TMI Tax Updates - e-Newsletter
January 18, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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GST:
Profiteering - benefit of reduction in the GST rate not passed - base price of goods also increased - Respondent has violated the provisions of section 171 in as much as the prices have remained the same inspite of reduction in the tax rate. His plea that the base prices were drastically lowered when GST came in effect cannot absolve him from not passing on the benefit.
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Income Tax:
Disallowance of excessive licence fee paid to M/s Uflex Ltd. - increase of the license fee from ₹ 50 Lac per month to ₹ 2 Crore per month - the issue of increasing the license fee is considered by all the authorities in the preceding years therefore, in the immediately preceding year, we hold that the CIT(A) was fully justified in allowing the license fee.
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Income Tax:
Levy of penalty u/s 272A(2)(e) - delay of 509 days in filing the return of income - Once the assessee is liable to file the return of income under the provisions of the Act and it fails to do so, then the provisions of section 272A(2)(e) of the Act automatically arises.
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Income Tax:
Exemption u/s 10(23EA) - charitable activities - claim not made by the assessee during the filing of return of income but as an alternative at the appellate stage before the CIT(A) - Benefit of exemption allowed.
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Income Tax:
Deduction u/s. 80IA - nexus with business activity - The assessee having paid excess income tax, received refund with interest - Benefit of deduction allowed.
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Income Tax:
Action against the employer u/s 276B - not depositing the tax deducted at source from the employee in the Government revenues, would amount to misappropriation of public funds - department is expected to take appropriate view on the basis of facts on record.
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Income Tax:
TDS u/s 194C OR 194J - short deduction of TDS - placement fees / carriage fees paid to cable operators - the activities covered by Section 194C are more specific and the activities covered by Section 194J are more general in terms - TDS liability confirmed u/s 194C
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Customs:
Effective date of notification - import - setting Minimum Import Price (MIP) on Iron and Steel - Notification No.38/2015-2020 dated 5th February, 2016 published in the Official Gazette on 11th February, 2016 was in force on the date of ‘import’ of goods by the petitioners as the ‘import’ was post publication in the Official Gazette on 11th February, 2016.
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Customs:
Misdeclaration of goods - clearance of “CR Engine with spares and accessories” - bonafide error or not - EPCG Scheme - error is not bonafide, demand confirmed with penalty.
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Service Tax:
Refund of service tax paid on cancellation of booking of flats - it is not the case of department that appellant has availed credit in excess of the requisite proportion. Admittedly tax stands paid. Resultantly, the procedural lapse is mere technical for no substantial loss to the department.
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Service Tax:
Liability of Service Tax - Security Services - in the absence of any agreement to utilize the services of an individual, assessee cannot be said to have provided Manpower Recruitment or Supply Agency Services.
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Service Tax:
Liability of service tax - GTA service - transportation of the tea - whether after the tea leaf had been put through the process of withering, crushing, roasting and fermentation it continued to be agricultural produce? - Held No - Benefit of exemption not available.
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Central Excise:
Scope and ambit of settlement order - Whether the Settlement Commission can after holding that the applicant has failed to make full and disclosure of his duty liability and the manner in which such liability was derived, act as an adjudicating authority to decide the show cause notice - Held No
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Central Excise:
CENVAT Credit - Though the maintenance is for roads, street lights, drainage, etc. i.e. for facilities being provided beyond the manufacturing/ factory premises of appellant but the simultaneous fact is that such services are charged on the basis of per square meter of business premises occupied by the appellant - The lease/ rent charge are the eligible inputs.
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Central Excise:
Clandestine removal - the Commissioner himself having found that the main evidence relied for quantification of duty i.e. computer print outs being not admissible in evidence, the demand could not have been confirmed.
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VAT:
Levy of VAT or service tax - transfer of right to use goods - providing passive telecommunication infrastructure to the telecom operator - the transaction in question cannot be said to be in the nature of “service contract” as contended on behalf of the petitioner.
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VAT:
Classification of goods - Merely because some cable is used in raising an industry it would not make the cable as industrial cable because the same involves manufacturing with specifications to be used only in industrial activity.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2019 (1) TMI 807
Profiteering - sale of Fortune ADW Detergent 1 Kg. and Fortune Rinse Aid 500 ml. - benefit of reduction in the GST rate not passed - base price of goods also increased - contravention of provisions of Section 171 of CGST Act, 2017 - penalty - Held that:- The Respondent has admittedly not passed on the benefit of tax reduction since the base prices of the above two products were increased to maintain the same selling prices which were existing before the reduction in the rate of tax. The Respondent, who is a registered manufacturer, is liable to pass on the benefit to the recipients irrespective of the fact whether the base prices are still lower as compared to the pre-GST price or not. Moreover, from the documents submitted to the DGAP by the Respondent it is also established that the base prices of the two products in question were increased to maintain the same selling prices (inclusive of GST), although there was a reduction in the GST rate from 28% to 18% w.e.f. 15.11.2017.
In the present case, the Respondent has admittedly accepted the fact that there was no reduction in the prices post 15.11.2017 on any of the products sold by him. Therefore, the Authority holds that the Respondent has violated the provisions of section 171 in as much as the prices have remained the same inspite of reduction in the tax rate. His plea that the base prices were drastically lowered when GST came in effect cannot absolve him from not passing on the benefit.
Penalty u/r 133(3)(d) of the CGST Rules, 2017 - Held that:- The Respondent has indulged in profiteering in violation of the provisions of Section 171 of the CGST Act, 2017 and has not passed on the benefit of reduction of tax as per the Notification 41/2017-Central Tax(Rate) dated 14.11.2017 in respect of the above products to his customers and therefore, he is liable for penalty under Rule 133(3)(d) of the CGST Rules, 2017.
Penalty u/s 122 (1) (i) of the Act - Held that:- As it is clear from the facts of the present case that the Respondent was fully aware of the Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 whereby the rate of GST was reduced from 28% to 18% and he was also fully aware of Section 171 of the CGST Act 2017, whereby he was bound to pass on the benefit of reduction in the rate of tax by commensurate reduction in the prices of the products in question, therefore he is liable for penalty - respondent has committed an offence under section 122 (1) (i) of the above Act and hence, he is liable for imposition of penalty under the above Section read with Rule of the CGST Rules 2017.
Decided against Respondent.
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2019 (1) TMI 809
Maintainability of petition - alternative remedy of appeal - Held that:- There is a remedy of appeal under Section 112 before the Appellate Tribunal but because the Tribunal itself has not been constituted, he has no remedy except to approach this Court under Article 226 - petition is entertained - List on 13.02.2019.
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2019 (1) TMI 808
Failure to upload FORM GST TRAN-1 within the stipulated time - input tax credit - Held that:- Not only the petitioner but also many other people faced this technical glitch and approached this Court. Both the learned counsel submit that this Court on earlier occasions permitted the petitioners to apply to the sixth respondent for the issue resolution.
The petitioner may apply to the sixth respondent, the Nodal Officer. The petitioner applying, the Nodal Officer will look into the issue and facilitate the petitioner’s uploading FORM GST TRAN-1, without reference to the time-frame - petition disposed off.
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Income Tax
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2019 (1) TMI 797
Disallowance of excessive licence fee paid to M/s Uflex Ltd. - Held that:- Issue of increase of the license fee from ₹ 50 Lac per month to ₹ 2 Crore per month was examined by the ITAT in the immediately preceding year. The ITAT after considering the facts and submissions of both the parties deem it appropriate to allow the increase of license fee from 1st February, 2006. The order of ITAT is approved by Hon’ble High Court and Supreme Court. Therefore, from 1.4.2006 some licence fee i.e. @ ₹ 2 crore p.a. is to be allowed. So far as the contention of the learned DR with regard to furnishing of lease agreement is concerned, it would be relevant to the preceding year and not to the year under consideration because the license fee was increased by the lease agreement in the preceding year. After considering the agreement and entire material, the issue of increasing the license fee is considered by all the authorities in the preceding years therefore, in the immediately preceding year, we hold that the CIT(A) was fully justified in allowing the license fee @ ₹ 2 Crore per month in the year under consideration. The ground no. 1 of the Revenue appeal is accordingly rejected.
Addition u/s 68 - Held that:- CIT(A) had allowed the opportunity to the AO and has decided the issue only after taking into consideration the remand report submitted by the AO. However, in the year under consideration, the CIT(A) has allowed no opportunity to the AO to examine the copy of account of the customer in subsequent years and no remand report is called for. In view of the above, we deem it appropriate to set aside the order of the CIT(A) on this point and restore the matter back to the file of the AO.
We direct the assessee to produce the copy of account of above three customers for subsequent years before the AO thereafter the AO will examine whether the above three parties are the regular customers and the assessee has supplied the goods to those parties in the normal course of business and whether these advances have been adjusted against such supply of goods. If it is so than the observation of ITAT would be squarely applicable and no addition would be made for trade advances received by the assessee.
Addition u/s 68 - Held that:- The director of AEPP stated that the net worth of AEPP is more than ₹ 100 crores and there is no cash deposit in the bank account of AEPP before making the payment for share application money to MEPL i.e., the assessee. The assessee has furnished the copy of audited balance sheet of AEPP, from which, we find that the share capital of AEPP including reserves and surplus is ₹ 103.64 crores and the investment in shares of various companies by AEPP is ₹ 95.32 crores. In our opinion, these facts clearly establish the creditworthiness of AEPP.
In view of the above hold that the assessee has been able to discharge the burden of proving the share application money received by it from AEPP and therefore, learned CIT(A) rightly deleted the addition made by the Assessing Officer.
Deduction u/s 80-IB on account of Self Cenvat Credit availment - Held that:- This issue is squarely covered in favour of the assessee by case of CIT Vs. Dharam Pal Prem Chand Ltd. – [2008 (11) TMI 231 - DELHI HIGH COURT] held that the assessee had on the payment of excise duty debited the profit and loss account and upon receipt of refund credited the profit and loss account. The net effect on the profit and loss was nil on account of the methodology followed by the assessee. Therefore, there was no reason to exclude the amount of refund of excise duty in arriving at “profit derived” for the purpose of claiming deduction under section 80-IB.
Excise duty refund - a capital receipt in nature and not liable to tax - Held that:- This claim of the assessee has been accepted by the learned CIT(A) and the order of learned CIT(A) has been upheld by us by rejecting ground No.6 of the Revenue’s appeal. Thus, the assessee’s claim that it is revenue receipt is approved by the learned CIT(A) as well as by us. Therefore, in our opinion, learned CIT(A) was not justified in holding this same income to be capital receipt in the year under consideration. We reverse the finding of the learned CIT(A) on this point and allow ground No.7 of the Revenue’s appeal.
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2019 (1) TMI 806
TDS u/s 194C OR 194J - short deduction of TDS - placement fees / carriage fees paid to cable operators / MSO/DTH Operators - payments for work contract OR fees for technical service - Held that:- As decided in CIT VERSUS M/S. UTV ENTERTAINMENT TELEVISION LTD. [2017 (11) TMI 915 - BOMBAY HIGH COURT] the placement fees are paid under the contract between the respondent and the cable operators/ MSOs. Therefore, by no stretch of imagination, considering the nature of transaction, the argument of the appellant that carriage fees or placement fees are in the nature of commission or royalty can be accepted.
Sub-clause (b) of clause (iv) of the explanation to Section 194C covers the work of broadcasting and telecasting including production of programmes for such broadcasting or telecasting. The work of subtitling will be naturally a part of production of programmes. Both Sections 194C and 194J having introduced into the Income Tax Act on the same day, it is observed that the activities covered by Section 194C are more specific and the activities covered by Section 194J are more general in terms. Therefore, for the activities covered by Section 194C, Section 194J cannot be applied being more general out of the two. - Decided against revenue
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2019 (1) TMI 805
Disallowance of interest expenditure claimed by the assessee u/s 36(1)(iii) - Held that:- In the present case, therefore, we are not inclined to examine the correctness of the Tribunal refusing to exercise its jurisdictional powers. However, we have serious doubt whether the Tribunal should have at the very outset given a direction to invoke the Transfer Pricing mechanism while in the appeal filed by the assessee on the issue at hand, the sole question was whether the disallowance of interest expenditure claimed by the assessee under Section 36(1)(iii) of the Act was correctly made. Under the circumstances, while disposing of this petition we observe that none of the pending proceedings of the petitioner assessee, be at any stage of assessment, first appellate or second appellate stage, would be influenced by the observations and directions of the Tribunal in this respect, in the context of the issue similar to the present one.
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2019 (1) TMI 804
Action against the employer u/s 276B - non issuing TDS Certificate after deducting TDS from the employees - appropriate steps so that the employer does not repeat such behavior of not issuing TDS Certificate after deducting TDS from the employees - Held that:- Department has not taken appropriate steps against the employer as a result, large amount of tax recoveries are outstanding, which are not being effectively made. He also argued that not depositing the tax deducted at source from the employee in the Government revenues, would amount to misappropriation of public funds. As submitted that prosecution under Section 405 of the Indian Penal Code should also be initiated.
The petitioner's principal grievance stands resolved, in the facts of the present case, we are not inclined to examine the petition further. Any of the submissions made by the petitioner and the reliefs claimed pursuant to such submissions, would be in the realm of public interest litigation, in which form this petition as admitted, is not filed.
Our attention was drawn to an order dated 18th October, 2018 passed by the Division Bench of this Court in which certain observations have been made. Department is aware about the said order and we are sure that the Department will take appropriate view in connection with such observations. With respect to the initiation of proceedings u/s 276B also, we find that the same is within the purview of the Department's consideration and we expect that the department will take appropriate view on the basis of facts on record.
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2019 (1) TMI 803
Deduction u/s. 80IA - interest received has a direct nexus with the development activities - it is an interest received on excess payment of tax which has no nexus with the business activity and it has not been derived from the I.T. Parks/S.E.Z. undertaking? - income from derived from the assessee's eligible business - Held that:- Assessee is engaged in the business of developing I.T. Parks and S.E.Z. and derives its income from leasing out such properties. Undisputedly, such income qualifies for deduction u/s 80IA. The revenue however contests the assessee's claim of such deduction for various other receipts such as interest on income tax refund, interest on FDRs etc.
CIT (Appeals) and the Tribunal concurrently hold that such income was also derived from the assessee's principal business of leasing out the premises in I.T. Parks and S.E.Z. areas. We are broadly in agreement with the view of the Tribunal. The assessee having paid excess income tax, received refund with interest. The assessee had obtained deposits from the lessees for performance guarantee which would not invite any interest.
The assessee parked such fund in bank deposits which earned interest. The entire transaction of leasing out the property at specified lease rent upon the lessees agreeing to offer deposit without claiming interest thereon is integral part of the assessee's principal business of leasing out the premises in I.T. Parks and S.E.Z. and therefore, Tribunal correctly concluded that such income can be stated to have been derived from the assessee's eligible business. - Decided against revenue.
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2019 (1) TMI 802
TDS u/s 194C OR 194J - short deduction of tds - placement fees/carriage fees paid to cable operators/MSO/DTH Operators - payments for work contract OR fees for technical services - Held that:- Revenue fairly states that this question stated concluded against the revenue and in favour of the respondent-assessee in view of the order of this Court in The Commissioner of Income Tax, TDS-2, Mumbai Vs. M/s Zee Entertainment Enterprises Ltd.[2018 (3) TMI 317 - BOMBAY HIGH COURT]
TDS u/s 194C OR 194J - uplinking charges paid to TV18 India Ltd for uplinking its channels /signals from TV18' s uplinking centre - payments for work contract or fees towards royalty - Held that:- We note that Section 194C of the Act specifically defines the scope of “work” included therein by defining the meaning of “work” to include broadcasting and telecasting. The work of unlinking charges is an integral part of telecasting the programmes. Thus, the deduction of tax on the above payment would thus clearly fall within Section 194C of the Act. The revenue has not been able to show as to why Section 194C of the Act would not apply in these facts. No substantial question of law.
TDS u/s 194C OR 194J - payment for production of programmes - Held that:- Tribunal upheld the view of the respondent and the CIT (A) that the payment for production of programmes for broadcasting and telecasting were liable to tax deduction at source under Section 194C of the Act and not under Section 194J of the Act as contended by the Revenue. Tribunal interalia placed reliance upon this CBDT circular bearing No.4 of 2016 dated 29th February, 2016, wherein it has been clarified that payment made by a broadcaster, telecaster to a production house for production of a programme would fall under the defination of "work" as defined in Section 194C of the Act. No substantial question of law.
Assessee in default u/s 201(1) - Held that:- In view of the fact that there is no short deduction of tax this question in the present facts would not arise. In the above view, there is no question of entertaining this question.
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2019 (1) TMI 801
Reopening of assessment - notice issued beyond the period of four years - escapement of income should be on account of failure on part of the assessee to disclose truly and fully all material facts - Held that:- Notice of reopening of assessment has been issued beyond the period of four years from the end of relevant assessment year. The additional requirement as per the proviso of Section 147 of the Act that .
In the present case, from the reasons recorded, find that no such requirement was fulfilled. In the reasons itself the AO has stated that the record of the assessee was checked and it was found that it is a builder and therefore, to verify the intelligence gathered by Intelligence Wing, it is necessary to carry out thorough and detailed inquiry. Very clearly thus by his own account the Assessing Officer wishes to carry out a fishing inquiry. Reopening of assessment cannot be permitted for carrying out fishing inquiries.
AO is proceeding on completely wrong premise. Perusal of the reasons recorded show that he has some prima facie objections to the assessee having developed Ganesh Krupa Housing Society land which according to information received by him did not contain any agreement. When the assessee repeatedly pointed out to the AO before and even after issuing of notice for reopening that he had neither developed any such project during the year of the consideration nor claimed exempt income arising out of such project, it was duty of the AO atleast to prima facie show how such assertion of the assessee was incorrect. He simply cannot claim that full assessment must be permitted even in absence of any prima facie evidence of income chargeable to tax having escaped assessment. For all these reasons, impugned notice is set aside. - Decided in favour of assessee.
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2019 (1) TMI 796
TPA - AMP expenses determination - following the BLT method - Held that:- Addition on protective basis by following the BLT method cannot be sustained. We answer the issue accordingly in favour of the assessee.See SONY ERICSSON MOBILE COMMUNICATIONS INDIA PVT. LTD. (NOW KNOWN AS SONY INDIA LIMITED) & OTHERS VERSUS COMMISSIONER OF INCOME TAX – III [2015 (3) TMI 580 - DELHI HIGH COURT]
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2019 (1) TMI 800
Penalty u/s 271(1)(c) - particular claim made by the assessee was due to bonafide oversight or error - Held that:- We have no hesitation in accepting the contention of the learned counsel of the Revenue that merely because the assessee surrenders certain income during assessment which is contrary to the claim in the return filed, he automatically gets immunity from penalty. In the decision in the case of MAK Data P Ltd [2013 (11) TMI 14 - SUPREME COURT] held that the assessee's contention that the income was offered to tax to by peace by itself would not be an immunity from penalty.
As is well settled, the penalty may still not be sustained. Reliance in this respect can be made to the decision of the Supreme Court in the case of Price Warehouse Coopers Pvt Ltd Vs. CIT [2012 (9) TMI 775 - SUPREME COURT]. It was well settled that every wrong claim or a claim which has been rejected during the assessment would not automatically result into penalty proceedings. In the present case, the Commissioner (Appeals) and the Tribunal concurrently held that the claims of the assessee which were withdrawn during the assessment itself was a pure mistake and oversight. The appeal is dismissed.
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2019 (1) TMI 795
Penalty u/s 271(1)(c) - discrepancy between Form 26AS and Form 16 - assessment u/s 144 - Held that:- With regard to salary, there is a difference between amounts as per Form No. 16 and Form No.26AS, since both are provided by the SBH, Hyderabad and the assessee has filed his return of income in accordance with Form No.16 issued by the employer of the assessee, by taking into account the amount mentioned in Form 26AS it cannot be said that the assessee has concealed amount or furnished inaccurate particulars of income.
With regard to commission income the assessee has not disclosed the same in his return of income and also not offered any explanation. In our considered view, A.O. can initiate penalty only for the amount of commission which was not disclosed, can fall within the ambit of ‘concealment of income’. Therefore, we direct the A.O. to restrict the penalty to the tax sought to be evaded on the amount of commission. - Decided partly in favour of assessee
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2019 (1) TMI 794
Charitable activities - provision of hostel facilities and transport facilities - exemption u/s 11 - Held that:- In the case of Delhi Public School Ghaziabad Society vs. ACIT [2018 (5) TMI 1482 - ITAT DELHI] we are of the considered view that hostel activities and transport activities of the assessee society are not in nature of business inasmuch as these two activities are incidental to the attainment of the main object of education. Accordingly, we allow the grounds of appeal raised by the assessee.
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2019 (1) TMI 799
Exemption u/s 10(23EA) - charitable activities - claim not made by the assessee during the filing of return of income but as an alternative at the appellate stage before the CIT(A) - Held that:- Revenue does not dispute that necessary facts were already on record to examine such a claim. That being the position, the assessee's claim was based on pure interpretation of statute. Tribunal, therefore, correctly rejected the Revenue's objection relying upon the decision of this Court in the case of Pruthvi Brokers & Share Holders Pvt. Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT]. The reference can also be made to the decision of the Supreme Court in case of National Thermal Power Corporation vs. CIT (1996 (12) TMI 7 - SUPREME COURT) holding that the powers of Commissioner of Income Tax (Appeals) are much wider than that of the AO.
The other contention though not specifically mentioned by the Revenue in the question framed, we have examined the same. There is no prohibition in law which would prevent the assessee – Trust which qualifies for benefits under Section 11 to 13 from claiming exemption under Section 10 (23EA) of the Act. In fact when the Assessing Officer allowed such an exemption for two claims which assessee had raised in the return, the Revenue accepted this position. - Decided against revenue.
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2019 (1) TMI 798
Deemed dividend u/s 2(22)(e) - assessee was found having received amounts/loans from and has paid various amounts to its group Concern - Keyman Insurance policy - Held that:- Whether an assessee who is neither a registered nor beneficial share holder in relative concerns would be governed by Section 2(22)(e) of 1961 Act, is no more res integra and is settled at rest by Division Bench of Delhi High Court in Commissioner of Income Tax Vs. Ankitech Pvt. Ltd. [2011 (5) TMI 325 - DELHI HIGH COURT] which has been affirmed by the Supreme Court in C.I.T., Delhi-II vs. Madhur Housing and Development Company [2017 (10) TMI 1279 - SUPREME COURT OF INDIA]. The deletion made on account of deemed dividend cannot be faulted with.
Addition of expenditure towards Keyman Insurance policy premium of the assessee Director, is an allowable expenses in view of the Circular by the CBDT No.38/2016, dated 22/11/2016. As we are not commended to any cogent material as would nullify the effect of the said circular no interference is caused in respect of said finding of facts and law. We are of the considered opinion that no substantial question of law arises for consideration as would warrant any indulgence.
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2019 (1) TMI 793
Addition on account of the bogus purchases - 3% of GP addition on account of bogus purchases - Held that:- The sales of the assessee have been accepted by the Department. Without purchases, there cannot be sales. Thus, entire alleged bogus purchases cannot be added in the hands of the assessee. Under such circumstances, the possibility of assessee purchasing the goods from grey market and procuring bills from the Hawala dealers cannot be ruled out. The CIT(A) after considering catena of judgments on various facets including the GP ratio to be applied in different set of industries estimated 3% of GP addition on account of bogus purchases in the hands of the assessee. We find the impugned order is reasoned and hence, requires no interference. Taking into consideration entirety of facts, the impugned order is upheld.
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2019 (1) TMI 792
Addition u/s 68 - nature and source of cash deposits in the bank accounts - Held that:- Considering the submission of AR that given an opportunity assessee will be able to prove the nature and source of cash deposits in the bank accounts coupled with the fact that assessee’s appeal was decided ex parte, we are inclined to restore the issues to the file of the Commissioner (Appeals) for de-novo adjudication of all the issues raised in the appeal after due opportunity of being heard to the assessee.
We direct the assessee to respond to the notice of hearing to be issued by the learned Commissioner (Appeals) and represent its case properly on the date of hearing to be fixed by learned Commissioner (Appeals). In the event of any further default by the assessee to appear and represent its case properly, learned Commissioner (Appeals) is at liberty to decide the appeal on its own merits on the basis of materials available on record and in accordance with law. - Assessee’s appeal is allowed for statistical purposes.
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2019 (1) TMI 791
Capital gain - capital asset - Agreement of assignment of immovable property which is unregistered is transfer u/s. 48 read with sec. 2(47)(v) - Held that:- We are of the view that the CIT(A) as well as the AO erred in referring to the expression “of the nature referred to in sec. 53A” in section 2(47)(v) in order to arrive at the impugned conclusion, so we are inclined to set aside the impugned order.
We note that any profit or gain arising from the transfer of a capital asset is chargeable to tax under the head “capital gain” and is deemed to be the income of the financial year in which the transfer took place. And capital asset is defined u/s. 2(14) which means property of any kind held by an assessee whether or not connected with his business or profession.
The term capital asset has an embracing connotation and includes every kind of property as generally understood except those that are expressly excluded in the definition. So too, expression property includes every conceivable thing, right or interest (Syndicate Bank Ltd. Vs. Addl. CIT (1985 (3) TMI 48 - KARNATAKA HIGH COURT). And so, if the capital asset is transferred as envisaged under section 2(47) then it has to be taxed as per law. - the issue of taxing the consideration in respect of assignment of leasehold rights need to be de novo carried out by the AO untrammeled by the finding/observations [supra] and of the CIT(A) while deciding the appeal of the assessee. - Appeal of assessee is allowed for statistical purposes.
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2019 (1) TMI 790
Levy of penalty u/s 272A(2)(e) - delay of 509 days in filing the return of income for the assessment year under consideration - period of limitation for issuing notice - Held that:- Ignorance of law is not an excuse. A mistake committed by the assessee cannot be a reasonable cause for committing another mistake. The penalty proceedings under section 272A(2)(e) of the Act is a separate proceeding from assessment of income and the determination of income has no bearing with the quantum of penalty as long as the assessee is required to file its return of income under section 139(4A). Once the assessee is liable to file the return of income under the provisions of the Act and it fails to do so, then the provisions of section 272A(2)(e) of the Act automatically arises. The penalty levied under section 272A(2)(e) of the Act was rightly confirmed by the ld. CIT(A). Thus, the ground raised by the assessee stands dismissed.
Penalty proceedings initiated by service of notice under section 272A(2)(e) r.w.s. 274 of the Act on 08.12.2015 and the penalty was levied vide order dated 02.03.2016, which is well within six month period provided and thus, clause (c) to section 275(1) of the Act also not applicable. Similarly, sub-sections 1(a) and 2 to section 275 of the Act also not applicable. Thus, the issue raised in the written submission by the assessee that the penalty proceeding is barred by limitation has no merits. In the appellate order, the ld. CIT(A) has considered all the grounds raised by the assessee and dismissed the appeal filed by the assessee since there was no merit in the grounds raised by the assessee. Thus, we find no reason to interfere with the order passed by the ld. CIT(A). - Decided against assessee.
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2019 (1) TMI 789
Revision u/s 263 - Claim of deduction u/s 54F and 54EC denied - Held that:- Section 2(14) is very widely defined to mean property of any kind held by an tax-payer, whether or not connected with his business or profession. The exceptions are also provided u/s 2(14) wherein property shall not be included in the definition of capital asset. As observed that CBDT own circulars bearing 471 dated 15.10.1986 and 672 dated 16.12.1993 are relevant, wherein allotment of flat under self financing scheme is held to be construction for the purposes of capital gains. Thus AO rightly allowed deduction u/s 54F to the assessee vide assessment order dated 20.10.2015 passed u/s 143(3) by the AO and to that extent the said assessment order cannot be termed as perverse or erroneous so far so it is prejudicial to the interest of Revenue calling for interference u/s 263 of the 1961 Act.
So, far as deduction u/s 54EC of the 1961 Act is concerned, the assessee made investment of ₹ 50,00,000/- during the year under consideration in NHAI Bonds which is an eligible investment under Section 54EC of the 1961 Act and further investment of ₹ 21,50,000/- was made by the assessee in eligible NHAI Bonds in the immediately succeeding financial year, but within a period of six months from the date of transfer. The deduction u/s 54EC was rightly allowed by the AO for an aggregate amount of ₹ 71,50,000/- as the amendment to Section 54EC was brought by Finance Act, 2014 w.e.f. 01.04.2015 which restricted/capped the deduction u/s 54EC to a maximum sum of ₹ 50,00,000/- for investment made in qualified bonds during the year in which transfer took place as also by including investment in eligible bonds in immediately succeeding year.
On the both the issues on which learned Pr. CIT invoked provisions of Section 263, it could not be said that the assessment order dated 20-10-2015 passed by the AO u/s 143(3) of the 1961 Act was erroneous so far as prejudicial to the interest of Revenue calling interference u/s 263 of the 1961 Act. Thus, not only did the AO made proper inquiry with respect to correctness of claim of computation of capital gain filed by the assessee but also applied law correctly by allowing the said claim(s) of the assessee in the return of income filed with Revenue. The assessee has rightly relied upon decision of Hon’ble Bombay High Court in the case of Moil Limited v. CIT reported in (2017 (5) TMI 258 - BOMBAY HIGH COURT). - Decided in favour of assessee.
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2019 (1) TMI 788
MAT - Addition on account of Capital Reserve while computing the book profit of the assessee-company u/s 115JB - Held that:- As rightly pointed out by the assessee, the adjustment on account of the amounts carried to any reserves, by whatever name called is permissible as per Clause (b) of Explanation (1) to Section 115JB only if such amounts are debited to the Profit & Loss Account as clearly provided in Explanation (1) to Section 115JB and since the amount in question transferred to the Capital Reserves directly by the assessee-company was not debited to the Profit & Loss Account as clearly mentioned by the AO himself in the assessment order, we find merit in the contention for the assessee that the adjustment made by the Assessing Officer while computing the book profit under section 115JB was not permissible even as per Clause (b) of Explanation (1) to section 115JB. D.R. has not been able to dispute this position, which is clearly evident from the clear language used in Explanation (1) to Section 115JB. No merit in the case of the Revenue on this issue and upholding the impugned order of the CIT(Appeals) deleting the addition/adjustment made by the Assessing Officer on account of Capital Reserve while computing the book profit of the assessee under section 115JB.
Disallowance of employees contribution to Provident Fund/Employees State Insurance (ESI) paid by the assessee beyond the due dates prescribed in the respective statute - Held that:- Both the sides have agreed that this issue is squarely covered in favour of the assessee, inter alia, by the decision in the case of Vijay Shree Limited (2011 (9) TMI 30 - CALCUTTA HIGH COURT), wherein following the decision in the case of Alom Extrusion Limited [2009 (11) TMI 27 - SUPREME COURT] that the amount paid on account of employees contribution before the due date of filing the return of income for the relevant year could not be disallowed as per the amendment made to section 43B by the Finance Act, 2003. Respectfully following the said binding precedent, we uphold the impugned order of the CIT(Appeals) deleting the addition made by the Assessing Officer by way of disallowance of belated payment of employees contribution to P.F/ESI.
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Customs
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2019 (1) TMI 782
Quantum of penalty imposed under Section 114A of the Customs Act, 1962 - Section 28 and 28A of the Customs Act, 1962 - Held that:- The issue involved is no longer res-integra and this tribunal has constantly taken the view the penalty imposed under Section 114A will be equivalent duty demanded under Section 28 or interest demanded under Section 28AA - appeal dismissed - decided against Revenue.
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2019 (1) TMI 781
Misdeclaration of goods - clearance of “CR Engine with spares and accessories” - bonafide error or not - EPCG Scheme - Customs Notification No 103/2009 - container was found to be stuffed with 15 drums containing chemicals like “Cetane, U-18, U-25, T-25, 80-Octane and Octane.” Though these chemicals were reflected in the Invoice No 1399159 dated 16.11.2010, the appellants declared them as parts and accessories of machine instead of showing them separately - Held that:- While filing the checklist the all the items covered by the said invoice number were put together und one description “CFR Engine with Spares and Accessories” an benefit of exemption in terms of EPCG License claimed in respect of entire goods covered by the said invoice. The said check list has been generated on 21.01.2011 and the benefit of exemption claimed in respect of all the goods covered by the said invoice - we do not find that the error/ mistake leading to misdeclaration of the goods was an “bonafide error”. Nothing has been brought on record to show the bonafides.
The error committed by the appellant was not a bonafide error, it was a clear cut case of misdeclaration of goods to clear the goods without payment of duty under exemption - goods valued around ₹ 56 Lakhs have been held liable for confiscation under Section 111 (m) of Customs Act, 1962 and allowed to be redeemed on payment of redemption fine of ₹ 1,00,000/- which is very reasonable - a penalty of ₹ 50,000/- under Section 112(a) is also reasonable and justified.
Appeal dismissed - decided against appellant.
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2019 (1) TMI 780
Classification of imported goods - Instachk HBsAg Test Card (WB) - whether classified under chapter 30 or under Chapter 38? - N/N. 21/2002-Cus dated 01.03.2002 (S No 83, List 4 Sl No 31) - Held that:- It is now settled law that against the assessment of B/E, appellants can file the appeal before the Commissioner (Appeal). In their appeal they could have claimed re-assessment of B/E, in terms of classification, valuation or any other benefit which they intended to seek but has been not sought by them at the time of filing the B/E.
The matter in respect of re-classification and claim of exemption need to be remanded back to the assessing authority for reconsideration of the said claim on the basis of the evidences that appellant would like to place on record in support of his claim. After considering the said claim and evidences assessing authority shall pass a reasoned speaking order accepting or denying the claim of appellant.
The matter remanded back to assessing authority for reconsideration - appeal allowed by way of remand.
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2019 (1) TMI 784
Effect of Notification No.38/2015-2020 - effective date of notification - retrospective or prospective effect of notification - import of freely importable items, which was later on restricted by the impugned notification - various items including mild steel varieties like Hot Rolled Coils, Cold Rolled Coils, Hot Rolled Steel Plates, Pre Painted Steel Coils etc. - Contention of the petitioners is that as per the mandate of Section 3 of the Foreign Trade (Development and Regulation) Act, 1992, the Notification would be effective from the date of publication in the Gazette of India and not from the date when public notice or trade notice was issued.
Held that:- The Notification No.38/2015-2020 though made public by way of trade notice on 5th February, 2016 fixing MIP against 173 HS Codes under Chapter-72 of the ITC (HS)-2012, Schedule-I (Import Policy) would be effective and applicable from 11th February, 2016. However, this does not imply that the writ petitions would succeed and have to be allowed for the ‘imports’ into India were made on or after 11th February, 2016, i.e., the date on which the Notification has been published in the Official Gazette. Notification is not being given retrospective effect to make it effective to ‘imports’ made from a date prior to publication in the Official Gazette. Notification was effective from the date when it was published in the Official Gazette and accordingly would apply to ‘imports’ made on or after 11th February, 2016.
Notification No.38/2015-2020 dated 5th February, 2016 published in the Official Gazette on 11th February, 2016 was in force on the date of ‘import’ of goods by the petitioners as the ‘import’ was post publication in the Official Gazette on 11th February, 2016. We would not be giving retrospective effect to Notification No.38/2015-2020, when we hold that it would apply to all ‘import’ on or after 11th February, 2016 - The argument that the respondents have given retrospective effect to the Notification No.38/2015-2020, which can be only prospective, falters and is rejected.
Notification No.38/2015-2020 even if it was published in the Official Gazette on 11th February, 2016 had specific exemption in restricting the same to import/shipments under LoCs opened prior to the date of Notification, i.e., 5th February, 2016. Paragraph 2 of the Notification No.38/2015-2020 refers to the ‘date of the Notification’ and not the date on which it was published in the Official Gazette - In the present case, the LoCs were opened between 5th February, 2016 till 11th February, 2016, when the Notification No. 38/20152020 was uploaded on the web-site of the Respondents on 5th Februray,2016 and was published in the Official Gazette on 11th February, 2016. No doubt, paragraph 2 refers to paragraph 1.05 of the Foreign Trade Policy 2015-2020, but in the context that the importers would comply with the conditions stated therein, i.e., the condition for registration. Conditions regarding opening of LOCs before 5th February, 2016 would over-ride and prevail over paragraph 1.05(b) of the Foreign Trade Policy 2015-2020, as provided and stated in the clause itself. Expression “unless otherwise stipulated” in paragraph 1.05(b) would apply as paragraph 2 of the Notification No.38/2015-2020 stipulates to the contrary.
The factual position in the present writ petitions is identical in facts in the case of M/s Agri Trade India Services (P) Ltd. [2006 (8) TMI 370 - DELHI HIGH COURT] decided by the Supreme Court in M/s Asian Food Industries [2006 (11) TMI 10 - SUPREME COURT OF INDIA], in favour of the Revenue.
Petition dismissed - decided against petitioner.
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2019 (1) TMI 783
Condonation of 778 days delay in filing the appeal - reasons set out in the affidavit is that the Department was under mistaken belief that a Customs Appeal filed in this Court from an earlier order dated 20th March, 2013 would also govern the impugned order dated 13th March, 2015 passed by the Tribunal - Held that:- We find that the affidavit in support does not inspire any confidence. There is no fixing of responsibility for alleged misunderstanding on the part of the Customs Department. We know that the appellant-Revenue regularly files appeal from orders of the Tribunal to this Court and the statute under which they function, provides for the same - here is gross negligence on part of the officers of the Customs in not filing an appeal from the impugned order dated 13th March, 2015 within time and thereafter till 5th December, 2017, when the appeal was filed. Consequently, no occasion to condone the delay of 778 days in filing accompanying appeal arises.
The Notice of Motion is dismissed.
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Corporate Laws
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2019 (1) TMI 785
Investigation by the Serious Fraud Investigation Office - Section 212(1)(c) of the Companies Act, 2013 - Held that:- The Central Government is entrusted with the power in Section 212 of the Companies Act, 2013 to order an investigation by the SFIO if in its discretion such an investigation is necessary to safeguard public interest. It is true that the text of the statute does not contain an explicit right to challenge the opinion of the Central Government. However, this does not mean that the power confers absolute discretion over the decision and that its decision consequently attains unassailable finality. An order of investigation is an administrative order.
Being an administrative order, it is essential that the Government must form an opinion under the section and it has been repeatedly affirmed by the jurisprudence of our courts that certain defects in the formation of opinion are justiciable.
The power to investigate the affairs of a company cannot be used casually.
The materials which were on the record of the Central Government when it did issue the impugned order under Section 212 of the Companies Act – and given the report of the SFIO (which is, of course post such order) this court is of the opinion that there is no infirmity with the impugned judgment - appeal dismissed.
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Insolvency & Bankruptcy
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2019 (1) TMI 787
Corporate Insolvency Resolution Process - Corporate Debtor has committed default in repayment of the principal debt amount along with interest and has failed to make monthly payment as per the terms of the aforesaid Loan Agreement - Held that:- The applicant clearly comes within the definition of Financial Creditor. On a bare perusal of Form - I filed under Section 7 of the Code read with Rule 4 of the Rules shows that the form is complete and there is no infirmity in the same. It is also seen that there is no disciplinary proceeding pending against the proposed IRP. We are satisfied that the present application is complete in all respect and the applicant financial creditor is entitled to claim its outstanding financial debt from the corporate debtor and that there has been default in payment of the financial debt.
As a sequel to the above discussion and in terms of Section 7(5)(a) of the Code, the present petition is admitted.
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2019 (1) TMI 786
Corporate insolvency procedure - pre-existence (bonafide) dispute raised by the ‘Corporate Debtor’ - Held that:- In the present case, the ‘Corporate Debtor’ has not disputed the existence of ‘debt’, nor there is anything on record of the pendency of a suit or arbitration proceedings, or any pre-existing dispute raised prior to issuance of demand notice under Section 8(1). Therefore, no relief can be granted on the plea of so-called existence of dispute.
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Service Tax
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2019 (1) TMI 779
Non-payment of service tax - freight charges paid to the transporters during the period from 2007-08 and onwards - freight is being paid by their Head office at Howrah, Kolkata - Held that:- All freight charges for transportation of goods from Kolkata to Jaipur by road have been paid by the Head Office of the Company at Kolkata - In view thereof since the freight of the transportation is paid by the Kolkata office naturally in view of the provisions contained in Rule 2(1)(d)(i)(B) of the Service Tax Rules, 1994, the service tax payable on the amount of freight can be paid by the Head Office of the company situated at Kolkata, else it shall amount to double taxation.
There is no evidence of centralized registration being produced by the appellant. Also, the documents tendered are insufficient to prove that Kolkata office has discharged the liability of Jaipur office as has also been observed by the adjudicating authorities below. The Chartered Accountant’s Certificate shows much higher an amount of freight charges for Kolkata office only then the amount shown by the appellant qua freight charge of Kolkata as well as Jaipur office.
Penalty - Held that:- The appellants certainly, cannot be alleged of committing an act of non payment of service tax by reason of fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of this Chapter or the Rules made thereunder, with intent to evade payment of Service Tax - the appellant were not liable to be imposed with any penalty under any of the provisions contained in the Finance Act, 1994.
CENVAT Credit - Held that:- Once there is no proof of payment of service tax by appellant question of entitlement of cenvat credit does not arise at all.
Thus, the appellant could not have proved that the liability towards GTA has been discharged. Hence, appellant is held liable to discharge the said liability though the same stands already paid with interest. Hence, the Order is set aside to the extent of confirming penalty - appeal allowed in part.
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2019 (1) TMI 778
Penalty u/s 76 and 78 of FA - short-payment of service tax - Business Support Service - suppression of facts - Held that:- From the facts on records as well as the submissions made, it is seen that the assessee has discharged the service tax along with interest. The show cause notices have been issued invoking sections 73 and 73A of the Finance Act, 1994. As per Section 73A, the assessee is duty bound to deposit the amount collected as service tax with the Central Government. However, the said section does not provide for imposition of penalty for non-failure to comply with the said provision. The show cause notices have invoked section 73 also.
The contention of the department that there is suppression of facts with intention to evade payment of service tax is not supported with any evidence. For these reasons, there are no grounds to impose penalty under section 78 - there are no ingredients to impose penalty under section 78. The appellants have established that the delay in payment of service tax was due to the default of one of the clients and consequent financial hardships. They have given reasonable cause for failure and we hold that it is a fit case for invocation of Section 80 to set aside the penalties.
The penalty imposed under sections 76 and 78 in these appeals cannot sustain - impugned orders are modified to the extent of setting aside the penalties imposed under sections 76 and 78 of Finance Act, 1994 without disturbing the demand or interest thereon - appeal allowed in part.
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2019 (1) TMI 777
Refund of service tax paid on cancellation of booking of flats - refund amount not shown separately by the assessee in their returns - Held that:- There is enough evidence on record to prove compliance of above said Rule 6 (3) on the part of the appellant. Thus, the finding of Commissioner (Appeal) about lack of document is apparently wrong.
Rejection of appeal also on the ground that the amount of credit has not been separately shown in Return Form - Held that:- Since the documents on record prove that these is no revenue loss, the alleged act is nothing more than the procedural lapse - The law has been settled that Lapses in technical procedures are condonable - In the present appeal, it is not the case of department that appellant has availed credit in excess of the requisite proportion. Admittedly tax stands paid. Resultantly, the procedural lapse is mere technical for no substantial loss to the department.
Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 776
Liability of Service Tax - Security Services - Held that:- Revenue has not advanced any evidence to reflect upon the fact that the assessee was actually supplying the Manpower to Nagar Nigam. The various contracts and agreements entered by the respondents with Nagar Nigam clearly show that the work required to be done by them was the lump-sum work of cleaning for which purpose they were being paid. The workers deployed by them are clearly working on behalf of the assessee himself and they are not under the supervision or control of the service recipient.
Thus, in the absence of any agreement to utilize the services of an individual, assessee cannot be said to have provided Manpower Recruitment or Supply Agency Services.
Appeal dismissed - decided against Revenue.
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2019 (1) TMI 775
SEZ Unit - refund of service tax paid - rejection on the ground that the appellant had failed to establish nexus between the service received and provided for authorized operations in SEZ - whether the appellant is entitled to refund of service tax paid on various input services used by them in the SEZ for authorized operations? - Held that:- On going through the sample documents submitted by the appellant, it is found that the invoices were addressed to the appellant and payment of service tax is duly indicated in the said invoices and payment of service charges is entered in the journal voucher enclosed along with the invoices issued by the service providers. The appellant has categorically submitted that besides the activity of generation of electricity in the SEZ area, in no other activity is carried out by them where the input services have been used.
Two refund claims which were also rejected as barred by limitation - Held that:- Initially these claims were filed in time but voluntarily withdrawn by the appellant and again filed after six months. The department ought to have condoned the delay in filing the application for the second time.
Appeal allowed - decided in favor of appellant.
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2019 (1) TMI 767
Liability of service tax - GTA service - petitioners availing the service of transportation of the tea - interpretation of statute - whether after the tea leaf had been put through the process of withering, crushing, roasting and fermentation it continued to be agricultural produce? - Held that:- The tea leaf remained what it always was. It was tea leaf when selected and plucked. and it continued to be tea leaf when after the process of withering, crushing and roasting it was sold in the market. The process applied was intended to bring out its potential qualities of flavour and colour. The potential inhered in the tea leaf from the outset when still a leaf on the tea bush. The potential surfaced in the tea leaf when the mechanical processes of withering, crushing and roasting, fermenting by covering with wet sheets and roasting again were applied. The tea leaf was made fit for human consumption by subjecting it to those processes. At no stage. did it change its essential substance. It remained a tea leaf throughout. In its basic nature, it continued to be agricultural produce.
In the instant case, it is taken note of that the expression agricultural produce appearing in entry 21(a) of the Notifications No. 3/2013-ST dated 01.03.2013 and 6/2015-ST dated 01.03.2015 are issued under the provisions of the Finance Act of 1994, where Section 65B(5) of the Finance Act of 1994 defines agricultural produce as such:- “agricultural produce means any produce of agriculture on which either no furtherer processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market.” - As the expression agricultural produce has been defined in the Finance Act of 1994 and the concerned notifications, wherein the said expression appears are also issued under the provisions of the said Act of 1994, it has to be understood that the expression agricultural produce used in the two notifications are not used in a similar context as prevailed in the matter before the Supreme Court in DS Bist [1979 (9) TMI 168 - SUPREME COURT OF INDIA], wherein the said expression was explained and a meaning given to it. From the said point of view, as the expression agricultural produce was used under two different contexts, the meaning given to it in DS Bist in its own context may not be applicable in the present case, where the expression is not only used in a different context, but is also defined for the purpose.
The agricultural produce has been defined for the purpose of the Finance Act of 1994 u/s 65B(5) of the Finance Act of 1994. Accordingly, whatever meaning transpires from the definition of the expression agricultural produce given u/s 65B(5) of the Finance Act of 1994 would prevail while interpreting the said expression as it appears under Entry-21(a) of the Notifications No.3/2013-ST dated 01.03.2013 and No.6/2015-ST dated 01.03.2015, which are admittedly issued u/s 93 of the Finance Act of 1994 - When the definition of agricultural produce as it appears u/s 65B(5) of the Finance Act of 1994, is examined, it is discernible that agricultural produce means any produce of agriculture on which either no further processing is done or such processing is done as is usually done by a cultivator or producer, which does not alter its essential characteristic, but makes it marketable for primary market. The elements as appears in the definition of agricultural produce u/s 65B(5) are that there must either be no further processing done on the produce of agriculture or the processing is done by a cultivator or producer, which does not alter its essential characteristic, but makes it marketable for the primary market.
As to whether the expression agricultural produce appearing in Entry 21(a) of the Notifications No. 3/2013-ST dated 01.03.2013 and 6/2015-ST dated 01.03.2015 includes tea or not would have to be understood from the perspective of the definition of the expression agricultural produce as appearing in Section 65B(5) of the Finance Act of 1994 and not from the perspective of the expression agricultural produce as defined and explained in D.S Bist.
The principle of interpretation of statutes clearly provides that any interpretation which renders a provision to be irrelevant and redundant is to be avoided.
Where a conclusion is already arrived that Entry-21(a) of the Notification No.3/2013-ST dated 0103.2013 did not include tea and the said Entry-21(a) having been retained as it was even after the Notification No.6/2015-ST dated 01.03.2015 was issued, it cannot be stated that tea now stands included within the meaning of the expression agricultural produce as appeared in Entry-21(a) - As a conclusion had already been arrived that Entry-21(a) of the Notification No.3/2013-ST dated 01.03.2013 does not include tea even after the amendment brought in by the Notification No.6/2015-ST dated 01.03.2015, the other contention of the petitioners that where two views are possible, the view in favour of the assessee is to be accepted, is inapplicable in the present case.
The contention of the petitioner that tea was included within the meaning of the expression agricultural produce as appearing under Entry- 21(a) of the Notification No.3/2013-ST dated 01.03.2013, and it continues to remain included even after the amendment incorporated by the Notification No.6/2015-ST dated 01.03.2015, the contention of the writ petitioners that they are entitled for an exemption from service tax in respect of its transportation by a goods carriage agency in a goods carrier is found to be unacceptable.
Petition dismissed - decided against petitioner.
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Central Excise
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2019 (1) TMI 771
CENVAT Credit - input services - Maintenance Charges - it is alleged that the said maintenance service is not used by the appellant in or in relation to manufacture of final products or clearance of final products up to place of removal - Held that:- It is the admitted fact that the manufacturing activity of appellant is carried from the premises as are taken on rent. It is apparent from record that the impugned maintenance charges are the part of lease/ rent charges. M/s AKVN i.e. the leaser is also charging the service charges in their lease bills raised for lease amount and maintenance amount. Though the maintenance is for roads, street lights, drainage, etc. i.e. for facilities being provided beyond the manufacturing/ factory premises of appellant but the simultaneous fact is that such services are charged on the basis of per square meter of business premises occupied by the appellant - The lease/ rent charge are the eligible inputs.
These charges are indirectly related to business and they fall in the main part of the definition of input services. The findings of Order-in-Appeal are therefore held incorrect - there is no apparent intention of tax evasion on part of appellants - penalty also not levied - appeal allowed.
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2019 (1) TMI 770
Clandestine removal - demand based on data / computer print outs retrieved from the computers which was used in head office / factory etc. - Admissibility of micro films, facsimile copies of documents and computer print outs as documents and as evidence - Section 36B of the Central Excise Act, 1944 - Held that:- The mahazars dated 11.9.2007 and 17.9.2007 prepared at the appellant premises and office of DGCEI respectively would show that employees of the appellant viz. Ashok Kumar, Anil Kumar, Selvaraj were present. They have endorsed signature in the mahazar. The question is whether such endorsement of signature would fulfill the condition required in sub-section (4) of Section 36B. Any statement / print out taken out of the computer would be admissible in evidence only if it is supported by a certificate as required under sub-section (4) of Section 36B. There is no such certificate stating that it is prepared as per the requirement of Section 36B. Further, though all the persons who have endorsed signature in the mahazar dated 17.9.2007 at the office of DGCEI were present at the appellant’s premises on 11.9.2007 at the time of search, instead of retrieving the data from the appellant premises itself, the computers as a whole have been seized and taken to the office of DGCEI.
Thus, evidently, the Commissioner admits that the condition in Section 36B have not been complied with respect to the data retrieved from the computer. On such score, the evidence said to be retrieved from the computer cannot be relied upon at all. The ld. AR has argued that even though the computer print outs are not admissible in evidence, the statements of the witnesses would support the computer print outs and therefore the evidence of clandestine manufacture and clearance is established. The statements of persons have to be subjected to examination-in-chief as well as cross-examination as per the provision under section 9D of Act in order to be admissible as evidence.
The statements cannot be considered as standalone documents to prove the allegations in the show cause notice. The evidence put forth is too flimsy to establish a serious charge of clandestine manufacture and clandestine clearance of goods. Though the department need not establish clandestine clearance with mathematical precision, the evidence should establish a probability of such clandestine clearance. On appreciating the facts of the present case, the Commissioner himself having found that the main evidence relied for quantification of duty i.e. computer print outs being not admissible in evidence, the demand could not have been confirmed.
The department has miserably failed to establish the allegations raised in the show cause notice - appeal allowed - decided in favor of appellant.
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2019 (1) TMI 774
Scope and ambit of settlement order - Whether the Settlement Commission can after holding that the applicant has failed to make full and disclosure of his duty liability and the manner in which such liability was derived, act as an adjudicating authority to decide the show cause notice issued by the Central excise Officer and determine the demand raised?
Held that:- The Settlement Commission did not accept the claim of the three petitioners that they had made ‘full and true’ disclosure of the duty liability. It had also opined on the petitioners’ failure to disclose the manner in which the said duty liability was derived. Two essential pre-conditions for invoking jurisdiction of the Settlement Commission were therefore not satisfied. In the given facts, the Settlement Commission should have rejected the settlement applications and referred the case to the Central Excise Officer to decide the show cause notices issued to the parties on merits. However, notwithstanding the failure and non-satisfaction of the jurisdictional pre-conditions, the Settlement Commission proceeded to act as an adjudicating authority and has decided the show cause notice. This would be beyond the scope and power of the Settlement Commission, for the Settlement Commission is not an adjudicatory authority substituting the Central Excise Officer.
The Settlement Commission must function under the four corners of the powers conferred under Chapter-V of the Act. The Settlement Commission, after expressing and recording the finding on the failure of the petitioners to make ‘full and true’ disclosure of the duty liability and the manner in which it was derived, should have rejected the settlement application. The petitioners should have been relegated to suffer and undergo adjudication mechanism and procedure as per the provisions of the Act.
The writ petitions are partly allowed, quashing the impugned orders passed by the Settlement Commission to the extent they ‘adjudicate’ and confirm the demand raised in the show cause notice.
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2019 (1) TMI 773
Condonation of delay in filing appeal - case of Revenue is that the petitioner had not filed an application seeking condonation of delay before the respondent Commissioner and therefore there was no occasion for the Commissioner to consider the request for condonation of delay - Held that:- This Court is of the opinion that an opportunity should be afforded to the petitioner to offer an explanation, by filing an application before the Commissioner seeking condonation of delay and the Commissioner is hereby directed to consider such application and thereafter proceed to pass orders on merits - petition allowed.
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2019 (1) TMI 772
Recovery of amount of Excise duty received back by it as refund - Held that:- Petitioner with all bona fides paid Excise Duty for second supply as per law and then proceeded to claim refund for first supply. When department found that no Excise Duty was payable for second supply it ought to have refunded that amount to him without going into technical aspects of the matter - the interest of justice can be met with by directing respondents to treat the refund already made to petitioner as refund of Excise Duty paid by it on second supply. Accordingly amount already paid to petitioner be adjusted and there shall not be any recovery from petitioner on said count - appeal allowed in part.
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CST, VAT & Sales Tax
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2019 (1) TMI 769
Rate of tax - mobile charger sold along with the phone - composite unit or separate entity - notification bearing No.FD 40 CSL 2005 (III) dated 31.03.2015 - Punjab Value Added Tax Act, 2005 - Whether the Mobile Phone Charger whether sold as a composite product along with the phone or separately post 01.04.2015 can be charged at a rate higher than 5.5%? - Held that:- The order impugned suffers from non-application of mind. The respondent No.1 cannot adjudicate with regard to the issue as to whether the State Government is entitled to reduce the rate of tax. The variation of the tax rates being within the domain of the State Government, respondent No.1 erred in not confirming his actions to the notification.
The impugned order at Annexure-C insofar as it relates to levying tax on mobile charges at 14.5% is set aside and the matter is remitted back to the Authority for re-assessment in the light of the notification bearing No.FD 40 CSL 2005 (III) dated 31.03.2015 - petition allowed by way of remand.
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2019 (1) TMI 768
Validity if reassessment order - validity of remand order - it was specifically observed by the learned Single Jude that liberty should be given to the petitioner to produce documents on which petitioner intended to rely upon - principles of natural justice - Held that:- The appellant would fall under second exception namely there being violation of principles of natural justice namely when matter came to be remanded by the learned Single Judge with a direction to the Assessing Authority to consider the additional documents or additional evidence that would be placed by the assessee it was incumbent upon the Assessing Officer to consider the same by either accepting or rejecting. In fact in the reassessment order dated 22.06.2018 at internal page No.2 we find there is reference to RA bills produced by the assessee for verification on 07.03.2018 and also other documentary evidences.
In the absence of such exercise having been undertaken by the assessing officer, we are of the considered view that this would be in clear violation of direction issued by this court or in otherwords there has non consideration of said material while passing the order dated 22.06.2018 and thereby principles of natural justice had been given a complete go-bye and as such order dated 22.06.2018 the first respondent authority would not be sustainable.
The matter will have to be remitted back to first respondent–authority for redetermination by considering entire material placed by petitioner - appeal allowed by way of remand.
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2019 (1) TMI 766
Levy of VAT or service tax - gross receipts of the petitioner from providing the Passive Infrastructure Services in Gujarat - transfer of right - GVAT Act - It is the case on behalf of the petitioners that the transaction in question i.e. the revenue under the MSA is governed completely by Finance Act, 1994 and is liable to service tax.
Whether the transactions under reference can be said to be and/or considered as “transfer of right to use goods” as contemplated under Section 2(23)(d) of the GVAT Act or in the nature of “service contract” (as contended on behalf of the petitioner)?
Held that:- On perusal of the MSA as amended from time to time it can be seen that the petitioner Company has agreed to provide passive telecommunication infrastructure to the telecom operator so as to facilitate them to install and operate requisite equipments to provide telecommunication services. The said infrastructure would be provided to the telecom operator on “use only basis” for installation, operation and maintenance etc. of the active infrastructure of a telecom operator - It also appears that the petitioner Company grants the right to the telecom operator to enter the concerned site for installing necessary equipments, machineries owned by it at such site as may be required by it as well as also grants the right to operate and maintain the same.
It also appears that the petitioner Company grants the right to the telecom operator to enter the concerned site for installing necessary equipments, machineries owned by it at such site as may be required by it as well as also grants the right to operate and maintain the same.
The telecom operator can be said to have effective control over the manner, time and nature of use of passive infrastructure by virtue of its “right to use goods” acquired through such contract. Even the telecom operator has right to select the particular height, direction or other equipments. The petitioner Company does not have any freedom to allot the same height, direction on the same tower. Thus, once a particular placed is allotted by way of passive infrastructure, to any telecom operator, the said telecom operator can be said to be in exclusive domain and/or possession and/or use of such passive infrastructure by virtue of its “right to use” acquired through the contract subject to the conditions of MSA as amended from time to time once it is allotted to the petitioner Company does not appear to have the effective control over the manner, time and nature of use of a specified access to passive infrastructure allotted to a particular operator - Therefore, the transaction in question between the petitioner Company and the respective telecom operators pursuant to the respective MSA as amended from time to time cannot be said to be in the nature of “service contract” as contended on behalf of the petitioner.
The impugned SCN cannot be said to be wholly without jurisdiction and/or without authority under the law - appeal dismissed.
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2019 (1) TMI 765
Imposition of tax and penalty - inter-state transfer - non-production of the endorsed transit passes - section 76(6) of Assam Value Added tax Act, 2003 - invocation of revisional jurisdiction - Held that:- The presumption in the event of non-submission of the requisite transit passes with the endorsement of the exit check post can very well be rebutted by simply producing the said transit passes which the petitioner has failed. Moreover, the transit passes were issued in the year 2011 and 2012 and the appeal before the honourable Assam Board of Revenue were filed in the year 2015 but on perusal of the application seeking leave to bring on record the new and additional facts by way of relying the requisite documents it is seen that even on the date of filing the said appeals, the present petitioner was not in a position to produce those documents not to speak of at the time of filing of revision before respondent No. 3. In the said application for leave there is no explanation in order to show as to why there was so much delay.
There is no failure on the part of the honourable Board in exercising the jurisdiction while passing the impugned order in the appeal - petition dismissed.
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2019 (1) TMI 764
Jurisdiction - Classification of goods - rate of tax - trading of Ammonium Nitrate - initially taxable under Entry 18(1) of Schedule II to the VAT Act which was subsequently deleted and goods were subsequently classified under the residuary Entry - Entry 42A of ScheduleII to the VAT Act - the order of assessment was neither challenged by the petitioner nor was taken in revision by the revisional authority and thus, achieved finality. On 01.02.2018, the Asst. Commissioner of State Tax issued the impugned Notice purportedly in exercise of powers u/s.34(8A) of the VAT Act.
Held that:- In terms of subsection (2) of Section 34 of the VAT Act, it is open for the Commissioner, if any of the grounds mentioned therein are present, to serve a notice upon a dealer requiring him to appear on a date and place specified and to produce necessary documents and supporting evidence. Subsection (6) of Section 34 authorizes the Commissioner to complete best judgment assessment in case a dealer does not cooperate with the scrutiny assessment undertaken by the Commissioner. Subsection (7) of Section 34 empowers the Commissioner to impose penalty under certain circumstances - Subsection (8A) of Section 34, which is of importance to us, was inserted by the Gujarat Value Added Tax (Amendment) Act, 9 of 2013 with effect from 01.04.2013. The Statement of Objects and Reasons for introduction of the said provision provided that the same was added “so as to provide to assess the dealers separately in respect of any period for certain transactions or claims not recorded or recorded in an incorrect manner to evade the tax”.
The legislative intent, thus, for introduction of the said subsection (8A) clearly is to enable the Revenue to bring to tax certain transactions which are noticed in the course of any of the proceedings under the VAT Act. Such proceedings may be for assessment of the dealer for some other Financial Year or may even be appellate or revisional proceedings. If the proceedings in question relate to appellate or revisional proceedings, the authority would place the issue before the concerned authority with a direction to assess the dealer in respect of such transaction or claim - powers under subsection (8A) of Section 34 of the VAT Act would be available when a certain claim or a transaction has not been subjected to audit assessment under subsection (2) of Section 34 of the VAT Act.
The powers under subsection (8A) of Section 34 are not akin to the powers of reassessment u/s.35. Essentially, under subsection (8A) of Section 34, if the authority, in the course of any proceedings, notices any evasion of tax, he can address to such an issue, without carrying out full assessment and if such authority happens to be either the appellate or the revisional authority, the issue would be placed before the assessing authority. Two things, thus, become abundantly clear. Firstly, the powers under subsection (8A) of Section 34 are not similar to the powers of reassessment flowing from Section 35 of the VAT Act and secondly, such powers cannot be exercised when audit assessment has already been completed in case of a dealer with respect to a certain period. Any other view will make the limitation period provided in Section 35(1) of the VAT Act substantially, if not, completely redundant.
Notices issued by the competent authority in the later two years u/s.35 of the VAT Act - Held that:- Perusal of the provision of subsection (1) of Section 35 of the VAT Act would demonstrate that unlike in case of Section 147 of the Income Tax Act, 1961, it does not make any distinction between a notice of reassessment within and beyond 04 years. It permits reassessment of turnover that has escaped assessment, whether the escapement is on account of any failure on the part of the assessee to disclose truly and fully all material facts or otherwise. However, the concept of change of opinion would certainly apply.
Petition allowed - decided in favor of petitioner.
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