TMI Tax Updates - e-Newsletter
November 1, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Rate of GST - The product ‘Militry Malai Mithai’ as described in the Application will merit classification under Chapter Heading 2106 90 of the GST Tariff as ‘Sweetmeat’ and would be chargeable to GST at applicable rate i.e. 5% at present.
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GST:
Interest on delayed refund - tax paid in respect of exported goods - section 16 of IGST Act - mismatch of invoices - Adjudicating authority to apply his mind independently
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GST:
Profiteering - restaurant service - benefit of reduction of tax from 18% to 5% not passed to customers - applicant could not establish profiteering for want of credible evidence
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GST:
Profiteering - benefit of reduction in the GST rates not passed to customers - Amway Business Owners (ABOs). - Petitioner could not establish profiteering for want of cogent and reliable evidence
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Income Tax:
Royalty V/S fee for technical service - All products, design of the engines and vehicles are supplied by the assessee. On completion all the drawings are also delivered by the Austrian company to the assessee. The entire project was carried out in Austria - the payment does not constitute royalty.
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Income Tax:
Exemption u/s 11 - diversion of funds - advance by account payee cheques for the benefit of interested party - The contention of the assessee that the amounts were returned by account payee cheques and within a short period is of no consequence.
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Income Tax:
Disallowance of provision for warranty & maintenance expenses - it was for the Revenue to have brought incriminating material/evidences to demolish the basis of computing such provision.
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Income Tax:
Taxability of Gift u/s 56 - the issue of gift of Indian Millennium Deposit certificate is not taxable in the hands of the assessee who received the same upon gift and also under the terms and conditions as stipulated in the Indian Millennium Deposit Certificate.
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Income Tax:
Capital Gains - Nature of payment to execute an order of eviction - payment to evict an unauthorized occupant can be treated as cost of improvement
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Income Tax:
Deduction u/s. 80IB - for setting up of new industrial undertaking, the number of building is wholly irrelevant. As all these units together constituted separate and distinct industrial undertaking eligible for deduction under section 80IB.
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Customs:
Non-payment of export duty at the time of export - relevant date of export - whether date of export is the date of let export order or not? - the date of export should be the date of let export order.
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Customs:
Valuation - Department has not produced any evidence to show that the relationship between the parties has influenced the price. Therefore, the reasons for rejecting the transaction value is not in consonance with law and therefore liable to be set aside
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Customs:
Refund claim - time limitation - section 27(1) of the Customs Act, 1962 - revenue submitted that amount paid as anti-deumping duty and not as pre-deposit - pre-deposit amount must be returned within three months of the date of the order passed by the Appellate Tribunal or the Court unless stay is granted against such order.
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Customs:
Reimbursement of CST under FTP - the condition sought to be read or imposed through the procedure laid down in Hand Book of Procedures could not override the provisions contained in the Foreign Trade Policy.
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Customs:
Anti-Dumping duty - import of Uncoated Copier Paper - data provided by the petitioner rejected by the Designated Authority while determining margin of dumping - record discloses a basic flaw or irregular approach by the DA in the proceedings - matter restored.
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Service Tax:
Tour Operator Service - the activity of the appellant has mentioned that collection of amount for any tour is merely a booking activity. Any demand under the guise of it being tour operator is not sustainable
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Service Tax:
Extended period of limitation - Inasmuch as, profit and loss account is a public document and reflection of the entire facts in the said documents cannot lead to the presence of malafide suppression on the part of the assessee.
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Service Tax:
Rejection of Refund claim without issuing show cause notice - Mere presence of the appellant before the Adjudicating Authority during the course of hearing does not authorise the department to encroach upon the right of the appellant to have a fair the opportunity of placing his defence before the adjudicating authority.
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Service Tax:
Rejection of Refund claim without issuing show cause notice - Even if a party has waived the show cause notice, it will not absolve the department’s statutory liability to issue show cause notice under the relevant provision.
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Service Tax:
Validity of show cause notice - the charges of wheeling/transmission received by the Petitioners from allowing the use of its facilities by third parties - notice stayed.
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Service Tax:
Recovery of service tax dues - the Department is empowered to recover the dues of service tax of respondent No.4 from the present petitioner, who had purchased the mortgaged property of the respondent No.4 from respondent No.5 by a consent decree.
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Service Tax:
Lack of judicial discipline - errant public servant - The cost is quantified at ₹ 1 lakh imposed on Commissioner of Service Tax (Appeals) from his personal funds with the Registrar General of this Court.
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Service Tax:
Attachment of properties - Orders for attachment of bank account vacated - However, recovery notices or attachment of the flat belonging to the Petitioner's Director shall remain in force. This, attachment would protect the interest of the Revenue.
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Central Excise:
Tribunal’s order in the appellant’s own case has attained finality as the department has not challenged the said order. Therefore, even though there is contrary view taken by the Hon'ble Supreme Court, the same will not apply in the present case.
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Central Excise:
CENVAT Credit - input services - construction of warehouse within the factory premises - The warehouse being prior to the place of removal, the service tax paid on construction of the same is available to the appellant
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VAT:
Liability of Entry tax - SIM cards can be termed as ‘goods’ for the purposes of Entry Tax as the same is being used and consumed in order to provide service to the customer by the Assesses.
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VAT:
Denial of downloading and issuance of 'C' declaration forms - post GST situation - purchase of petroleum products at concessional rate - petitioners permitted to download 'C ' forms, as has been done in the past.
Articles
Notifications
Circulars / Instructions / Orders
News
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GST MSME FLYER
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India Improves Rank by 23 Positions in Ease of Doing Business
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Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified
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Autonomy for Central Bank, within the Framework of the RBI Act, Is an Essential and Accepted Governance Requirement: Says Government
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Startups are future of India: Suresh Prabhu
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Committee of Experts submits its report on Regulating audit firms and the Networks
Case Laws:
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GST
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2018 (10) TMI 1622
Validity of seizure order - Section 67(2) of the U.P. Goods and Services Tax Act, 2017 - apart from directing for the deposit of the Central G.S.T., State G.S.T. and penalty under both the Acts, an equivalent amount of fine has also been imposed under both the Acts - Held that:- The imposition of penalty and fine simultaneously amounts to double jeopardy and that the interest of the petitioner be protected by releasing deemed reasonable conditions which were deemed proper by the court. We direct the Standing Counsel as well as counsel for the Tax Department to seek instructions and file counter affidavit within a month. Two weeks thereafter are allowed to the petitioner for filing rejoinder affidavit.
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2018 (10) TMI 1621
Release of detained goods - delayed submission of E-Way bill - Held that:- E-way bill could not be down loaded but it was subsequently produced after down loading it on 24.10.2018 which is valid upto 2nd November 2018. It is directed for the release of the goods of the petitioner and the vehicle on deposit of the proposed amount of tax of ₹ 28,000/- and ₹ 25,000/- towards penalty - petition disposed off.
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2018 (10) TMI 1615
Profiteering - restaurant service - benefit of reduction of tax from 18% to 5% not passed to customers - it was also alleged that Respondent was illegally profiteering by appropriating the amount of reduction of tax by fleecing the poor customers as he was denying them the benefit of reduction - Held that:- The investigation conducted in the matter by the Applicant No. 2 against the Respondent No. 1 could not establish profiteering for want of credible evidence and hence no violation of the provisions of Section 171 of the CGST Act 2017 could be established - there are no violation of the provisions of Section 171 of the CGST Act, 2017 - application dismissed.
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2018 (10) TMI 1614
Profiteering - benefit of reduction in the GST rates not passed to customers - Amway Business Owners (ABOs). - Rule 129 (6) of the Central Goods & Services Tax (CGST) Rules, 2017 - Held that:- The Applicant No. 1 had not supplied details of the products or the invoices vide which he had bought them from the Respondent inspite of repeated requests made by the Applicant No. 2 and therefore, the investigation conducted in the allegation levelled by the Applicant No. 2 against the Respondent could not establish profiteering for want of cogent and reliable evidence and hence no violation of the provisions of Section 171 of the CGST Act 2017 has been found in this case - There are no violation of provisions - application dismissed.
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2018 (10) TMI 1620
Rectification of form TRAN-1 filed under Section 140 of the Goods and Service Tax, 2017 - incorrect figures of Cenvat Credit keyed in - Held that:- Petitioners would have to file representation to the Central Board of Indirect Taxes and Customs (CBIC). This representation would be considered by the CBIC for verification and the bona fides of the claim made by the Petitioners. If satisfied, Petitioners would be allowed to amend the Trans-I form to reflect the correct amount of credit available - petition disposed off.
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2018 (10) TMI 1619
Interest on delayed refund - tax paid in respect of exported goods - section 16 of IGST Act - mismatch of invoices - Held that:- The Respondents state that there is an Invoices mismatch in respect of the refund sought. Thus, leading to delay in passing the refund. This is disputed by the Petitioner. Besides, the Circulars and FAQ mentioned, inter alia, deal with grant of refund in spite of Invoices mismatch/ error, as indicated by SB005. The above Circular/ FAQ does not deal with grant of interest even for the period when there Invoice mismatched/ error. Thus, the Circular/FAQ does not decide the issue, but would require deeper consideration. The issue of grant of interest for delaying refund does requires factual determination as to the type of Invoices mismatch, who was responsible for the same and who, if any, and how, was the same corrected. This exercise would be best done by the adjudicating authorities under the Act after hearing the parties - petition allowed by way of remand.
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2018 (10) TMI 1618
Extension of date for uploading Form Tran-1 and Form Tran-2 - issuance of N/N. 48/2018 – Central Tax, New Delhi dated 10.09.2018 - Held that:- In view of the notification admittedly, the petitioner has an opportunity to upload its FORM GST TRAN-1 and FORM GST TRAN-2 at Annexures-G and H of the Writ Petition on the official website of the GST Council on or before 31.03.2019, and therefore, to this extent the relief prayed for in this writ petition stands granted by the GST Department extending the period for submitting the declaration upto 31.03.2019. The present writ petition is disposed of as infructuous, with a liberty and direction to the petitioner-assessee to upload the said FORM GST TRAN-1 and FORM GST TRAN-2 on the official website of the GST Council on or before 31.03.2019 - petition disposed off.
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2018 (10) TMI 1617
Input tax credit - transitional credit - transition to GST Regime - distribution of input credit amongst its branch offices/locations which have separate registration under the Act - Section 140(8) of the Central Goods and Services Tax Act, 2017 - Held that:- The Petitioners are entitled to distribute the Input Credit available with it as on 1st July 2017 amongst its branches/locations. This distribution has not been possible on account of technical problems of the Respondents. Further the availment of input tax credit available on 1st July 2017 has to be done on or before 20th October 2018 in view of Section 16(4) of the Act. Thus, it is likely that the Petitioners may be deprived of the facility of the input tax credit available with it on 1st July 2017, if the same is not taken before 20th October 2018. The Respondents have extended the time to file TRANS1 and TRANS2, but no such extension has been granted to extend the time to file GSTR3B - thus, pending the final disposal of the Petition (when these issues will be considered in greater depth), as the system is not accepting it, the Petitioners would manually file with the Respondents a copy of its revised TRANS1, ITC01 and also GSTR3B at Mumbai (in physical form). On the basis of the revised TRANS1, ITC02 and the GSTR3B at Mumbai (to be certified by the Commissioner at Mumbai), the Petitioners will be entitled to take the credit reduced at Mumbai (Maharashtra) to its locations in Delhi, Gujarat and Karnataka subject to the satisfaction of the Commissioner having jurisdiction over those locations - petition disposed off.
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2018 (10) TMI 1616
Unable to form upload TRANS-1 - migration to GST Regime - transitional credit - Held that:- The petitioner-company is therefore relegated before the concerned Nodal Officer (Commissioner) at Bengaluru, before whom the representations already filed by the petitioners-company or which may be now filed afresh with the relevant evidence will be decided by the said Nodal Officer and all the issues relating to administration and technical difficulties faced by the petitioner as raised in the writ petitions will be decided on merits - petition disposed off.
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2018 (10) TMI 1623
Classification of an item - Militry Malai Mithai - whether classified under the Tariff Heading 2106 as Sweet Meats or under Tariff Heading 0404 as other dairy product consisting of natural milk constituents or under the Tariff Heading 1704 as a Sugar confectionery? Held that:- Applicant’s reservations against Chapter Head 1704 are driven, among other things, by financial grounds. Because, against Chapter Head 1704 they would have to cough up GST @18%. We also sense a similar but tacit approach from the department to maintain the status quo by placing the impugned product under Chapter 17 with an eye on higher rate of tax that is attracts - however, the endeavour of the department should be to decide appropriate classification irrespective of the rate of tax attached to it. Chapter 04 essentially covers dairy products and as per Chapter Note 4 of Chapter 04, the heading 0404 applies interalia to products consisting of natural milk constituents whether or not containing added sugar or other sweetening matter or flavoured or containing added fruit or cocoa. Now while chapter head 0401 to 0406 are meant for natural dairy products viz. Milk, Cheese, Butter Milk, Butter, Whey etc. and other products made out of such items, the product in question i.e. Militry Malai Mithai contains Skimmed Milk Powder, Whey Powder, Sugar, Emulsifiers etc. as predominant ingredients, which would not make it entitles to be classified as a product of natural milk constituents as has been pleaded by the Applicant. By no stretch of imagination, the product in question can be brought under the ambit of Chpater 04 of the HSN - classification of the impugned product under Chapter 04 of the I-ISN is ruled out. Fitment of impugned product under Chapter 1704 - Held that:- The product ‘Militry Malai Mithai’ cannot be terms as ‘Chewing Gum’ (1704 10 00) or Jelly Confectionery (1704 90 10) or Boiled Sweet (1704 90 20) or Toffee, caramel etc (1704 90 30). Clearly the product is neither a gum nor boiled sweet nor toffee or caramel. That leaves residual entry ‘Others’ (1704 90 90) if at all the impugned product is to brought under the purview of Chapter 17. In other words, there is no specific entry under Chapter 17 which would encompass the impugned product even by a remote chance. Moreover, the residual entry i.e ‘Others’ (1704 90 90) is to take care of other similar products of the same family viz. Sugar Confectionery which do not find specific mention against rest of the sub-headings. The impugned product i.e. ‘Militry Malai Mithai’ is made of Skimmed Milk Powder, Sugar, Whey Powder, Emulsifiers & flavours etc. mixed together in a semi-liquid form (neither semi-solid nor in the form of Jelly) and packed in elongated pouches/sachets and ready for consumption. The ingredients, process and final shape of the impugned product takes itself out of the family of Sugar Confectionery in any form - the impugned product cannot be termed and classified as Sugar Confectionery under Chapter 17 of the GST Tariff. The product in question i.e. ‘Militry Malai Mithai’ is a product made out of Skimmed Milk Powder, Sugar & Whey Powder as main ingredients with Emulsifiers etc. put up in small sachet/pouch in semi-liquid (paste) consistency, ready for consumption. The product cannot be termed as Dairy Product or Sugar Confectionery - there is no doubt that being edible preparation, manufactured under due license issued by concerned Government authorities, it would merit classification under Chapter 21 i.e. ‘Miscellaneous Edible Products’. Once the chapter is decided, a careful examination of different entries under Chapter 21, the quest for appropriate classification rests finally at 2106 90 99, the residual entry, as the product itself does not find specific place anywhere else in the Chapter 21 - the impugned product viz. ‘Militry Malai Mithai’ would merit classification as Miscellaneous Edible Product under Chapter Heading 2106 90 99, as ‘Sweetmeat’ and chargeable to GST as applicable. The impugned goods shall be aptly classifiable under Chapter Head 2106 90 99 as ‘Sweetmeats’ and shall be entitled to benefit of Notification No.01/2017-Central Tax (Rate) dtd.28.06.2017 (as amended) and corresponding notification under MPGST Act,2017 at present attracting GST @5% Adv. [(2.5% CGST + 2.5% SGST) or 5% IGST as the case may be) as envisaged under Serial Number 101 Schedule I to the said Notification. Ruling:- The product ‘Militry Malai Mithai’ as described in the Application will merit classification under Chapter Heading 2106 90 of the GST Tariff as ‘Sweetmeat’ and would be chargeable to GST at applicable rate under the said tariff entry, presently read with Notification No.01/2017-Central Tax (Rate) dtd.28.06.2017 (Sr. No. 101 to Schedule l) and corresponding notification under MPGST Act,2017.
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Income Tax
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2018 (10) TMI 1601
TPA - Comparable selection - exclusion of Accentia Technology Limited - Held that:- Accentia Technology is engaged in providing varied services in the nature of medical transcription services, medical billing, practice management consulting services, medical coding, claims processing and software development including SAAS and implementation services. Accentia it is evident has a large portfolio of products such as instaKare a EMR software developed by Accentia that enables providers using it receive EMR incentives from federal and state agencies, Insta PMS a web based practice management solution, Insta EMR, Insta WEB, instaBill, InstaDRT, Insta Scribe Insta View - making it a product company more than a services company even though it is reporting only one segment i.e. ITes. Though TPO has stated that more than 84.76% receipt is from healthcare receivables and only 15.24% Sale of software, the offering of software as a service (SaaS) makes it functionally different from the taxpayer. Segmental information is also not available since taxpayer is reporting only one ITES segment. DR has argued vehemently against the directions of the DRP for exclusion of Accentia Technology Limited, he was unable to point out any infirmity in the directions of the Ld. DRP. He could also not point out any judicial precedent wherein Accentia Technology Limited was retained as a comparable in case of a service company. - Decided against revenue.
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2018 (10) TMI 1600
Royalty addition - bringing the service tax element to tax - Held that:- The assessee explained by letter dated 15.12.2014 that the difference between ₹ 61,78,57,313/- and ₹ 57,43,37,091/- is the amount of ₹ 4,35,20,223/- which was debited in the accounts of MNYL towards pre paid expenses charged during the year. The confirmation from the MNYL establishes the same. Even at this stage, in all fairness, learned AO should have made enquiries into the figure of ₹ 4,35,20,223/- instead of blindly saying that this new fact that has emerged at that stage was not before the revenue at the scrutiny stage, as such, the fresh reconciliation filed by MNYL u/s 133(6) of the Income-tax Act, 1961 does not prove the contention of the assessee that MNYL paid or credited only the amount of ₹ 57,43,37,091/- excluding the amount of service tax to the assessee as per MNYL books of accounts for the relevant period. This approach of the learned AO does not seem to be correct. There is no reason for the learned AO to disregard the direction of the learned DRP to bring to tax only the royalty amount after excluding the service tax element after due verification of the fact. The confirmation submitted by the MNYL subsequent to the directions of the learned DRP clearly establishes that the royalty amount that was paid during the year was only ₹ 57,43,37,091/- and service tax amount was ₹ 5,91,56,720/-. The debiting of ₹ 4,35,20,223/- by MNYL towards pre paid expenses charged during the year does not necessarily characterize that amount as Royalty and even in that case, the Royalty figure cannot be ₹ 63,34,93,811/- to be taxed in the hands of the assessee. It is a clear case of Royalty amount being ₹ 57,43,37,091/- out of which the tax of ₹ 6,68,77,942/- was deducted at source and balance of ₹ 50,74,59,146/- was paid to the assessee whereas the tax deducted at source viz. ₹ 6,68,77,942/- along with service tax amount of ₹ 5,91,56,720/- was deposited with the Government by the MNYL directly. On the face of this established facts, we find it difficult to sustain the addition of ₹ 5,91,56,720/- treating it as royalty. Bringing the service tax element to income tax cannot be sustained and the learned AO is directed to delete the same - Decided in favour of assessee.
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2018 (10) TMI 1613
Disallowance of non-compete fees - Disallowance of marketing know how - Disallowance of depreciation on Royalty payments - Interest charged u/s 234B and 234C while computing income u/s 115JB - Held that:- Since the tax effect is more than Rs. one crore, let the matter be listed in due course.
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2018 (10) TMI 1612
Addition u/s 68 - identity of the person who has put in the money - no plausible explanation as furnished by the assessee - Held that:- SLP dismissed.
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2018 (10) TMI 1611
Transfer pricing adjustment - justification on application of Arms Length Price (ALP) only to A.E. transactions and not to all transactions - Held that:- SLP dismissed.
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2018 (10) TMI 1610
Reopening of assessment - deemed dividend addition u/s 2(22)(e) - Held that:- In absence of any scrutiny on this issue in the original assessment, the Asesssing Officer cannot be estopped from examining this question provided, of course, that he had reason to believe that income chargeable to tax had escaped assessment. In this context, he had cited reasons why, prima facie, applicability of Section 2(22)(e) of the Act arises. It would be for the assessee to contest the additions during the course of assessment proceedings. As is well settled, at the stage of Notice for reassessment, the Assessing Officer only has to demonstrate formation of a reasonable belief on the basis of the material on record that income chargeable to tax had escaped assessment. He does not have to establish beyond dispute that invariably, the addition would be made. The scrutiny of the Court, at that stage also, is limited. The petitioner’s contention that even if he may be holding more than 10% of the shares of the Company, he did not have less than 10% voting rights, can be examined in the assessment proceedings, for which, we are not inclined to quash the Notice itself. - Decided against assessee.
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2018 (10) TMI 1599
Reopening of assessment - addition on account of alleged on money against purchase of flat - addition on document found during search and seizure action u/s 132 in the case of “Marvel Group” wherein one of the partner had admitted to have collected ‘on money’ from various flat purchasers - whether course of search should have been initiated proceedings u/s 153C of the Act and not u/s 147/148 - Held that:- It is an undisputed fact that the case of assessee was re-opened on the basis of a document found during search and seizure action u/s 132 in the case of “Marvel Group” wherein one of the partner had admitted to have collected "on money" from various flat purchasers. As per those details, it was noted that assessee had also paid “on money” of ₹ 6,65,000/-. Thus, it is seen that the re-opening was on the basis of search carried out at Marvel Group, wherein the documents pertaining to the assessee was found. AO had initiated re-assessment proceedings and had framed the assessment u/s 143(3) r.w.s. 147 of the Act. It is assessee’s contention that AO should have proceeded u/s 153C of the Act instead of Sec.147 / 148. As find that identical issue arose in the case of V.L. Khandge and others in [2018 (4) TMI 1607 - ITAT PUNE] and others, wherein the Co-ordinate Bench of the Tribunal has held that AO after receipt of information belonging to assessee that was found during the course of search should have been initiated proceedings u/s 153C of the Act and not u/s 147/148. It was further held that in such a situation, the re-assessment proceedings passed u/s 148 of the Act does not stand - decided in favour of assessee.
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2018 (10) TMI 1598
Addition on account of capital introduction from undisclosed sources - CIT-A deleted the addition - Held that:- We find that the assessee had duly reconciled and explained the introduction of capital of ₹ 39,10,000/- in his personal balance sheet and that it indeed formed part of the additional income of ₹ 70,00,000/- disclosed at the time of survey. The Ld. CIT(A) was therefore right in observing that assessee was able to explain the entries in his balance sheet and that the addition of ₹ 39,10,000/- made by the AO was unwarranted. - Decided against revenue. Addition on account of unaccounted transportation expenses - expenses found recorded in the material impounded in the course of survey - assessee submitted that when the books of account of the assessee are rejected and the Gross Profit rate is estimated, no other additions by making specific disallowance of the expenses could be made - Held that:- It is noted that there is no dispute with regard to the rejection of books of accounts. We are of the considered view that when the GP rate is applied by rejecting the books result, no further addition on account of any item of specific expenses are required to be made because the books of account could not be relied for the purpose of completing the assessment of the assessee and it is for that reason that the AO has resorted to estimation of profit earned by the assessee on the overall sales - Decided against revenue. Estimating the GP rate at 1% instead of 1.5% as estimated by the AO - Held that:- It is noted that the income-tax assessments for the earlier years were framed u/s 143(3) and in those years the trading results of the assessee had been accepted by the Department. From the chart submitted before us, we find that the assessee has disclosed the fair rate of gross profit in comparison to the earlier years. In the circumstances the profit declared by the assessee in earlier years cannot be brushed aside for estimating the profit of the relevant year until and unless, there are changes in the facts and circumstances or the AO brings any results of comparable cases to justify his action, which is not the case here in hand - we find merit in the action of the Ld. CIT(A) in estimating the profit at 1% after taking into consideration the profit of earlier years declared by assessee.- Decided against revenue.
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2018 (10) TMI 1597
Validity of reassessment proceedings - reopening after the expiry of four years from the end of the assessment year - addition made treating income from sale of shares as income from other sources instead of income from capital gains - information received from the Investigation Wing, which was gathered during the search and seizure action - non independent application of mind by AO - borrowed information - Held that:- Though the information received from the Investigation Wing was subsequent to the original assessment passed U/s 143(3) read with Section 147 of the Act on 25/8/2009, however, the Assessing Officer himself has not alleged in the reasons recorded that there is failure on the part of the assessee to disclose fully and truly all relevant material facts necessary for assessment. Therefore, once the Assessing Officer himself has not stated in the reasons that there is a failure on the part of the assessee to disclose fully and truly all relevant facts necessary for assessment then the reopening of assessment after four years from the end of the assessment year is not permitted as hit by proviso to Section 147 - Quash the reopening of the assessment being invalid - decided in favour of assessee.
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2018 (10) TMI 1596
TPA - comparable selection - the comparables which were selected by the TPO are functionally different - Held that:- CIT(A) has given an extensive finding as to TPO’s comparables are not relevant at all and the fresh benchmarking conducted by the assessee company is relevant. Therefore, there is no need to interfere with the findings of the CIT(A). Ground No. 1 is dismissed.
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2018 (10) TMI 1595
Denying the benefit of deduction u/s 11 - diversion of funds - advance by account payee cheques - Taking an amount at the maximum marginal rate and allow exemption for the balance amount - violation of provisions of section 13(1)(c) - Held that:- In the garb of purchase of timber, the advance amounts were diverted for the personal benefit of an interested party, who is mentioned in section 13(3) of the I. T. Act. Therefore, there is clear violation of provisions of section 13(1)(c). The contention of the assessee that the amounts were returned by account payee cheques and within a short period is of no consequence. Only a small portion of the advance was repaid to the assessee trust within four months from the date of advance. Therefore, the repayment by M/s. VUS Timbers of all the advance by account payee cheques is of no significance insofar as there was already a violation of provisions of section 13(1)(c). Therefore, the CIT(A) is justified in directing the A. O. to treat an amount of ₹ 72,45,000 as advance as income of the assessee. The assessee was paying interest on borrowings, and therefore, notional interest at the rate of 18% on the advance of ₹ 72,45,000 was rightly brought to tax as income of the assessee by the A. O. Therefore, we see no reason to interfere with the findings of the CIT(A). Accordingly, we confirm the order of the CIT(A) on this issue. Disallowance invoking the provisions of section 40(a)(ia) - Held that:- Admittedly, no tax was deducted on the payment of ₹ 21,27,846. The assessee has not proved that the provisions of section 40(a)(ia) of the I. T. Act does not have any application on the said payment of ₹ 21,27,846. Hence, the A. O. was correctly disallowed the expenditure by invoking the provisions of section 40(a)(ia) of the I. T. Act, which was confirmed by the CIT(A). Hence, we see no reason to interfere with the order of the CIT(A) and we confirm the same. Disallowance of labour charges expenses - Held that:- The assessee has not produced any details that the said labour charges has been expended by it. Hence, the A. O. had correctly disallowed the expenditure and added back to the income of the assessee. We see no reasons to interfere with the orders of the Income-tax authorities, and confirm the same.
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2018 (10) TMI 1594
Deduction u/s. 80IB - CIT-A holding Unit No.47 as new Industrial Undertaking and allowing the deduction - industrial undertaking has more than one physical place for it’s allied activities - Held that:- The mere fact that an industrial undertaking has more than one physical place for it’s allied activities, such as storage of raw material, final touches and packing of end products or other ancillary activities would not mean that all these physical places are to be treated as standalone unit and profits for each of these places are to be computed separately. As learned CIT(A) rightly puts it, for setting up of new industrial undertaking, the number of building is wholly irrelevant. As all these units together constituted separate and distinct industrial undertaking eligible for deduction under section 80IB. We have also noted that there is no dispute that, vide registration dated 3rd June 2001, District Industries Centre has confirmed setting up of unit at “No.47 New Grain Market, Opp. Anupam Talkies, Khokhra, Ahmedabad” for production of “Readymade garments for children”. As for the statement made by the partners of the assessee firm, all that has been stated in the said statement is that the activities are carried out at other places as well but then none of these activities were independent activities on standalone basis or resulted in a distinct product. In any event, as is the settled legal position, statement recorded under section 131 has no evidentiary value, and there is nothing more than the statement which is put against the assessee in the present case. - Decided against revenue
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2018 (10) TMI 1593
Long Term Capital Gain - non reference of matter to the Valuation Officer as per section 50C(2) - FMV determination - Held that:- We direct the AO to refer to the Valuation Officer to determine the fair market value u/s 50C(2). Accordingly determine the capital gain after giving proper opportunity of being heard to the assessee. Therefore, the impugned order is set aside and AO is directed to redo assessment de-novo. Appeal of the assessee allowed for statistical purposes.
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2018 (10) TMI 1524
Deduction u/s. 80IB - CIT-A holding Unit No.47 as new Industrial Undertaking and allowing the deduction - industrial undertaking has more than one physical place for it’s allied activities - Held that:- The mere fact that an industrial undertaking has more than one physical place for it’s allied activities, such as storage of raw material, final touches and packing of end products or other ancillary activities would not mean that all these physical places are to be treated as standalone unit and profits for each of these places are to be computed separately. CIT(A) rightly puts it, for setting up of new industrial undertaking, the number of building is wholly irrelevant. As all these units together constituted separate and distinct industrial undertaking eligible for deduction under section 80IB. There is no dispute that, vide registration dated 3rd June 2001, District Industries Centre has confirmed setting up of unit at “No.47 New Grain Market, Opp. Anupam Talkies, Khokhra, Ahmedabad” for production of “Readymade garments for children”. As for the statement made by the partners of the assessee firm, all that has been stated in the said statement is that the activities are carried out at other places as well but then none of these activities were independent activities on standalone basis or resulted in a distinct product. In any event, as is the settled legal position, statement recorded under section 131 has no evidentiary value, and there is nothing more than the statement which is put against the assessee in the present case. - Decided against revenue
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2018 (10) TMI 1609
Reopening of assessment u/s 147 - unexplained investment - Held that:- It is recorded that the appellant was unable to explain the source of income from which these investments have been made by furnishing her bank statements, and which finding has even not been challenged before us. The only so called explanation given was that since her husband had expired in the year 2011, the records were not available with her to explain the source of these investments. This excuse of the appellant was not believed by the authorities below, and therefore, on merits also they proceeded to make the additions. In fact, if the appellant would have produced the material to show from what source these investments were made, she would have probably succeeded in the proceedings. However, she failed to do so as recorded by the authorities below. This being the case, and since the ITAT in her son’s case accepted the submission that these investments should not be brought to tax in his hands as he was the second holder and they could have been brought to tax, if any, in the hands of the first holder, namely, the appellant, we find that the A.O., in view of these observations of the ITAT, clearly had reason to believe that the income of the appellant with reference to these three investments had escaped assessment.
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2018 (10) TMI 1592
Deduction u/s 80P(2) - interest income received from investments with co-operative banks - Held that:- In the case of ITO v. The Chengala Service Co-operative Bank Ltd. [2018 (4) TMI 339 - ITAT COCHIN] after elaborately considering all the judicial pronouncements had decided the issue in favour of the assessee. As regards the interest received on investments with cooperative Banks, we are of the view that the deduction u/s 80P(2)(d) can be granted only if the interest income is received out of investments made with co-operative societies. In the instant case, it is not clear that the interest income was received out of investments made with co-operative societies. Therefore, we are of the view that deduction u/s 80P(2)(d) of the I.T.Act cannot be granted. Further, we find that the investments are made by the assessee-society in the course of its banking business / providing credit facilities to its members and hence such income will form part of banking activities of the assessee and same is entitled to deduction u/s 80P(2)(a)(i) of the I.T.Act. On identical facts, the Cochin Bench of the Tribunal in the case of The Azhikode Service Cooperative Bank Ltd. & Ors.[2017 (7) TMI 1138 - ITAT COCHIN] after considering all the judicial pronouncements had decided the issue in favour of the assessee.
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2018 (10) TMI 1591
Penalty levied u/s 271AAA - undisclosed income - assessee had failed to furnish details as to the source of earning such additional income - rejection of assessee's contention of assessee that additional income was on account of under-valuation of stock and there were no changes in purchases, hence no merit in levy of penalty - Held that:- The additional income had been offered by the assessee on account of valuation of stock. It is not case of the Department that any unaccounted stock was found during the course of search or any entry was found in any document or transaction or the books of account, during the course of search, which depicts the said stock. The assessee on the other hand, had not modified the quantity of stock but had declared additional income on account of valuation of stock, which had been recorded in books of account. Such disclosure made by assessee in the return of income filed for the search year was not on account of any surrender made at the time of assessment and at best was additional income offered on appraisal of totality of facts of the case. The basic condition of additional income being offered on the basis of seized document during the course of search had not been fulfilled in the present case. We find support from the ratio laid down by the Delhi Bench of Tribunal in Mahavir Prasad Jaipuria Vs. ACIT [2017 (10) TMI 875 - ITAT DELHI] wherein it was held that where the amount was not surrendered at the time of search but was surrendered subsequently during course of assessment proceedings; as per specific provisions of section 271AAA of the Act, said amount did not specifically fall under definition of ‘undisclosed income’ found during course of search, thus, levy of penalty was not justified. - Decided in favour of assessee.
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2018 (10) TMI 1590
Rectification of mistake - mistake apparent from record - Held that:- We find that the alleged error pointed out by the assessee while considering the issue in dispute, the Tribunal had detailed discussion on legal as well as on factual aspects and no fresh exercise is required. We find that the scope of sub-section (2) is restricted to rectifying any mistake in the order which is apparent from record and does not extend to reviewing of the earlier order. It is settled position of law that reconsidering the findings recorded, or reconsidering application of relevant provisions of law to facts of case, such a course is not permissible under section 254(2). Therefore, we are of the view that by pointing out the alleged apparent errors, relying on new found and repeated submissions, the assessee is trying to review and revisit entire order of the Tribunal, which is not permissible in law. We do not find any merit in this application of the assessee, because the issues agitated in the MA have already been examined and deliberated upon, and reached a conclusion on merit. MA, therefore, fails.
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2018 (10) TMI 1589
Disallowance of depreciation @ 30% on cars and various expenses incurred on cars treating the same for noncommercial purpose - Held that:- CIT(A) has given a categorical finding that log books for each vehicle and even the books of account were not produced for verification before the Assessing Officer as well as before him. But while arriving at the disallowance of 30% depreciation and ₹ 50,000/- out of maintenance expenses the same was not based on any specific basis by the Assessing Officer as well as by the CIT(A). Besides, AR submitted that the documents were provided before the revenue authorities but the same was not properly considered by the Revenue. Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer to verify this issue. Addition as notional income from house property - addition on estimates basis - Held that:- admittedly no benefit was derived from the house property in the year under reference by the assessee and no depreciation was claimed on the property. The business exigency required the assessee to visit Bilaspur which was pointed and demonstrated by the assessee. Therefore, the Assessing Officer merely on estimate basis cannot make the addition. Thus, Assessing Officer as well as CIT(A) was not correct in making this addition on estimated basis. TDS u/s 194C - sums credited or paid during the year to the contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing PAN, to the person paying or crediting the such sum - scope of amendment in section 194C(6) - Held that:- It is pertinent to note that the Assessing Officer while making additions has not taken proper cognizance of the documents produced at the time of assessment proceedings by the assessee. Therefore, it will be appropriate to admit the additional evidence at this juncture and remand back this issue to the file of the Assessing Officer to verify this issue in light of the various documents produced by the assessee. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Ground partly allowed for statistical purpose. Admission of additional evidence - Held that:- It is pertinent to note that the relevant documents were not produced before the revenue authorizes, but at the same time the Assessing Officer while making additions has not taken proper cognizance of the documents produced at the time of assessment proceedings which are not supported by the assessee with the other documents. Therefore, it will be appropriate to admit the additional evidence at this juncture and remand back this issue to the file of the Assessing Officer to verify this issue in light of the various documents produced by the assessee. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Ground partly allowed for statistical purpose.
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2018 (10) TMI 1588
Revision u/s 263 - proof of AO's order to be erroneous and prejudicial to the interest of the Revenue - Held that:- Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the Revenue, but which are passed after inquiry/investigation on the question/issue are not per se are normally treated as erroneous and prejudicial to the interest of the Revenue. Because, the Revisionary Authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken, the same cannot be initiated without following the proper provisions u/s 263 of the Act. In the present case the Assessing Officer has made all the inquiries and after verifying the documents/ material on record passed a reasoned Assessment Order. Therefore, the Commissioner does not have any locus standi to make further inquiry. Therefore, order u/s 263 of the Act in present appeal is not justified and is set aside herewith - Decided in favour of assessee
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2018 (10) TMI 1587
Levy of late filing fees u/s 234E while issuing intimation u/s 200A - scope of amendment to section 200A - Held that:- In the present bunch of appeals is identical to the issue raised before the Tribunal in different bunches of appeals and since the amendment to section 200A of the Act was prospective in nature, the Assessing Officer while processing TDS returns / statements for the period prior to 01.06.2015 was not empowered to charge late filing fees under section 234E of the Act, even in cases where such TDS returns were filed belatedly after June, 2015 and even in cases where the Assessing Officer processed the said TDS returns after June, 2015. Accordingly, we hold that intimation issued by Assessing Officer under section 200A of the Act in all the appeals does not stand and the demand raised by charging late filing fees under section 234E of the Act is not valid and the same is deleted. - Decided in favour of assessee.
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2018 (10) TMI 1586
Transfer pricing adjustment on the entire cost of sales of CBU Unit of the Appellant instead of limiting it to the international transactions with Associated Enterprises in respect of purchase cost of CBU's - MAM - Held that:- Approach adopted by TPO in comparing margins of controlled transaction i.e. import of spare parts and import of CBUs from associated enterprises and proposing adjustment on account of arm's length price of international transactions does not stand and the same is cancelled. Hence, the TPO had erred in applying RPM method. In any case, under the garb of RPM method, TPO has compared sale of spares with sale of passenger cars. Further, it may be pointed out that TPO compared margins of fully developed vehicles with margins of spare parts, but the two items cannot be said to be functionally comparable and hence, there is no merit in the stand of Assessing Officer / TPO in this regard. Application of most appropriate method in order to benchmark international transactions undertaken by assessee - Held that:- We find that assessee had applied TNNM method by selecting certain concerns as comparables. Though the TPO in show cause notice had proposed to reject five companies out of total 12 companies identified by assessee in its TP study report, but there are no final observations of TPO / TO in this regard. The same also was not necessitated because the TPO had applied RPM method. In such scenario, where the TPO has failed to look into the comparability aspect of margins of assessee with mean margins of comparables, we remit this issue back to the file of Assessing Officer / TPO to consider submissions of assessee in this regard and after applying aggregation approach, compute the margins of assessee company and compare it with mean margins of concerns which are functionally comparable to the assessee. The assessee shall cooperate and furnish the details and Assessing Officer shall decide the limited issue after affording reasonable opportunity of hearing to the assessee. Transfer pricing adjustment made to royalty payment by taking the rate @ 3% as against rate of 5% paid by assessee - disallowing balance royalty expenditure, post TP adjustment considering the same to be capital in nature - Held that:- We hold that payment of royalty is to be aggregated with production and sales activity and could not be benchmarked separately. Further, we also hold that there was no merit in the orders of Assessing Officer / TPO in applying CUP method and comparing the rate of royalty paid by assessee with the rate of royalty paid by Maruti Udyog Ltd. to Suzuki Motors Corporation, Japan, which was controlled transaction. Consequently, grounds of appeal No.2 and 3 raised by Revenue are dismissed. However, the benchmarking of said transactions along with other transactions needs to be computed by Assessing Officer / TPO by applying TNNM method as directed in earlier grounds of appeal. The Assessing Officer shall also include the payment of royalty while applying transfer pricing provisions in order to benchmark international transactions with its associated enterprises. Treating royalty payment as revenue expenditure, where the assessee had acquired enduring benefit - Held that:- We are referring to the findings of Tribunal in assessment years 2003-04 and 2004-05, wherein vide paras 23 and 24, the said issue has been decided in favour of assessee and the grounds of appeal raised by Revenue were dismissed, but for the sake of brevity, we are not reproducing the same. Accordingly, the ground of appeal raised by Revenue is dismissed.
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2018 (10) TMI 1608
Rectification application u/s 254(2) - held that:- There is a clerical error and ambiguity in the order passed [ 2018 (10) TMI 1132 - BOMBAY HIGH COURT], on the appeals and the writ petition. The correction as proposed in the praecipe of the learned advocate for the petitioner / appellant Mr. Atul Jasani be, therefore, carried out. 2 The sub-paragraph (a) of paragraph 46 would read as under : (a) In the event the tax on a sum of ₹ 3,25,00,000/- (Rupees Three crores twenty five lakhs) is deposited by the petitioner with the Respondent/Revenue within a period of two months from the date of receipt of a copy of the order giving effect to this order, each of the Income Tax Appeals before the Tribunal and the proceedings before us would stand disposed of.” The order should contain an addition as proposed by Mr. Malhotra and while we clarify that the tax on the above sum has to be computed and paid, it will be open for the Revenue official to also include in the amount, the quantum of interest, if any. Secondly, the amount as payable be apportioned in terms of the Assessment Years in relation to which the decision of the Tribunal has been rendered.
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2018 (10) TMI 1607
Royalty V/S fee for technical service - Payments liable to Income tax Act - scope of the work was for design of a new 3-valve cylinder head with AVL CCBR combustion system - DTAA India and Austria - Treatment to sum as royalty and bringing it to tax - claim of the assessee that the payment represent fee for technical services - revenue's plea is that clause 7 of the general terms and conditions would clearly show that the know-how and patents and the ideas introduced into the project shall remain the exclusive property of the Austrian company and therefore, what has been given to the assessee is only a right to use and therefore, the payment is royalty. Held that:- We are unable to accept the submission made by the Revenue for treatment to sum as royalty for the reason that the engine has already been developed by the assessee and scope of the technical services agreement was only to design a new 3-valve cylinder head with a specified combustion system for considerable improvement of fuel efficiency, performance and meeting the Indian emission standards. All products, design of the engines and vehicles are supplied by the assessee. On completion all the drawings are also delivered by the Austrian company to the assessee. The entire project was carried out in Austria and no part of the project was performed in India. Thus, in our considered view the CIT(A) rightly held that the payment does not constitute royalty. In the assessee's own case for the assessment years 1991-92, 1992-03 1994-05 [1999 (5) TMI 69 - ITAT MADRAS-A] a similar agreement came up for interpretation. In the said agreement, the Austrian company was to render technical assistance for consideration to be paid in four installments for improvement of fuel efficiency of carburetters manufactured by the assessee for two wheeler engines. The Tribunal after considering the admitted facts, pointed out that the Austrian Company was not a manufacturer of two wheelers and was only a consultant and according to the terms of the agreement between the two companies the entire technical know-how was absolutely to be passed on to the assessee and there was no grant of any right to use any property of the Austrian company and the payment could only be termed as 'fees for technical services' and could not be considered in the nature of royalty, since it was not payment for the right to use any property of the Austrian company. We find the terms and conditions of the agreement are similar to that of the agreement, which is subject matter of consideration in this appeal and the decision in the assessee's own case - Decided against revenue.
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2018 (10) TMI 1606
Reopening of assessment - introduction of capital - validity of reasons - Held that:- Revenue has hardly explained how and in under what circumstances, it can proceed to re-open the assessment for the subsequent year, F.Y. 2009-10 (A.Y. 2010-11). This Court is further of the opinion that there is no material to support the Revenue’s premise that any infusion of capital which was made on 01.04.2009, which could, if at all, be found to be the only basis to form a valid reason as stated in the notice. In the absence of such information, what emerges is that the investment of ₹7.22 crores in the equity capital of the petitioner were related quite logically or naturally, to the previous year i.e. AY 2009-10 (FY 2008-09). In these circumstances, the re-opening of the assessment, cannot be sustained even though the Revenue may be otherwise right in contending that it was based upon tangible information. Clearly, the inaccuracy or rather a mistake in this case, affected the validity of the notice. - Decided in favour of assessee.
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2018 (10) TMI 1605
Compounding of offences - default u/s 276B read with section 278B - delay in depositing the tax deducted at source - compounding applications rejected on the ground that nobody attended the proceedings when the first application was being taken up and the subsequent fresh applications cannot be entertained as the first one was rejected - Held that:- We do not find that the respondents have applied their mind to the compounding applications by dealing with the merits thereof. The applications have been dismissed only on the ground that nobody attended the proceedings when the first application was being taken up and the subsequent fresh applications cannot be entertained as the first one was rejected. All this hardly indicates any application of mind. It is in these circumstances and in facts peculiar to this case, without this order being treated as a precedent, we allow the writ petition. We direct that the application for compounding the offences made as early as on 20th February, 2014 (Exhibit 'K') be considered and a fresh order be passed thereon as expeditiously as possible and in any event within a period of two months from the date the petitioners pay the requisite fees on that application. The application shall be decided by a speaking order.
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2018 (10) TMI 1585
Rejection of books of accounts - estimation of profit - estimating the income at 5 percent of gross receipts - Held that:- On identical reasons in earlier A. Y. 2010-11 [2015 (11) TMI 297 - ITAT DELHI] no specific discrepancies or defects in the books of account of the assessee has been pointed out, nor any material was brought to establish that the purchases and expenses had been inflated or the sales had been suppressed and in the absence of any such material or finding given, there was no justification in invoking the provisions of Section 145(2) of the Act. Thus in the present case Assessing Officer was not justified in rejecting the book results without pointing any specific defects in the books of account. - Decided in favour of assessee.
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2018 (10) TMI 1584
Reopening of assessment u/s 147 r.w.s. 148 - reopening based on information of Investigation wing - non independent application of mind by A0 - capitalization fee received - Held that:- It is significant to note that the information received by the AO was neither unspecific nor general nor vague and it referred to the direct transaction of capitation fee paid in cash by the guardian of assessee’s son to Santosh Medical College. Not only this, the AO was in possession of documentary evidences seized in the search, i.e., ledger account of Santosh Medical college, the statements of principal person of the Institute admitting receipt of capitation fee during the year under consideration and the letter of ADIT, Investigation Wing as referred to in the assessment order. This information contains the name of the person, from whom the capitation fee was received along with their addresses, date of payments, name of the course pursued, which establishes a live link between the recipient of the cash payments and the payer thereof. Once, the receipt of cash payments towards capitation fee stood established by documentary evidences and statements of the recipient, it was incumbent upon the assessee to explain and establish by cogent evidence that no such payment was made by it. However, there is no evidence to this effect on record. In presence of such a specific information and tangible material in possession of the Assessing Officer, in our considered view, the Assessing Officer was justified to form a prima facie belief or opinion that income chargeable to tax in the hands of the assessee had escaped assessment. Thus, the contention of the assessee that there was no application of mind, does not sound good. Assessing Officer has tried its best to justify the impugned addition. The assessee in his statements, side tracking the explanation to explain the source an nature of payment stated that the payments towards fee etc. for his son’s admission was made by his father-inlaw, Shri Jile Singh Bhati and Shri Jile Singh Bhati in his statements stated that he did not remember payment of capitation fee, but admitted payment of only ₹ 4.18 lacs. The statements of both the assessee and his father-in-law nowhere go to belie the factum of payment of capitation fee. Even no evidence regarding admitted payment of regular fee was also laid before the Assessing Officer. In such state of affairs, in our opinion, there is no infirmity in the conclusions reached by the authorities below. Contention of assessee regarding reopening of case without proper service of notice u/s. 148 - notices, summons etc. so issued to the assessee at the given address admittedly stood served upon the assessee either through the tenant or through his brother. The assessee, when appeared before the Assessing Officer itself had shown copies of three letters issued by the Assessing Officer on 23.03.15, 26.03.15 and 09.07.15, which included the notice u/s. 148. We, therefore, find that this contention of the assessee does not stand proved nor does it render any help to the assessee. Reopening without seeking proper sanction - evident from record that no assessment of assessee was made u/s. 143(3). The assessee did not file even a return u/s. 139 for this year. Therefore, the case of assessee does not come within the reach of subsection (1). In Sub-sec. (2), there is restriction without sanction of competent authority for the issuance of notice beyond the period of four years from the end of relevant assessment year, which too is not applicable in the instant case, as the notice u/s. 148 has been issued within the period of four years. In presence of these facts, the decisions relied by the ld. AR on this issue are not applicable to the present case. - Decided against assessee.
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2018 (10) TMI 1604
Taxability of subsidy - scheme for grant of subsidy to Marathi feature films - capital receipt or revenue receipt - Challenge to proviso to Rule 9A of the Income Tax Rules, 1962 as ultra vires - Held that:- In the light of the above submissions of Mr. Naniwadekar and the position in law emerging from the discussion in the foregoing paragraphs, we are of the view that interest of justice would be served by not examining presently the issue of constitutional validity and legality of the provisio to Rule 9A. In the event, the Commissioner passes an order which is adverse to the interest of the petitioner, then, while challenging it in Appeal before the Tribunal, the petitioner can rely upon the view taken by the Tribunal in several cases after introduction of the proviso. The petitioner can persuade the Tribunal to pass an order consistent with its earlier views and, in the event, the facts and circumstances are found to be identical, we have no doubt in our mind that the Tribunal will render a judgment in accordance with law. While rendering such a judgment, it will note the rival contentions and equally make reference to the earlier views of the Tribunal. All this would emerge in the speaking order.
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2018 (10) TMI 1583
Disallowance of provision for warranty & maintenance expenses - as per assessee it is not a provision for warranty & maintenance expenses rather it is an excess provision for warranty & maintenance expenses which was written back during the year, but not credited to Profit and Loss Account - MAT computation - Held that:- The assessee is also making provision for warranties and maintenance expenses every year which may arise in future out of present obligations arising from sales concluded with warranties and maintenance obligations contracted by the assessee along with sale transaction. The obligation on account of warranties and maintenance which arose during the current year out of contractual obligations towards warranties and maintenance attached to sales made in preceding years are debited to Provisions for Warranties and Maintenance account As observed assessee has made regular provisions towards warranties and maintenance expenses which may arise in future on account of sale already made as contracted while making sales of equipment/appliances, which is in consonance with Accounting Standard 29 issued by ICAI and the said provision cannot be termed as unascertained liability. The assessee has computed its provision for warranties and maintenance based on past experience which cannot be simply brushed aside as the onus which stood on the assessee stood discharged and it was for the Revenue to have brought incriminating material/evidences to demolish the basis of computing such provision. The detailed elaboration were made by the assessee to that effect to substantiate its contentions vide written submissions filed before the learned CIT(A) . CIT(A) has passed a well reasoned order deleting additions both under normal provisions as also under provisions of Section 115JB while computing book profits , and we have no reason to interfere with the well reasoned order - Decided against revenue
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2018 (10) TMI 1582
Taxability of Gift u/s 56 - Indian Millennium Deposit (IMD) bonds taxation in the hands of the assessee - "sum of money" as used in Section 56(2) - Valid gift - Held that:- We find that the issue of gift of Indian Millennium Deposit certificate is not taxable in the hands of the assessee who received the same upon gift and also under the terms and conditions as stipulated in the Indian Millennium Deposit Certificate. It was provided that the said certificates can be gifted by NIR/banks only once to any person resident in India but the IMD bonds will be passed on to the donee including the gift for premature encashment. However, non resident only will be entitled to transfer the said IMD certificates. Also as perused various decisions relied upon by the assessee and find that the IMD bonds falls under the category of securities and therefore it does not fall within the meaning of any some of money. - decided against revenue
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2018 (10) TMI 1603
Deduction u/s 80P - Whether the Assessee - Co-Operative Society which fulfills the conditions of being Primary Co-Operative Bank as provided under the provisions of Section 5(ccv) of Banking Regulations, 1949? - Held that:- Hon’ble Supreme Court in an identical circumstances in the case of the Citizen Co-Operative Society Ltd. Vs. ACIT (2017 (8) TMI 536 - SUPREME COURT) held that, business of the Society does not amount to that of Co-Operative Bank, so as to come within the mischief of Sub-Section (4) of Section 80P. Since the Assessee was catering to the needs of nonmembers also, the principle of mutuality is tainted and therefore the benefit of Section 80P was denied. Whether the appellant – Assessee accepting the deposits even from the non-members has to be held enquiry afresh by the Assessing Authority. Therefore, the Tribunal has remanded the matter to the Assessing Officer for fresh enquiry and the same is in accordance with law. The Tribunal while remanding the matter ought not to have recorded any finding on merits of the case - No substantial question of law.
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2018 (10) TMI 1602
Penalty u/s 271(1)(C) - deduction u/s 80IA(4)(iv) rejected - Held that:- In the quantum appeal the assessee has succeeded before this Court while allowing the appeals held that the Substantial Questions of Law, which have been framed for consideration, are covered by the decision of this Court in Velayudhaswamy Spinning Mills (P) Ltd., Vs. Assistant Commissioner of Income Tax [2010 (3) TMI 860 - MADRAS HIGH COURT] [2010 (3) TMI 860 - MADRAS HIGH COURT]. We may also add that the Tribunal has considered the matter in a proper perspective, took note of the factual position and held that at the relevant point of time there were two interpretations which were possible with regard to the deduction that can be claimed under Section 80IA(4)(iv). In such circumstances, the Tribunal has rightly held that the case of the assessee cannot be brought within the ambit of concealment and furnishing of inaccurate particulars with deliberate intention, to avoid payment of tax. - Decided in favour of assessee. Amounts paid to the employees under the Voluntary Retirement Scheme - whether such expense was an allowable expense or not? - Held that:- In order to get over the legal embargo which permitted such expense to be allowable as a deduction, the Income Tax Act was amended and Section 35DDA was introduced by Finance Act, 2001 w.e.f 01.04.2001. Thus, in our considered view, the Tribunal was justified in setting aside the penalty levied on the assessee on account of the fact that the assessee had acted in terms of the law prevailing at the relevant point of time. Thus, for the above reasons the Revenue has not made out any grounds to interfere with the order passed by the Tribunal. - Appeal decided against revenue
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2018 (10) TMI 1523
Re-opening of assessment u/s. 147 / 148 - Held that:- The assessee filed its return of income on 27/09/2009 declaring total income at ₹ 1,70,61,600/-. The Assessing Officer (AO) completed the assessment u/s 143(3) on 30/12/2011 assessing the total income at ₹ 12,25,11,130/-. After giving effect to the order of the CIT(A), the AO revised the total income to ₹ 2,28,60,465/-. Once, the original assessment is re-opened on some issue, the AO can reassess any issue which may come to his notice subsequently during the course of proceedings u/s. 147 of the Act as per Explanation-3 to section 147. Thus, we uphold the order of the ld. CIT(A) on the issue of reopening. Bogus purchases - estimating the profit to the extent of 12.5% of the purchases - Held that:- We find that the AO has failed to find any fault on the sales made by the assessee. In the case of Simit P. Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] the Hon’ble Gujarat High Court has held that where purchases were not bogus but were made from parties other than those mentioned in the books of account, not entire purchase price but only profit element embedded in such purchases can be added to income of the assessee. CIT(A) has rightly directed the AO to restrict the disallowance to 12.5% of the disputed purchases. We uphold the order of the ld. CIT(A) and dismiss the 1st ground of appeal filed by the revenue. Unsold flats as stock-in-trade used for purpose of business - CIT-A held that the unsold flats as stock-in-trade used for purpose of business - Held that:- In order to give relief to Real Estate Developers, section 23 has been amended w.e.f. AY 2018-19 (FY 2017-18). By this amendment, it is provided that if the assessee is holding any house property as his stock-in-trade which is not let out for the whole or part of the year, the annual value of such property will be considered as Nil for a period up to one year from the end of the financial year in which a completion certificate is obtained from the competent authority. In the instant case, the assessee is a builder and developer. The issue of taxability is with regard to unsold flats. The AY is 2009-10. In view of the insertion of sub-section (5) in section 23 by the Finance Act, 2017, w.e.f. 01.04.2018 narrated hereinbefore, we uphold the order of the Ld. CIT(A) and dismiss the 2nd ground of appeal filed by the revenue. Addition u/s. 14A r.w. Rule 8D - Held that:- AO has rightly made a disallowance of ₹ 18,393/- u/s. 14A r.w. Rule 8D(2)(iii) of the Income tax Rules, 1962. This is in line with the judgement of the Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg.Co.Ltd. vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT]. Therefore, we set aside the order of the CIT(A) on the above issue and restrict the disallowance to ₹ 18,393/- in place of ₹ 18,829/- made by the AO. Thus, the 1st ground of appeal is partly allowed.
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2018 (10) TMI 1581
Capital Gains - Nature of payment to execute an order of eviction - Addition for payment to vacant of unauthorized possession out of capital gain - to be treated as cost of improvement or not - Held that:- From the available records, it is noted that there was a dispute and Shri Babu Lal Meena and Shri Phool Chand Jhan were having the illegal possessin on the premises of the assessee. It is further noted that the assessee vide letter dated 17-03-2016 addressed to ACIT, Circle – 6,Jaipur had requested the AO to make enquiry if he has any doubt about the illegal possession of the premises by these two persons. AO had not given any adverse findings thereon. It is noted from the sale agreement made between the assessee wherein the assessee had received the amount of ₹ 45.00 lacs through cheque, the details of which are available at PBP 36 of sale agreement. The assessee had taken only ₹ 45.00 lacs through banking channel and ₹ 10.00 lacs was received by cash which was due to the reason that these illegal possession holder wanted the amount in cash. Hon'ble Karnataka High Court in the case of Mrs.June Perrett vs ITO [2007 (11) TMI 86 - KARNATAKA HIGH COURT] held that Payment to evict an unauthorized occupant can be treated as cost of improvement. CIT(A) is not justified in confirming the addition of ₹ 5.00 lacs which we direct to delete. - Decided in favour of assessee. Expenses claimed against the interest income shown under the head Income from other sources - Held that:- The assessee during the course of assessment proceeding submitted all these details filed before the AO who has made the addition of ₹ 8,02,854/-. CIT(A) has confirmed the action of the AO. From the available records before us, it is noted that the assessee has utilized the borrowed funds to purchase the agricultural land. As regards interest payment to Raj Kumari Agarwal and Aparjita Saini, it is noted that there were opening balances of the amounts in their accounts. Further the assessee has earned interest on the advances made to M/s. Feathertouch Polychem (P) Ltd. of ₹ 6,17,757/-. It is important to note that during the year the assessee has earned interest income of ₹ 13,95,012/- and paid the interest of ₹ 8,02,854/-. In view of these facts and circumstances of the case, we find no merit in the order of the ld. CIT(A) in sustaining the disallowance of interest - Decided in favour of assessee.
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Customs
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2018 (10) TMI 1574
Valuation - Mis-declaration of imported goods - there is a case of misdeclaration by the appellant, a manufacturer of carpets, which had been imported are used and old carpets - rejection of declared value - enhancement of assessable value - misdeclaration in the country of origin - confiscation - redemption fine - penalty. Held that:- The appellant has declared Country of Origin as USA with respect to Bill of Entry dated 24.02.2011. It is found that the appellant wanted to correct the said error under the provision of Section 149 of Customs Act, however, that request was not acceded to by the Department. The said error is purely clerical in nature, as the appellant had declared the goods as old and/or used. Only on the said basis, it cannot be said that the appellant has misdeclared the goods in order to clear their goods - With respect to second Bill of Entry dated 11.05.2011, it is found that there is no misdeclaration by the appellant as alleged by the department. That sofar the enhancement of value is concerned, Rule 12(2)(iii)(d) is not applicable in as much as there is no mis-declaration of goods. Further, the Department has not produced any evidence to show that the relationship between the parties has influenced the price. Therefore, the reasons for rejecting the transaction value is not in consonance with law and therefore liable to be set aside. also the goods are not liable for confiscation as well - Since the charges of misdeclaration undervaluation are not sustainable in law, the differential duty demand is liable to be set aside along with penalties imposed and redemption fine imposed. Appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1573
Classification of imported goods - Silicon Steel Sheet Cuttings (CRGO) (Secondary & Defective) having different irregular shapes and sizes - classified under CTH 72261100 or otherwise - Confiscation - penalty - change of classification based on the reports of the Chartered Engineers - Whether the Chartered Engineer report is acceptable in the facts and circumstances of the case or not? - Held that:- The Chartered Engineer who has examined the goods are not metallurgical engineer and the reports were based on visual examination without any market inquiry, therefore, the reports provided by the Chartered Engineers are not acceptable as held by this Tribunal in the case of R.G. Gupta [2017 (8) TMI 501 - CESTAT CHANDIGARH] - as Chartered Engineers who were not metallurgical engineer and given the reports without market survey on visual examination cannot be relied upon. Therefore, the reports given by the Chartered Engineers are not acceptable for assessment of the bills of entry in question. Whether the classification of the impugned goods has been done by the adjudicating authority correctly or not in the absence of any test report? - Held that:- Admittedly, no samples have been drawn for testing despite several requests were made by the appellant in terms of Steel and Steel Products (Quality Control) second order dated 12.03.2012 wherein para 3(ii) deals with how the goods are to be disposed of - Admittedly, as per the steel and steel products (quality control) second order 2012, the goods are required to be testing and inspection of the Bureau of Indian Standard and the same has not been done. In that circumstances, the classification arrived by the adjudicating authority is not acceptable, therefore, classification is declared by the appellant is accepted. Whether the goods are required to be mutilated as directed by the adjudicating authority? - Held that:- As the reports of the Chartered Engineers are not acceptable and the goods declared by the appellant as scrap has been accepted. In that circumstances, the goods are none other than the scrap as declared by the appellant, therefore, the same are not required to be mutilated. Whether in the facts and circumstances of the case redemption fine and penalty can be imposed on the appellant or not? - Held that:- Admittedly, the declaration made by the appellant has been accepted. Moreover, the goods were not mis- declared and held to be scrap. In that circumstances, the redemption fine and penalty imposed on the appellant are set aside. The appeal is allowed with the direction the goods to be released immediately - decided in favor of appellant.
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2018 (10) TMI 1579
Refund claim - time limitation - section 27(1) of the Customs Act, 1962 - revenue submitted that amount paid as anti-deumping duty and not as pre-deposit - Held that:- CBEC Circular dated 08.12.2004 states that pre-deposit amount must be returned within three months of the date of the order passed by the Appellate Tribunal or the Court unless stay is granted against such order. It was held that, it was the duty of the department to refund such amount. The show-cause notice issued for rejecting the assessee's application for returning the amount itself records this basic facts. Particularly, the amount in question was deposited by way of pre-deposit pending investigation - appeal dismissed.
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2018 (10) TMI 1572
Refund of SAD - N/N. 102/2007-Cus dated 14.09.2007 - rejection on the ground that the same has been filed after the prescribed time limit of one year from the date of payment - time limitation. Whether there is any time limit prescribed by law for filing the refund claim of additional duty of Customs as stands exempted vide the N/N. 102/2007? Held that:- No doubt, the said Notification is silent about any time period for filing the said claim. But the Notification exempts the goods in first schedule of Customs Tariff Act from being leviable to the additional duty of Customs. However, the Notification itself mandates the deposit of the said additional duty at the time of importation of the goods and thereafter to get the refund - the amending N/N. 93/2008 is arising out of the statute, i.e. Section 25(2A) of the Customs Act, 1962 hence, the findings of the Commissioner(Appeals) that the amendment introducing one year from the date of payment of additional duty as a time to claim the refund thereof is without statutory amendment, is not sustainable rather is opined to be legally erroneous. Otherwise also, the said amendment came into force w.e.f. 01.08.2008 that too in accordance of another statutory provision, i.e. Section 25(4) of the Customs Act. We cannot rule out that the Notification No. 93/2008 came into existence to align the statutory provision with the Notification which was silent as far as the period of limitation for the purpose as mentioned therein is concerned. Otherwise also, on examination of relevant provision it appears that the provisions of limitation are excluded, it would nonetheless be still open to the court to examine whether and to what extent the nature of those provisions or the nature of the subject matter and scheme of the special law exclude their operation. The refund claim of additional duty due to the exemption flowing out of N/N. 102/2007 has to be filed within one year in view of the subsequent Notification No. 93/2008-Cus which still holds good and also in view of Section 27 of the Customs Act, 1962 - refund rightly rejected - appeal dismissed - decided against Revenue.
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2018 (10) TMI 1571
Import of restricted item - PRODOTTO NW 775058 (Special Boiling Point Sprit for footwear industry) - importers requested for allowing them to re-export the items as they were not aware that the said import of the goods were restricted - Held that:- Para 2.20 of the Foreign Trade Policy allows import of the goods only through State Trading Enterprises. Sub-para c of the same is to the effect that DGFT may, however, grant an authorization to any other person to import or export any of the goods notified for exclusive trading through STEs . As such it is clarified that even the grant of authorization is for import of the goods for exclusive trading through STEs and is not to be given to any other independent importer - import of this Special Boiling Point Spirit was not permissible in terms of the said para 2.20 and is un-authorized. The appellant had made a request for re-export of the same before the Adjudicating Authority, which request stands accepted by the Adjudicating Authority. Redemption fine - Held that:- It is a settled law that where the goods are allowed to be re-exported, the redemption find cannot be imposed - redemption fine set aside. Penalty - Held that:- It is not the Revenue s case that the appellant had tried to import the restricted items by mis-declaring their description or there was any mala-fide on their part. The value of the goods is only to the extent of 40,000 and the same were imported by the appellant for use in the manufacture of their final product and not for the trading purpose so as to earn profit - penalty not warranted. The redemption fine and penalty set aside and the re-export of the goods allowed - appeal disposed off.
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2018 (10) TMI 1578
Directions to Customs i.e. Respondent No.2 to hand over all the documents pertaining to 41 Advance Licenses along with certificate that same are lost or misplaced - Held that:- The Petitioner's appeal from the order dated 24th February, 1997/ 9th April, 1997 of the Deputy Director General of Foreign Trade was last heard by the Appellate Authority on 12th May, 2004. Since then, according to the Petitioner, the appeal is still awaiting disposal. Thus, the re-validation of the 29 Advance Licenses which are a part of 41 misplaced licenses (Ex. W to the Petition), would primary depend upon the result of the appeal filed by the Petitioner. Only then the question of the Licenses being produced would arise - petition disposed off.
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2018 (10) TMI 1569
Anti-Dumping duty - import of Uncoated Copier Paper - data provided by the petitioner rejected by the Designated Authority while determining margin of dumping - Section 9A of the Customs Tariff Act, 1975 - petitioner’s grievance is with respect to certain observations in the final disclosure statement, made under Rule 16 of the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty of AntiDumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995. Held that:- The primary mandate is that the DA is to determine, firstly the margin of dumping and also deduce the export price from the available data. The petitioner’s objection to the impugned order is that the 40% of its production, imported into India through a Singapore trading entity (apparently funded by Chinese financers) are not related transactions. Its emphasis is upon its admitted capacity of production and the ex-factory price the facts relating to which, it says was, gathered by the Indian authorities upon inspection. The complaint of the Indian manufacturers, on the other hand is that in the absence of full details with respect to the sale price, ex-factory, at which the goods were sold to the Singapore trading concerns, and then imported into India, the entire picture would not be revealed. It is based largely on the latter argument that the DA appears to have concluded that the petitioner’s data cannot be analyzed, and taken into consideration for arriving at its export price and if at all the margin of dumping. Undoubtedly, this Court while exercising judicial review jurisdiction, in on-going quasi judicial or statutory proceedings, has to be nuanced and circumspect. It cannot, per se, express its opinion on the merits of the dispute. At the same time, the course of action advocated on behalf of the DA and the complainants cannot be entirely accepted. If the record discloses a basic flaw or irregular approach by the DA in the proceedings, the Court under Article 226 is not helpless. This Court is of the opinion that the petitioner’s grievance can be best addressed by affording it an opportunity of making, what according to it, are relevant submissions, in writing to the Designated Authority with respect to the disclosure statement - The timeline which is indicated by this Court is tentative; in the event that the time to conclude the proceedings and render final findings is extended, under the proviso to Rule 17 of the Rules, it is open to the Designated Authority to extend the time suitably. Petition disposed off.
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2018 (10) TMI 1577
Maintainability of appeal - Classification of imported goods - whether the goods imported are Stainless Steel Melting Scrap of Duplex Grade 2205 or cut pieces of Stainless Steel Pipes which were serviceable and usable? Held that:- The Supreme Court in the case of Navin Chemicals Mfg. & Trading Co. Ltd. Vs. Collector of Customs [1993 (9) TMI 107 - SUPREME COURT OF INDIA] has inter alia held that the words “the determination of any question having a relation to the rate of customs duty or the valuation of goods for the purposes of assessment of duty” inter alia would include an issue of classification of goods. Therefore, in terms of Section 83 of the Finance Act, 1994 read with Section 35G(1) of the Central Excise Act, 1944, the Appeal on issue of classification is not maintainable before this Court. The remedy for the Appellant, if any, is to file an Appeal to the Hon'ble Supreme Court under Section 35L(1)(b) of the Central Excise Act, 1944 as made applicable to the Finance Act, 1994 by Section 83 thereof. Appeal dismissed being not maintainable.
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2018 (10) TMI 1570
Export of cold rolled galvanized non alloy corrugated steel sheets of zink coating and flat rolled products of iron or non-alloy steel, cold rolled, not clad, plated or coated products - non-payment of export duty at the time of export - relevant date of export - whether date of export is the date of let export order or not? - case of appellant is only that since shipping bill was filed on earlier date but it is due to the delay by the Customs, the export has taken place on 10.05.2008 and therefore the appellant is not responsible. Held that:- This plea of the appellant will be of no help as there is no relaxation provided in the law for delay in export as regard levy of export duty - As per the Notification No. 66/2008-Cus dated 10.05.2008, the export duty was levied with effect from 10.05.2008 and the export has also taken place on 10.05.2008, as per the let export order. Therefore, the export duty is very much payable on the said export. This issue has been decided by this Tribunal in the case of CCE, Goa vs. Fomento Resources Pvt. Limited [2016 (11) TMI 226 - CESTAT MUMBAI], where it is made clear that the date of export should be the date of let export order. Appeal dismissed - decided against appellant.
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2018 (10) TMI 1576
Liability of demurrage charges - the charges arose on account the malafide action on the part of the Respondent-Revenue in not accepting the transactional value declared of goods imported - Held that:- Mere fact that the Respondent do not release the goods as they were in the process of filing an Appeal to the Supreme Court, would not by itself lead to the conclusion that the decision was malafide - All this is matter of evidence and can be best adjudicated before the Civil Court by leading evidence. It requires determination of factual issues. Petition not entertained - the remedy, if any, available to the Petitioner, is to file a suit in a Civil Court where above aspect can be considered.
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2018 (10) TMI 1568
Reimbursement of CST under FTP - EOU - Refund claim - duty paid under protest - Debonding of unit - reimbursement in relation to the petitioners' purchases from EOUs - Departmental authorities would not permit debonding of the petitioners' manufacturing unit unless and until all dues were cleared - Held that:- As per the Foreign Trade Policy prevailing at the relevant time, the petitioner would claim reimbursement of central sales tax paid on the purchases made. Such reimbursements were granted at the relevant time. Later on the department issued demands for returning such reimbursement in relation to the petitioners' purchases from EOUs. The Court held that there was no such condition in the Foreign Trade Policy and the condition sought to be read or imposed through the procedure laid down in Hand Book of Procedures could not override the provisions contained in the Foreign Trade Policy. Demand raised in show cause notices would not be enforced against the petitioners - petition disposed off.
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2018 (10) TMI 1575
Review order - Section 129D of the Customs Act, 1962 - Petitioner submits that Review order seeks to erroneously reopen an issue that has been settled by the order dated 31st March, 2017 of the Commissioner of Customs (Export-I), Mumbai Zone - Held that:- The effect of and applicability of the the Supreme Court order in Khushalchand & Co. [2010 (10) TMI 239 - CESTAT, BANGALORE] to the present facts is an issue which would be a subject of consideration before the Tribunal while considering the Appeal of the Revenue. It is in the above context that the use of the word “blatantly” has to be considered. The word 'blatantly' has been used in the context of having followed the decisions of the Apex Court without appreciating the facts of the case. Undoubtedly, the use of the word 'blatantly' is ill-advised. Particularly, bearing in mind that the order in original dated 31st March, 2017 was passed by the Commissioner of Customs in his official capacity in the light of his understanding. The grievance against the order dated 31 March 2017 could have been worded better. Therefore, the grievance of the Petitioner that the use of the word 'blatantly' indicates disregarding the Hon'ble Supreme Court is not justified. The decision on whether the Review order dated 24th August, 2017 is without authority of law would have to depend upon the Affidavits which are to be filed by the Revenue. Therefore, the above issue is the only issue which is now left for consideration viz. whether the impugned review order dated 7th August, 2017 is duly authorised or not. On the other issue raised in this Petition, as indicated above does not warrant any interference. Petition is adjourned to 31st October, 2018.
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Insolvency & Bankruptcy
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2018 (10) TMI 1580
Corporate insolvency resolution process - occurrence of default - Held that:- By the notice, the corporate debtor was called upon to discharge the entire liability of ₹81,97,40,974 as on date of 12.09.2017 and also future interest thereon along with cost charge and expense within 15 days from the notice failing which the financial creditor, in addition to initiating recovery process under prevailing laws, shall be constrained to exercise all or any of the rights conferred under the Code. The notice of demand is not required to be statutorily issued in respect of initiation of CIRP in the case of financial creditors. However, the contents of the notice clearly bring out the occurrence of default. The occurrence of default is also supported by the issue of notice under Section 13(2) read with Section 13(13) of SARFAESI Act, 2002. Whether the application under Section 7(2) is complete? - Held that:- We find that the valuation of the securities does not have much relevance for determination of the question whether the application is to be admitted or rejected. The objection of the learned counsel for the corporate debtor is, therefore, not accepted. As regards the date on which the default occurred, even though the same is not specified in para-2 of Part IV of Form1, we have already noted above that the detail of date of default is available in the Notice under Section 13(2) of the SARFAESI Act, 2002 dated 21.07.2016 enclosed as Annexure A- 25 of the petition. In the reply/objections filed vide Diary No. 645 dated 05.03.2018, it is inter alia submitted that the financial creditor has failed to provide the record of the default with the information utility as required under Section 7 of the Code. Para-3 of Part V of Form 1 requires furnishing of details of record of default with the information utility, if any. It is stated by the financial creditor in Form 1 that the para is not applicable. Further, Section 7(4) requires the Adjudicating Authority to ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under Section 7(3) of the Code. Therefore, no record being available with the information utility, cannot result in making the application under Section 7(2) as incomplete. In view of the above discussion we hold that the application filed by the financial creditor in Form 1 is complete. Whether any disciplinary proceedings are pending against the proposed resolution professional - Held that:- In Part-III of Form 1, the financial creditor has proposed the appointment of Shri Hemanshu Jetley, Regn. No. IBBI/IPA-001/IP-P00219/2017-18/10457 as Interim Resolution Professional. The copy of the registration certificate has been annexed as Annexure A-3 of the petition. Form II has been filed at pages 14 to 15 of the petition in which Shri Hemanshu Jetley has agreed to accept appointment as Interim Resolution Professional and has affirmed that he is eligible to be appointed as Resolution Professional in respect of the corporate debtor in accordance with the provisions of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons ) Regulations, 2016. In Form No. 2, Shri Hemanshu Jetley has also certified that there are no disciplinary proceedings pending against him with the Board or Indian Institute of Insolvency Professional of ICAI. In view of the above discussion, the requirements of Section 7(5)(a) are satisfied in the present case and, therefore, the petition is admitted and the moratorium is declared accordingly.
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Service Tax
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2018 (10) TMI 1561
Rejection of Refund claim without issuing show cause notice - refund claimed on the ground that they have not provided any service to M/s Generic Partners, Australia but only provided documents to them - refund rejected on the ground of time limitation - section 11B of CEA - unjust enrichment - Waiver of SCN by the appellant- Principles of Natural Justice. Held that:- A consistent view taken by this Tribunal is that there has to be issuance of show cause notice, since it is mandatory and if the same has not been issued, then it is contrary to law and such proceedings have to be quashed. The lacunae of non issue of show cause notice is not curable and such proceedings are not sustainable. Even if a party has waived the show cause notice, it will not absolve the department’s statutory liability to issue show cause notice under the relevant provision. Mere presence of the appellant before the Adjudicating Authority during the course of hearing does not authorise the department to encroach upon the right of the appellant to have a fair the opportunity of placing his defence before the adjudicating authority. The presence of the appellant before the Adjudicating Authority, without issuance of show cause notice, cannot lead to the conclusion that the appellant had a fair opportunity to defend the case. Otherwise also principle of natural justice requires issuance of show cause notice before the adjudication proceedings. There is no doubt that the principle of natural justice has been violated in the present matter - Appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1560
Extended period of limitation - Business Auxiliary Services - contract with M/s TRF Ltd., Jamshedpur for promoting sale of their products by informing the company of prospective markets and potential customers, to maintain close contract with all customers and consultants in the territory of northern reason and generate, acquire and forward the enquiries to M/s TRF Ltd. Held that:- The lower authorities have invoked the longer period only on the ground that the appellant had not paid the service tax - However, the appellants were reflecting value of the services in their profit and loss account maintained in the ordinary course of business. Such reflection of the activities in the profit and loss account has been held to be a reason for not allowing the revenue to invoke the extended period. Inasmuch as, profit and loss account is a public document and reflection of the entire facts in the said documents cannot lead to the presence of malafide suppression on the part of the assessee. Inasmuch as, in the present case there is admittedly no evidence to show any suppression or misstatement on the part of the assessee with a malafide intention, longer period of limitation was not available to the revenue - Inasmuch as, the entire demand is beyond the normal period, same is set aside along with setting aside of penalty. Appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1566
Attachment of properties - flat belonging to the Director of the Petitioner Company - Bank accounts of the Petitioner's sister concern M/s. Patankar Hospitality Pvt. Ltd., and M/s. Patankar Hotels Enterprises Pvt. Ltd. - recovery of dues of petitioner - date of the receipt of the order dated 14th October, 2011. It is the case of the Respondents that the Petitioner was served with a copy of the order dated 14th October, 2011 in 2011 itself. Therefore, the impugned recovery notices as well as the attachment of bank accounts, were justified as the appeal was not filed within the statutory period of limitation to file the appeal. Held that:- This is a case where, admittedly, there is a disputed issue of the date on which the order dated 14th October, 2011 passed by the Joint Commissioner of Service Tax Respondent No.3 was received by the Petitioner. It is the date of receipt of the order dated 14th October, 2011 which will decide the jurisdiction of the impugned recovery and attachment notices. In matters such as this, where the Respondent had attached the bank account of the Petitioner's sister concern for the recovery of the Petitioner's dues, the least that is expected of the Respondent would be to decide the preliminary issue of the date of the receipt of the order dated 14th October, 2011 as expeditiously as possible. This, as the attachment of bank account would cause prejudice to any person, carrying on business as it would cripple its capacity to do business. Orders for attachment of bank account vacated - However, we do not disturb the impugned recovery notices or attachment of the flat belonging to the Petitioner's Director. This, attachment would protect the interest of the Revenue.
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2018 (10) TMI 1559
CENVAT Credit - service tax paid under reverse charge mechanism on goods transport agency - period prior to 01.04.2008 - Period post 01.04.2008. Eligibility to avail CENVAT credit on the service tax paid on goods transport agency prior to 01.04.2008 - Held that:- There is no dispute as to the fact that such service tax liability has been discharged by the appellant under reverse charge mechanism, availed the CENVAT credit of service tax which is correct as the agreement with Power Grid Corporation indicates that the cost of equipments/transmission line materials were Ex-works and appellant is required to deliver the same at site and Power Grid Corporation have issued the same to appellant for executing the contract of erection, commissioning and installation services - credit for this period allowed. Confirmation of demands for the period post 01.04.2008 - Held that:- It is seen that the Apex Court in various decisions has categorically held that CENVAT credit of the service tax paid on goods transport agency which are eligible to till 01.04.2008 and not for the subsequent period - demands confirmed along with interest are upheld. Penalty - Held that:- Since the issue was settled by the Apex Court in 2018, there is no reason to visit appellant with any penalty - Penalty set aside. Appeal disposed off.
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2018 (10) TMI 1558
Liability of Service Tax - Department took the view that appellants should have been paying service tax also on the freight charges reimbursed by them from their customers charged over and above the freight amount payable to the airline companies - Held that:- The very issue had been addressed in the decisions of this Tribunal in the case of Skylift Cargo (P) Ltd. Vs CST Chennai [2018 (2) TMI 320 - CESTAT CHENNAI] relied upon by Ld. Advocate holding that mere sale and purchase of cargo space and earning profit in the process is not a taxable activity - demand set aside - appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1557
CENVAT Credit - Construction of real estate projects - Rule 3 of the Cenvat Credit Rules, 2004 - whether the Appellants are required to reverse any portion of the Cenvat Credit availed by them, after receipt of Completion Certificate for the projects, since thereafter, they will not be discharging Service Tax liability on properties sold thereafter, where no advance was received prior to receipt of Completion Certificate at all? Held that:- The output service must first be exempt service. That upon receipt of Completion Certificate for the projects, the output activity of sale of residential units becomes non-service as per provisions of Section 65B of the Finance Act, 1994 read with definition of the term exempt service under Rule 2(e) of the CCR, 04. This is further supported by specific amendment carried out in Rule 6(1) of the CCR, 04 whereby w.e.f. 1.4.16, Explanation 3 was inserted specifically dealing with a situation as in the present case, where a deeming fiction was created that for the purposes of Rule 6 of CCR, 04, exempted services as defined in clause (e) of rule 2 shall include an activity, which is not a service as defined in section 65B(44) of the Finance Act, 1994 provided that such activity has used inputs or input services. That there was no such stipulation prior to 1.4.16 in law and prima facie such situation was not to be treated as exempt service and did not attract the mischief created under Rule 6 of the CCR, 04 - However, for the period prior to 1.4.16, does this mean that a service provider can take and retain full credit on input services received even after receipt of Completion Certificate? In our considered view, the situation will be governed by Rule 3 of the CCR, 04 till such time, i.e. till the time Rule 6 was specifically made applicable by virtue of the deeming fiction created. It is trite law and in terms of Rule 3 of the CCR, 04, Cenvat Credit of Service Tax paid on input services used to provide output service, is eligible. In light of the provisions of Rule 3 of the CCR, 04, the Appellant cannot avail full Cenvat Credit on input services received after obtaining completion certificate, however, the Appellants cannot be expected to pay an amount equal to 8%/10% of sale price of immovable property after obtaining such Completion Certificate where no Service Tax is paid as if it is sale of immovable property since Rule 6 of the CCR, 04 per se does not apply to the present case until 1.4.16 at all. Even after 1.4.16, since the Appellants had availed only proportionate credit, we are of the view that they are not legally required to pay 8%/10% amount under Rule 6(3) of the CCR, 04 since they can be said to have maintained separate accounts as required under Rule 6(2) of the CCR, 04. Whether the Appellants were also required to reverse proportionate credit, out of the valid input service credits availed by them during the period 2010 till obtaining Completion Certificate, i.e. availing during the time when whole of output service of construction of residential complex was taxable? - Held that:- While the law does not intend to allow any undue benefit to a service provider in terms of Cenvat Credit of Service Tax paid on input services used in providing non-taxable output activity, however, Modvat / Cenvat Credit is a vested right. Once it is legally and validly availed, the same cannot be denied and/or recovered unless specific provisions exist for the same. It has been a consistent judicial view that credit entitlement is on the date of receipt of inputs when the output activity was wholly dutiable. Merely because the finished goods eventually became exempt later on, the credit availed on inputs which were contained in semi-finished / finished goods state was held as not deniable. The assesse is not required to wait till output service is sold to the service recipient. The assesse can take the credit immediately after the day on bill/ challan of input service is received. In the present case, there is no dispute that the appellant have availed the credit after receipt of bill, challan in respect of input service, therefore, the appellant was legally entitled to take the credit on the date after the receipt of service Bills/ Challans. Therefore, the availment of cenvat credit by the appellant is absolutely legal and correct in accordance with Rule 4(7) of Cenvat Credit Rules, 2004 - Since we hold that the Appellants are not required to reverse any credit availed by them on valid input services availed during the period 2010 till obtaining of Completion certificate, the said amounts reversed by them under protest cannot be retained by the revenue authorities and have to be returned to the Appellants. Appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1565
Refund of tax - export of services - Lack of judicial discipline - Held that:- In the impugned order, the first appellate authority throwing to the winds, the principles of judicial discipline and binding order passed by higher appellate forum, not only reiterated his own stand, which were set aside by the Tribunal but the same is sought to be defended by the Department with the aforesaid words quoted above. The total callous, negligent and disrespectful behaviour shown by the Departmental authorities in this Court should not be tolerated at all. It is this kind of lack of judicial discipline which if it goes unpunished, will lead to more litigation and chaos and such public servants are actually a threat to the society. The cost is quantified at ₹ 1 lakh (Rupees One Lakh only) to be deposited by Mr.Suresh Kumar, Commissioner of Service Tax (Appeals) from his personal funds with the Registrar General of this Court. The impugned order apparently flies in the face of the higher Tribunal s order dated 23.03.2017 and therefore cannot be sustained. The writ petition therefore clearly deserves to be allowed with exemplary costs.
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2018 (10) TMI 1564
Principles of natural justice - non prosecution by impugned Exparte order - Whether in the facts and circumstances of the case and in law, the Tribunal was correct in dismissing an appeal for non prosecution by impugned Exparte order dated 27.1.2015 as well as order dated 8.3.2013 signed on 11.3.2013 contrary to Rule 20 of the Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982 read with Section 35C of CEA, 1944? - Whether in the facts and circumstances of the case and in law, the Tribunal was justified in dismissing the appeal when issue is settled by Hon'ble Apex Court in the case of Balaji Steel Rerolling Mills Vs. Commissioner of C. Ex. Customs [2014 (11) TMI 531 - SUPREME COURT]? - Held that:- Even if the party / parties do not appear at the time of the hearing, Rule 20 of the Rules requires the Tribunal to decide the issue on merits. This is not the requirement while dismissing an appeal for noncompliance with the Rule 11(2) of the CESTAT (Procedural) Rules. Thus, we see no reason to entertain the appeal on the aforesaid two questions of law as proposed by the appellant. Whether in the facts and circumstances of the case and in law, the Tribunal was correct who did not consider the genuine cause for non prosecution and dismissed an appeal by order dated 27.1.2015? - Held that:- The question as proposed in respect of the order dated 27th January, 2015 i.e. rejecting the restoration application, thus outside the scope of the appeal. Thus, not entertained. Appeal is dismissed.
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2018 (10) TMI 1563
Recovery of service tax dues from the first charge on the property - attachment of property - Section 88 of Finance Act, 1994 - the present petitioner has purchased the asset of respondent No.4 from respondent No.5 – SICOM Ltd. which is established by Government of Maharashtra and is a deemed State Financial Corporation as per Section 46 of the State Financial Corporation Act, 1951 - Proviso to Section 87(c) of the Finance Act, 1994. Held that:- It is not in dispute that the business of the respondent No.4 M/s. Ujjain Treasure Bazar Ltd. Indore had been taken over by the petitioner – M/s Future Market Networks Ltd. Mumbai on “as is where is and what is” basis according to the Tri-Party Settlement Order issued by DRT, Mumbai vide order dated 30/07/2014. In these circumstances, the acquisition by the petitioner is not limited to immovable property only but they also acquired entire running business of the respondent No.4 and, therefore the plea of petitioner that they had not taken over the business / liabilities of the respondent No.4 does not appear to be correct. It is an admitted fact that entire business of the respondent No.4 has been transferred to the petitioner and Ujjain Treasure Bazar Mall was under the control and possession of the petitioner. The properties, which were subject to mortgage has been transferred in favour of the petitioner by a consent decree. As per Clause 1(d) and 1(k), the petitioner has virtually taken over the entire business, which they are running since 2013 and, therefore, Section 87(c) applies with full force. The Finance Act and Clause 1(d) and 1(k) Memorandum of Understanding (MoU) are very clear and specific. The transactions so been entered between the parties is covered by Section 87(c) of the Service Tax Act - In the case in hand, as per proviso to Section 87(c) of the Finance Act and Clause (d) and (k) of MoU dated 01.07.2013, the Department is empowered to recover the dues of service tax of respondent No.4 from the present petitioner, who had purchased the mortgaged property of the respondent No.4 from respondent No.5 by a consent decree. Petition dismissed - decided against petitioner.
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2018 (10) TMI 1556
Validity of Revisional Order of Commissioner (Patna)- Section 84 of the Finance Act, 1994 - Held that:- The dispute is only with reference to the service tax demand totaling to ₹ 5,86,019/-. Relief for such amount has been granted by the Joint Commissioner, but the ld. Commissioner has taken the view that such relief was not given appropriately and hence, the demand for service tax is justified. From the nature of the amounts it is fairly obvious that such amounts cannot be considered as consideration for the services rendered. These amounts are having no financial effect. The impugned order set aside and the order passed by the ld. Joint Commissioner is reinstated - appeal allowed.
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2018 (10) TMI 1555
Rebate of service tax paid - appellants have vehemently claimed that they are engaged in export of BPO services and have filed rebate claims in terms of Notification No.11/2005-ST - Held that:- What is required to be verified while sanctioning rebate claim under the said Notification is whether service has been exported or not and whether consideration has been received by the exported service and whether the tax has been paid on the service exported or not. Other than this, no other verification is required. Tribunal has followed the decision in the case of Cochin Branch of appellant’s themselves. In view of the above, all other considerations and discussions made in the OIOs/OIAs are not acceptable. The authorities are required to verify the requirements in terms of Notification No.11/2005-ST as cited above. Appellants have claimed that they have submitted the records, documents, certificate to that effect. In view of the same, it will be in the interest of justice that the matter should go back to the original authority for proper appreciation of the evidence submitted by the appellants and the case law cited. Appeal allowed by way pf remand.
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2018 (10) TMI 1554
CENVAT Credit - denial on the ground that the service tax registration number of vendor was not mentioned in its input invoices - case of appellant is that since the vendor was registered under Service Tax laws, therefore inadvertent error on the invoices should not be used as a basis to deny the CENVAT credit - Held that:- The vendor applied for service tax registration number on 17.10.2001 and the same was allowed to the vendor on 29.04.2005 i.e. much before the vendor issued invoices to the Appellant for the period in question - It is not the case of Revenue that the vendor has not paid the Service Tax which was collected by him from the Appellant, who have utilised their services. CENVAT credit is being denied to the Appellant only on the ground that the invoices were not having the registration number of the service provider. There is no allegation or finding to the effect that the input services were not received by the Appellant or that the said services were not covered under the scope of eligible input services in terms of CENVAT Credit Rules, 2004 - There is no dispute that the Appellant had made substantial compliance for availing the CENVAT credit, whatever error or discrepancy has occurred that too was rectified by the Appellant without any delay. Non-mentioning of registration number is merely a procedural lapse. It is settled legal position that CENVAT credit should not be denied on mere technicalities or procedural lapses. Credit allowed - appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1553
Manpower Recruitment and Supply Agency Service - work was related to shifting of Coal from outside coal yard to inside factory, packing of cartons of sugar, repairing at new bagasse yard and certain such other works - Held that:- The learned Commissioner (Appeals) has scrutinized the individual contracts and observed that the contracts were for jobs to be completed by the respondent. From the observation of learned Commissioner (Appeals), we note that there was no contract for supply of any fixed number of labours to M/s Simbhaoli Sugar Ltd. and that the contracts were fixed job to be performed in fix time frame. The respondent’s responsibility was to get the job completed and it was not merely supply of manpower to M/s Simbhaoli Sugar Ltd. - The only ground of appeal raised by Revenue is that the respondents were responsible to comply with all provisions of law in respect of labours engaged by them. Such condition in a contract does not indicate that such contract is for supply of labours. Appeal dismissed - decided against Revenue.
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2018 (10) TMI 1562
Validity of show cause notice - Negative list of services - wheeling service provided to M/s. Tata Power Co. Ltd. for the period 1st July 2012 to 30th June 2017 - Section 66B of the Finance Act, 1994 - scope of SCN - Held that:- The impugned notice has itself come to a final conclusion that the charges of wheeling/transmission received by the Petitioners from allowing the use of its facilities by third parties would not fall within the negative list provided under Section 66D of the Act. Further it also records that the Report of the High Level Committee has been accepted by the Finance Ministry. Therefore, though the impugned notice is issued by the Additional Director General–Respondent No. 4 (who has come to the above conclusion), it is answerable to the Commissioner, CGST and CX. However, the above Adjudicating Authority is also an officer of the Ministry of Finance who would be bound by the report of the High Level Committee which has been accepted by the Ministry of Finance. The impugned notice dated 3rd April 2018 is stayed till the final disposal of this Petition.
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2018 (10) TMI 1552
Tour Operator Service - appellant have collected the amount of taxable tour charges from the other Tour Operator - scope of SCN - Held that:- The perusal thereof shows that for a person to render a tour operator service it is not merely collection of the ticket booking/the tour booking charges but in addition requires planning, scheduling, organizing & arranging tours, which also includes arrangement for accommodation, site seeing and other similar services. The only reason that there is no evidence for the discharge of liability of tour operator service even on part of the M/s. Dashmesh Tours & Travels the same cannot be the reason to confirm the demand of tour operator service qua the assessee who apparently and admittedly is just rendering service of booking tickets - the activity of the appellant has mentioned that collection of amount for any tour is merely a booking activity. Any demand under the guise of it being tour operator is not sustainable. The booking activity demand has not been raised by the show cause notice. Appeal allowed - decided in favor of appellant.
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Central Excise
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2018 (10) TMI 1549
Clandestine removal - shortage of raw material, finished goods and capital goods - appellant allegedly removed raw material and capital goods to their job worker which are their own unit and inputs were also removed to their godown outside the factory - demand also based on LRs. Demand of ₹ 27,466/- on the shortage of finished goods - Held that:- This demand is based on the shortage found out during the physical stock verification by the officers in the presence of representative of the appellant - Since the shortage was not disputed at the time of punchnama and thereafter no explanation was made, demand confirmed on shortages of ₹ 27,466/- is sustainable - demand upheld. Demand of ₹ 14,93,495/- on the raw material and capital goods seized on job workers premises as well as godown of the appellant - Held that:- If it is established on the basis of documents that the goods which were seized were brought back to the appellant’s factory and the same were used in the manufacture of final product which were cleared on payment of duty, then no demand shall exist. Consequently, no penalty will be imposable - this issue needs to be reconsidered on the basis of verification of the documents - matter on remand. Demand of ₹ 13,28,814/- based on LRs - principles of natural justice - Held that:- Except the transporters’ LRs and statement, there is no other evidence. The LRs submitted by the transporters is a 3rd party document which can only be relied upon after cross examine the said transporters - In the present case it is not only a 3rd party evidence but even the appellant also disputed the same and requested for cross examination. In such a situation, it was necessary for the adjudicating authority to grant the cross examination. By not allowing the cross examination, there is a clear violation of principles of natural justice - matter requires reconsideration. Appeal disposed off.
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2018 (10) TMI 1548
Clandestine removal - shortage of scrap - whole allegation is based only on ER-4 return - case of assessee is that it is a case of a bona fide clerical error which could have been verified with regard to the ER-1 returns - Held that:- There was no allegation by the Revenue that there was any such mistake or difference unearthed even in ER-1 returns. Unfortunately, there is also no finding on the appellant’s stand right from its reply to the Show Cause Notice that the appellant had furnished ER-1 returns for the year, Form-IV Register, chart reflecting purchase and usage of raw material/removal of raw material as such, etc., along with its replies to Show Cause Notice. The Revenue has not taken any supporting evidence to nail the assessee on the alleged difference in stock in ER-4 return which only points out that no further investigation was done in the interests of justice. It is the settled position of law that the allegations/assumptions howsoever strong, cannot take the place of proof - The Revenue has only harped upon the difference in closing stock of raw material, but nothing prevented the Revenue from examining the balance-sheet for the year filed with the Income Tax Department vis-à-vis the appellant’s ledger account filed therewith or the revised ER-4 return. The demand on the alleged difference cannot sustain - appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1551
Condonation of delay of 639 days in filing appeal - Held that:- The Affidavit states that there is a delay in taking out the Motion seeking to set aside the order dated 25th August 2016 passed by the Prothonotary & Senior Master. The Affidavit in Support does not state that it was not informed and/or not aware of the dismissal of its Appeal in August 2017. Nor does the Affidavit indicate the date when the Respondent for the first time came to know about the date of the rejection of Appeal by the Prothonotary & Senior Master. This date is crucial for considering whether the delay in making out this Application is required to be condoned or not. The change of panel advocates does not absolve that the officers of the Revenue to keep themselves abreact of the proceedings in this Court and/or taking appropriate steps to appoint new advocate for the first panel. Not taking steps in the above regard is itself evidence of negligence on the part of the Revenue. We are not satisfied with the reasons set out in support of the Applicant to condone the delay as it evidences negligence on the part of the Revenue - delay cannot be condoned - application dismissed.
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2018 (10) TMI 1547
CENVAT Credit - input services - construction of warehouse within the factory premises - repair and maintenance of Automatic Dispensing Machines (ADM) installed at the dealer’s premises - It is the case of Revenue that the maintenance of these machines which are beyond the stage of manufacture and place of removal does not entitle the appellant to credit of service tax paid on maintenance of these machines - time limitation. Construction of warehouse - Held that:- In this case the warehouse in question was built within the factory premises and I do not find any force in the argument of the Revenue that simply because the warehouse is not meant for manufacture the appellant is not entitled to the credit of service tax. The warehouse being prior to the place of removal, the service tax paid on construction of the same is available to the appellant the demand on this count therefore needs to be set aside - credit allowed. Maintenance of ADMs - Held that:- These are used in relation to the business by the dealers of the appellant and not by the appellant himself. The manufacture and clearance of their products is complete the moment of the goods leave the factory or other place of removal. What happens thereafter is not part of the manufacture although it may be part of the business of the appellant - appellant is not entitled to the credit of service tax or the maintenance of ADMs at their dealers premises which are beyond the place of removal. Time limitation - Held that:- The nexus between irregularly availed CENVAT credit on such input services and their intention to evade Central Excise duty is apparent from the face of the record - the extended period of limitation is invokable in this case. Appeal allowed in part.
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2018 (10) TMI 1546
CENVAT Credit - input services - services used in their windmill situated at a site near Belgaum, which is at a distant place outside the factory - Held that:- This issue is settled in favour of the assessee by various decisions of the Tribunal - reliance placed in the case of CCE vs. V. S. Lignite Power Ltd. [2018 (4) TMI 1082 - CESTAT NEW DELHI], where it was held that the assessee-Respondents will be entitled to the credit of Service Tad paid on such mining and transportation upto the point of weigh bridge - appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1545
Valuation - Precision Pipes/Tubes falling under Chapter 73 of the Central Excise Tariff Act - Revenue’s only grievance that such remanant pipes emerging at the depots end were of lesser value than the value of regular pipes and as such lesser duty should have been paid by the depots, in which case lesser credit would be available to the respondents - Held that:- Revenue is not denying the fact that the issue is covered by the earlier order of the Tribunal in the same assessee’s case but submits the view adopted by the Tribunal is not correct. The issue stands decided by the Tribunal by relying upon the earlier Hon’ble Supreme Court’s order. As long as the Tribunal’s order has not been set aside by the higher Appellate Forum, the same holds the field - impugned order upheld. CENVAT Credit - welding electrodes - Held that:- The issue is covered by various decisions of the High Courts, where on similar issue, credit is allowed - credit allowed. Appeal dismissed - decided against Revenue.
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2018 (10) TMI 1544
Area based expansion - substantial expansion or not - N/N. 50/03-CE dt.10.6.2003 - it appeared to the Revenue that there was no substantial expansion by increasing installed capacity by more than 25% - contention of the appellants is that there is no such requirement under clause (b) of para 2 of the said notification. Held that:- We have perused the record and seen recommendation by the jurisdictional Range Superintendent and also report submitted by the team of the District Industries Centre that the installed capacity was increased by 31% - thus the condition of the notification was satisfied by the appellant. Without going into the issue of limitation, it is held that the appellants were eligible for exemption under Notification No.50/03-CE dt.10.6.2003 for the period covered by the present appeals - appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1543
CENVAT Credit - duty paying invoices - input services availed by their head office located at Kandivali, Mumbai, which was registered as ISD under Rule 4(A) of the Service Tax Rules. Whether the invoices issued by the assessee’s head office, which is also registered as ISD, can be held to be eligible cenvatable invoices, even if the same relate to various services received at the head office and is not connected with the assessee’s manufacturing unit? Held that:- The issue is no more res integra and stands settled by the Tribunal’s decision in the case of ECOF Industries Pvt. Ltd. vs. CCE, Bangalore [2009 (10) TMI 171 - CESTAT, BANGALORE], where it was held that the distribution of credit by input service distributor to a unit where the services were not availed, cannot be question in terms of Rule 7 of the Cenvat Credit Rules, 2004 - Admittedly, in the present case, the assessee’s final product is neither exempted nor the credit stands availed in excess of the tax paid. Credit cannot be denied - appeal dismissed - decided against Revenue.
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2018 (10) TMI 1542
100% EOU - short payment of Additional Duty of Customs - the assessable value in respect of the goods cleared to their sister units was enhanced / re-determined - extended period of limitation - scope of SCN - Held that:- It is clear that in the earlier SCN dt. 22.10.2007 the department had not raised the allegation of extended period of limitation. It is only in the corrigendum issued to the said SCN that they have invoked proviso to Section 11AC of Central Excise Act 1994 for the period 1.3.2006 to 10.10.2006. The Commissioner (Appeals) has therefore rightly concluded that as the dispute was already in the domain of the department, the of allegation of suppression cannot be fastened on the respondents. The decision of the Commissioner (Appeals) in holding that the demand made in the SCN for the same period is hit by time-bar - Appeal is dismissed upholding the ground of limitation without going into merits.
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2018 (10) TMI 1550
Non-contest of demand by appellant on merits - demand of Interest under a situation where the Appellant always had balance in its cenvat credit account (more than the amount under dispute) throughout the disputed period - non-speaking order. The Appeal is admitted in the substantial question of law on non-speaking order only - other questions not maintainable and is dismissed.
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2018 (10) TMI 1541
Benefit of N/N. 67/95-CE dt. 16.06.95 - Supply of industrial valves to Mega Power Projects - demand of Excise duty under N/N. 12/2012-CE dt. 17.03.2012 as amended - Held that:- The matter id covered by the decision in the case of Bharat Aluminium Co.Ltd. Vs CCE Raipur [2017 (4) TMI 276 - CESTAT NEW DELHI], where it was held that The exclusion made under sub-clause (vii) of sub-rule (6) of Rule 6 of CCR, 2004 read with proviso to N/N. 67/95 makes it clear that the exemption for captive consumption of intermediate products has been correctly claimed by the appellant in the present case - appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1540
CENVAT Credit - inputs/input services used for dutiable and exempted service - Rule 6(2) of CCR, 2004 - Held that:- Rule 6 gives three options to the appellant to reverse the credit and it is the option of the assessee to choose any option which is beneficial to him if he is unable to maintain separate books of accounts and demanding 6% of the value of exempted goods and services is not sustainable in law. The appellant has given the calculation in the ground of appeal that as per the appellant, the total amount credit to be reversed proportionately comes to ₹ 49,647/- which he has already reversed and therefore, the demand of 6% on the value of exempted services is not tenable. This needs to be remanded back to the original authority to verify whether the appellant has reversed the proportionate credit as claimed by him as per Rule 6(3A) of the CCR, 2004 - appeal allowed by way of remand.
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2018 (10) TMI 1539
Benefit of exemption N/N. 10/97-CE, dated 01.03.1997 denied - invocation of extended period of limitation - Essentiality Certificate not issued by Registrar - Clearances made for non-research of dual purpose - Purpose not mentioned in the certificate - No evidence that the Institutions are registered with DSIR. Held that:- The original authority has taken a broader view of the intent of the exemption notification No. 10/97 and allowed the benefit of notification while admitting that some documents as required under notification such as Registration Certificate of DSIR or the specific purpose for which equipment is supposed to be used were missing. In view of the law laid down by Hon’ble Apex Court in the case of Dilip Kumar & Company [2018 (7) TMI 1826 - SUPREME COURT OF INDIA], the entitlement of the exemption notification has to be examined and strictly consider with reference to each of the clearances which requires detailed examination of the documents - this is a fit case to be remitted back to the original authority for reexamination in the light of the laws laid down by Hon’ble Apex Court in the case of Dilip Kumar & Company and Others - appeal allowed by way of remand.
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2018 (10) TMI 1538
Valuation - Ingots and Billets/ Non alloys steel Hot-re-rolled products - Changed parameters - re-quantification of demand - Rule 4 of Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 - Held that:- Except for the re-quantification as directed by the Tribunal, nothing was open either for the Assistant Commissioner or the Commissioner (Appeals) to deviate from the directions given by the Tribunal. The lower authorities have relied on the decision of Hon'ble Supreme Court in the case of Doaba Steel Rolling Mills [2011 (7) TMI 10 - SUPREME COURT OF INDIA]. In this regard, we find that the decision in the case of Doaba Steel Rolling Mills cannot be made applicable in the present case when the Tribunal’s order in the appellant’s own case has attained finality as the department has not challenged the said order. Therefore, even though there is contrary view taken by the Hon'ble Supreme Court, the same will not apply in the present case. Whereas, in the present case itself, the order was passed and therefore, ratio of the decision of Hon'ble Supreme Court is not applicable in the facts of the present case. The only right course of action on the part of the Revenue was to challenge the Tribunal order and if the Revenue chose not to challenge the said order then that order attained finality and it cannot automatically be set-aside on the basis of adverse order in some other party’s case. Both the lower authorities have gravely erred in not following the Tribunal’s directions for re-quantification of duty on the basis of changed parameters, in terms of Rule 4 of Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 - the Assistant Commissioner is directed to re-quantify the demand in terms of Tribunal’s order - appeal allowed by way of remand.
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2018 (10) TMI 1537
CENVAT Credit - fake invoices - only paper transactions, no receipt of goods - denial of opportunity to cross-examine - principles of natural justice - Held that:- The department tried to establish that the appellant have not received the goods and they have only received the invoices on the basis of which the credit was availed. To establish the said charges, the statements of various persons were recorded and cross-examination of the said persons has been sought by the appellants. The Adjudicating Authority rejected the request of cross-examination, at the same time he relied upon all the statements for adjudicating the show cause notice. In terms of Section 9D of the Central Excise Act, 1944, if the Adjudicating Authority wants to rely upon any statement, it is incumbent upon him to test the witness before relying upon the statement - In the present case, it is more necessary when the appellants themselves have asked for cross-examination of the witnesses. The matter is remanded to the Adjudicating Authority for passing a fresh order after granting cross-examination of witnesses as requested by the appellants - appeal allowed by way of remand.
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2018 (10) TMI 1536
Penalty - irregular availment of credit - reversal with interest on being pointed out - extended period of limitation - Held that:- The appellants have availed the CENVAT credit wrongly but the same was reversed along with interest after being pointed out by the audit party - Once the appellant has reversed the credit along with interest before the issuance of show-cause notice, then as per Section 11A(2), the Department should not have issued the show-cause notice. Further, Department has not brought any material on record to show that there was suppression of fact with intent to evade duty. Penalty not sustainable - appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1535
Penalty u/r 15(2) of CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - CENVAT credit on Customs Education Cess and Customs Secondary Education Cess - reversal with interest on being pointed out - Held that:- The department has not been able to bring any material on record to show that the appellant has a mala fide intention to take the CENVAT credit wrongly - The department vide its Board Circular No.137/46/2015-ST dated 18.8.2015 wherein also the Board has clarified that in cases not involving fraud, suppression of facts, etc., if the assessee pays the tax along with interest either within 30 days from the date of issuance of show-cause notice or before the issue of show-cause notice, then in such cases, proceedings shall be deemed to be concluded. Penalty not imposable - appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1532
SSI Exemption - dummy unit - Clubbing of clearances - Department made out a case that M/s. Ganesh Enterprises is owned by proprietor Shri Yogesh Chandradutt Dhariyal and therefore, M/s. Ganesh Enterprises is not entitled for SSI exemption - issue can be solved on the basis of classification of product itself. Held that:- Reliance placed in the coordinate bench of this Tribunal in the case of Dhariyal Chemicals [2014 (8) TMI 81 - CESTAT AHMEDABAD]. From the above decision, it is observed that the product of the appellant is identical to the product involved in above judgment of the Tribunal - As per the department itself, M/s. Ganesh Enterprises and M/s. Dhariyal Chemicals belong to one person i.e. Shri Yogesh Chandradutt Dhariyal. In the show cause notice also, it is admitted that the product of M/s. Dhariyal Chemicals and M/s. Ganesh Enterprises is identical. It is also observed that the ingredients used for manufacture of product by both the units are the same and resultant product is also the same. Therefore, in view of the judgment of this Tribunal in the case of Dhariyal Chemicals the product in the appellant’s case is also clearly classifiable under Chapter heading 47 which attracts nil rate of duty. Therefore, there is no need to go to the question of limit of SSI exemption. Since, the department’s proposal is to club the clearances of M/s. Dhariyal Chemicals and M/s. Ganesh Enterprises, but the clearances of M/s. Dhariyal Chemicals has been held as nil rated under Chapter heading 47, therefore, the same needs to be deducted from the aggregate value of M/s. Dhariyal Chemicals and M/s. Ganesh Enterprises. The yearly turn-over of M/s. Ganesh Enterprise is well within the limit of ₹ 1.5 Crores, therefore, even if it is assumed that the product of M/s. Ganesh Enterprises is dutiable, but when the products of M/s. Dhariyal Chemicals is not dutiable, the clearances of M/s. Ganesh Enterprise is eligible for SSI Exemption Notification No. 8/2003-Central Excise. Appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1531
Principles of natural justice - appellant filed an appeal before the Commissioner (Appeals) contending that they had not been provided with the "working paper" enclosed with the show cause notice - Violation of Rule 7 of Valuation Rules, 2000, read with Rule 4 of Central Excise Rules, 2002 - Held that:- From a perusal of the order dated 15 December, 2008 passed by the Assistant Commissioner, Central Excise, Division-I, Allahabad that there is no statement that a copy of Annexure-A which was said to have been enclosed with the show cause notice was actually served upon appellant. The order merely mentions that despite personal hearing fixed for 14 February, 2008, 21 February, 2008 and 27 February, 2008, the party did not appear and nor did it substantiate its claim by providing any chart. The Commissioner (Appeals) has also not recorded any finding that Annexure-A was supplied to the appellant. The order passed by the Commissioner (Appeals) on 24 September, 2007 requiring the department to supply the working sheet was therefore, not complied with. The impugned orders dated 23 August 2011 and 15 December 2008, therefore, cannot be sustained and deserve to be set aside - appeal allowed.
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2018 (10) TMI 1530
Clandestine manufacture and removal - MS Ingots - excess consumption of electricity - Held that:- The initial demand of ₹ 14,39,38,470/- has already been dropped to the major extent of ₹ 13,62,85,928/- qua excess consumption of electricity, relying upon the decision of Hon’ble Apex Court in the case of RA Castings Pvt. Ltd. [2011 (1) TMI 1302 - SUPREME COURT OF INDIA] - similar issue is no more res-integra as stand already been decided in favour of assessee. Case of the Revenue based upon the records recovered from M/s Monu Steels M/s. Kailash Traders etc. - Held that:- Mr.S.K. Pansari during his cross-examiantion also didn’t deny this fact rather admitted that all the recovered documents were written by Mr. Bal Mukund. Department has failed to obtain any document, as direct evidence, to corroborate the said recovered record. The same also finds mention in the order under challenge - the Revenue has not made any other enquiries and has solely relied upon the entries made in the record of M/s Monu Steels. Similarly for the record from M/s. Kailash Traders as far as the raw material is concerned, Department couldn’t have any other corroborative piece of evidence. The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established. Appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1534
CENVAT Credit - inputs procured from 100% EOU - Payment of education cess/ higher education cess third time - credit paid by the appellant on education cess/ higher education cess sought to be denied on the ground that the supplier of goods was not required to pay duty on the said goods - Held that:- Similar issue came up before this Tribunal in the case of Polypack Industries vs. CCE, Belgaum [2013 (8) TMI 956 - CESTAT BANGALORE], wherein it has been held that third time cess which is payable according to the department on the ground that what is required to pay by 100% EOU is Excise duty and total Excise duty arising only after the calculation of equal amount of custom duty. If third time education cess is considered as levy of the total excise duty, therefore credit is admissible to the appellant. The appellant is entitle to avail the Cenvat credit on third time education cess paid by them on inputs procured from 100% EOU - appeal allowed - decided in favor of appellant.
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2018 (10) TMI 1533
CENVAT Credit - fake invoices - Cenvatable invoices of non-ferrous materials to the manufacturers without delivery of the goods - Held that:- The Department is not supposed to establish a fact with mathematical presumption as has been impressed upon by the adjudicating authority below but simultaneously the onus to falsify the document of the appellant still rests upon the Department and the adjudication cannot be decided merely based on the presumptions - In the given circumstances where the documents as produced by the appellant showing that they have received goods in the factory which were duly accounted in the books of accounts have not been rebutted. There seems no reason for holding that the unaccounted credit has been availed by the appellant. Time limitation - Held that:- Once there is no evidence for the alleged availment of irregular credit, per contra the evidence reflects the regular purchase of goods under proper invoices with the payment of appropriate amount of Central Excise Duty, there remains no genuine and legal basis for holding the alleged suppression or mis-representation of the facts on the part of the appellant that too with an intention to evade payment of duty - The show cause notice is therefore held to be barred by time and the penalty imposition based on the said ground is also held not sustainable. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2018 (10) TMI 1529
Denial of downloading and issuance of 'C' declaration forms - post GST situation - purchase of petroleum products at concessional rate - inter-state trade - Section 8(3)(b) of the CST Act, 1956 - Held that:- A registered dealer, who is holding a valid Certificate of Registration, which is in force, if satisfies the requirement contemplated under sub clause (3)(b) of Section 8, is entitled to pay the concessional tax, as provided under sub clause (1) of Section 8. There is no dispute to the fact that even after the introduction of GST, though several drastic amendments were made to CST Act, 1956, this particular provision of law viz., Section 8(3)(b) has not undergone any change. On the other hand, it is admitted by both sides that the said provision still holds the field. The crux of the contentions raised by the respondents to deny the benefit under Section 8(3)(b) to these petitioners is that the purchasing goods and manufacturing or selling goods of the petitioners are not one and the same - Held that:- It is very clear that though the goods as defined under Section 2(d), is purchased by the dealer by availing benefit of concessional rate of tax under Section 8(3)(b), it is not necessary that such dealer must be a person of manufacturing or processing only the same goods for sale to avail such benefit. On the other hand, if the said goods so purchased is put into use for the mining or for the telecommunication network or for the generation and captive consumption of electricity or distribution of the same or any other form of power as well, such of those dealers, who are engaged in those activities are also entitled to the benefit under Section 8(3)(b). The benefit that is being enjoyed by the dealer out of the unamended provision of Section 8(3)(b) should continue to flow till any change is made to the said provision. The respondents are directed to permit these petitioners to download 'C ' forms, as has been done in the past for the purpose of purchasing petroleum products against the issuance of 'C' declaration forms - petition allowed - decided in favor of petitioner.
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2018 (10) TMI 1528
Pre-deposit, pending appeals - CENVAT Credit - cancellation of registration of the dealers with backdate - principles of natural justice - Held that:- In the context of requirement of pre-deposit, the Courts examine undue hardship, which would have both the elements of financial difficulties as well as strong prima facie case. Nevertheless a threadbare minute examination of merits and demerits of the case would not be called for. There is no reason for reducing the pre-deposit requirement imposed by the Tribunal. Appeal dismissed - decided against appellant.
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2018 (10) TMI 1527
Validity of Assessment Order - constitutional validity of Section 174(1) (d) and (e) of the Karnataka Goods and Services Tax Act, 2017 - appealable order - Scope of SCN. Held that:- All these questions sought to be raised are only academic and do not really arise in the present case and the amended law and GST regime with effect from 01/07/2017 is not at all applicable to the facts of the present case for the year 2012-13. These questions are therefore left open to be considered in appropriate case. Since the re-assessment order under challenge Annexure C dated 31/03/2018 for the period 2012-13 is clearly appealable before the higher Appellate Authority under Section 62 of the KVAT Act, 2003, the present writ petition is dismissed with a liberty to the petitioner Assessee Company to avail the remedy by way of an appeal if it so chooses - petition dismissed.
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2018 (10) TMI 1526
Interpretation of statute - Liability of Entry tax - SIM Cards - whether a dealer registered under the VAT Act, 2002 is only liable to pay Entry tax u/s 3(1) of the Entry Tax Act - Held that:- The Madhya Pradesh Legislature has brought the Entry Tax Act in order to levy a tax on entry of goods into a local area of Madhya Pradesh for consumption, use or sale therein. Before coming into force of Entry Tax Act w.e.f. 2.10.1976, all local authorities used to collect Octroi on entry of any goods within their local area - if the goods brought into the local area from outside the State for consumption, use or sale, the same is subjected to payment of Entry Tax as per value of the goods. Hence, the goods brought not only for its sale but consumption and use is also material eventuality for payment of entry tax. It is also immaterial that who is bringing the good within the local area - Entry tax is payable once either u/s. 3(1) or u/s. 3(2) of the Entry Tax Act by dealer or any person. Whether the Assesse being service provider not a dealer is liable to pay Entry Tax u/s. 3(1) or u/s. 3(2) of the Entry Tax Act? - Held that:- The Division Bench of this Court in the case of Sanjay Trading Co. V/s. Commissioner of Sales Tax others [1994 (2) TMI 284 - MADHYA PRADESH HIGH COURT], had held that M.P. Entry Tax Act is intended to levy Entry Tax on entry of specified goods into the local area for consumption, use or sale. The Entry Tax is not a tax on goods, but a tax on entry of goods into the local area for particular purpose. The Entry Tax is not a part and parcel of VAT Act, where a dealer who is covered under the VAT Act is only liable to pay Entry Tax. Any businessman who brings the goods for consumption, use or sale is liable to pay Entry Tax whether he is a dealer under the VAT Act or not because, provisions of u/s. 3(2), are applicable to such person who is not engaged in any business and simply brings the goods within the local area for any purpose. Section 3(1) is applicable to those persons who are engaged in the business and effecting entries of the goods in the local area for use, sale and consumption in his course of business - the Assesse is covered under the provisions of Section 3(1) of Entry tax Act. Levy of Entry tax on sale of SIM Cards - Held that:- Since, the SIM Card is being used and consumed in the course of business of service. Hence, it will fall under the incidence of Taxation under Section 3(1) of the Entry Tax Act - In case of Maheshwari Fish Seed Farm v. T.N. Electricity Board, [2004 (4) TMI 632 - SUPREME COURT], the Apex court has held that the definition of the term in one statute does not afford a guide to the construction of the same term in another statute and the sense in which the term has been understood in the several statutes does not necessarily throw any light on the manner in which the term should be understood generally - SIM cards can be termed as goods for the purposes of Entry Tax as the same is being used and consumed in order to provide service to the customer by the Assesses. Petition dismissed - decided against petitioner.
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2018 (10) TMI 1525
Restoration of re-assessment dated 01.01.2013 made under Section 39(1) of the KVAT Act - suppression of purchase of arecanut, cigarettes and Guthka - Held that:- The suppression is not in dispute. When the suppression is not in dispute, the Appellate Authority ought not to have set aside the order passed by the Original Authority. When the Appellate Authority found that the order passed by the Original Authority is without considering any books of accounts, the Appellate Authority ought to have remanded the matter, but the same was not done. When the suppression is not is dispute, the Revisional Authority was justified in exercising the powers under the provisions of Section 64(1) of the KVAT Act, 1964. The order passed by the Revisional Authority is in accordance with law. The appellant has not made out any case to interfere with the revision order passed by the 1st respondent - petition dismissed.
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Indian Laws
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2018 (10) TMI 1567
Dishonor of cheque - section 138 of NI Act - Whether the petitioner having availed of the remedy of revision should be allowed to have recourse to the petition at hand as a substitute for virtually a second revisional challenge or scrutiny which is clearly barred under Section 397 (3) Cr.P.C.? Held that:- The liability to return the interest free security deposit had not arisen by the time the cause of action for filing the criminal complaints had come up. Since the handing of the vacant and physical possession of the premises was a subsequent event that occurred on 30.03.2013, it was only on that date and thereafter that the complainant became obliged to account for the interest free security deposit. In fact prior to the said date, he had no lawful reason or authority to draw from the security deposit so as to claim the money which was stated to be due against the dishonoured cheques. The interest free security deposit, even otherwise, was not meant to take care only of default in payment of rent. Various other liabilities including on account of taxes or utility charges as indeed the satisfaction about the condition in which the property was being handed over required to be factored in such context - It was the submission of the petitioners themselves that in terms of the arbitration clause forming part of the lease agreement, the parties are presently before an arbitrator vis-a-vis the refund of the security deposit. Such deposit and arbitral proceedings relate to civil rights and obligations, determination of such rights and obligations being still pending, no benefit on that account can be claimed – not atleast at this stage of the criminal process, in the context of proceedings relating to offences under Section 138 of the Negotiable Instruments Act.It was the submission of the petitioners themselves that in terms of the arbitration clause forming part of the lease agreement, the parties are presently before an arbitrator vis-a-vis the refund of the security deposit. Such deposit and arbitral proceedings relate to civil rights and obligations, determination of such rights and obligations being still pending, no benefit on that account can be claimed – not atleast at this stage of the criminal process, in the context of proceedings relating to offences under Section 138 of the Negotiable Instruments Act. The contentions of the petitioners at best give rise to questions of facts which will have to be determined by the trial court on the basis of evidence - There is no case made out for any interdict by this court - petition dismissed.
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