TMI Tax Updates - e-Newsletter
October 8, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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GST:
Classification of goods - RBD Palm Stearin - there is specific Tariff Item 1511 90 30 for ‘Refined bleached deodorized palm stearin’. Therefore, the product ‘Refined bleached deodorized palm stearin’ is classifiable under Chapter Heading 1511 with Tariff Item 1511 90 30
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GST:
Development Authorities - exempt entity or not - Taxability of supply of goods and services - Whether the Development Authorities formed and constituted under "Uttar Pradesh Urban Planning and Development Act, 1973" are to be treated as "Exempt entity or not" under new GST Law? - Held No.
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GST:
Classification of goods - Waste/by-product - Mahua De-oiled cake/De-oiIed Rice Bran is a by-product occurred during the solvent extraction process, which is used as an ingredient of Cattle Feed, Poultry Feed and Other animal feeds - Since the product is exempt, reversal of credit is required.
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GST:
Canned Pineapple Slices, dipped in Sugar Syrup comes within Tariff item no. 2008 - Taxable @12% of GST
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GST:
Supply of goods or Supply of services? - use of explosives in the blasting activity - the situation as narrated by the applicant is a composite supply of goods and services and shall be covered by Section 2(30) and Section 8(a) of the CGST Act, 2017 and the GGST Act, 2017.
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GST:
Exemption from GST - the training imparted by the applicant to create interest in students for more advance form of mathematics so as to enhance their thinking capacity and mental development or employing methods of play involving Musical, Visual and specialized effects does not make the activities of the applicant as the training or coaching in recreational activities.
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GST:
Classification of goods - Rate of tax - Slate for Teacher’ - ‘Slate for Student’ - the same are clearly designed to be used for writing or drawing with slate pen and chalk. - Benefit of exemption from GST allowed.
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Income Tax:
Penalty imposed u/s 271G - default in producing certain documents - since “event of default” occurred in March, 2014 i.e. well prior to the date of coming into force the amendment (i.e. 01.10.2014), the impugned order was wholly without jurisdiction
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Income Tax:
Higher rate of Depreciation on vehicles used for hire purposes - dumper and Volvo - It is not in dispute that the assessee has earned rental income from these vehicles. The requirement of the provision stands satisfied - claim of assessee allowed.
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Income Tax:
TDS u/s 194A - interest paid on unsecured loans raised from Bajaj Auto Finance Company - when payee has confirmed that it has accounted such an interest payment as its income, then no disallowance u/s. 40(ia) should be made
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Income Tax:
Additions towards excess stock was found - It was admitted by the director. Now this discovery of discrepancy cannot be bruised aside by merely submitting that on account of water contents in the cotton bales, their weight has been increased resulting into excess stock.
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Income Tax:
TDS u/s. 194G - non deduction of tds on commission paid to sub-agents - sale of lottery tickets through sub-agents - assessee is not liable to deduct TDS under section 194G, no disallowance under section 40(a)(ia) is called for.
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Income Tax:
Levy of fees u/s 234E - Section 200A, which deals with the processing of TDS returns, gave no mandate to make adjustments on account of levy of fees u/s 234E prior to 01.06.2015 and that the same was brought on the Statute only vide Finance Act, 2015 w.e.f. 01.06.2015.
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Income Tax:
Interest on delayed payment of VAT and TDS is only compensatory and is not penal in nature. Therefore, the CIT(A) has correctly deleted the disallowance made for the interest expenditure claimed on delayed payment of VAT and TDS.
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Income Tax:
Provision for impairment of stocks - method of valuation of stock - inventory consisted of old/used stock which was categorized as defective, but, repairable stock and demo stock. These stocks were valued at their net realizable value - claim of assessee allowed.
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Income Tax:
Penalty levied u/s 271(1)(c) - undervalued its closing stock - in the subsequent year, the assessee has shown less amount of opening stock which will lead in the enhancement of the profit of the assessee - there cannot be a deliberate act on the part of the assessee in declaring less amount of closing stock.
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Income Tax:
LTCG - Exemption u/s 54F - eligibility criteria - determination of net consideration - The net consideration as determined under section 50C based on the stamp duty authority valuation is not a consideration which has been received by or has accrued to the assessee.
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Income Tax:
Claim of deduction u/s 35DD or alternatively u/s 32 - acquiring commercial rights - the assessee has not paid any consideration to acquire the Palakollu Bank, the assessee has not shown any depreciation schedule in the amounts towards goodwill /commercial rights. Therefore, it cannot be considered that the assessee has acquired goodwill/commercial rights - Claim not allowed.
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Customs:
EPCG Scheme - benefit of Concessional rate of duty - The objection by the department is not on the basis of the material fact but on the interpreting of Notification No. 97/2004-Cus. - the demand is clearly hit by limitation.
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Customs:
Valuation of imported goods - if at all the value of contemporary imports is to be applied, the lowest value of similar goods imported into India is to be adopted. However, in the present case, the department could not bring on record that there are various imports and lowest price among all the imports is adopted. - Rejection of valuation is not proper.
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DGFT:
Benefits under the Services Exports from India Scheme (SEIS) - while educational services provided to NRI students (who constitute foreign consumers) would be eligible under the SEIS, services given to Indian students sponsored by NRIs would not be eligible.
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Service Tax:
CENVAT Credit - input services - insurance services provided by the appellant to workers working at their site - the availment of the policy appears to be a statutory requirement and as rightly contended by the assessee, this service is not used primarily for personal use or consumption of an employee and this, being the statutory requirement, it is insured (assessee) specific and not employees specific - Credit allowed.
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Service Tax:
Failure to deposit the service tax collected from clients though reflected in the ST-3 return - Extended period of limitation - Appellants have misappropriate the funds held by them in trust for their personal gain and should not be allowed the plea of financial hardship. - Demand with penalty sustained.
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Central Excise:
Extended period of Limitation - CENVAT Credit - The assessee did not file any return and did not maintain any records. Therefore, for reasons assigned by the original authority, the credit was rightly denied.
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Central Excise:
Valuation - goods manufactured on Job-work basis, sold by the principal - "Said Goods" - whether the goods manufactured and cleared by job worker and the same was sold by the principal falls under the term of “Said Goods” then only the obligation of Rule 10A (ii) can be decided.
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Central Excise:
Valuation - Job-work - Appellant had bona-fide belief for valuation of goods manufactured under job work. The demands beyond normal period of limitation are thus held to be patently time barred
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2018 (10) TMI 309
Classification - services or goods? - Determination of SAC or HSN? - Service of printing Question Papers for Educational Institutions - Service to such Educational Institutions relating to conduct of examination - Levy of GST - Rate of GST - input tax credit. Whether the Question Papers supplied by the Applicant are “goods” or “services”? - Held that:- As stated in the Application and in the arguments of the Applicant at the time of Personal Hearing the content of the matter printed referred to above, is being provided to the Applicant, and to print the same, i.e to convert the matter into a tangible form, necessary raw material, manpower and machinery is being provided by the Applicant. In other words, the content of the printed matter is specific to the customer, and, neither is the matter pre-printed, nor has the Applicant any ownership to the content at any point of time, and, therefore, cannot transfer title of the above printed matters. In other words, Question Papers are not the property of the Applicant - Furthermore, the Question Papers supplied by the Applicant to their customers are not marketable commodities in the open market and as goods they have no legitimate value to persons other than the specific customer who provides the input content. The Applicant, therefore, cannot be said to be supplying Question Papers as “goods” under the GST Act, but to be supplying the service of printing - Hence, the SAC is to be determined and not the HSN - Section 9 of the GST Tariff-Services deals with Community, Social and Personal Services and other miscellaneous services which include Education Services (covering services related to admission to or conduct of examination by Educational Institutions) under Heading 9992. Since the Applicant has specified the printing of question papers for Educational Institutions, supply of service under Section 9 of the GST Tariff is found to be appropriate. Benefit of exemption - Held that:- Serial No. 66(b)(iv) of Notification No. 12/2017–CT(Rate) dated 28/06/2017, as amended from time to time, as applicable, wholly exempts services provided to an Educational Institution relating to conduct of examination. The phrase „relating to’ expands the scope of this entry to include such support services without which conduct of the examination is not possible, unless they are specifically mentioned under any other entry. Question papers can have no use other than in conducting a specific examination, and the supply of service of printing such question papers is a supply related to conduct of that examination - Explanation (iv) to Notification No. 12/2017-CT (Rate) dated 28/06/2017, inserted vide Notification No. 14/2018-CT(Rate) dated 26/07/2018, clarifies that the Central and State Educational Boards shall be treated as Educational Institution for the limited purpose of services by way of conducting examinations. Serial No. 66(b)(iv) above, therefore, includes services provided to such Boards relating to the conduct of examinations - The Applicant is, therefore, not liable to pay tax on the service of printing question papers provided to the Educational Boards/Councils/Universities/Institutions relating to the conduct of examination. Section 17(2) of GST Act states that “Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.” - Since the supply of Question Papers to Educational Institutions if provided, for a particular examination is an exempt supply under Serial No. 66(b)(iv) of Notification No. 12/2017-CT (Rate) dated 28/06/2017, as amended, as applicable, the Applicant is not eligible to avail of Input Tax Credit. Ruling:- Service of printing Question Papers for Educational Institutions [as defined under clause 2(y) read with Explanation (iv) to Notification No. 12/2017-CT (Rate) dated 28/06/2017] for specific examination is classifiable under SAC 9992. Service to such Educational Institutions relating to conduct of examination, as described in 66(b)(iv) of Notification No.12/2017-CT(Rate) dated 28/06/2017, includes supply of the service of printing question papers, and is exempt under the GST Act. Being an exempt supply, the Applicant cannot claim credit of the GST paid on the inputs used for provisioning the service of printing question papers provided to the Boards / Educational Institutions relating to conduct of examination. This Ruling is valid subject to the provisions under Section 103(2) until and unless declared void under Section 104(1) of the GST Act.
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2018 (10) TMI 308
Classification of goods - RBD Palm Stearin - Whether RBD Palm Stearin would fall under Chapter 1511 – ‘Palm Oil and its fractions, whether or not refined but not chemically modified’ or under Chapter 382311 ‘Industrial monocarboxylic fatty acid, acid oils from refining, stearic acid, Palm Stearin? Held that:- Now there is specific Tariff Item 1511 90 30 for ‘Refined bleached deodorized palm stearin’. Therefore, the product ‘Refined bleached deodorized palm stearin’ is classifiable under Chapter Heading 1511 with Tariff Item 1511 90 30 in view of Rule 1 and Rule 3(a) of the General Rules for the Interpretation of the First Schedule to the Customs Tariff Act, 1975 - It is observed that CBEC Circular No. 81/2002-Customs dated 3.12.2002 was issued in the context of the then existing entries in the First Schedule to the Customs Tariff Act, 1975. Similarly, in the judgement of Hon’ble Supreme Court, in the case of Commissioner of Central Excise, Customs & Service Tax, Vishakhapatnam Vs. Jocil Ltd. [2010 (12) TMI 24 - SUPREME COURT OF INDIA], it was held that ‘palm stearin’ is specifically identified in Chapter sub-heading No. 3823 11 as ‘Palm Stearin’, and further differentiated as ‘Crude’ and ‘RBD’ in sub-heading Nos. 3823 11 11 and 3823 11 12 respectively. Ruling:- The product Refined Bleached Deodorised Palm Stearin, supplied by M/s. Gokul Agro Resources Ltd. is classifiable under Heading 1511.
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2018 (10) TMI 307
Development Authorities - exempt entity or not - Taxability of supply of goods and services - Whether the Development Authorities formed and constituted under "Uttar Pradesh Urban Planning and Development Act, 1973" are to be treated as "Exempt entity or not" under new GST Law? Held that:- It is undisputed fact that the Development Authority has been constituted under Uttar Pradesh Urban Planning and Development Act, 1973 - This is Act of State Legislature, Uttar Pradesh. No entity is categorized as Exempt Entity under the CGST Act or SGST Act. - Certain activities of public authorities are exempt - other activities are liable to be taxed. Ruling:- According to CGST Act, 2017, and UP SGST Act, 2017 no entity is "exempt entity" - Varanasi Development Authority is Governmental Authority - other than the Supply of services and goods made by Varanasi Development Authority, which is exempt, other services and goods are liable to GST.
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2018 (10) TMI 306
Classification of goods - Waste/by-product - Mahua De-oiled cake - input credit - Whether Mahua De-oiled cake (De-oiled Rice Bran being used as an ingredient of Cattle Feed, Poultry Feed and other animal feeds and is 'Waste generated' during the solvent extraction process? - Whether the applicant is eligible to get entire tax input credit of GST paid on purchase of Mahua Oil Cake/ Rice Bran Oil cake used in the manufacture of solvent extracted oil? Held that:- When common inputs are being used for both taxable and exempted supplies, the party is required to reverse the credit proportional to the amount of credit pertaining to the exempted supplies. ITC can be availed only on goods and services for business purposes. If they are used for non-business (personal) purposes, or for making exempt supplies ITC cannot be claimed. From Classification of various goods it can be seen that de-oiled mahua cake and de-oiled rice bran emerging as by-products after the process of manufacture fall under HSN 2308 and 2309 - Mahua de-oiled cake has been described rich in sugers, nitrogen and proteins but also there is presence of some toxic saponins which limits its usages as fish or cattle feed. However, on mixing further with some other vegetable and cereal waste its usage in cattle feeding and fish feeding are usual in practice. De-oiled rice bran has been seen in its usage in largely cattle feed, poultry and fish feed. Thus, de-oiled cake which is used for animal feed has been exempted by the Entry 102 and de-oiled rice bran has been specifically exempted under Entry 102A. Ruling:- Mahua De-oiled cake/De-oiIed Rice Bran is a by-product occurred during the solvent extraction process, which is used as an ingredient of Cattle Feed, Poultry Feed and Other animal feeds. The input credit of GST paid on purchase of Mahua Oil Cake/Rice Bran Oil cake used in the manufacture of solvent extracted oil is partially allowed as per process/ formula prescribed in the Chapter V (INPUT TAX CREDIT) of GST Rules, 2017, because, the applicant manufacturing both taxable and exempted goods by using raw materials viz Mahua De-oiled cake and De-oiled Rice Bran. Further, if common inputs are used for both taxable and exempted supplies, the applicant is required to reverse the credit proportional to the amount of credit pertaining to the exempted supplies immediately.
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2018 (10) TMI 305
Classification of an item - Peeled Sliced Pineapple, put up in airtight unit container in sugar syrup. Held that:- Canned Pineapple Slices, dipped in Sugar Syrup comes within Tariff item no. 2008 and N/N. 01/2017-C.T. (Rate) dated 28-06-2017 issued by Central Government and Notification KANI-2-836/XI-9(47)/17-U.P. Act-1-2017-Order-(06)-2017 dated 30-06-2017, schedule-II and taxable at 6% CGST and 6% SGST.
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2018 (10) TMI 304
Jurisdiction of AAR - Issuance of Tax Invoice - issuance of single invoice for every truck unlike the situation Prior to GST regime, where it was practice to receive single invoice for the entire month, and daily challan accompanied with each truck. Ruling:- The responsibility to issue Tax Invoice related to Supply of Taxable Goods is with the Registered person who supplies the goods - in this case the suppliers are registered with Jharkhand and Chattisgarh states - the Jurisdiction to decide the issue with the authority is limited to the state of Uttar Pradesh. As the registered persons are outside the territorial limits of State of Uttar Pradesh, the present application is outside the scope of Jurisdiction - the present Advance Ruling application is dismissed as not maintainable.
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2018 (10) TMI 303
Maintainability of Advance Ruling Application - Section 97(2) of the Central Goods and Services Tax Act, 2017 and Gujarat Goods and Services Tax Act, 2017 - services of scientific testing and technical analysis on pharmaceutical products - determination of ‘place of supply’ - whether the activities provided by the applicant will be treated as ‘export of service’ under the provision of the Integrated Goods and Services Tax Act, 2017 and will consequently fall under ‘zero rated supply’ as per Section 16 of the IGST Act, 2017? Held that:- The issue whether the activity of the applicant provided to foreign clients towards scientific testing and technical analysis services on pharmaceutical products which are supplied by an entity situated outside India would be treated as ‘export of service’ under the provisions of the IGST Act can be determined in light of various provisions of the IGST Act, 2017 including Section 2(6) which defines ‘export of services’ - Thus, one of the important requirements of supply of any service to be treated as ‘export of service’ is that the place of supply of service is outside India. The entire issue is intrinsically related to determination of ‘place of supply’ of service by the applicant. This authority has been constituted in exercise of the powers conferred by section 96 of the Gujarat Goods and Services Tax Act, 2017, which Act extends to the whole of the state of Gujarat. This authority is a creature of statute and has to function within the legal boundary mandated by the Act. As the ‘place of supply’ is not covered by Section 97(2) of the Acts, this authority is helpless to answer the question raised in the application, as it is lacking jurisdiction to decide the issues. The jurisdiction of this authority does not extend to the questions on determination of ‘place of supply’. The application for Advance Ruling of M/s. Lambda Therapeutic Research Limited is rejected, under sub-section (2) of section 98 of the CGST Act, 2017 and the GGST Act, 2017.
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2018 (10) TMI 302
Supply of goods or Supply of services? - use of explosives in the blasting activity - Whether the blasting activity carried out by the applicant is to be considered as a 'supply of goods' or 'supply of service'? Held that:- In the present case applicant uses explosives in the blasting activity at their client’s site. Thus it would be evident that blasting activity is carried out by the applicant for their client for which the applicant uses explosives. The applicant carries out blasting work with the aid of explosives. Thus, there is deemed supply of explosives in this case in view of the judgement of Hon’ble Supreme Court in the case of Bharat Pest Control (supra) as well as the supply of service in the form of the blasting work. Therefore, the situation as narrated by the applicant is a composite supply of goods and services and shall be covered by Section 2(30) and Section 8(a) of the CGST Act, 2017 and the GGST Act, 2017. Ruling:- The blasting activity carried out by M/s. Khedut Hat, Moti Bazar, Gondal, Rajkot- 360 311 is a 'composite supply' of goods and services and shall be covered by Section 2(30) and Section 8(a) of the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017.
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2018 (10) TMI 301
Exemption from GST - training or coaching - recreational activities or not - UCMAS (Universal Concept Mental Arithmetic System) - The activity provided by UCMAS using abacus whether qualifies for exemption from the payment of GST? Held that:- As per Sl. No. 80 of Notification No. 12/2017-Central Tax (Rate) exempts services by way of training or coaching in recreational activities relating to arts or culture or sports. (In case of training or coaching in recreational activities relating to sports, exemption is admissible only when such services are by charitable entities registered under section 12AA of the Income-tax Act) - The words ‘recreational activities’ and ‘arts’ have not been defined in the GST Acts or Notifications issued thereunder. As per the dictionary meaning, ‘Art’ is the expression or application of human creative skill and imagination, typically in a visual form such as painting or sculpture, producing works to be appreciated primarily for their beauty or emotional power - The improvement of speed and accuracy of calculations or development of mental capabilities, such as, concentration, observation, visualization, imagination and memory cannot be said to fall within the meaning of ‘Art’. It is evident from the dictionary meaning of the term ‘Art’ as well as from the relevant entries of the scheme of classification of services, as reproduced above, that the activities of the applicant do not fall within the term ‘Art’. Therefore, the exemption provided vide Sl. No. 80 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 issued under the CGST Act, 2017 and corresponding Notification issued under the GGST Act, 2017 and Sl. No. 83 of Notification No. 9/2017-Integrated Tax (Rate) issued under the IGST Act, 2017 is not admissible to the activities of the applicant - Further, the training imparted by the applicant to create interest in students for more advance form of mathematics so as to enhance their thinking capacity and mental development or employing methods of play involving Musical, Visual and specialized effects does not make the activities of the applicant as the training or coaching in recreational activities. Ruling:- M/s. Omnisoft Technologies Private Limited is not entitled to the exemption provided vide Sl. No. 80 of Notification No. 12/2017Central Tax (Rate) dated 28.06.2017 issued under the CGST Act, 2017 and corresponding Notification issued under the GGST Act, 2017 and Sl. No. 83 of Notification No. 9/2017-Integrated Tax (Rate) issued under the IGST Act, 2017. Hence the activity provided by UCMAS using abacus does not qualify for exemption from the payment of Goods and Services Tax.
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2018 (10) TMI 300
Withdrawal of Advance Ruling application - Whether clarification F.No 354/03/2018 dt.08.01.2018 is also applicable to “Industrial Canteen”? Held that:- In the matter personal hearing was fixed for 28.7.2018 but no one appeared on the stipulated date from applicant side and vide their letter, which was received on 06.08.2018 informed about withdrawal of their application and requested to drop the verification and examination of the said Application - The application is dismissed having been withdrawn by the applicant.
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2018 (10) TMI 299
Classification of goods - Rate of tax - Slate for Teacher’ - ‘Slate for Student’ - job-work - receipt of ‘manufacturing services on physical inputs (goods) owned by others’ by M/s. Raja Slates Pvt. Ltd. Held that:- From the technical specification of ‘Teachers’ Slate’ and ‘Students’ Slate’, we find that the same are clearly designed to be used for writing or drawing with slate pen and chalk. The material specified to be used in ‘Teachers’ Slate’ is Pine wood base MDF (Medium Density Fibre) and it should be without frame. The material specified to be used in ‘Students’ Slate’ is Pine wood base MDF (Medium Density Fibre) and it should be with Tinpatti Frame in four sides and both sides. Taking the technical specification of ‘Teachers’ Slate’ and ‘Students’ Slate’, as submitted by the applicant, and Explanatory Notes for Heading 96.10 of Harmonised System of Nomenclature, into consideration, we hold that the product ‘Teachers’ Slate’ and ‘Students’ Slate’ is appropriately classifiable under Tariff Heading 96.10. Rate of tax - Held that:- The product ‘Slates’ falling under Tariff Item 9610 00 00 is exempted from Goods and Services Tax vide Sl. No. 146 of Notification No. 2/2017Central Tax (Rate) dated 28.06.2017 issued under the Central Goods and Services Tax Act, 2017 and corresponding Notification issued under the Gujarat Goods and Services Tax Act, 2017 and the Integrated Goods and Services Tax Act, 2017 (herein after referred to as the ‘IGST Act, 2017’), whereas the product ‘Boards, with writing or drawing surface, whether or not framed’ falling under Tariff Item 9610 00 00 is leviable to Goods and Services Tax @ 18% (CGST 9% + SGST 9% or IGST 18%) vide Sl. No. 448 of Schedule III of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 issued under the CGST Act, 2017 and corresponding Notification issued under the GGST Act, 2017 or the IGST Act, 2017. It is now well settled principle of interpretation of statue that the word not defined in the statute must be construed in its popular sense, meaning ‘that sense which people conversant with the subject matter with which the statue is dealing would attribute to it’. It is to be construed as understood in common language. Whether the products manufactured and supplied by the applicant can be termed as ‘Slates’ as understood in common parlance, or otherwise? - Held that:- It is observed that in the document issued by the Gujarat Council of Elementary Education, the products have been referred to as ‘Slate for Student’ and ‘Slate for Teacher’. Thus, the products ‘Slate for Student’ and ‘Slate for Teacher’ are known as ‘Slates’ in common parlance and therefore are eligible for exemption from payment of Goods and Services Tax vide Sl. No. 146 of Notification No. 2/2017-Central Tax (Rate) dated 28.06.2017 issued under the CGST Act, 2017 and corresponding Notifications issued under the GGST Act, 2017 and the IGST Act, 2017. Levy of tax on job-work - appellant are getting some job work done on slates and when the main manufactured item is tax free - reverse charge mechanism - Held that:- As per clause 3 of Schedule II of the CGST Act 2017 and the GGST Act, 2017, ‘any treatment or process which is applied to another person’s goods is a supply of services’. Accordingly, applicable Goods and Service Tax on ‘manufacturing services on physical inputs (goods) owned by others’ is required to be paid - Further, as per clause (4) of Section 9 of the CGST Act, 2017 and the GGST Act, 2017 the Goods and Services Tax (Central Goods & Services Tax and State Goods and Services Tax) in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of the Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. In a case where registered person is recipient of taxable service of ‘manufacturing services on physical inputs (goods) owned by others’ from the supplier of such service who is not registered, the Goods and Services Tax is required to be paid under Section 9(4) of the CGST Act, 2017 and the GGST Act, 2017, subject to exemption, if any, available. Ruling:- The products ‘Slate for Student’ and ‘Slate for Teacher’ supplied by M/s. Raja Slates Pvt. Ltd. are appropriately classifiable under Tariff Heading 96.10. The products ‘Slate for Student’ and ‘Slate for Teacher’ supplied by M/s. Raja Slates Pvt. Ltd. are eligible for exemption from payment of Goods and Services Tax vide Sl. No. 146 of Notification No. 2/2017-Central Tax (Rate) dated 28.06.2017 issued under the CGST Act, 2017 and Sl. No. 146 of Notifications No. 2/2017-State Tax (Rate) dated 30.06.2017 issued under the GGST Act, 2017. In case of receipt of ‘manufacturing services on physical inputs (goods) owned by others’ by M/s. Raja Slates Pvt. Ltd. from the unregistered supplier of such service, the Goods and Services Tax is required to be paid by M/s. Raja Slates Pvt. Ltd. under Section 9(4) of the CGST Act, 2017 and the GGST Act, 2017, subject to exemption, if any, available.
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Income Tax
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2018 (10) TMI 298
Penalty imposed u/s 271G - default of the notice requiring the petitioner/assessee to produce the relevant documents under Section 92D(3) - TPO did not possess the requisite jurisdiction to initiate penalty proceedings and its imposition subsequently on 16.01.2015, was not justified - Held that:- In Varkey Chacko [1993 (8) TMI 1 - SUPREME COURT], the Supreme Court considered the formulation of law in Brij Mohan [1993 (8) TMI 1 - SUPREME COURT] and reiterated it. The assessee’s contention was that the concealment exercise – being penal in nature, committed when the return was filed and cognizance taken by the authority, by virtue of the subsequent amendment, was not legal. It was in these circumstances that the Court held that the penalty for concealment of particulars of income for furnishing inaccurate particulars would be upon the assessing authority for satisfaction in that regard. In the opinion of this Court, that judgment does not help the revenue’s answer on the charge of lack of jurisdiction and the law as enunciated in Brij Mohan and Varkey Chacko (supra) i.e. that the event of default defines the jurisdiction of the concerned authority, who may proceed to initiate the penalty proceedings. In the present case, since “event of default” occurred in March, 2014 i.e. well prior to the date of coming into force the amendment (i.e. 01.10.2014), the impugned order was wholly without jurisdiction. - Decided in favour of assessee.
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2018 (10) TMI 297
Levy of interest tax on the penal/default interest collected - whether Penal interest collected would fall within the ambit of the Interest Tax Act u/s 2(7) of the Interest Tax Act - Held that:- The High Court of Karnataka, in the case of State Bank of Mysore vs. Commissioner of Income-tax reported in (1988 (6) TMI 21 - KARNATAKA HIGH COURT) held that interest is the damages or compensation for delayed payment of money due and therefore, the expression 'compensation' in Section 32 of the Negotiable Instruments Act, will include interest paid by way of damages or compensation for delayed payments. It was further, held that any amount collected by the Bank cannot be anything but interest, whatever may be the nomenclature, and is chargeable interest for the purpose of Interest Tax Act. "Loans and advances” has been held to be different from discounts and legislature has kept in mind the difference between the two and it is clear that the right to charge for overdue interest by the assessee banks did not arise on account of any delay in repayment of any loan or advance made by the said banks and this right arose on account of default in payment of amounts due under a discounted bill of exchange. It was held that a subject can be brought to tax only by a clear statutory provision in that behalf and interest is chargeable to tax under Interest Tax Act only if it arises directly from a loan or advance. This finding was explained by stating that it is clear from the use of the word “on” in Section 2(7) of the Interest Tax Act that interest payable “on” a discounted bill of exchange cannot be equated with interest payable “on” a loan or advance.
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2018 (10) TMI 296
Higher rate of Depreciation on vehicles used for hire purposes - AO denied depreciation @ 30% - whether subject dumper and Volvo do not fall within the expression of motor buses, motor lorries and motor taxies, ? - Held that:- It is not in dispute that the assessee has earned rental income from these vehicles. The requirement of the provision stands satisfied, in wake of such finding recorded by none other than the Assessing Officer himself. The Commissioner (Appeals) has tried to non-suit the assessee on the ground that the subject dumper and Volvo do not fall within the expression of motor buses, motor lorries and motor taxies, as provided in Entry No. III (3)(ii) of Part-A of Appendix-1. It is pertinent to note that the depreciation for motor buses, motor lorries and motor taxies has been provided under the Head-III Machinery and Plant, wherein Clause (ii) of Entry No.III (3) deals with the motor buses, motor lorries and motor taxies, while Clause 3(iii) concerns with commercial vehicles. As such, if the vehicles in question are not held to be falling in subclause (ii) of Clause (3), they would well fall in sub-Clause (iii) of the Clause 3 of Entruy No. III of Appendix-1, entailing even higher rate of depreciation to the assessee. The expression used in sub-clause (ii), namely motor buses, motor lorries and motor taxies is having wide amplitude and the term motor lorries used therein, would take in its sweep the subject vehicles, i.e., dumper and Volvo. Thus as the vehicles in question were used for hire purposes, the assessee cannot be denied depreciation @ 30%. - Decided in favour of assessee.
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2018 (10) TMI 295
TDS u/s 194A - interest paid on unsecured loans raised from Bajaj Auto Finance Company - Non deduction of tds - addition u/s 40(a)(ia) - certificates filed by the assessee are not in Form no.26A - whether in view of 2nd proviso to Section 201(1) read with 1st proviso to Section 201(1) the conditions mentioned therein have been met or not? - Held that:- Certificate in Form 26A may not have been furnished but once such a declaration has been given, then such an artificial disallowance of Section 40(ia) should not be made. Section 40(ia) is meant for collection of tax at source on behalf of payee and if such taxes has neither been deducted by the payer nor shown by the payee then there is loss to the exchequer which consequently entails disallowance of expenditure claimed by the assessee. Such a provision cannot mean to call for disallowance when payer has paid the taxes on such an income as this proviso was brought to remove such hardship to the payer. Now such a beneficial amendment has been held to be retrospective by the Courts. Therefore, when payee has confirmed that it has accounted such an interest payment as its income, then no disallowance u/s. 40(ia) should be made. Accordingly, the addition made by the Assessing Officer is deleted. - Decided in favour of assessee.
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2018 (10) TMI 294
Addition u/s 68 - treating the agricultural income as non agricultural income - whether income earned by the appellant was agriculture and will tantamount to income by overriding title.? - Held that:- Findings of the Assessing Officer was never dispelled by the assessee by placing contra evidence. Admittedly, the assessee was never the owner of the agricultural properties from where it is claimed that he was in receipt of agricultural income of ₹ 12,36,000. The assessee did not produce any documentary evidence to prove that he was in receipt of any agricultural income on account of any agricultural operation carried out by him. Therefore, we are of the view that the Income-tax Authorities have correctly held that the assessee was not in receipt of ₹ 12,36,000 as agricultural income. Having held ₹ 12,36,000 as not agricultural income, the sum that is credited to the book of account has to be necessarily added as income from other sources u/s 68 of the I.T.Act. - Decided against assessee
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2018 (10) TMI 293
Penalty u/s 271AAA - absence of any specific inquiry - manner of earning undisclosed income and substantiation thereof - Held that:- In the absence of any evidence on record to show that any specific query was made to the assessee in this regard, the allegation for non-fulfillment of condition of Section 271AAA(2) of the Act does not survive. In view of the binding precedent, the onus would shift on the assessee to specify the manner of earning undisclosed income and substantiation thereof only upon requisite inquiry in this regard. In the absence of any specific inquiry, the assessee cannot be blamed for non-furnishing of manner of earning undisclosed income and substantiation thereof sue motu. It was not shown to us as to whether such query was put even in the course of assessment proceedings. In the absence of any inquiry, the assessee cannot be blamed for non-satisfaction of the exit clause provided under s.271AAA(2) of the Act. Therefore, in the facts and circumstances of the case, the immunity provided under erstwhile provisions of Section 271AAA(1) of the Act cannot be denied. - Decided against revenue
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2018 (10) TMI 292
Addition u/s 069 and u/s 69C - as during the course of survey excess stock was found - Held that:- The assessee has included value of above stock in the closing stock. At this stage, it is pertinent to observe that as far as first fold of contention is concerned, for the assessee did not make any arguments. It is an admitted fact that during the course of survey excess stock was found. It was admitted by the director. Now this discovery of discrepancy cannot be bruised aside by merely submitting that on account of water contents in the cotton bales, their weight has been increased resulting into excess stock. This aspect ought to have contested at the time of survey by the directors. He should have not admitted working of the excess stock and objected the calculations made by the department. Subsequently, it cannot be stated that cotton was having water contents on account of rain etc. There should be a specific circumstances or specific reply. This is missing. We do not find any merit in the first fold of contention. The assessee is having excess stock of ₹ 58,02,095/-. This value of excess stock should suffer tax. Second question is, whether by inclusion of this stock in the value of the closing stock, the assessee has recognized income offered by it or not. AO without looking into the reply of the assessee extracted separately made addition. Therefore, remit this issue to the file of the AO to consider the above reply of the assessee. It is to be ascertained that excess stock found at the time of survey valued at ₹ 58,02,095/- should suffer tax. If the assessee has already included this amount in the value of closing stock, then separate addition would result double addition. Make it clear that the AO would verify the fact about the enhancement of closing stock by a sum of ₹ 58,02,095/-. There should not be any corresponding expenditure debited by the assessee. The assessee will not be entitled for corresponding expenses because this must have already been debited in the regular course of business. If it is found that the assessee included a sum of ₹ 58,02,095/- in the value of the closing stock, and not debited any corresponding expenditure, then there should not be further addition, because this stock will ultimately suffer tax on account of sale without allowing corresponding expenditure. With the above directions, the appeal of the assessee is partly allowed.
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2018 (10) TMI 291
Expenditure incurred for Research & Development u/s 35(1) - advance paid for acquiring research equipments - Held that:- We found that various judicial decision submitted by the Ld. AR upheld the view that the acquisition and installation of the R&D machine is not a prerequisite for allowing deduction u/s 35(1)(iv) and the expenses incurred for constructing and acquiring the fixed assets are allowable with reference to the work in progress and machinery in transit also. Thus, there is no need to interfere with the finding of the CIT(A). Ground Nos. 1 and 2 of the Revenue’s appeal are dismissed. Expenditure for constructing external roads to the factory premises as permissible deduction u/s 37(1) - the ownership remains with government - Held that:- The AO has made the disallowance by observing that as per the contractor the amount was spent on ‘laying and making of RCC Road.’ The AO also observed that this road was exclusively the asset of the assessee, or even otherwise there was no obligation on the assessee to constructed this road. The A.O treated the amount as capital expenditure by relying on Travencore Cochin chemical Ltd. [1977 (1) TMI 2 - SUPREME COURT]. However, in this case the issue was related to construction of new roads and not repairs of existing roads. As going through the decision of the Apex Court and also the fact that the road were only being strengthened through RCC, the observations of the A.O are not based on findings regarding ownership of the road with the appellant or whether new roads had been laid out from scratch. - Decided against revenue
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2018 (10) TMI 290
Assessment u/s 153A - Addition u/s 68 - unexplained share application money - Held that:- In present case, the assessment proceedings were already completed and unabated and no incriminating evidence found. Thus, the Revenue could not differ from the fact that there was no incriminating evidence found in the present case.- Decided in favour of assessee.
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2018 (10) TMI 289
TDS u/s. 194G - non deduction of tds on commission paid to sub-agents - sale of lottery tickets through sub-agents - Held that:- The assessee is not giving any commission to the sub agents as there is a sale being effected between the assessee and the sub agents and the assessee after transferring the lottery tickets to the sub agents has no control over the same. It is not a case where the assessee is giving any remuneration or prize to the sub agents, in as much as the value of prize winning lottery tickets is claimed from the government agency supplying the lottery tickets to the assessee. The government agency after deduction of TDS credits the value to the account of the assessee who, thereafter, passes on the same to the sub agents. In the facts of the present case we find that the application of section 194G/194H of the Act was not warranted. While delivering the decision of the Tribunal, the Tribunal took note of the binding decision of the Jurisdictional High Court in the case of M.S. Hameed and Ors. Vs. Director of State Lotteries [2000 (11) TMI 63 - KERALA HIGH COURT] wherein it was held that the assessee is not liable to deduct TDS under section 194G, no disallowance under section 40(a)(ia) is called for. - Decided in favour of the assessee.
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2018 (10) TMI 288
Reopening of assessment - unexplained investment u/s 69 - Held that:- The grievance of the AR of the assessee is that the CIT(A) without appreciating or examining the documents filed before him in the proper perspective, upheld the action of the AO. AR, the CIT(A) ought to have remitted the matter back to the AO or ought to have called for a remand report from AO. Therefore,to meet the ends of justice, we set aside the order of CIT(A) and remit the issue back to the file of the AO with a direction to re-do the assessment de-novo after examining the documents as per law after providing reasonable opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.
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2018 (10) TMI 287
Bogus purchases u/s 69C on account of substantiated creditors - Held that:- Information was given by the assessee in 154 proceedings, which were rejected by the AO. Hence addition on information received with respect to the supplier, CIT (A) deleted the addition of ₹ 3198701/-. With respect to other parties similar matter existed and confirmation was received so the ld CIT A deleted the addition. The facts submitted in para no three of the order was not controverted by the ld DR. With respect to only on party information was not received where the addition was only of ₹ 38930/- which has been verified by the CIT (A) that in subsequent period, the payment has been made by assessee by cheque and it was confirmed through the bank statement of the assessee as stated by the CIT A. So the whole addition was deleted. DR also could not show that where the ld CIT A has gone wrong. We have also carefully seen the reason given by the CIT A in para no three of his order and we do not find any infirmity in his order. We uphold the order of the CIT-A deleting the above addition of ₹ 3198701/- and ₹ 2360970/-. - Decided against revenue.
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2018 (10) TMI 286
Deemed dividend addition u/s 2(22)(e) - commercial transaction - interpretation of Section 2(22) (e) of the Act, in so for as it concerns the term "loan" and "advance" used therein - Held that:- Trading advances which were in the nature of commercial transactions would not come within the preview of Section of 2(22) (e) of the Act and such view had attained finality. As examine the transactions between M/s.ISML and assessee, in so far as application of Section2(22) ( e) of the Act is concerned there is no dispute that a sum of D20 Crores was received by the assessee from M/s.ISML by virtue of its agreement entered by the assessee with M/s.ISML on 10.12.2011. It is also not disputed that assessee had made available its entire capacity for manufacturing rough castings on captive basis to M/s.ISML on a regular basis. Assessee had also undertaken not to utilize its manufacturing capacity for any other party. It is obvious in our opinion, that the sum to the extent of D20 Crores received by the assessee based on the above agreement, through which it gave away all its manufacturing capacity, was nothing but a commercial transaction. Transactions between assessee and ISML had started much earlier to 20.12.2011 and we have already pointed a large number of instances when the balance in the name of the assessee was negative. In our opinion, ld. Assessing Officer fell in error in taking an isolated view and considering only a part of the transactions ignoring the transactions prior to 23.01.2012, which together clearly indicated that account was in the nature of a running trade account. Coming to the addition of D2,69,89,513/- sustained by the ld. Commissioner of Income Tax (Appeals), there is a clear finding by the ld. Commissioner of Income Tax (Appeals) that M/s.ISML had paid such sum towards statutory duties, TDS and wages of the assessee. Nevertheless, in our opinion, such payments would not take the transaction out of preview of a commercial transaction. Assessee had given its entire capacity to M/s.ISML and if M/s.ISML paid part of the statutory duties, TDS and wages of the assessee directly, in our opinion, such payments cannot be considered as loans or advances coming within the ambit of Section 2(22) (e) of the Act. We cannot say that assessee received any benefit since there was a quid-pro-quo in the nature of surrendering its entire production capacity to M/s. ISML. Thus in our opinion sums received by the assessee from M/s. ISML would not come within the preview of advances/ loans mentioned in Section 2(22)(e)- Decided in favour of assessee.
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2018 (10) TMI 285
Levy of fees u/s 234E - delay in filing TDS returns - intimation u/s 200A - Held that:- As decided in M/S SONALAC PAINTS & COATINGS LTD. AND M/S NAGPAL TRADING CO., VERSUS THE DCIT, CPC (TDS) , VAISHALI, CHANDIGARH [2018 (6) TMI 303 - ITAT CHANDIGARH] the provisions of Section 234E for levy of fees on account of late filing of TDS returns was brought on the Statute vide Finance Act, 2012 w.e.f. 01.07.2012 and also that Section 200A, which deals with the processing of TDS returns, gave no mandate to make adjustments on account of levy of fees u/s 234E prior to 01.06.2015 and that the same was brought on the Statute only vide Finance Act, 2015 w.e.f. 01.06.2015. Respectfully following the decision in the case of Fatheraj Singhvi (2016 (9) TMI 964 - KARNATAKA HIGH COURT) we hold that the fees levied in all the present cases u/s 234E prior to 01.06.2015 in the intimations made u/s 200A was without authority of law and the same is, therefore, directed to be deleted. All the appeals of the assessee stand allowed.
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2018 (10) TMI 284
Depreciation on a higher rate - commercial vehicle - Held that:- As per the notification no.10/2009 dated 19 January 2009 issued by the CBDT a vehicle purchased during the specified period and put to use before the 1st October, 2009 is eligible for depreciation at higher rate i.e. 50%. In the CBDT Circular there is no mentioned that the vehicle needs to be registered with the RTO under the category of commercial vehicles. Therefore, we are of the view that the assessee is eligible for the depreciation on a higher rate. We also note that in the identical facts and circumstances this Tribunal in the case of Shree Balaji Products (2016 (11) TMI 443 - ITAT AHMEDABAD) has decided the issue in favour of the assessee. Disallowance of interest expenses - sufficiency of own funds - Held that:- From the submission of the assessee it appears that own fund of the assessee exceeds the amount of money advanced/invested without any interest income. Therefore, inference can be drawn that the own fund has been invested as discussed aforesaid. However, we feel that the balance sheet for the year under consideration is essential for adjudicating the issue on hand. Therefore we are inclined to sent back issue to the file of AO for fresh adjudication with the direction to check whether the own fund of the assessee exceeds the amount of money advanced/invested without charging any interest income. - Decided in favour of assessee for statistical purposes.
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2018 (10) TMI 283
Eligibility to benefit of section 10(26B) - proof of promoting the interest of the members of the scheduled tribes - Held that:- In view of the above order of the Tribunal in assessee’s own case for the immediately preceding assessment years, i.e. A.Ys. 2011-2012 and 2012-2013 [2017 (8) TMI 849 - ITAT COCHIN] we hold that the assessee which is financed and established by the Government for promoting the interest of the members of the scheduled tribes living in the Lakshadweep Islands, is entitled to the benefit of section 10(26B) of the I.T. Act. - Decided in favour of assessee. Interest on delayed payment of VAT and TDS as allowable expenditure - Held that:- Interest on delayed payment of VAT and TDS is only compensatory and is not penal in nature. Therefore, the CIT(A) has correctly deleted the disallowance made for the interest expenditure claimed on delayed payment of VAT and TDS. Hence, this ground raised by the Revenue is rejected.
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2018 (10) TMI 282
Claim of deduction u/s 80P(2) - assessee is a primary agricultural credit society, registered under the Kerala Co-operative Societies Act, 1969 - Held that:- In the instant case, the assessee is primary agricultural society. A certificate to the above effect is on record. In view of the judgment of the Hon'ble Jurisdictional High Court in the case of The Chirakkal Service Co-op Bank Ltd. & Ors. (2016 (4) TMI 826 - KERALA HIGH COURT), we hold that the assessee-society is entitled to the benefit of deduction u/s. 80P of the Act. Eligible for deduction u/s 80P(2)(a)(i) - co-operative societies engaged in providing credit facilities to its members, in course of its business had made investments with treasury, bank etc. and earned interest income - Held that:- In the instant case the assessee had made investments with sub-treasuries and banks in the course of its business of banking / providing credit facilities to its members. Therefore, it was entitled to deduction u/s 80P(2)(a)(i) in respect of interest income that was received on such investments. See Vaveru Co-operative Rural Bank Ltd. v CIT [2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT].
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2018 (10) TMI 281
Provision for impairment of stocks - method of valuation of stock - inventory consisted of old/used stock which was categorized as defective, but, repairable stock and demo stock. These stocks were valued at their net realizable value. - Held that:- The immediately preceding assessment year i.e., 2004-05 Tribunal approved the assessee’s method of valuation of the old/used stock and stock meant for demo purpose. As noticed that the assessee was following this method of valuing closing stock consistently. This led to the vindication of the assessee’s stand. The Revenue assailed this order before the Hon'ble Delhi High Court. The Hon'ble jurisdictional High Court in its judgment in CIT vs. Hughes Communication India Ltd. [2011 (12) TMI 710 - ITAT DELHI]), has approved the view taken by the Tribunal on this issue. Since the facts and circumstances of the instant ground are mutatis mutandis similar to those of the immediately preceding year, respectfully following the precedent, we order to delete the addition of ₹ 6,13,176/- sustained in the first appeal. The alternate prayer made for increasing the value of the opening stock of the relevant assessment year by ₹ 90,35,298/- is dismissed as similar ground of the assessee for preceding year, reducing the value of closing stock to this extent, has been accepted by the Tribunal. Addition being credit balance of sundry creditors which were static for the last three years or more - Held that:- AR supplied a chart showing that a sum of ₹ 2,32,743/- payable to its vendor, namely, Noisecon, was paid on 17.06.2008 and the remaining amounts were written back as its income in the accounts for the year ending 31.03.2009. On a pertinent query, the details of such write back in the accounts of the next year could not be pointed out by the ld. AR to demonstrate that such a sum was actually offered for taxation in the year of write back. We, therefore, direct the AO to verify the assessee’s claim in respect of writing back of the amount in a later year and ensure that such an amount gets offered to taxation in terms of Explanation to section 41(1) of the Act. Disallowance of ‘Regulatory expenses’ - revenue or capital expenditure - Held that:- On going through the above Memorandum, we fail to appreciate as to how such a payment is an annual charge. Prima facie, it appears to be a onetime fee, payable by the assessee, in respect of each site. The ld. AR was required to draw our attention towards some further literature or material to indicate the nature of payment, which he could not readily point out. Thus ends of justice would meet adequately if the impugned order on this score is set aside and the matter is remitted to the AO. Disallowance of ‘Software expenses’ - nature of expenses - revenue or capital - Held that:- Hon’ble Delhi High Court in CIT vs. Amway India Enterprises [2011 (11) TMI 4 - DELHI HIGH COURT], has held that expenditure incurred on purchase of application software is allowable as revenue expenditure. Similar view has been taken in CIT vs. Asahi India Safety Glass Ltd. [2011 (11) TMI 2 - DELHI HIGH COURT] by holding that the expenditure incurred by the assessee on software is allowable as revenue expenditure, more so, when it is towards purchase of an application software. When we consider the detail of software expenses incurred by the assessee, it becomes manifest that the same is liable to be treated as a revenue expenditure and not a capital expenditure. Addition on account of licence fee which was held by the AO to be capital in nature - Held that:- CIT(A) has, in fact, restored the matter to the file of AO by giving certain directions. Technically, he has no power to remit the matter to the AO for a fresh decision. However, on merits, we find that the direction given by him is in substance germane to the issue and decisive in appreciating the deductibility or otherwise of the amount. We, therefore, set aside the impugned order in so far as the restoration of the matter is concerned. However, adopting the direction, we require the AO to verify the assessee’s claim in the hue of the portion extracted above from the impugned order. Disallowance of WPC charges paid to DOT for obtaining the frequency/spectrum from Wireless Planning Commission in terms of licence agreement with DOT - Held that:- it is noticed that the assessee made a claim before the AO that a sum of ₹ 1.33 crore and odd was paid as royalty to WPC for obtaining frequency/spectrum. The ld. AR stated that the payment was a recurring cost payable on the basis of use on year to year basis. On a pertinent query, the precise nature and necessary details of such payment could not be provided. In the given circumstances, we set aside the impugned order and remit the matter to the file of the AO for examining the nature of such payment. Disallowing deduction in respect of foreign exchange loss arising due to restatement of outstanding liabilities - Held that:- The Hon’ble Supreme Court in CIT vs. Woodward Governor India (P) Ltd. . [2009 (4) TMI 4 - SUPREME COURT] has held that the loss suffered by the assessee in respect of revenue liability on account of exchange difference as on the date of balance sheet is an item of expenditure liable for deduction u/s 37(1) in the year of accrual. In this view of the matter, the direction given by the ld. CIT(A) to the AO for allowing deduction if the restatement of liability is on revenue account and not allowing the same, if it is on capital account, does not warrant any interference. Although, technically, the direction given by the CIT(A) is not possible in view of his limit on the power to restore an issue to the AO, but, we adopt the same as our direction to the AO for consideration and decision on the issue raised in these grounds. Addition holding that the stock was not reconciled - Held that:- As observed from the annual report of the assessee for the year under consideration that there is no difference in the value of last year’s closing stock becoming as opening stock for this year. The difference is only in certain quantities. The auditors have mentioned that: “It is not practicable to furnish quantitative information in view of the considerable number of items diverse in size and nature.” Such a note has been given while giving the figures of purchases, turnover and stocks. In view of the note of the auditor, it is clear that quantitative information was neither complete nor precise. As, admittedly, there is no difference in the value of last year’s closing stock becoming opening stock of this year, there can be no rationale in making any addition on account of difference in quantities because of the admitted position stated by the auditor that there are considerable number of items diverse in size and nature. We, therefore, order to delete the addition
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2018 (10) TMI 280
Penalty levied u/s 271(1)(c) - addition made on difference in closing stock - AO alleges that assessee has undervalued its closing stock - Held that:- Assessee during the assessment proceedings has duly explained the difference in the quantity of closing stock as discussed above but the AO has not pointed out any defect/infirmity in the submission of the assessee. It is a fact that the penalty proceedings are different with the assessment proceedings. To levy the penalty, there has to be some deliberate act on the part of the assessee either for concealing of the income or furnishing the inaccurate particulars of income. It is an undisputed fact that the closing stock of one year becomes the opening stock of the subsequent year. Thus, it can be inferred that if the assessee has shown less amount of closing stock then the assessee will carry forward the same to the next year at lesser value which shows there will be no effect on the tax liability of the assessee except the fact that the tax liability of one year will shift to another year. We also note that the assessee cannot be benefited by showing less amount of closing stock as it will become opening stock of the subsequent year. Therefore we are of the view that the act of the assessee for showing less closing stock cannot be said as deliberate. Closing stock for the year under consideration was shown less as pointed out by the AO. Thus, the assessee has to bear more burden of tax in the year under consideration. If the assessee has not made any adjustment, then it will bear more burden of the tax. It is because the assessee in the year under consideration has declared the higher amount of closing stock, but in the subsequent year, the assessee has shown less amount of opening stock which will lead in the enhancement of the profit of the assessee. Thus, we can conclude that there cannot be a deliberate act on the part of the assessee in declaring less amount of closing stock. - Decided in favour of assessee.
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2018 (10) TMI 279
Assessment framed u/s 153A - Unexplained credit under section 68 - proof of incriminating material - Held that:- The fact that no incriminating material was found has been admitted at Bar by the DR before us. The only document pointed out by the Revenue, we find, is a Balance Sheet that too pertaining to the succeeding year and which throws no light absolutely on the facts leading to additions made in the impugned year on account of share application money of ₹ 50 lakhs received from M/s RSM Metals and M/s. Octomac Software Pvt. Ltd. The said document, we find, reflects only some unsecured loans taken by the assessee from the two companies that too in the succeeding year only and not in the impugned year. Therefore it is an admitted fact that no incriminating material was found during search conducted on the assessee. The fact that the assessment for the impugned year has not abated is also an undisputed fact. In view of the same we hold that the Ld. CIT(Appeals) has rightly deleted the additions made following the proposition in case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] that no addition to be made in assessment framed u/s 153A of the Act in absence of any incriminating material, where assessments were not abated. - Decided against revenue.
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2018 (10) TMI 278
Valuation of property u/s 50C - computation of capital gain - reference to DVO - land as situated in the interior area of Narayanapuram Varisai and there was no proper approach road, therefore, the Approved Valuer has rightly valued the property at ₹ 50,40,000/- - taking sale consideration of property - Held that:- A perusal of the Departmental Valuation Officer’s report shows that the method prescribed under the Wealth Tax Act was not followed. Moreover, the factors such as the location of property, availability of infrastructure facility around the area, potential development in the near future, accessibility to the infrastructure facility such as road, airport, educational institutions, etc. were not properly considered either by the Approved Valuer or by the Departmental Valuation Officer. In those circumstances, relying upon both the Valuer’s report would not reflect the correct fair market value of the property. Therefore, when the assessee claims that what was received is only ₹ 50,00,000/-, the Approved / Registered Valuer estimated the property at ₹ 50,40,000/- and the Departmental Valuation Officer estimated at ₹ 81,68,304/-, this Tribunal is of the considered opinion that estimation of value of the property after considering the infrastructure facilities and other factors as referred above, at ₹ 69,00,000/- would meet the ends of justice. Accordingly, the orders of both the authorities below are modified and the Assessing Officer is directed to take the sale consideration of the property at ₹ 69,00,000/- and thereafter compute the capital gain. Coming to development charges the assessee has produced the receipt from Shri K. Manikandan for filling up the land to the extent of ₹ 3,10,000/-. This Tribunal is of the considered opinion that when the assessee has produced the receipt for filling the land, the Assessing Officer is not justified in disallowing the claim of the assessee. The cost of filling of land has to be allowed while computing the capital gain. The payment of brokerage was also disallowed by the Assessing Officer. It is a fact that in the real estate business, the assessee has to pay 2% to 3% of sale consideration as brokerage for negotiating the price of the property to the prospective purchasers. Therefore, this Tribunal is of the considered opinion that 2% of the total sale consideration has to be allowed as brokerage charges. Accordingly, the Assessing Officer is directed to allow 2% of ₹ 69,00,000/- as brokerage while computing the capital gain. Eligibility for exemption u/s 54 - Held that:- In the eyes of common / Hindu law, husband and wife are considered to be one and same even though they are independent and distinct assessable entity under the Income-tax Act. In a joint family system, particularly, male dominated society, the investment would always be made in the name of eldest male member of the family. Since the property sold was admittedly belonging to the assessee, Tribunal is of the considered opinion that the investment made in the property belonged to the assessee’s husband, has to be construed as investment made by the assessee. The additional construction, which was not disputed as not an independent residential unit, belonging to the assessee, therefore, the assessee is eligible for exemption under Section 54F in respect of the investment made. Accordingly, both the authorities below are not justified in disallowing the claim of the assessee. Hence, the orders of both the authorities below are set aside and the AO is directed to allow the claim of exemption under Section 54F. Now coming to development expenditure of ₹ 3,20,000/-, it is not in dispute that the property was sold on 22.01.2010. But, the quotation for so-called development was obtained from M/s Thirumalai Construction only on 20.03.2010. Therefore, after the sale of property, this Tribunal is of the considered opinion that the assessee would not have incurred the expenditure. Therefore, as rightly submitted by the D.R., the claim of ₹ 3,20,000/- is not justified. The disallowance of development expenditure of ₹ 3,20,000/- is confirmed. - Appeal of assessee partly allowed.
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2018 (10) TMI 277
Deduction u/s 54F - eligibility criteria - determination of net consideration - Held that:- On perusal of section 54F, what is, therefore, relevant is the investment of the net consideration in respect of original asset which has been transferred and whether net consideration is fully invested in the new asset. The net consideration as determined under section 50C based on the stamp duty authority valuation is not a consideration which has been received by or has accrued to the assessee. The ld. D.R. did not place reliance on the proviso to section 54F. It is, therefore, clear that the entire net consideration and whatever has physically received and accrued to the assessee, the entire amount has been invested and in such circumstances, provisions of section 54F(1)(a) are complied with by the assessee and, therefore, assessee becomes eligible for deduction in respect of whole of the capital gains to be computed under section 45 read with section 48 and 54F(1)(a) of the Act. In this view of the matter, we set aside the order of the ld. CIT(A) and allow the appeal of the assessee.
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2018 (10) TMI 276
Claim of deduction u/s 35DD or alternatively u/s 32 - acquiring commercial rights - AO corrected the mistake u/s 154 by disallowing the deduction u/s 35DD - Held that:- Assessee company being an Indian company can only make a claim under section 35DD of the Act. The Income Tax Act, 1961 has defined what is an Indian company, as per section 2(26), Indian company means a company formed and registered under the companies Act 1956. The assessee is not an Indian Company and not registered under the Companies Act, 1956 it is only a Cooperative Bank, therefore, primfa-facie assessee is not eligible for claim of expenditure under section 35DD of the Act. The Assessing Officer by allowing claim of the assessee under section 35DD has committed a mistake apparent on record. AO has applied inapplicable provisions to the assessee’s case i.e. 35DD allowed the claim made by the assessee on face of it, there is a mistake apparent on record. Therefore, same can be rectified under section 154. CIT(A) by considering the entire facts and circumstances of the case, confirmed the rectification order passed by the Assessing Officer by holding that the order passed by AO is within the scope of section 154. CIT(A) correctly confirmed the order of the AO. Allowance of brought forward losses and unabsorbed depreciation - Held that:- The assessee has not filed any material to substantiate that the losses /unabsorbed depreciation of the amalgamation company ascertained as per provisions of section 72AB of the Act. Therefore, we find that the ld. CIT(A) rightly confirmed the order of the Assessing Officer by observing that the entitlement of allowance of such losses in the hands of the said bank (amalgamated bank) or its eligibility to be carried forward under the provisions of section 72 was not proved. Therefore, we find that the ld. CIT(A) rightly considered the issue and confirmed the order of the Assessing Officer. Liability undertaken by the assessee by paying over and above the asset value has to be considered as payment for acquiring commercial rights - Held that:- We find that the assessee has not paid any consideration to acquire the Palakollu Bank, the assessee has not shown any depreciation schedule in the amounts towards goodwill /commercial rights. Therefore, it cannot be considered that the assessee has acquired goodwill/commercial rights. Therefore, we find no infirmity in the order passed by the ld. CIT(A).- Decided against the assessee
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Customs
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2018 (10) TMI 275
Extended period of Limitation - EPCG Scheme - benefit of Concessional rate of duty - benefit denied on the ground that the assessee have imported the goods i.e. consumables and since word ‘consumables’ was deleted from the scope of N/N. 97/2004-Cus dated 17.09.2004 by way of amendment through N/N. 72/2007-Cus dated 21.05.2007 - confiscation - recovery of differential duty with penalty, interest etc. Held that:- The respondent have obtained the EPCG license wherein the description of goods was clearly declared as consumables. The bills of entry also bear the same description. The objection by the department is not on the basis of the material fact but on the interpreting of Notification No. 97/2004-Cus. It was clear to all that the word consumables was deleted in the exemption entry under EPCG Scheme, therefore, there is no mis-declaration or suppression of fact on the part of the respondent. This case is solely on the interpretation of the word interpreting of exemption entry of capital goods in the Notification 97/2004-Cus dated 18.09.2004. Moreover the Revenue in its appeal has not made any ground on the issue of limitation which appears that the Revenue has given up the issue of limitation, therefore, the demand is clearly hit by limitation. Appeal dismissed - decided against Revenue.
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2018 (10) TMI 274
Valuation of imported goods - valuation based on contemporary goods - various tableware and household items which includes glass ware made out of opal glass like dinner sets - it was alleged that the respondent have mis-classified and mis-declared the goods - it was argued that the value of the goods imported by respondent were not worked out on the basis of invoices found in the premises of the said importer - whether the appellant have undervalued the goods in question or otherwise? - time limitation. Held that:- It is observed that in the show cause notice, the sole reason given for undervaluation was on the basis of mis-declaration of goods. The Tribunal in the earlier order, as referred above, clearly held that there is no case of mis-declaration or mis-classification. Therefore, the very basis, even for valuation of goods, gets demolished. Once the charge in the show cause notice was made on the basis of some material, the adjudication order cannot travel beyond the allegation and the material evidence adduced in the show cause notice. From the allegation in the show cause notice, it is clear that even for the charge of undervaluation, the reason stated is mis-declaration of the description of Opal ware as Glass ware and the claim of classification of goods is under CTH 7013 39 00 instead of under CTH 7013 32 00. Since, now the charge of misdeclaration of goods and classification does not exist, the case of undervaluation of the Revenue fails on this ground itself. Other evidences in support of Revenue’s allegation of undervaluation - Revenue has relied on two parallel invoices found in the premises of M/s. Vishal Hira Merchant Pvt. Limited, Delhi - Held that:- The enhanced price of the goods is not based on these parallel invoices, therefore, this evidence of parallel invoices is discarded and the same cannot be used against the respondent. It is also pointed out by the ld. Counsel that the said invoices are not authentic as the same does not show that it belongs to the supplier. It also does not show that the price is meant for all customers across the world or applicable to all customers in India. Therefore, the invoices of M/s. Vishal Hira Merchant cannot be used as evidence against the respondent. Email exchanged between supplier and M/s. K.P. International - Held that:- It is not the conclusive evidence for the reason that it contains only offer/ counter-offer between the parties and it is exchanged with M/s. K.P. International only for enquiring about the price. There is no evidence that goods have been imported by M/s. K.P. International at the price mentioned in the emails - Therefore, whatsoever price mentioned in the email, cannot be taken as price of contemporary goods. It is was submission of the ld. Counsel that for application of Rule 6(2) read with Rule 5(3) of Customs Valuation Rules, it clearly provides that if at all the value of contemporary imports is to be applied, the lowest value of similar goods imported into India is to be adopted. However, in the present case, the department could not bring on record that there are various imports and lowest price among all the imports is adopted. Therefore, the provisions of Rule 6 has not been complied with. Valuation based on contemporary goods - Respondent have produced evidence in the form of bills of entry under which others have imported the similar goods from the same supplier at price lower than the price at which the respondent had imported the goods - Held that:- Even if the value of contemporary goods has to be adopted, the value of bills of entry produced by the respondent should have been taken. It is undisputed fact that the respondent is a bulk buyer of the goods in question, the goods are specifically branded as per the requirement of the respondent. Therefore, there cannot be contemporary goods similar to the goods imported by the respondent. For this reason also, the value declared by the respondent cannot be rejected. The Revenue has no evidence that there is any extra consideration paid by the respondent to supplier of Glassware, therefore, there is no material at all to suggest that there is undervaluation of the goods imported by the respondent - the rejection of declared value is improper and illegal. Time Limitation - show cause notice dated 23.03.2007, which was issued for the period covering from May 2005 to May 2006 - Held that:- The extended period was invoked mainly on the allegation that the respondent have mis-declared the description and classification of the goods. As discussed above, the Tribunal in the first round, set-aside the charge of mis- declaration of description and classification. Therefore, in this scenario, when no mis-declaration is involved, no suppression of facts exists. Hence, the extended period for demands proposed in the show cause notice also not sustainable and therefore, the demand for the extended period is set-aside also on the ground of limitation. Appeal dismissed - decided against Revenue.
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2018 (10) TMI 273
Rectification of Mistake - appellant points out that the denial of the exemption also would appear to be an error as, in a similar dispute, the Tribunal had allowed the benefit of the said notification to M/s Ammunition Factory [2017 (10) TMI 1378 - CESTAT MUMBAI] - Held that:- The decision in re M/s Ammunition factory was rendered on a set of facts that does not have a bearing on the submission made by Learned Counsel - the said order had been dictated and pronounced in open Court and any deficiency in recording of submission should have been brought to the notice there and then. There is no merit in the application for rectification of mistake which is dismissed.
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Service Tax
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2018 (10) TMI 269
CENVAT Credit - input services - insurance services provided by the appellant to workers working at their site, as per the mandatory requirement of labour laws - denial of credit on the ground that the payment of insurance premium for availing the insurance policy stand excluded from the definition of input services , pursuant to the definition of Input Services , after 01.04.2011. Held that:- The Tribunal interpreted Clause (C) above and stated that in so far as the expression and used between two expressions health insurance and Travel benefits is disjunctive and is not required to be read along with the expression health insurance . - Further, it held that the exclusion clearly mentions various services, including life insurance and health insurance, as not covered by input services. It is further held that the travel benefits extended to the employees at the time of leave or home travel concession also stand excluded and therefore, there is no warrant to read excluded health insurance services with the travel benefits for leave etc. and the contention of the assessee that the health insurance services, which stand excluded are only which are extended during leave, cannot be accepted. The Tribunal missed a very significant point, while taking a decision as to whether the credit availed by the assessee is eligible or not ?. The first and foremost factor, which should have weighed the mind of the Tribunal is the nature of the policy availed by the assessee ; the beneficiary of the policy ; and the Statute, under which, the policy is required to be availed. These three are very important factors in the instant case. The inclusion of the Workmen's Compensation Act in the 1996 Act, a beneficial legislation, is for the purpose of protecting workmen, who generally belong to unorganized sector. The policy does not name the employees, but categorized the employees based on their vocation/skill. The insured is the assessee and the intention of the policy is to protect the employees, who work in the site and not to drive them to various forums for availing compensation in the event of an injury or death. Therefore, even viewed from this angle, the availment of the policy appears to be a statutory requirement and as rightly contended by the assessee, this service is not used primarily for personal use or consumption of an employee and this, being the statutory requirement, it is insured (assessee) specific and not employees specific. Thus, the Tribunal fell in error in dismissing the appeal filed by the assessee and equally the First Appellate Authority as well as the Original Authority failed to interpret the statutory provisions, in the manner it is required to be done. Appeal allowed - decided in favor of assessee.
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2018 (10) TMI 268
Failure to deposit the service tax collected from clients though reflected in the ST-3 return - Security Agency Services - Commercial Training and Coaching services - it was alleged that service tax paid by the appellant was not commensurate with the amounts received during the corresponding periods - Demand of Service Tax alongwith Interest and Penalty - Extended period of limitation - Simultaneous penalty u/s 76 and 78 - Financial hardship Held that:- The plea advanced by the appellants for not depositing the tax is on account of financial hardship. If such plea is entertained, then not only the scheme of indirect taxation will be impacted but the entire mechanism of fair trade and commerce will collapse. Can really financial hardship, be the reason for holding on the money collected from the customer/ client be valid reason for nonpayment of tax due to the government. In the scheme of indirect taxation the tax depositor is only a conduit for depositing the tax collected from the recipient of taxable service to the government - the amounts collected as tax from the customer/ client are not the money in the hand of tax payer but only held in trust by the said taxable person for the period and to be deposited with revenue in manner as prescribed by the taxing statue. By not depositing the said amounts in the manner as have been provided by law, Appellants have misappropriate the funds held by them in trust for their personal gain and should not be allowed the plea of financial hardship. Financial hardship cannot be reason to justify such misappropriation of the money which was never held as the money by the appellant - demand upheld. Extended period of limitation - Penalty - Held that:- It is quite evident that appellants have been collecting the service tax from their customers/ clients but were not depositing the same with the exchequer. They were rotating the amounts collected as tax for their personal gains. They were also guilty of not filing the returns on due date to declare their tax liabilities and hence they have definitely suppressed the details of tax collected and payable to the exchequer. Thus demands made invoking extended period as provided by proviso to section 73(1) is justifiable and for the same reasons appellants liable to penalty under Section 78 of the Finance Act, 1994 - Further for various contraventions such as not payment of tax by the due date and delay in filing the returns for the period prior to 2008, simultaneous penalties under Section 76 also justified - penalty u/s 77 also upheld. Benefit of reduced penalty - Held that:- The option to pay penalty to extent of 25% at the Appellate stage cannot be allowed. Appeal dismissed - decided against appellant.
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Central Excise
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2018 (10) TMI 267
Extended period of Limitation - Benefit of reduced Penalty - invoking extended period of limitation under Section 11A of the Central Excise Act and imposition of penalty under Section 11AC when all relevant information were within the knowledge of the department from 02.12.2003? - Eligibility of availing Cenvat Credit when no return was filed. Held that:- The proviso comes into play only when suppression is established or stands admitted and it would differ from a case where fraud, etc., are merely alleged or is disputed by the assessee and therefore, the concept of knowledge cannot be read into the provisos because that would amount to rendering the term "relevant date" negatory and such interpretation is not permissible. The contention that once knowledge has been acquired by the department, there is no suppression and the ordinary statutory period of limitation prescribed under sub-section (1) of section 11 would be applicable was rejected as a fallacious argument inasmuch as once the suppression is admitted, merely because the department acquires knowledge of the irregularity, the suppression would not be obliterated. In the instant case, it has been established that there has been suppression, there has been clandestine removal of excisable goods without payment of excise duty, the assessee having collected excise duty from the customers did not remit it to the department and the assessee did not obtain registration from the department nor maintained any records and obtained registration under the provisions of the Act only on 16.05.2003. Thus, these facts would clearly establish that the extended period of limitation was invocable in the assessee's case. Also, the plea raised by the assessee that they should have been granted the opportunity to pay 25% is unacceptable. If the assessee had collected excise duty, he is bound to remit the duty to the department and cannot retain the same and then contend that due to financial difficulty, he could not remit the same and had remitted a portion of the same in instalments. The factual scenario in the instant case disentitles the assessee for any remedy. CENVAT Credit - it is submitted that the Adjudicating Authority has erroneously denied the Cenvat credit and the assessee was able to succeed only before the Appellate Authority - Held that:- The assessee did not file any return and did not maintain any records. Therefore, for reasons assigned by the original authority, the credit was rightly denied. However, the assessee has partially succeeded before the Appellate Authority and as against the said finding, the department has not filed an appeal - this can, in no way, advance the case of the assessee. Appeal dismissed - decided against assessee.
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2018 (10) TMI 266
Clandestine removal - Remand of the case - power of Tribunal to remand the case - evasion of duty - evidence available on record not discussed with - admissibility of statements available on record as evidence. Whether the Tribunal has committed an error of law by remitting the matter back to the Commissioner for de novo inquiry on the issue concerning evasion of duty amounting to ₹ 9,94,65,997/- without discussion of evidence available on record which prevailed upon the Commissioner to drop this part of the demand? - Held that:- The Tribunal having broadly considered the nature of evidence brought before the Adjudicating authority, decided to remand the case. There is nothing in those finding that any of the parties were not afforded opportunity of proper hearing to lead oral or documentary evidence. The Tribunal also directed towards necessity of collection of new evidence by granting opportunity to the parties before the Adjudicating authority. We also do not find that an occasion for remand arose because before CESTAT, either the assessee or the Revenue came out with some new relevance in the form of oral and documentary evidence necessitating, in the interest of justice, a de novo inquiry - What, in fact, the Tribunal has done is to remand the case with the direction to the Adjudicating authority to review its own order and nothing else. In our considered opinion, this course of action, in the facts and circumstances of the present case, was not available under the law, even assuming that in view of provision contained in Section 35-C of the Act of 1944, the Tribunal has implicit power and jurisdiction to remand the case for afresh adjudication. The Tribunal while hearing an appeal against an order of Adjudicating authority, no doubt is empowered to confirm, modify or annul the decision or order appealed against. It is also empowered to refer the case back to the authority which passed order with such directions as the Tribunal may think fit - However, such power has to be exercised on satisfaction that a case of remand is made out. The power of remand cannot be taken recourse to only for the purposes of directing the Adjudicating authority to review its own order by entering into re-appreciation of oral and documentary evidence which was already appreciated by it, followed by findings thereon. The Tribunal, no doubt, is not circumscribed by the rules relating to remand in civil cases which are governed by the provision contained under Order XLI Rule 23-A, 24 & 25 CPC. - Nevertheless, remand would be permissible only when it has become necessary to do so. There may be cases where the parties had complained of violation of principle of natural justice or that it was not allowed to lead any oral and documentary evidence which, in the opinion of the Tribunal, was relevant. There may be other cases where the Tribunal forms an opinion that the matter required further enquiry by the Adjudicating authority. These, instances are not exhaustive but only indicative as regards the circumstances when an order of remand may become necessary. Tribunal had power to remand the case, in the circumstances, exercise of power was not justified in law as the Adjudicating authority had elaborately examined the issue by taking into consideration the entire material on record. It was for the Tribunal to examine the legality and validity of such finding on the grounds raised by the Revenue and arrive at its own finding as to whether the Adjudicating authority was correct in law and on fact in reaching upon the conclusion that demand of duty of ₹ 9,94,65,997/- was liable to be dropped - the part of the order of the Tribunal to the extent it directs remand of the case in the matter of consideration of leviability of demand of ₹ 9,94,65,997/- is set aside - substantial question of law decided against the Revenue and in favour of the Assessee. Admissibility of a statement recorded during investigation - Whether the Tribunal is justified in relying upon the admission made by the AGM of the assessee company to sustain the order of imposition of duty to the tune of ₹ 1,51,44,426/- more so when this part of the demand was also based on the same set of evidence on which the demand of ₹ 9,94,65,997/- was dropped by the Commissioner? - Held that:- In the present case, however, the admitted facts are that the statements of two Assistant General Managers of the Assessee company namely: Shri R.K. Bhadoria, AGM (Logistics) and Shri S.N. Jha, AGM (Excise) which were recorded during investigation and which the investigator used as their admission of clandestine removal, had retracted their statement by filing their respective affidavit also. The order passed by the Adjudicating authority shows that both of them were cross-examined also. However, we do not find any satisfaction recorded by the Adjudicating authority in terms of statutory requirement of Section 9-D (1)(b) of the Act of 1944. Therefore, the twin requirement before the statement become admissible as relevant pieces of evidence where they are used as corroborative piece of evidence or as admission, are that the person who made the statement is examined as witness before the Adjudicating authority and secondly, that the Adjudicating authority forms an opinion that having regard to the circumstances of the case, the statement should be admitted in the evidence, in the interest of justice - the statement of two Assistant General Managers namely : Shri R.K. Bhadoria and Shri S.N. Jha could not be treated as admission of clandestine removal. However, we find that the finding recorded by the Adjudicating authority and confirmed by the Tribunal is not solely based on the so called admission but based on other evidence on record which we were taken through during the course of argument, as contained in paras 5.4, 5.5, 5.6, 5.7 & 5.8. Though, it was strenuously urged before us that once statements recorded during investigation are excluded from consideration as admission of clandestine removal, the matter would further require a relook as to whether on the basis of the remaining evidence, the finding could be sustained in law, after giving our anxious consideration, we are unable to accept the submission - apart from the statement recorded during investigation, there were other incriminating evidence and circumstances relied upon by the Adjudicating authority as well as the Tribunal to confirm demand of duty of ₹ 1,51,44,426/- and it is not a case that once the statement is excluded from consideration as admission of clandestine removal, the conclusion of clandestine removal, would fall to the ground - substantial question of law decided against the assessee and in favour of the Revenue. Appeal disposed off.
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2018 (10) TMI 265
Valuation - goods manufactured on Job-work basis, sold by the principal - Whether the goods manufactured by job worker and cleared to the principal which subsequently sold by the principal after certain activity would be valued in terms if Rule 10A (ii) or otherwise? Held that:- If there is no substantial change in the product then the goods cleared from the job workers premises will remain the said goods which is subsequently sold by the principal. However, we observed that the adjudicating authority has not properly verified the nature of activity carried out by the principal that whether such activity brought a substantial change in the product so that the identity of the product is changed. This is a vital issue to be verified before going to the conclusion that whether the goods manufactured and cleared by job worker and the same was sold by the principal falls under the term of “Said Goods” then only the obligation of Rule 10A (ii) can be decided. Appeal allowed by way of remand.
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2018 (10) TMI 264
Valuation - Job-work - processing of Grey Fabrics manufactured and supplied by Ms GSML - Related person or not? - third proviso to Section 4(1)(a) of Central Excise Act - demand of differential duties on the value of difference between sale price to the related person and the value adopted by Appellant at the time of clearance of goods. Held that:- It appears that the OIA dated 18.09.2003, in as much as it relates to the Appellant has attained finality and the findings made therein cannot be interfered with. The Revenue by not filing an appeal against the said OIA dated 18.09.2003 against the Appellant has not contested the findings made by the Commissioner (Appeals) and hence the demand of ₹ 24,154,40/- against the Appellant cannot be allowed to be sustained - the Revenue has no ground to make demand of aforesaid amount against the Appellant. Demand of ₹ 6031775.30 raised against the Appellant vide Show Cause Notice dated 12.05.1998 - The Revenue s case is that the Appellant and M/s SPL are related persons and has under-valued the goods manufactured by them and supplied to each other by paying excise duty on cost construction method, i.e. by adding landed cost of raw material and job work charges - Held that:- It is not a disputed fact that the Appellant and M/s SPL have sold the similar excisable goods to other independent buyers. In such case, when the other buyers of the similar goods are available, the assessable value cannot be determined in terms of Section 4(1)(a) as the same is applicable only when the goods are sold only through related persons, which is not the case here. Even if the demands are to be made the same should have been computed by taking assessable value of the goods to the nearest ascertainable equivalent value thereof determined in such manner, as may be prescribed - Since there is no major difference between the goods sold to independent buyers and allegedly related person M/s SPL and the prices are comparable after taking into consideration the discount and other expenses, we do not find any reason to demand duty from the Appellant. The discounts by the Appellant to M/s SPL are normal business transaction as has been upheld by the Tribunal in various judgments in the case of CCE Vs. Indian Turpentine Resin Co. Ltd [1987 (2) TMI 334 - CEGAT, NEW DELHI] - the demands raised against the Appellant does not sustain and are set aside. Time Limitation - Held that:- In the case of Show Cause Notice dt 12.05.1998, the period involved is April 1993 to March 1998 and the Appellants were under bona-fide belief that in case of job work, the concept of related persons is not applicable and the value has to be determined as per Hon ble Supreme Court judgment in the case of Ujagar Prints [1989 (1) TMI 124 - SUPREME COURT OF INDIA]. Thus, the Appellant had bona-fide belief for valuation of goods manufactured under job work. The demands beyond normal period of limitation are thus held to be patently time barred. Demand set aside - appeal allowed - decided in favor of appellant.
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2018 (10) TMI 263
Time Limitation - CENVAT Credit - steel materials like M.S. Channels, Joists, MS Angles, Beams, HC Coils, HR Sheet Plates, Plates etc. - denial on the ground that the manufacture of machinery out of steel items is not supported by evidence of issue slips showing one to one correlation between particular steel items and a particular machine/ equipment. Held that:- The appellant vide letter dated 10.08.2007 intimated the department that they intend to avail the cenvat credit in respect of inputs for manufacturing of capital goods/ inputs (consumed capital goods). It is further noticed that the appellant have been filing Annexure along with ER-1 return showing detailed information of invoice No., date, description of inputs, amount of Cenvat credit etc. to the department. In the ER-1 return also, the attachment of this annexure is mentioned. From the annexure of the Cenvat credit, it is found that the description of the input has been mentioned. With these information provided to the department, nothing more than that is required for the department, if at all they wish to issue SCN, nothing prevented to the department from issuing the SCN within the normal period of one year at least from filing of the return. The period involved in the present case is July and August 2009 whereas the SCN was issued on 17.07.2012 which is much after the normal period of one year. Moreover, this issue was highly debatable. The demand is clearly hit by limitation - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2018 (10) TMI 262
Classification of an item - Bearings - Whether on the facts and in the circumstances of the case the Tribunal is right in law in holding that bearing would fall under item 3 of 8th Schedule to the Tamil Nadu General Sales Tax Act 1959 when there is specific entry under 66 of part C of 1st Schedule to the Tamil Nadu General Sales Tax Act 1959? - concessional rate of tax - Form XVII declarations under section 3(5) of TNGST Act. Held that:- This Court, in an identical matter, in the case of The State of Tamil Nadu vs. Tvl.Phoenix Trading Corporation, [2018 (9) TMI 1115 - MADRAS HIGH COURT] took note of the observations in the order passed by the Appellate Assistant Commissioner and upheld the decision of the Appellate Assistant Commissioner - It was held in the case that The Revenue has not disputed the factual position, which was taken note of by the Appellate Assistant Commissioner (CT), which has not been adequately dealt with in the order passed by the Tribunal. Thus, on facts, the Appellate Assistant Commissioner (CT) was fully justified in allowing the appeal and considering the factual matrix. Following the above case, the substantial questions of law, which have been raised, do not arise for consideration in this Tax Case (Revision) - Tax Case Revision is dismissed
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Indian Laws
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2018 (10) TMI 310
Conviction of the appellant u/s 13(1)(C) r.w.. 13(2) of Prevention of Corruption Act, 1988 and under Sections 409 and 477-A IPC - sentence of imprisonment - conviction based on a voluntarily confession of accused - Contention of the appellant is that PWs 2 and 3 being the higher officials, it cannot be said that the confession statement of the accused has been made voluntarily and it must have been under the inducement or under false promise of favour- Held that:- It is well settled that conviction can be based on a voluntarily confession but the rule of prudence requires that wherever possible it should be corroborated by independent evidence. Extra-judicial confession of accused need not in all cases be corroborated. Law does not require that the evidence of an extra-judicial confession should in all cases be corroborated. The rule of prudence does not require that each and every circumstance mentioned in the confession must be separately and independently corroborated. If the court is satisfied that if the confession is voluntary, the conviction can be based upon the same. Rule of Prudence does not require that each and every circumstance mentioned in the confession with regard to the participation of the accused must be separately and independently corroborated Mere allegation of threat or inducement is not enough; in the court’s opinion, such inducement must be sufficient to cause a reasonable belief in the mind of the accused that by so confessing, he would get an advantage. As pointed out by the trial court and the High Court, though the confession statement has been initially made in the presence of R.C. Chhabra (PW-3) and M.P. Sethi by the appellant, no question was put to R.C. Chhabra (PW-3) that extrajudicial confession (Ex.-PW3/A) was an outcome of any threat, inducement or allurement. The statement which runs to eleven sheets has been held to be made by the appellant voluntarily. Likewise, confession statement (Ex.-PW-2/A) made before R.K. Soni (PW-2) was in the handwriting of the appellant made in the presence of R.K. Soni (PW-2) and H.O. Agrawal, the then Assistant Chief Officer (Inspection). Here again, it was not suggested to R.K. Soni (PW-2) that Ex.-PW-2/A was outcome of some threat or pressure. We do not find any good ground warranting interference with the said concurrent findings. In so far as the conviction under Section 13(1)(c) read with Section 13(2) of PC Act, 1988, the appellant was sentenced to undergo rigorous imprisonment for two years. For conviction under Section 477-A IPC, the appellant was sentenced to undergo rigorous imprisonment for two years. For conviction under Section 409 IPC, the appellant was sentenced to undergo rigorous imprisonment for five years. The occurrence was of the year 1992- 94. Considering the passage of time and the facts and circumstance of the case, the sentence of imprisonment imposed on the appellant is reduced to three years. In the result, the conviction of the appellant under Section 13(1)(c) read with Section 13(2) of the Prevention of Corruption Act, 1988 and sentence of imprisonment of two years is confirmed. The conviction under Sections 477-A IPC and 409 IPC is confirmed and the sentence of imprisonment under Section 409 IPC is reduced to three years.
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2018 (10) TMI 272
Disposal of Land remaining idle - closure of Joint Venture - rehabilitation scheme under the Sick Industrial Companies (Special Protection) Act, 1985 - disputes have arisen between the appellant (Company) and the State through its Authority called Maharashtra Housing and Area Development Authority (MHADA) in relation to the aforementioned land for its disposal etc. Held that:- The parties expressed that it is not possible to come to any mutually acceptable terms due to myriad reasons. The parties, however, requested to refer the matter to any sole Arbitrator and left it to the Court to pass appropriate orders in that behalf including an order appointing an Arbitrator to decide the dispute(s) by an award - thus, the various disputes which have arisen between the parties including the one which is the subject matter of the writ petition/appeal be referred to the sole Arbitrator for his decision. Mr. Justice R.V. Raveendranformer Judge of this Court is requested to act as a sole Arbitrator for deciding the dispute(s), which have arisen between the parties to this appeal - appeal disposed off.
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2018 (10) TMI 271
Recovery of outstanding amount - Mis-utilization of investment made in a company - It is the Plaintiff’s case that the funds which were invested by the Plaintiff, were misused by the said persons for their personal gains and benefits - revival scheme - Section 138 of the Negotiable Instruments Act, 1881. Held that:- The three agreements clearly show that firstly the main agreement by which the investment was made by the Plaintiff was made in a company where not only Dr. Niaz Ahmed, the Defendant, but also his wife was one of the promoters. The company had acknowledged by the said agreement, the receipt of the sum of ₹ 3.24 crores. This investment was almost 11 years ago i.e. on 29th October, 2007. Thereafter, the two MOUs have been executed which are of 12th April, 2010 and 23rd August, 2012. The transaction has been a long duration transaction and not an overnight transaction. The stand of the Defendant that there was any threat is belied by the fact that these agreements span over seven to eight years. Further the fact that some payments under the 2010 agreement as also under the 2012 agreement having been made, the allegation of coercion is not made out. Moreover, the Defendant himself looked for and arranged an overseas buyer, which also did not work out. These facts go to prove that there was no coercion or duress or pressure. Proceedings before the criminal court under the Negotiable Instruments Act are tested under a different yardstick than a suit under Order XXXVII - In a suit under Order XXXVII all that the Court needs to see is as to whether the Defendant has a triable defence. In the present case, the agreements themselves having been admitted and some payments under the said agreements/settlement have already been made, a mere allegation of coercion or threat is not sufficient to raise a triable defence. The suit is liable to be decreed as there is no triable defence - The suit is decreed for a sum of ₹ 1,74,00,000/- towards the principal amount.
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2018 (10) TMI 270
Dishonor of Cheque - insufficiency of funds - Recovery of amount borrowed - burden of prove - Section 138 of Negotiable Instruments Act - Held that:- It reveals that the respondent/complainant stated that there is money transaction between the appellant/accused and respondent/complainant, whereas in the deposition he has clearly stated that he knows the accused from childhood and the accused used to come his father's Cycle Shop and there is no money transactions between him and the appellant/accused. Both the Courts below have failed to consider the above contrary statement made by the respondent/complainant - Further the respondent/complainant did not produce any substantial document to prove his claim, except production of disputed cheque/Ex.P1. It is settled proposition of law, in criminal case, the burden of proof on the side of the prosecution only, if it is private complaint then the complainant has to prove his case. In the present case on hand the accused entered into witness box and stoutly denied the execution of cheque and the signature found on the cheque, it is for the complainant to substantiate his claim beyond reasonable doubts in the manner known to law. This Court is inclined to set aside the conviction and sentence imposed by the trial Court and confirmed by the lower appellate Court by judgment dated 23.11.2012 - revision allowed.
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