while stating that the assessee has diverted part of the borrowed funds to the sister concern has not given any independent reasoning on what basis the Assessing Officer was of the view that part of the borrowed funds has been diverted to its sister concerns. In fact, the Tribunal has held that the assessee company has not derived any benefit out of such advances to the sister concern. If that is so, the exercise that is required to be done is to examine whether any part of the borrowed funds was diverted to its sisters concerns. This exercise appears to have not been done to the fullest extent.
Tribunal has not given cogent reasons as to why the decision in the case of S.A. Builders (2006 (12) TMI 82 - SUPREME COURT) cannot be applied to the facts of the present case as the test in such a case was whether this was done as a measure of commercial expediency.
Thus AO has to take a fresh look into the matter, as we are not satisfied on the basis on which the Assessing Officer had come to the conclusion that part of the borrowed funds have been diverted by the assessee to its sister concerns. Thus, we are inclined to remand the matter for fresh consideration. One more reason which convinced us that the Assessing Officer should take a fresh look is that the judgment in Abhishek Industries (2006 (8) TMI 123 - PUNJAB AND HARYANA HIGH COURT) has been held to be no longer good law in the light of the decision of the Hon'ble Supreme Court in Hero Cycles (2015 (11) TMI 1314 - SUPREME COURT OF INDIA). This aspect also has to be noted by the Assessing Officer while re-doing the assessment. - decided in favour of assessee for statistical purposes.
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2019 (1) TMI 753
Nature of expenditure - expenditure for re-place of flooring and purchase of air conditioner, dish washing machine, and audio/video equipments in the pub etc. - whether these expenditures should be treated as 'capital' or 'revenue'? - Held that:- We are guided by the decision of Commissioner of Income-tax vs. Dasaprakash, [1976 (7) TMI 3 - MADRAS HIGH COURT] held that expenditure like putting of decorated mirrors with pictures of religious personages or putting of plaster-moulded roof decoration in the dining-cum-lecture hall was incurred with a view to beautify the premises and this would have to be recorded as revenue expenditure having regard to the nature of business carried on by the assessee. Furthermore, it was pointed out that this fixtures and fittings cannot be removed and used again, and taking note of the nature of business carried on by the assessee and nature of expenditure, the Hon'ble Division Bench held that the Tribunal came to the correct conclusion in holding that those items as revenue expenditure allowable as deduction under Section 37 of the Act. - decided against the Revenue
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2019 (1) TMI 698
Assessment u/s 153A - addition u/s 68 bogus LTCG and alleged unaccounted commission expenses - addition based on the statement of Shri R.K. Kedia (alleged entry provider), Manish Arora (employee of Sri R.K. Kedia), alleged exit operators, directors of penny stock companies etc. recorded by various officers of the Department - Held that:- AO was having reasonable evidences but has unnecessarily took the burden on him of proving that long term capital gain earned by the assessee is bogus instead of first asking assessee to prove that the above income is exempt u/s. 10(38) of the Act. After granting full opportunity to the assessee to adduce as many evidence as assessee could have produce and then should have carried out vast powers bestowed upon him under the Income Tax Act, 1961 of examining the details furnished by the assessee. AO could have also asked the assessee to produce all the persons whose statement AO was relying upon.
AO has unnecessarily taken the onus of proving long-term capital gain as bogus instead of first asking assessee to prove that the long-term capital gain is genuine. AO should have first put the burden to put prima facie case in respect of cash credit on assessee as to how it was introduced in the books of the assessee. However, from the first paragraph of the assessment order itself the AO alleged that assessee has entered into a scam and they by walked into the trap of section 110 of the evidence act on him to prove that the long-term capital gain earned by the assessee is bogus. AO after that could not substantiate his allegations by granting cross-examination to the assessee of various persons. It is fatal to the case, as the assessment strategy adopted by the AO could not prove his allegation.
Therefore, in view of overwhelming decisions of the various high courts and coordinate benches produced before us and which came to our knowledge. Even on the merit, we hold that the long-term capital gain earned by the assessee cannot be charged to tax under section 68 of the act. Therefore, we reverse the finding of the lower authorities and direct the AO to grant the benefit of section 10 (38) of the act on the long-term capital gain earned by the assessee on sale of shares. Accordingly as a natural corollary, we also delete the addition of 6 % unaccounted commission expenditure also. Accordingly, ground of the assessee are allowed.
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2019 (1) TMI 762
Reopening of assessment - change of opinion - allegation that the assessee failed to fully and truly disclose all the details - Held that:- CIT(A) as well as the Tribunal rightly appreciated the factual position and noted that the scrutiny assessment was taken up since the survey under Section 133A was conducted and that during such scrutiny assessment, the statement recorded from the Managing Director of the assessee was not taken into consideration by the Assessing Officer. Therefore, there was no opinion formed by the Assessing Officer on the said issue under the head of income. Further, the assessee themselves accepted that the income was earned, but not disclosed in the returns. Accordingly, the reopening was confirmed.
With regard to the contention of the assessee that there was a full and true disclosure by the assessee, on facts, we find that in the instant case, the reopening has been done based on the statement given by the Managing Director of the assessee during the survey. It is not the record of the assessee that they disclosed it in the returns. Hence, on facts, the Assessing Officer, the CIT(A) and the Tribunal clearly held that the reopening was not a change of opinion, with which, we are in entire agreement - decided against the assessee.
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2019 (1) TMI 738
Bogus purchases - Revenue received information from Sales-tax Department, Government of Maharashtra, that certain dealers were only providing accommodation bills without actually supplying materials Held that:- Since the assessee has failed to reconcile the purchases with the sales, we are of the view that the profit element embedded in such purchases is justified. The learned AR submitted that the VAT applicable on the product is around 5%. In these kind of purchases, the assessee could have made savings on account of VAT and also would have got materials at discounted rate. Considering these position of the issue, we are of the view that the estimate of profit at 25% is on the higher side. Hence on the conspectus of the matter, we are of the view that this issue may be put to rest, if the addition is sustained to 12.50% of the value of bogus purchases.
Accordingly, we modify the order passed by the learned CIT(A) and direct the A.O. to sustain the addition to the extent of 12.50% of the value of bogus purchases. - Appeal filed by the assessee is partly allowed.
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2019 (1) TMI 737
Disallowance of payment of commission - Held that:- During the year under consideration, the Assessing Officer undertaken the exercise of enquiry and verification of the claim of the assessee. It is settled proposition of law that the onus is on the assessee to establish that the expenditure is incurred wholly and exclusive for the purpose of business. In order to establish the claim of expenditure wholly and exclusively lend out for the purpose of business, the assessee is required to produce supporting evidence to show that the expenditure was incurred against the services rendered by these persons. We find that, though the assessee has filed confirmation from the persons and the payment was made after deduction of TDS, however, when the AO has issued the summons to ten persons, none has appeared before the Assessing Officer and only three persons responded to the summons issued by the AO.
As far as enquiry conducted by the AO in respect of the persons who whom summons were issued it was brought on record that the assessee has claimed the expenditure without any agreement with any of the parties and further some of the parties as noted by the Assessing Officer has not filed return of income. The fact that the amount was transferred at the fag end of the financial year in the accounts of these parties and immediately thereafter was withdrawn again shifting the burden on the assessee to prove the claim of expenditure.
Therefore, to the extent of the expenditure on which the Assessing Officer has conducted enquiry, the assessee failed to disprove the enquiry conducted by the Assessing Officer. Since the Assessing Officer has not conducted any enquiry in respect of the remaining parties, therefore, we restrict the disallowance to the extent of the amount paid to the ten persons in respect to whom the Assessing Officer has conducted the enquiry. Accordingly the disallowance made by the Assessing Officer is restricted only to the ten persons and the remaining disallowances made by the Assessing Officer without conducting a proper enquiry is deleted.
As clarified that once the assessee has filed the relevant documents in support of the claim and the Assessing Officer has conducted enquiry in respect of the part of the claim to disprove the documents filed by the assessee then so far as the claim which has been supported by the documentary evidence and has not been disproved by the Assessing Officer through a proper enquiry, the same cannot be disallowed. - Appeal of the assessee is partly allowed.
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Customs
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2019 (1) TMI 730
Maintainability of Refund claim - assessment order not challenged - case of appellant is that the duty was paid under mistake of law - Section 27 of the Customs Act, 1962 - Held that:- The refund claim is not maintainable till the order of assessment is modified in view of the decision of the Apex Court in case of Priya Blue [2004 (9) TMI 105 - SUPREME COURT OF INDIA]. However exercising the extraordinary jurisdiction under Article 226 of Constitution of India, High Court has directed for amendment of the assessment order. Tribunal being the creation of statue do not have such extraordinary jurisdiction as can be exercised by the High Court. In fact the decision goes against the Appellant’s as the ratio decidendi of the same is that refund claim is not maintainable without modification of the assessment order.
Thus the clear position which emerges from all the decisions of Hon’ble Supreme Court and High Courts is that the refund claim under section 27 is not maintainable unless the order of assessment is modified in the appellate proceedings.
Appeal dismissed - decided against appellant.
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2019 (1) TMI 736
Principles of natural justice - suspension of CHA License - invocation of Regulation 11(2) of HCCAR, 2009 - whether an immediate action is necessary to suspend the license, pending enquiry? - Held that:- Perusal of the Regulation 11(2) of HCCAR, 2009, would show that the Commissioner of Customs is empowered to suspend the approval granted to Customs Cargo Services Provider in appropriate cases where immediate action is necessary, pending enquiry or where the enquiry is contemplated - it is evident that action under Regulation 11(2) can be taken only when the Commissioner of Customs is of the view that immediate action is necessary for suspending the license. Needless to say that such consideration must explicitly available in the order of suspension.
It is relevant to note that Regulation 11(1) empowers the very same Commissioner to suspend or revoke the license and the procedure to be followed for suspension or revocation of the license is contemplated under Regulation 12. Perusal of the Regulation 12 would show that before doing so, the licensee should be put on notice and he must be heard. However, Regulation 11(2) can be invoked for suspending the license only when the Commissioner of Customs feels and comes to a conclusion that immediate action is necessary to suspend the license.
Perusal of the impugned order in this writ petition would show that no such consideration was made by the Commissioner of Customs except extracting Regulation 11(2) and stating that an enquiry is contemplated in this case and that allowing the petitioner to continue for work will seriously jeopardize the Customs duties and security of Cargo. The respondent has not stated any other reason anywhere as to why an immediate action is required in this case - This Court has considered the similar provision made under Regulation 21(2) of the Customs House Agent License Regulation in 1994 (11) TMI 244 - MADRAS HIGH COURT [1994 (11) TMI 244 - MADRAS HIGH COURT], where it was held that In the absence of any indication that there was application of mind by the Collector on the aspect as to whether immediate action was necessary, in my opinion, the impugned order cannot be sustained.
Thus, the present impugned order passed under Regulation 11(2) without there being any finding as to why immediate action is necessary to suspend the license, cannot be sustained even though the respondent is entitled to proceed against the petitioner under 11(1) after issuing notice to them - petition allowed - decided in favor of petitioner.
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2019 (1) TMI 735
Jurisdiction - power to issue SCN - the order is questioned in this writ petition on the ground that the show cause notices preceding the impugned order were issued by an authority who was not competent to issue the same - Held that:- It is true that when the show cause notices were issued by the Additional Director General, DRI, Mumbai, he did not have the authority or jurisdiction to issue the same. But then, Section 28(11) of the Customs Act, 1962 was inserted, where it was held that all persons appointed as officers of Customs under sub-section (1) of section 4 before the 6th day of July, 2011 shall be deemed to have and always had the power of assessment under Section 17 and shall be deemed to have been and always had been the proper officers for the purposes of this section - So long as Section 28(11) of the Customs Act, 1962 is holding the field, I am bound to give effect to the same.
The writ petition filed by the petitioner questioning the impugned order cannot be allowed - petition dismissed.
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2019 (1) TMI 734
Release of goods - undervaluation - second respondent has disowned the entire transaction - Held that:- Indeed, there is more than what meets the eye in this transaction. It reflects how a statutory scheme is exploited or abused. The second respondent holds the I-E code, but admittedly its Proprietor knows nothing about either import or export. He seems to be a name lender. And that name lending is with his actual knowledge, at that. He admits that earlier too there had been transactions - The Ext.P3 show cause notice records that the Proprietor of the second respondent has agreed that the goods were sent in his name with his consent and they are meant for the third respondent. Nevertheless, faced with the detention and the allegation of undervaluation, only before this Court has he disowned the transaction. Indeed, it is a matter the Department must probe into.
Pending adjudication of the proceedings under the Ext.P3, the second respondent will get the goods released, without any liability attached to it, and hand them over to the third respondent.
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2019 (1) TMI 729
Rectification of mistake - Tribunal has repeated the same facts which were available in the earlier order of the Tribunal vide which the matters were remanded - Held that:- Admittedly, the facts in the earlier remanded matter and the facts in the present order of the Tribunal would remain the same inasmuch as the same were the continuation of the earlier proceedings. The objection of the learned Commissioner, Customs, Noida that the same facts stand repeated in the present order, by no stretch of imagination can be said to be a mistake.
The present applications not only refer to any mistake in the order but are frivolous applications, showing non application of mind - ROM application dismissed.
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2019 (1) TMI 733
Power of the Central Government to regulate marine trade, especially Foreign Trade Policy - export of shark finning - Constitutional validity and legality of Notification S.O. 197(E), dated 6-12-2001 - vires of Ext. P3 Notification, vires the Foreign Trade (Development and Regulation) Act, 1992 - Challenge to subordinate legislation - principles of natural justice - Held that:- The impugned Ext. P3 notification is a piece of subordinate legislation - It is a precedentially settled proposition that a piece subordinate legislation does not carry the same immunity as enjoyed by a statute passed by a competent Legislature - An enquiry into the vires of delegated legislation must be confined to the ground on which the plenary legislation may be questioned. Yet subordinate legislation cannot be questioned on the ground of violation of the principle of natural justice on which administrative action may be questioned.
Public interest - burden of proof - Has the Government discharged its burden in establishing that there involved public interest, and that it applied its mind to it? - Held that:- If a statute confers a benefit of exemption on a person, the Government may, in public interest, curtail or abridge the extent of exemption - But Government, when questioned, must establish the grounds of public interest. We reckon the Government did discharge its burden here.
Policy preferences - Judicial interference - Held that:- The Court should constantly remind itself that “the problems of Government are practical ones and may justify, if they do not require, rough accommodations, illogical it may be, and unscientific. But even such criticism should not be hastily expressed. What is the best is not always discernible, the wisdom of any choice may be disputed or condemned. Mere errors of Government are not subject to our judicial review.
Discrimination - Marine Fins consistently contends that Ext. P3 smacks of arbitrariness. According to it, the ban does not apply to domestic consumption - Held that:- In Parisons Agrotech (P) Ltd. v. Union of India [2015 (8) TMI 997 - SUPREME COURT], the Supreme Court has held that once the court finds that there is sufficient material for the Government to take a particular policy decision; even by bringing Article 14 of the Constitution into play, courts cannot judicially review and determine the correctness of the policy decision. Backed by cogent material, if the authorities demonstrate that the decision is not arbitrary or irrational, but is taken in public interest, the Court must respect the Executive’s decision.
A question of fact - Judicial approach - Held that:- The Writ Court has to be very careful in accepting what evidence should be received and relied upon if there is a bona fide dispute between the parties about its correctness.
Is the Government insensitive to the issue? - Held that:- True that the notification does not prohibit hunting of shark for domestic consumption, though it bans export of shark fins. Shark meat, we must acknowledge, is no staple food for Indians. Even among the fish consumers, those that prefer shark meat are minuscule. So, to cater to the needs of such negligible consumers, there cannot be the wholesale killing of sharks. The culprit is finning, and the result is the species thinning, to the extent of disappearing - almost.
There is no legal infirmity in the impugned judgment - appeal dismissed.
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2019 (1) TMI 732
Adjournment of the matter - Court refused to extend its beneficial jurisdiction to the appellants on the ground of the conduct of the appellants, particularly, the delay in approaching the Court - Held that:- It is evident that the order dated July 14, 1987 was not directly challenged by way of the writ proceedings. Indeed, it was the Appellate Tribunal’s order that was challenged and, by a side-wind, the original order of July 14, 1987 was sought to be questioned. Since the order dated July 14, 1987 was amenable to an appeal and the outcome in the appeal was amenable to a challenge before the Appellate Tribunal and the appellants herein exhausted their remedies in such regard, the original order could no longer be challenged in any manner or form without the intermediate orders (meaning, the order of the Commissioner (Appeals) and the order of the Appellate Tribunal) being found to be erroneous - In any event, the Single Bench also disbelieved the appellants’ contention that they had merely sought an adjournment on July 13, 1987 and had chosen to make no enquiries as to the fate of their matter thereafter.
The order impugned does not call for any interference - application dismissed.
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2019 (1) TMI 731
Absence of SCN - the fourth respondent has not issued any demand for payment of differential duty along with interest - Held that:- It is seen that the matter is now pending investigation and that the petitioner is co-operating with the investigation, more so in the light of the stand taken in the letter dated 14-3-2018. Even assuming that the fourth respondent comes to the conclusion that they have certain other evidence for not adopting the classification as 9022 30 90, a demand cannot be issued by the fourth respondent to the petitioner and at best, a show cause notice could have been issued - However, no such show cause notice has been issued to the petitioner.
In any event, the third respondent cannot insist for a no objection certificate from the fourth respondent. The third respondent, who functions under a different Statute governed by separate set of circulars and instructions issued by the Central Board of Excise and Customs, has to independently consider the request made by the petitioner vide their letter dated 17-3-2018 - the writ petition is disposed of by directing the third respondent to take an independent decision on the petitioner’s letter dated 17-3-2018 without insisting upon a no objection certificate from the fourth respondent
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Insolvency & Bankruptcy
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2019 (1) TMI 728
Initiation of Corporate Insolvency Resolution Process - default committed by the Corporate Debtor - Held that:- The proceedings under the Code are not in the nature of recovery. In the present application the Financial Creditors are seeking initiation of Corporate Insolvency Resolution Process by making prayer that all the Financial Creditors, Operational Creditors and others may raise their claims and if Corporate Financial Restructuring is possible then within the stipulated period it may be explored failing which the due process of law is to take its course. By initiation of Corporate Insolvency Resolution Process the Financial Creditors are only highlighting the default committed by the Corporate Debtor with respect to its inability to pay. The same is required to be remedied. Therefore, it cannot be concluded that the filing of the present petition would amount to recovery of the debts by the Financial Creditor.
On 23.10.2018, we have granted time to the Corporate Debtor to come forward and prevail upon the Financial Creditors to accept its offer and fixed the date for hearing on 05.12.2018. However, on 05.12.2018 there was no whisper of settlement. We further granted time to the Corporate Debtor to do so and fixed the date for hearing on 02.01.2019. However, again on 02.01.2019 there was no whisper of settlement. Corporate Debtor did not appear to argue the matter.
We heard the arguments and reserved the order. During the previous interregnum period between 23.10.2018 to 02.01.2019 and again after lapse of four days no meaningful results have followed. The object of the 'Code' is to resolve the insolvency issue which cannot be achieved unless the petition is admitted. The resolution as against liquidation would only be possible if the Corporate Insolvency Resolution Process is triggered and efforts in that direction are made. The admission of the petition cannot be successfully resisted on such a flimsy ground. Therefore, we have no hesitation to reject the defence raised on behalf of the Corporate Debtor.
Discussion and the material placed on record it is confirmed that applicants-financial creditors had disbursed the money to the respondent corporate debtor as consideration for purchase of a residential flat. Though a considerable long period has lapsed even the principal amount disbursed has not been repaid by the respondent corporate debtor as per the provision of clause II of the Flat Buyer's Agreement. It is accordingly held that respondent corporate debtor has committed default in repayment of the outstanding financial debt which exceeds the statutory limit of rupees one Lakh. Thus, the application warrant admission as it is complete in all respects.
Accordingly, in terms of Section 7 (5) (a) of the Code, the present application is admitted.
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2019 (1) TMI 727
Initiate insolvency resolution process in respect of a ‘default’ under the provisions of the ‘I&B Code’ - Held that:- On bare perusal of the 13th June, 2017 and the 12th February, 2018 Circulars, it is clear that they are not applicable in the present case. The 13th June, 2017 Circular only provides directions for initiating ‘Corporate Insolvency Resolution Process’ under the ‘I&B Code’ for certain ‘identified accounts’. The 12th February, 2018 Circular has come into effect after the filing of the application under Section 7 by the State Bank of India. Therefore, the said Circular is not applicable in the present case.
The directions of the Reserve Bank of India also suggest that the Reserve Bank of India never intended to interfere with the statutory remedy of resolution process under the ‘I&B Code’. Those Circulars also cannot override the provisions of the ‘I&B Code’.
The right of the Creditors under the ‘I&B Code’ for initiation of ‘Corporate Insolvency Resolution Process’ is a statutory right. The ‘I&B Code’ is a special enactment passed by the legislature and is a complete Code in itself. The Adjudicating Authority needs only to be satisfied of the existence of a debt and default if any. Once the Adjudicating Authority is satisfied, and the application is complete, then the application is required to be admitted.
In the present case, as we find that there is no dispute about debt or default and the same has not been denied by the ‘Corporate Debtor’, the present appeal being devoid any merit is dismissed.
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Service Tax
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2019 (1) TMI 724
CENVAT Credit - input services used in taxable as well as exempt services - Interest charged on account of late payment of brokerage and fee towards depository services - services in the nature of “banking and financial service” which is exempted from service tax also provided - Rule 6(3) of CCR - Held that:- The activity of a banking and financial service concern has been well defined under the RBI Act, Banking Regulation Act and section 65 (12) of the Finance Act, 1994. It is an undisputed fact that the Appellant is not doing any banking or financing or leasing activity. The interest earned has to be from deposit, loans or advances when the activity is of “Banking & Other Financial Service”. The interest on delayed payment of consideration in the present case i.e. delay in payment of brokerage and fee etc would not ipso facto lead to conclusion that the Appellant is rendering any banking or financial activity.
The contention of the revenue that since the Appellant is also registered under the category of “Banking and Other Financial service” under Service tax and hence interest income is falling under that heading is wrong preposition.
The interest arising due to late payment of dues by the clients to the Appellant would not fall under the category of Banking & other Financial service - the activity of the Appellant are not covered under the category of Banking & Financial services. In such case the demand under Rule 6 (3B) towards reversal of 50% of Cenvat Credit on input and input services is also not sustainable - Also as the cenvat credit has been correctly utilized for payment of service tax, hence the demand of service tax is not sustainable.
Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 723
Demand of Service Tax - Banking and Financial services - business auxiliary services - interest income from hire purchase/activities - commission received from Insurance Company for canvassing their policies - commission which they received from various vendors of the consumer durables, etc. - time limitation - penalty.
Banking and Financial services - interest income from hire purchase/activities - Held that:- In this case as it is evident from the arrangement with the government employees and their offices, the ownership of the goods lies with the appellants and gets transferred to the employee only after he pays all the hire charges and thereafter pays a transfer fee of rupee one. Therefore, the activity undertaken by the appellant is clearly hire purchase and not hire purchase finance and is exigible to service tax during the relevant period - however, the service tax can be levied only on the hire purchase charges excluding the interest element for the period post 10.09.2004. For the period prior to 10.09.2004, the service tax is payable including the interest element.
Banking and Financial services - commission received from Insurance Company for canvassing their policies - Held that:- The appellant received commission from the insurance companies for promoting their products and thus acted as their agent. Therefore this falls under the category of ‘insurance auxiliary service’ which was chargeable under reverse charge mechanism during the relevant period and the service tax has to be collected on it from the insurance company and not from the agent. Therefore, the demands on this count need to be dropped - demand set aside.
Business auxiliary services - commission which they received from various vendors of the consumer durables, etc. - Held that:- Such commissions were exempted vide Notification No. 13/2003-ST until 09.07.2004 and service tax is chargeable thereafter along with interest.
Time Limitation - Held that:- The appellants have not declared the value of the services to the department in their returns. Therefore they suppressed the value of taxable services from the department - the extended period of limitation can be invoked in this case.
Penalties - Held that:- Cnsidering that the appellant is public sector undertaking, it is found that they may not have had a malafide intention of evade service tax. Hence invoking Section 80, the penalties imposed on the appellant is set aside.
Appeal disposed off.
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2019 (1) TMI 722
CENVAT Credit - trading activities undertaken by the corporate office - consultancy charges and insurance charges exclusively used for trading activities - input services - Held that:- There is nothing in the allegations that show that the appellant (Ericsson India Pvt Ltd, Secunderabad) registered as service tax payer in their Secunderabad office had taken any credit wrongly. They have not rendered any exempted services and were therefore, not required to reverse any CENVAT credit. There is also nothing on record to show that they have availed CENVAT credit in excess of 20% of the service tax paid by them in their office.
The allegation in the show cause notice is that the corporate office, which is a separate registrant and also as an ISD (although part of the same corporation) which is registered in Gurgaon (Haryana) had wrongly taken CENVAT credit and distributed it to their branch office in Secunderabad. Therefore, if these allegations are true, the demand, if any, and penalties, if any, is imposable on the corporate office.
Demand set aside - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 721
Refund of service tax - service provided by the club to its members - principles of mutuality - time limit prescribed under Section 11B of the Central Excise Act, 1944 - Held that:- It is an admitted fact on record that the refund application was filed by the appellant beyond the statutory time limitation prescribed under the statute. Therefore, the refund sanctioning authority adjudicating the refund issue under the statute has no option or scope to take a contrary view, than the position prescribed in the statute, to decide the issue differently. In other words, when the wordings of Section 11B are clear and unambiguous, different interpretations cannot be placed by the authorities functioning under the statute and they are bound to obey the dictates/provisions contained therein.
In view of the above settled principles of law and in view of the fact that the refund applications were filed and decided under Section 11B ibid, the time limit prescribed there-under was strictly applicable for deciding such issue. Since, the authorities below have rejected the refund applications on the ground of limitation, there is no infirmity in such orders, as the same are in conformity with the statutory provisions.
Appeal dismissed - decided against appellant.
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2019 (1) TMI 720
Refund claim - export of service - intermediary - place of provision of service - Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No.27/2012-C.E. (N.T.), dated 18.6.2012 - denial on the ground that the services provided by the appellant are not to be considered as export of service inasmuch as the services were executed in India and since, the appellant was the intermediary, the place of provision of service should be considered as provided in India - Held that:- It is an admitted fact on record that the consideration received by the appellant for providing the services was based upon cost plus markup and is nowhere connected with the main supply of goods. In other words, the main supply may or may not happen and thus, cannot be directly correlated with the service provided by the appellant. Thus, the appellant is not acting as a bridge between the overseas group entities and supplies made to their customers in India and accordingly, it cannot be said that the appellant has provided intermediary service and should be governed under the provisions of Rule 9 of the rules.
The services were in fact used for business purpose and not for the personal use or for providing welfare measures to the employees. Thus, there is nexus between the input services and the output service provided by the appellant. Since the appellant was not in a position to utilize the accumulated cenvat credit, it should be entitled for refund of service tax under Rule 5 of the Cenvat Credit Rules.
Input tax credit - unregistered premises - Rule 3 of the Cenvat Credit Rules - Held that:- Rule 3 provides that service tax paid on input service by the service provider of output service should be allowed for cenvat benefit. The said rule nowhere specifies that credit should only be available for the services used/utilized in the registered premises alone. Since registration of premises is not a pre-requisite condition for claiming input tax credit, denial of the refund benefit on such ground is not legally sustainable.
Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 719
Refund claim - excess service tax paid which was not payable as per the statutory provisions - time limitation - Section 11B of the Central Excise Act, 1944 - Held that:- Section 11B ibid deals with the situation of claim of refund of duty (service tax). Clause (f) in explanation (B), appended to Section 11B ibid provides the relevant date for the purpose of computation of the limitation period for filing of the refund application. In the case of the present appellant, the relevant date should be considered as the date of payment of service tax. Section 11B ibid mandates that the refund application has to be filed before expiry of one year from the relevant date.
In this case, it is an admitted fact on record that the refund application was filed by the appellant beyond the statutory time limitation prescribed under the statute. Therefore, the refund sanctioning authority adjudicating the refund issue under the statute has no option or scope to take a contrary view, than the limitation period prescribed in the statute, to decide the issue differently. In other words, when the wordings of Section 11B are clear and unambiguous, different interpretations cannot be placed by the authorities functioning under the statute and they are bound to obey the dictates/provisions contained therein.
The refund application was filed and decided under Section 11B ibid, the time limit prescribed there-under was strictly applicable for deciding such issue - appeal dismissed - decided against appellant.
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2019 (1) TMI 718
Refund claim - export of the output service - time limitation - Section 11B of the Central Excise Act, 1944 - Held that:- Filing of refund application is governed under the provisions of Section 11B of the Central Excise Act, 1944, as made applicable to the service tax matters under Section 83 of the Finance Act, 1994. The statute provides that the refund application should be filed with the competent authority before the expiry of one year from the relevant date - The appellant has not furnished any information with regard to non-filing of the claim application on 18.04.2016 and on 20.04.2016, which were not declared as public holidays and the Service Tax Department was functional during those days. It is evident that the refund application was filed beyond the stipulated time frame prescribed under Section 11B of the Act.
In this case, since the appeal of Revenue was allowed by the Learned Commissioner (Appeals) on the ground of limitation, holding that the claim application was lodged after the prescribed time limit, there is no infirmity therein - appeal dismissed - decided against appellant.
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2019 (1) TMI 717
Rectification of mistake - contention of Revenue through the ROM application is that M/s PCTL has informed that they did not paid any tax on behalf of the appellant - Held that:- It is very clear that M/s PCTL has paid service tax on the entire contract and therefore the conclusion drawn by Revenue that the part of the contract which was executed by appellant did not suffer service tax is not established - ROM application dismissed.
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2019 (1) TMI 716
Business Auxiliary services - Sales Incentives received by the appellant from M/s Tata Motors Ltd. - demand of service tax - Held that:- In the case of Sai Service Station Ltd. [2013 (10) TMI 1155 - CESTAT MUMBAI], this Tribunal had held that demand raised on sale target incentives cannot be considered as Business Auxiliary Service - demand do not sustain.
Business Auxiliary services - short payment of service tax - case of Revenue is that if the appellant is having documents and records for verification then the matter can go back to the Original Authority for re-verification - Held that:- In respect of the confirmation of demand of ₹ 24,93,761/-, matter remanded to the Original Authority with direction re-examined the whole issue taking into consideration the documents that are available on record with a freedom to appellant to submit any such documents which they want to rely - matter remanded.
Renting of Immovable Property - demand of service tax - extended period of limitation - Held that:- Since the matter was under litigation in respect of renting of immovable property, this matter is remanded to the Original Authority with direction to examine the issue after given an opportunity to the appellant to present their case.
Appeal allowed in part - part matter on remand.
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2019 (1) TMI 715
Valuation - Liability of service tax - reimbursement received from the customers on account of E.S.I./P.F./W.C.P - Manpower Recruitment and Supply Agency Service - Held that:- Hon’ble Delhi High Court in the case of M/s Intercontinental Consultants & Technocrats Pvt. Ltd. [2012 (12) TMI 150 - DELHI HIGH COURT] has held Rule 5 (1) of the Rules as running counter and repugnant to Section 66 & 67 of the Act and to that extent the same has been held as ultra-vires. The Hon’ble High Court observed that it purports to tax not what is due from the service provider under the charging Section, but seeks to extract something more from him by including in the valuation of the taxable service the other expenditure and costs which are incurred by the service provider.
Inasmuch as the issue stands settled that reimbursable expenses cannot form part of the gross value of the services being provided by the service provider, we find no reasons to include the E.S.I./P.F./W.C.P. amount in the assessable value of the services, inasmuch as the same are admittedly reimbursable to the persons concerned.
Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 714
Business Auxiliary Services - benefit of N/N. 214/86-CE - demand on the ground that by melting of scrap/pig iron by electric furnace, no new product emerges and the same has to be considered as business auxiliary services provided by the appellant - Held that:- The finding of the Commissioner (Appeals) that melting of scrap by electric furnace does not amount to manufacture, does not appeal to us. The same has resulted in emergence of some product, to which the Commissioner (Appeals) has not referred to at all. On the other hand, the facts indicate and establish that the M.S. Castings were emerging in the appellant’s factory. It is also on record that Notification No.214/86-CE challans were being issued by the manufacturer and the goods were being returned by the appellant under the cover of same challans - Demand set aside.
Commission earned on trading of commodities etc - service tax paid on being pointed out - penalty - Held that:- The law during the relevant period was not clear and there could be a bona-fide belief on the part of the assessee that the said transaction are not taxable - penalty set aside.
Appeal allowed in part.
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2019 (1) TMI 713
CENVAT Credit - input services - Repair and Maintenance of Automatic Dispensing Machines installed at the dealer’s premises - place of removal - Held that:- It is an admittedly position that until the activity undertaken by Automatic Dispensing Machines to desired mix colour, the goods are manufactured by the appellant are not marketable. Unless until the goods are not marketable, they are not excisable. Therefore, any activity/services availed by the assessee till the product become excisable is entitled for input services credit in terms of Rule 2 (l) of Cenvat Credit Rules, 2004.
The service availed by the appellant before the stage the paint becomes marketable, the appellant is entitled to avail cenvat credit on Repair & Maintenance Service of Automatic Dispensing Machines which enables their product marketable consequently excisable - appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (1) TMI 705
Classification of goods - Manufacture of power bank/ portable mobile charger out of imported components - concessional rate of duty under the Notification No. 12/2012/ Customs dated 13/03/2012, as amended - Held that:- From the perusal of the Bill of Entry, it is found that the Customs has classified the ‘power bank’ under Heading No 8504 40 30. This Customs classification for the product is also based on the HSN commodity description as in the case of Central Excise Tariff. We, therefore, find that the uniformity in the classification has to be maintained by the Revenue appellant. It cannot be a case of Revenue that for the Customs classification under the Customs Tariff Act, 1975, and Central Excise Tariff, 1986, there can be two classifications for the same product on the ground that both the Customs and Excise Tariff are aligned to the HSN Classification of the goods.
In this case although the Ministry has issued the clarification to the Respondent regarding the classification of ‘power bank’ as the ‘accumulator’ but the same cannot be treated as a circular issued by the Board was as to make it mandatory on the part of the Adjudicating Authority to follow the same.
Once it is held that power bank is also a kind of mobile charger, automatically the benefit of the Notification is above will be available to the respondent. It is on record that in this case the goods imported are part and input of power bank (portable mobile battery charger and is entailed for the purpose of use in same, the benefit cannot be denied).
The respondent is entitled for the benefit of Notification mentioned as above and has held by the Commissioner (Appeal) in this case - appeal dismissed - decided against Revenue.
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2019 (1) TMI 704
Clandestine removal - Duplex Paper - evidence in the form of Dispatch register, various statement and admission of the respondent director - Held that:- Though on the investigation which detailed in the SCN show a picture of clandestine removal of duplex paper by the respondent. However, subsequently statements were retracted by the director and employees of the respondent company, not only that all the buyers of alleged clandestine removed goods and alleged supply of raw-material retracted there statements before the adjudicating authority. In the proceeding of cross-examination it was established on the basis of their procurement of inputs, manufacture and clearance of goods i.e. input output ratio that neither any raw-material in excess was procured nor any finished goods was manufactured in excess too.
The only evidence left with the department is dispatch register which was properly explained by the respondent that said register is not for clearance but for the dispatch planning wherein all the entries are not related to clearance. In this position, the serious charge of clandestinely removal is not established against the respondent - also, Ld. Commissioner (Appeals) after considering the cross-examination and other facts came to conclusion that the clandestine removal of goods is not established.
Appeal dismissed - decided against Revenue.
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2019 (1) TMI 703
Condonation of delay of 38 days in filing appeal - there was strike and unrest in the factory and jurisdiction police station namely Dahanu and Dy. Commissioner of Labour, Boisar were intimated by the appellant regarding such unrest - Held that:- Section 35C empowers this Tribunal to confirm, modify or annul the decision of the order appeal against, which indicates that the merit of the decision is to be assessed by the Appellate Tribunal - In the instant case, as found from the order of the Commissioner (Appeals), no merit concerning tax liability of the appellant has been discussed and the appeal filed by him was rejected as not maintainable as hit by the period of limitation.
Section 35B (b) empowers the Appellate Tribunal to entertain appeal against an order passed by the Commissioner (Appeals) under Section 35A and in view of Sub-Section 4 to Section 35A, such order of the Commissioner (Appeals), at the time of disposal of appeal before him, shall state the points for determination, the decision thereon and the reasons for such decisions.
Admittedly, there was delay in filing appeal by the appellant at the Commissioner (Appeals) end and the delay being 60 days he is not empowered by the statute to condone the delay. In view of the decision of this Tribunal in Yapp India Automotive decision dated 21.06.2018/10.07.2018, delay of 60 days in filing appeal before the Commissioner (Appeals) is also condoned at this end - the matter is remanded back for readjudication by the Commissioner (Appeals).
Appeal allowed by way of remand.
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2019 (1) TMI 710
Demand and levy of Interest - short payment of duty - In the absence of levy of interest in the substantive provision of Section 3A of the Central Excise Act, 1944, whether interest can be levied under Rule 96 ZO which has been framed in exercise of power conferred under the aforesaid Section 3A? - Held that:- Rule 96-ZP of the Central Excise Rules stipulates the method of payment and Rule 96-ZP contains detailed provision regarding time and manner of payment and it also contains provisions relating to payment of interest and penalty in the event of delay in payment or non-payment of dues. Thus, this is a comprehensive scheme in itself and general provisions in the Act and the Rules are excluded - the Commissioner of Central Excise was obviously not right in demanding the interest from the Assessee and that the CESTAT was also not right in confirming the demand for interest.
Whether confirmation of demand by the Tribunal based on annual production capacity determined by Commissioner of Customs and Central Excise without taking into account factor of electricity is utterly perverse? - Held that:- There is really no reason to hold that the Assessee had indeed challenged the determination of the annual production capacity on account of power cuts/power outages and this consideration was not taken into account by the Commissioner or the CESTAT. The Memo of Appeal before the CESTAT has not been produced for our perusal. Even assuming that there was any ground in the Memo of Appeal, it does not appear that such a ground was pressed before the CESTAT - The Memo of Appeal before the CESTAT has not been produced for our perusal. Even assuming that there was any ground in the Memo of Appeal, it does not appear that such a ground was pressed before the CESTAT.
When documentary evidence clearly shows of restricted supply to the Appellant/manufacturer unit during the disputed period for a continuous period of more than seven days, whether abatement as provided in sub clause (3) of Section 3A deniable ? Whether finding of the Tribunal in this regards is perverse? - Held that:- Rule 96ZO(2) provides that where a manufacturer does not produce the ingots and billets of non-alloy steel during any continuous period of not less than seven days and wishes to claim abatement under sub-section (3) of Section 3A of the said Act, the abatement will be allowed by an order passed by the Commissioner of Central Excise of such amount as may be specified in such order, subject to fulfillment of certain conditions - Admittedly, in the present case, there is no material on record to establish that the Assessee had indeed fulfilled the aforesaid conditions prescribed in Rule 96ZO(2) of the said Rules. In fact, there is nothing on record to indicate that such abatement was claimed by the Assessee by following the procedure prescribed under Rule 96ZO(2) of the said Rules. In such circumstances, even the third substantial question of law will have to be answered against the Assessee.
Appeal allowed in part.
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2019 (1) TMI 709
Demand of Central Excise duty short paid - section 11A of the Central Excise Act 1944 read with Rule 96 ZO(3) of the Central Excise Rules 1944 - hether the omission of Section 3A of the Central Excise Act, 1944 by Section 121 of the Finance Act, 2001 without any savings clause would affect proceedings in respect of which action had already been initiated?
Held that:- The issue is no longer res integra. The Hon'ble Apex Court in the case of M/s Shree Bhagwati Steel Rolling Mill ruling mainly [2015 (11) TMI 1172 - SUPREME COURT] by relying upon its earlier judgment in the case of M/s Fibre Boards(P) Ltd., Bangalore Vs. Commissioner of Income Tax, Bangalore,[2015 (8) TMI 482 - SUPREME COURT] has held that omission of Section 3A of the said Act by Section 131 of the Finance Act, 2001, without any saving clause would not affect the proceedings in respect of which action has already been initiated - Hon'ble Apex court held that “omission” would amount to a “repeal” for the purpose of General Clauses Act, 1897 and, therefore, even after omission Section 3A of the said Act w.e.f. 11.5.2001, pending proceedings would remain unaffected.
In terms of the ruling of the Hon'ble Apex Court in M/s Shree Bhagwati Steel Rolling Mill demand or levy in excess of ₹ 5000/- (Rupees five thousand only) would amount to demand or levy, otherwise than under the authority of law. Therefore, there would be no point in allowing Excise Appeal - appeals disposed off.
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2019 (1) TMI 708
Recovery of Central Excise Duty short paid - imposition of penalty - allegations against the company in the complaint was that it had contravened the provisions of Rules 9(1), 52, 52A of the Central Excise Rules, 1944, inasmuch as, the company had falsely and fraudulently declared to the proper officer and on the cigarette packets, lower sale price with clear intent to evade payment of appropriate excise duty and availed exempted rates as applicable to cigarettes with lower sale price by concealment of correct price - Held that:- The criminal complaint dated 31.8.1998 is based on the findings of the Commissioner of Central Excise, Delhi about the liability of the company to pay the excise duty which it had allegedly evaded. The basis of the said complaint itself goes with the judgment and order dated 10th September, 2004 passed by the Apex Court and, therefore, this Court is of the considered view that the proceedings of Criminal Case No. 875 of 1998 (Shailendra Sharma vs. ITC and others) cannot continue to prosecute the company and its directors.
The proceedings of the Criminal Case No. 875 of 1998 (Shailendra Sharma vs. ITC and others) pending before the Court of Special Chief Judicial Magistrate, Meerut are hereby quashed.
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2019 (1) TMI 702
Rectification of mistake - typographical error - It stands submitted that the word ‘SSI Exemption of Carbon’ appearing in the last line of Para 7 should be read as ‘stainless steel of Carbon' - Held that:- Inasmuch as the mistake is typographical mistake, we replace the word ‘SSI Exemption of’ with ‘stainless steel’ and allow the ROM application to that extent.
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2019 (1) TMI 707
100% EOU - evasion of taxes - misuse of the scheme of EOU - discharge of duty liability during the de-bonding of the unit - petitioner contends that the orders are ex-facie illegal, arbitrary and left with no other alternative remedy they are forced to approach this Court in a Writ Petition - disagreements for the applicants in the proceedings before the settlement commission - Held that:- It is not open for the petitioner to opt for remedy under the settlement commission and contest its conclusions after choosing immunity from the adjudication and appeal processes set out in Law - The Hon'ble Supreme Court in the case of Sanghvi Reconditioners Private Limited [2010 (2) TMI 6 - SUPREME COURT] held that the petitioner having opted for settlement is not permitted to dissect Settlement Commission's Order to accept what is favourable and reject what is not.
On perusal of the petition, and the Final Order of the Settlement Commission, it is seen that no new averments are placed in the Writ Petition. All the averments in the Writ Petition are part of the settlement application that are considered and covered in the Settlement Commission proceedings culminating in the impugned orders. Though this court does not want to get into the merits of the disputes, it is difficult to lose sight of the fact that some of the claims of the petitioner is patently at error - Rightly, the Commission had directed to pay the amount.
Demand of ₹ 7,47,15,817/- being the duty on the manufactured goods escaping assessment at the time of de-bonding of the Petitioner's Unit - Held that:- The conditional permission of the Assistant Commissioner is at worst a concession/relaxation extended to the petitioner. It is unclear whether such a concession is permissible in law. However, it is certain that the final products in question manufactured under bond availing the benefits of the EOU Scheme had to be cleared for exports without illegitimately availing any export incentives/benefits like DEPB or Draw Back. But the finished goods under question were exported under claim of DEPB & Drawback which is not permissible under the EOU Scheme under the EXIM Policy - Rightly, the issue was concluded in favour of revenue by the Settlement Commission. But the petitioner herein is aggrieved by the conclusion and had pleaded arbitrariness in the Writ Petition.
No extra ordinary situation warranting writ interference under Article 226 is brought out in the Writ Petition - petition dismissed.
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2019 (1) TMI 706
Clandestine removal - cotton yarn - Department was of the view that the assessee removed cotton yarn on cheese in the guise of hank yarn with an intent to evade the payment of excise duty and clandestinely cleared the same - Demand based upon confession statement, which were retracted - Jurisdiction - Held that:- The assessee appears to have lost sight of the fact that any exemption from levy of duty is not automatic. Exemptions come along with conditions. Exemptions are either product specific or purpose specific or on other parameters. Exemptions can be conditional or absolute, yet it is an exemption. Therefore, strict interpretation is to be given and a person, who is charged of clandestine removal with sufficient evidence has to establish his innocence, having failed to discharge the burden cast on them and cannot be heard to say that despite all the charges against them, they are still entitled for exemption - perversity is manifast in the order passed by the Tribunal. The materials such as gate passes etc., which were recovered during the search and analysed by the Adjudicating Authority have been totally brushed aside. No proof of prejudice had been shown by the assessee for not making available for cross examination of two of the persons, who were the buyers from the assessee, who had candidly stated about the clandestine transaction.
There is also an allegation of destruction of records at the assessee's end after the products were delivered to the buyers. Thus, in our considered view, there was sufficient material to establish that the assessee was guilty of clandestine removal and consequently, is liable for payment of duty, penalty and interest. Thus, the Tribunal wholly erred in reversing the order passed by the Commissioner and as we are satisfied that the order passed by the Tribunal is perverse and we are inclined to interfere with the order.
The Adjudicating Authority is right in his conclusion that there are good and sufficient reasons as to why the assessee had effected clandestine clearances under the guise of clearing hank yarn. It attracts NIL rate of duty. Majority of the buyers of yarn from the assessee have given statements under Section 14 of the Act stating that they are manufacturing terry towels from the goods purchased from the assessee in their power looms, which goes to show that they cannot use hank yarn and this evidence was also brushed aside by the Tribunal.
Appeal allowed - decided in favor of Revenue.
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2019 (1) TMI 701
Penalty - CENVAT Credit on removal of capital goods after use - Rule 3 (5A) of Cenvat Credit Rules - appellant’s contention that they were not aware of the legal position that they have to pay the duty at the time of clearance of the Cenvatable Capital Goods - duty paid with interest paid on being pointed out - Held that:- There is no dispute on the facts that admittedly the clearances of the transformer was by raising an invoice in which case, it cannot be said that there was any mala fide on the part of the assessee to suppress the fact of clearance of the transformer. Non-payment duty by itself cannot lead to ipso facto presence of any mala fide - Tribunal in the case of Commissioner of Central Excise & Customs, Aurangabad vs. Shrigonda Sahakari Sakhar Karkhana Ltd. [2014 (6) TMI 940 - CESTAT MUMBAI] in similar circumstances, set aside the penalty imposed upon the assessee.
Penalty set aside - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 700
Refund Claim - Adhoc Exemption Order dated 4th April 1994 - Section 5A (2) Of the Central Excise Act, 1944 - Section 11B of the Central Excise Act, 1994 - amount credited to Consumer Welfare Fund - unjust enrichment - What is the scope and impact of the Adhoc 0045emption Order issued under Section 5A(2)? - Whether the refund claim permissible in terms of Adhoc Exemption Order issued under Section 5A(2) of the Central Excise Act, 1944, when the goods have been assessed to duty and cleared on payment of duty, by the supplier at the time supply of goods? - Held that:- The Adhoc Exemption Order issued under the said sub-section is distinct from the general exemption granted under Section 5A(1). The section exemption is ranted qua the user of the goods exempted for specified purpose. The said adhoc exemption order is issued in public interest and not to grant benefit to a particular person - After issuance of the adhoc exemption order, the same can be implemented either by way of refund in respect of the duty paid on the goods received by the person qua whom said adhoc exemption order has been issued or by way of non-payment of duty in respect of the goods covered by the said adhoc exemption order and still not cleared from the source, i.e. from the factory of supplier or from the port of clearance in case of imported goods.
Sub-section (2) to Section 5A, is an exceptional power available with the Government to exempt specified goods to be used for specified purpose by a specified person in public interest. This power is over riding the power under sub- section (1), wherein the exemption is granted in general to all the users of the said goods subject to such conditions as may be specified - In our view there is no dispute in respect of the operation of adhoc exemption order by way of refund under section 11B. If such a view is taken then it will make the Insertion of clause (ee) in explanation to section 11B otiose - refund allowed.
Whether bar under the erstwhile Rule 57C be applicable in this case i.e. because the supplier has availed the Modvat Credit Of the inputs used in manufacture and supply of the finished goods to person to whom Adhoc Exemption Order has been issued under Section 5A(2), the refund claim seeking exemption from duty be granted? - Held that:- In the present case the goods have been cleared on payment of duty by the supplier/ manufacturer who has availed the MODVAT Credit on the inputs used in manufacture of the said goods. Once the goods are cleared by the person availing the MODVAT Credit on payment of duty, requirements of rule 57C of the erstwhile Central Excise Rules, 1944 are satisfied - Since in the present case the goods by the person availing the MODVAT Credit have been cleared on payment of duty, as assessed and payable the finished goods cleared will not attract rule 57C - the submissions to the effect that in the present case the supplier/ manufacturer has availed the MODVAT Credit in respect of the inputs used in manufacture of the finished goods, to the recipient availing the benefit of adhoc exemption order issued under Section 5A(2) of the Central Excise Act, 1944 is not tenable.
Where the proceedings in respect of the refund of duty exempted under the Adhoc Exemption Order, concluded by the order of the Tribunal, dismissing the appeals filed by the appellants on the ground of seeking clearance from the Committee of Secretaries? - Held that:- When Tribunal had dismissed the appeal with liberty to revive the same after clearance from the Committee of Secretaries, the issues in the appeal cannot be said to have been disposed of by the said order of Tribunal. It was committee of secretaries and Ministries which resolved the issue by issuing the Adhoc Exemption Order afresh. Thus the Adhoc Exemption Order issued in 2002 was final resolution of the disputes between the parties. Thus we do not find applicability of 'principle of res-judicata' in the present case a tenable argument.
Whether the second refund claim was maintainable consequent to issuance of Second Adhoc Exemption Order in the year 2002 in supersession of the adhoc exemption order of 1994? - Held that:- From the two adhoc exemption orders and the correspondences leading to issuance of second order, it is quite evident that the second order was issued to rectify the operational errors being faced in the first Order. The said intention can also be drawn from the fact that when second order has been issued in supersession of the first order, first order had outlived itself. As per the para 3 of the order of 1994, the said order was valid only upto “31.03.1995.” thus if the said order was valid only upto 31.03.1995, issuing another order for the same period from 1990 orders in respect of the same goods supplied by the same manufacturer/ suppliers in terms of quantity and value to the appellant cannot be but for rectification of the operational difficulties faced in the operation of first order. Thus in our view Section 38A Of the Central Excise Act, 1944 would not be applicable in the present case.
Whether the appellants have produced sufficient documentary evidence to establish that they have paid the duty for which they are seeking the refund, to satisfy the requirements of Section 11B? - Held that:- From the said documents it is quite evident that appellants have produced the duty paying documents in respect of which the refund has been claimed before the concerned authorities. Even the adjudicating authority do not dispute the production of the said documents along with the refund claims. In absence of any evidence to the contrary the averments made with regards to non production of documents as required under Section 11B of the Central Excise Act, 1944 do not merit acceptance.
Whether Bar of Unjust enrichment applicable in such cases where the refund claim is filed by the person qua whom adhoc exemption order is issued? - Held that:- There is no dispute about the fact that no refund claim can be sanctioned in the favour of claimant in terms of Section 11B, without recording a finding of fact to the effect that the person claiming the refund has suffered the burden of the duty paid by him and has not passed on the said burden to anyone else - In terms of "e" in Proviso to section 11B(2), the refund will be paid to the claimant if he is the buyer and has not passed on the burden of the said duty on to any other person. In the present case the appellants are the consumer of the goods and have utilized the said goods in creation of Konkan Rail Project, for which the adhoc exemption order Of 1994 and the 2002 issued.
The burden of duty claimed as refund has been borne by the appellant and could not have been passed on to the anyone else. The bar of unjust enrichment as in Section 11B is not a absolute bar but a rebuttable presumption - appellants have sufficiently discharged the burden cast on them as buyer/ consumers of these goods, to show that they have borne the incidence of duty paid by them, and hence the bar of unjust enrichment would not be applicable in respect of the refund claims filed.
Appeal dismissed - decided against Revenue.
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2019 (1) TMI 699
Clearance of Transmission Hardware to State Electricity Boards and also to various Mega Power Projects - N/N. 6/2006-CE dated 01/03/2006 as amended vide Notification No. 46/2008-CE dated 14/08/2008 under Serial No. 91A - Held that:- In the facts and circumstances of the present case, since refund has been made in cash and not by crediting in the Cenvat Credit account of the appellant, the appellant is not getting additional credit for which it has to pay more in cash and less through CENVAT Credit Account. Thus, in effect, it does not make any difference so far, payment of Central Excise Duty is concerned - refund allowed - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2019 (1) TMI 712
Recovery of arrears of sales tax - CST Act - the very order of assessment made in respect of those assessment years were set aside by this Court - Held that:- It is seen that the impugned demand is made in respect of three assessment years namely 2001-02, 2007-08 and 2010-11. It is also seen that in respect of the assessment year 2007-08, already an order of assessment was put to challenge before this Court in W.P.No.12986/2015 wherein the order came to be passed on 02.06.2015, wherein and whereby, the assessment order was set aside and the matter was remitted back to the Assessing Officer for fresh consideration.
The impugned demand made in respect of the assessment year 2010-11 also cannot be sustained in the absence of any fresh assessment order. Therefore, it leaves the issue to be decided herein is only in respect of the assessment year 2001-02 - petition disposed off.
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2019 (1) TMI 711
Valuation - includibility - deduction on freight and pumping charges shown separately in the invoice disallowed - assessee's specific case is that they have a dual role one that of seller and the other of transporter as agent of the buyer - Held that:- In the instant case, as a matter of fact, the first Appellate Authority found that the freight charges, pumping charges have been separately shown in the invoices without including the same in the cost of the goods. Further, the purchase order also clearly says that the delivery is ex-RMC Works. Further, the Assessing Officer has not pointed out even a single instance of collection of consolidated amount and that the sale is completed only after delivery of RMC at the site of the customer and not even a single buyer was enquired and there was no material available with the Assessing Officer.
The Tribunal committed a serious error in deciding the questions against the assessee - appeal allowed - the substantial questions framed for consideration are decided in favour of the assessee.
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Indian Laws
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2019 (1) TMI 726
Principles of natural justice - permission of this Court to file a report by a handwriting expert in rebuttal of the report - Section 151 of CPC - it is submitted by the counsel for the petitioner that when one of the parties have produced the report of the handwriting expert, then the opportunity should be provided to the other party to produce the report of the handwriting expert in rebuttal - Held that:- It is undisputed fact that the application filed by the respondent no.1 for getting thumb impression on the agreement examined from the handwriting expert was allowed by the trial court and accordingly, the report of the handwriting expert has been placed on record. Under these circumstances, this Court is of the considered opinion that the trial court cannot take away the right of the petitioner\defendant to produce the report of the handwriting expert in rebuttal of the report of the handwriting expert filed by the respondent no.1/plaintiff.
This Court is of the considered opinion that the order dated 6/12/2017, so far as it relates to rejection of application under Section 151 of CPC, is hereby set aside - petition allowed.
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2019 (1) TMI 725
Dismissal of the summary suit seeking recovery - time limitation - Whether the suit for recovery is filed within limitation in the light of the fact that the four cheques acknowledging the defendant's liability were dishonoured? - Held that:- The trial Court dismissed the suit as being barred by limitation. On appeal by the plaintiff it was urged that the amount borrowed on 12/07/1939 having been acknowledged and partly paid by virtue of cheques dated 25/09/1942 and 10/11/1944 the suit as filed on 08/11/1947 was within limitation. Said contention was not accepted by the Division Bench holding that the subsequent dishonour of cheques would not amount to acknowledgment of liability and same could not be regarded as part payment within the meaning of the provisions of Section 20 of the Limitation Act, 1908. It was thus held that the suit having been filed beyond the period of limitation which commenced after 12/07/1939 was thus barred by limitation. The Court then considered the alternate claim as made based on the four cheques issued by the defendant and held that the plaintiff was entitled for the amounts mentioned in the cheques that were dishonoured as that claim was within limitation. The Court thus did not grant any relief as regards the principal claim but granted relief as regards the amount as shown under the dishonoured cheques - the finding recorded by the trial Court that issuance of four cheques would not result in extending the period of limitation in the light of provisions of Section 18 of the said Act cannot be faulted.
Demand of interest - Held that:- As the plaintiff's claim based on the invoices has been found to be barred by limitation, the decreetal amount cannot carry interest at the rate of 24% per annum. The four cheques having been issued pursuant to the plaintiff's legal notice, interest at the rate of 10% per annum in the light of the proviso to Section 34 of the Code of Civil Procedure, 1908 would serve the ends of justice.
Appeal allowed in part.
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