TMI Tax Updates - e-Newsletter
November 23, 2018
Case Laws in this Newsletter:
GST
Income Tax
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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GST:
Levy of GST - ancillary service provided by a company duly registered under the Companies Act, 2013 which is owned by State Government of Punjab - Transfer fees - such activity is liable to GST
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GST:
Detention of goods - demand of IGST - petitioner paid the amount through the portal - Revenue insists that the petitioner ought to have paid the tax and penalty either through cash or through Demand Draft - That insistence seems to be archaic and out of tune with the very spirit of the GST regime.
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GST:
Profiteering - reduction of rate of tax - The restaurant has failed to pass on both the above benefits to his customers - The amount is inclusive of the extra GST which the Respondent had forced the customers to pay due to wrong increase in his basic prices otherwise the prices to be paid by them should have further got reduced by the amount of the GST illegally charged from them.
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Income Tax:
Cancellation of registration of assessee charitable trust u/s 12AA(3) - No evidence for misuse of such foreign contribution/donation is brought on record by the Revenue authorities before cancelling such registration - No ultra vires or illegal activity on the part of the respondent-trust.
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Income Tax:
Charitable activities - exemption u/s 11 - the fact of the actual payment made to the Ohio University in the very next year and that too offered for taxation in India being undisputed, no such substantial question of law arises for our further consideration.
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Income Tax:
If the assessee invests the entire consideration in construction of the residential house within three years from the date of transfer he cannot be denied deduction u/s 54F of the Act on the ground that he did not deposit the said amount in capital gain account scheme before the due date prescribed u/s 139(1) of the Act.
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Income Tax:
The deduction has been claimed by the assessee under section 10A and not under the sections specified above for computing adjusted total income, thus, the provisions of section 115JC are clearly not applicable.
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Income Tax:
TPA - computation of ALP of the international transactions by applying BLT - ALP of an international transaction involving AMP expenses, the adjustment made by the TPO/DRP/AO is not sustainable in the eyes of law.
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Income Tax:
Disallowance made u/s 14A - there is no need to take into account any direct or indirect expenses of the agriculture division and apply the provisions of section 14A of the Act thereon.
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Income Tax:
Computation of deduction u/s 80IB(9) - there is no scope to adjust expenses relating to other “undertakings” while computing deduction u/s 80IB(9) of the Act.
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Corporate Law:
Conversion of the status of the company from “Public Limited” to “Private Limited” - in the absence of any objections from the ROC or creditors, conversion allowed.
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Service Tax:
Penalty u/s 77(2) & 78 of the Finance Act, 1994 - The issue is a bonafide dispute of legal interpretation of the newly introduced provision coupled with transaction concerning availment of such services has been reflected in ST-I monthly return, no malafide can be attributed to the assessee to call for imposition of penalty of any kind - penalty set aside.
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Service Tax:
Department having accepted the declaration in terms of VCES and having issued acknowledgement of discharge, cannot seek to recover or deny CENVAT Credit, which would amount to double taxation.
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Service Tax:
Liability of service tax - Amounts received towards reimbursement of income tax and VAT paid including the TDS paid by the appellant and reimbursed by the Indian Navy - These are in the nature of reimbursable expenses, not liable to service tax.
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Service Tax:
Demand of Service Tax - brokerage and Commission income received from the shipping lines - sale and purchase of freight space - assessee cannot be held as engaged in promoting or marketing the services of any ‘client’
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Central Excise:
Clandestine removal - in the absence of expert opinion by examiner of electronic evidence the allegations that the computer was capable of repeatedly generating invoices with the same number is not established beyond doubt.
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Central Excise:
SSI Exemption - valuation - the clearances to merchant exporters, which itself is not disputed, is to be excluded from the computation of total clearances
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Central Excise:
100% EOU - levy of excise duty - there is no doubt that the said plastic drums are durable and re-useable, therefore the clearance of such empty drum liable for payment of duty
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Central Excise:
Classification of goods - coated paper of three varieties i.e. Coated Front, Coated Back and Coated front and back sides - CETH 4809 is a more specific entry for the product in question.
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Central Excise:
Clandestine removal - case of Revenue is that the assessee has set up a factory in Arunachal Pradesh, but has not bothered to take registration from jurisdictional Central Excise Authorities - once the conditions of notifications / formalities not complied with, benefit of area based exemption cannot be allowed.
Articles
Notifications
GST - States
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G.O.MS.No. 570 - dated
14-11-2018
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Andhra Pradesh SGST
Notification exempting casual taxable persons making taxable supplies of handicraft goods from obtaining Registration.
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G.O.MS.No. 569 - dated
14-11-2018
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Andhra Pradesh SGST
The Andhra Pradesh Goods and Services Tax (Twenty Sixth Amendment) Rules, 2018
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G.O.MS.No. 568 - dated
14-11-2018
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Andhra Pradesh SGST
The Andhra Pradesh Goods and Services Tax (Twenty Fifth Amendment) Rules, 2018.
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47/2018-State Tax - dated
5-11-2018
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Arunachal Pradesh SGST
Seeks to exempt supply from PSU to PSU from applicability of provisions relating to TDS.
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46/2018-State Tax - dated
30-10-2018
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Arunachal Pradesh SGST
The Arunachal Pradesh Goods and Services Tax (Thirteenth Amendment) Rules, 2018.
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45/2018-State Tax - dated
26-10-2018
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Arunachal Pradesh SGST
Seeks to provide taxpayers whose registration has been cancelled on or before the 30th September, 2018 time to furnish final return in FORM GSTR-10 till 31st December, 2018.
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44/2018-State Tax - dated
23-10-2018
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Arunachal Pradesh SGST
Seeks to exempt post audit authorities under MoD from TDS compliance
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43/2018-State Tax - dated
23-10-2018
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Arunachal Pradesh SGST
Seeks to supersede Notification No. 29/2017 - State Tax, dated the 20th September, 2017.
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42/2018-State Tax - dated
9-10-2018
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Arunachal Pradesh SGST
The Arunachal Pradesh Goods and Services Tax (Twelfth Amendment) Rules, 2018.
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41/2018-State Tax - dated
9-10-2018
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Arunachal Pradesh SGST
Arunachal Pradesh Goods and Services Tax (Eleventh Amendment) Rules, 2018.
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37/2018-State Tax - dated
13-9-2018
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Arunachal Pradesh SGST
Arunachal Pradesh Goods and Services Tax (Tenth Amendment) Rules, 2018.
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36/2018-State Tax - dated
10-9-2018
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Arunachal Pradesh SGST
The Arunachal Pradesh Goods and Services Tax (Ninth Amendment) Rules, 2018.
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35/2018-State Tax - dated
10-9-2018
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Arunachal Pradesh SGST
Seeks to extend the due date for filing of FORM GSTR - 3B for newly migrated (obtaining GSTIN vide notification No. 26/2018-State Tax, dated 06.08.2018) taxpayers [Amends notf. No. 28/2018 - ST].
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30/2018-State Tax - dated
4-9-2018
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Arunachal Pradesh SGST
The Arunachal Pradesh Goods and Services Tax (Eighth Amendment) Rules, 2018.
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19/2018-GST-FTX.56/2017/Pt-III/166 - dated
31-10-2018
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Assam SGST
Seeks to notify the rate of tax collection at source (TCS) to be collected by every electronic commerce operator for intra-State taxable supplies.
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1605-F.T.-61/2018-State Tax - dated
15-11-2018
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West Bengal SGST
Amendments in this Department Notification No. 1344-F.T. dated the 13th September, 2018.
Indian Laws
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S.O. 5808(E) - dated
20-11-2018
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Indian Law
Amendment in the notification of the Government of India in the Ministry of Corporate Affairs, vide number S.O. 1693 (E) dated the 3rd October, 2007.
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2018 (11) TMI 1075
Detention of goods - demand of IGST - petitioner paid the amount through the portal - case of Revenue is that the petitioner ought to have paid the tax and penalty either through cash or through Demand Draft - Held that:- Evidently it is only a service provider, having no role to pay in the apportionment. Further, the Government both at the Centre and in the State, have ushered in the GST Tax regime to ensure that everything is made online with minimum manual interventions.
Yet strangely, the authorities still insist that the payment should be by physical means: either in cash or through Demand Draft. That insistence seems to be archaic and out of tune with the very spirit of the GST regime. In apportionment, there may be delays and difficulties, but the tax payer cannot be made to suffer, on that count.
Petition disposed off.
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2018 (11) TMI 1073
Profiteering - reduction of rate of tax - Restaurant Services - rate of tax reduced from 18% to 5% w.e.f. 15.11.2017 - it is alleged that though the rate of GST on Restaurant Services had been reduced from 18% to 5% w.e.f. 15.11.2017, the Respondent had increased the prices of the products which were being sold by him and had maintained the same price which he was charging before the above reduction - contravention of the provisions of Section 171 of the CGST Act, 2017.
Held that:- It is established beyond any doubt that the Respondent had increased the base prices on the intervening night of 14/15th November, 2017 by an average of 10.45% in respect of 1,730 products out of the 1,844 products which comes to about 93.82% which clearly shows that he had deliberately in conscious disregard of the provisions of Section 171 of the above Act had resorted to profiteering as he had no ground whatsoever to increase his prices on the eve of tax reduction.
The quantum of denial of benefit due to the reduction in the rate of tax and the benefit of ITC availed by the Respondent which was required to be passed on to the customers or the amount of profiteering done by the Respondent is determined as ₹ 7,49,27,786/- under the provisions of Rule 133 (1) of the CGST Rules, 2017 as the Respondent has failed to pass on both the above benefits to his customers - The above amount is inclusive of the extra GST which the Respondent had forced the customers to pay due to wrong increase in his basic prices otherwise the prices to be paid by them should have further got reduced by the amount of the GST illegally charged from them.
The Respondent is directed to reduce his prices by way of commensurate reduction keeping in view the reduced rate of tax and the benefit of ITC which has been availed by him as per Rule 133 (3) (a). Since the complainants are not identifiable in this case the Respondent is further directed to deposit the above amount as per the provisions of Rule 133 (3) (c) in the ratio of 50:50 in the Central or the State CWFs of all the 10 States mentioned in para 12 above, along with the interest @ 18% till the same is deposited, within a period of 3 months.
Penalty - Held that:- The Respondent has resorted to profiteering by charging more price than that he could have charged by issuing incorrect tax invoices. He has further acted in conscious disregard of the obligation which was cast upon him by the law by issuing incorrect invoices in which the base prices were deliberately enhanced exactly equal to the amount of reduced tax and benefit of ITC and thus he had denied the benefit of ITC and reduction in the rate of tax granted vide Notification dated 14.11.2017 to his customers. Accordingly he has committed an offence under Section 122 (1) (i) of the CGST Act, 2017 - a SCN may be issued to the Respondent to explain why penalty under the provisions of the above Section should not be imposed on him.
Application disposed off.
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2018 (11) TMI 1076
Levy of GST - ancillary service provided by a company duly registered under the Companies Act, 2013 which is owned by State Government of Punjab - Transfer fees - Extension fees - conversion fees - processing fees - bifurcation fees - tower charges - N/N. 12/2017 -Central Tax (Rate), dated 28.06.2017 - applicant is engaged in providing (30 years or more) lease of Industrial Plots against one time upfront amount.
Held that:- The services provided by the applicant, as enumerated at serial No. 14 of their application, though are in respect of the same plots but the entry No. 41 ibid, does not provide exemption to all services related to the plots covered there as is evident from the description of service which grants exemption only to the Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease of thirty years, or more. Therefore, the other subsequent services rendered by the applicant as enumerated by them in their application (Sr. No. 14) are not mentioned therein and thus, appear to be not covered under the said exemption entry or any additional other entry in Notification No. 12/2017-CT(R) for that matter and thus appear to be liable for payment of CGST and UTGST.
These services are, therefore, covered under "Other Miscellaneous services"-Group 99979 [scheme of classification of services in the Annexure to Notification No.11/2017- Tax (Rate) dated 28.06.2017] with CGST rate of 9% as provided at Sr. No. 35 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (as amended) with equal rate (9%) of UTGST as per entry No. 35 in' Notification No. 11/2017-Union Territory Tax (Rate) dated 28.06.2017 (as amended).
Ruling:- The said services are taxable services in terms of sub-section (21) of section 2 read with section 9 of the CGST Act, 2017. The services are not specifically exempted in terms of Notifications issued under section 11 of the GGST Act, 2017.
For the purpose of charging the tax, the services are covered under "Other Miscellaneous services"-Group 99979, Service Code 999799-'Other" services nowhere else classified' as per the scheme of classification of services and taxable at 18%.
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2018 (11) TMI 1074
Summon issued to answer the queries of the Director General of Goods and Services Tax (GST) Intelligence - the scope of investigation which was confined to allegations of evasion of service tax liability is sought to be expanded - Held that:- In view of the statement made, the GAIL Gas Ltd. shall intimate in advance – within two weeks, the officer/officers concerned who are familiar with the records in connection with the inquiry pertaining to the contracts with M/s Avinash EM Projects Pvt. Ltd. as according to its previous replies, no transactions had been entered into with the other concerns. Upon receipt of information with respect to such officers, the Directorate General of GST Intelligence shall fix a convenient date, time and venue for the presence of such officers, who may be best to reply to the queries, in connection with the investigation being carried out. As regards the other grievance, the summons issued on 26.04.2018 do indicate that now the scope of inquiry seems to have expanded.
The recital to the summons clearly mentions that the investigation was with respect to the M/s Avinash EM Projects Pvt. Ltd. In these circumstances, Directorate General of GST Intelligence shall confine its inquiry with respect to the transactions that GAIL Gas Ltd. had with M/s Avinash EM Projects Pvt. Ltd. only.
Petition disposed off.
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Income Tax
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2018 (11) TMI 1054
Rejection of exemption u/s 54F - investment before the date specified u/s 139(4) - non deposit the said amount in capital gain account scheme before the due date prescribed u/s 139(1) - investment of sale consideration in construction of a residential house within three years from the date of transfer - Held that:- It is not in dispute that the assessee in the instant case had invested net sale consideration for purchase of new residential flat before the date specified u/s 139(4) of the Act. We find that issue under dispute is squarely covered in favour of the assessee by the Co-ordinate Bench decision of this Tribunal in the case of Sunayana Devi vs. ITO [2017 (9) TMI 961 - ITAT KOLKATA] wherein as relying on Hon’ble Karnataka High Court in the case of CIT, Bangalore vs K.Ramachandra Rao [2015 (4) TMI 620 - KARNATAKA HIGH COURT] held that if the assessee invests the entire consideration in construction of the residential house within three years from the date of transfer he cannot be denied deduction u/s 54F of the Act on the ground that he did not deposit the said amount in capital gain account scheme before the due date prescribed u/s 139(1) of the Act.
As the assessee invested the sale consideration in construction of a residential house within three years from the date of transfer, we are of the view that the assessee should be given the benefit of deduction u/s 54F - decided in favour of assessee.
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2018 (11) TMI 1053
Revision u/s 263 - issue of deduction u/s 10A - Special provision in respect of newly established undertakings in free trade zone, etc. - Held that:- Deduction u/s 10A(1A) is allowable notwithstanding anything contained in subsection (1) of section 10A. The fourth proviso being relevant to subsection (1), it was not applicable in case of the deductions eligible under subsection 1A of section 10A of the Act. The observation of the CIT that assessee is not entitled for deduction under section 10A for the year under consideration in view of the 4th proviso to subsection (1), is incorrect appreciation of law. In view of the clear provisions, the Assessing Officer was not required to examine applicability of 4th proviso to subsection (1) of section 10A of the Act. Accordingly, the contention of the Ld. CIT that no enquiry has been conducted by the Assessing Officer on the applicability of the 4th proviso, is hereby rejected.
Applicability of MAT provisions on adjusted income - Special provisions for payment of tax by certain persons other than a company - Held that:- If the deduction is claimed under chapter VIA or under section 10AA or under section 35D then the adjusted total income would be total income before claim of those deductions and if the regular income tax payable is less than the MAT payable on such adjusted total income, the assessee would be liable to pay MAT. But, in the instant case, the deduction has been claimed by the assessee under section 10A and not under the sections specified above for computing adjusted total income, thus, the provisions of section 115JC are clearly not applicable. In view of the clear and unambiguous provisions of the law, the Ld. Assessing Officer was not required to enquired upon the applicability of section 115JC in the case of the assessee and thus accordingly, we reject the contention of the Ld. CIT that the Assessing Officer has not made any enquiry on this issue.
Deduction in respect of the commission expenses disallowed - Held that:- CIT has observed that copy of the order of the Tribunal of the earlier year was not readily available or was not filed by the counsel of the assessee and therefore the issue required examination by the Assessing Officer. In our opinion, the CIT could have verified the order of the Tribunal and then decided whether the examination was required in the case.
Deduction on interest income earned on various FDR - Interest income in the case of the assessee earned on FDR’s with the bank is also eligible for deduction under section 10A. We also find that Assessing Officer asked for the details of the said interest income and assessee has duly filed reply giving detail of the said income. In such facts and circumstances, we are of the opinion that the Assessing Officer has correctly applied the law after carrying out the enquiries, which he ought to have done. Accordingly, we reject the contention of the Ld. CIT that the Assessing Officer has wrongly allowed the deduction on interest income earned on various FDR.
We are of the opinion that finding of the CIT that the AO ought to have done enquiries on the four issues is not correct and thus action of the Ld. CIT for holding the order of the Assessing Officer as erroneous insofar as prejudicial to the interest of the Revenue, cannot be sustained. Accordingly, we cancel the order of the Ld. CIT(A) passed under section 263 of the Act. - Decided in favour of assessee.
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2018 (11) TMI 1072
Reopening of assessment - notice issued after four years - disallowance of claim of expenditure of 30% of the receipts - Held that:- In view of the fact that the tax effect in the present case is below the threshold of ₹ 1 crore, we are not entertaining the special leave petition.
The special leave petition is, accordingly, dismissed on the ground of low tax effect.
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2018 (11) TMI 1071
Application u/s 12-AA denied - proof of charitable activities - society is getting preparation and distribution charges per child per month from the state govt. the activity in this field cannot be treated as charitable in nature - Held that:- Issue notice on the application for condonation of delay in filing the Special Leave Petition as well as in the Special Leave Petition.
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2018 (11) TMI 1070
Disallowance under Section 80M - establishment of nexus between the investments made during the year and the borrowed funds - Penalty proceedings initiated under Section 271(1)(c)- Held that:- There is an inordinate delay of 205 days in filing the Petition which has not been explained satisfactorily.
Even otherwise, we do not find any merit in this Special Leave Petition.
SLP dismissed both on the ground of delay as well as on merits.
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2018 (11) TMI 1069
Entitlement to deduction under Section 80IA - non reducing deduction u/s 80HHC - Held that:- The Special Leave Petition is dismissed on the ground of low-tax effect, leaving the question of law open.
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2018 (11) TMI 1052
TPA - computation of ALP of the international transactions by applying BLT - AMP expenses - Held that:- Merely by applying the BLT, the existence of international transactions cannot be proved and as such the adjustment made by the TPO/DRP/AO on this account is not sustainable in the eyes of law. We are further of the considered view that ALP expenses incurred by the taxpayer were not for the benefit of AE but only to enhance sales of the taxpayer. Identical issue has already been decided by the coordinate Bench of the Tribunal in favour of the taxpayer in taxpayer’s own case for AY 2013-14 having identical facts and same business model as in the year under consideration wherein the TPO had also computed the ALP of the international transactions by applying BLT.
We are of the considered opinion that the ALP of an international transaction involving AMP expenses, the adjustment made by the TPO/DRP/AO is not sustainable in the eyes of law. At the same time, we cannot ignore the submission of the learned DR that the matter is pending before Hon'ble Apex Court and the decision of Hon'ble Apex Court would be binding upon all the authorities.
In view of the above, we set aside the orders of authorities below and restore the matter to the file of the Assessing Officer. We hold that as per the facts of the case and the legal position as of now and discussed above in this order, the adjustment made by the TPO/DRP/AO in respect of AMP expenses is not sustainable. However, if the above decisions of Hon'ble Jurisdictional High Court which is under consideration before the Hon'ble Apex Court is modified or reversed by the Hon'ble Apex Court, then the Assessing Officer would pass the order afresh considering the decision of Hon'ble Apex Court. In those circumstances, he will also allow opportunity of being heard to the assessee.
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2018 (11) TMI 1068
Matter be restored to the Division Bench for adjudication - cross-appeals filed by the Revenue and the Assessee, therefore, have to be now listed before the Division Bench and decided - Held that:- SLP dismissed.
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2018 (11) TMI 1067
Reopening of assessment - valuation of closing stock - ITAT affirmed the CIT’s opinion but held that the re-assessment was unwarranted - Held that:- No reason to entertain this special leave petition, which is, accordingly, dismissed.
Pending application (s), if any, shall stand disposed of.
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2018 (11) TMI 1066
Reopening of assessment - case of petitioner is that Since amalgamation, the company had no legal existence - also, it was claimed that M/s. Dharmanath Share & Services Private Limited was subjected to assessment under Section 153 [C] in which entire transactions; including the commission amount, have been taxed. The same cannot now be taxed in the hands of assessee - Held that:- SLP dismissed.
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2018 (11) TMI 1065
Reopening of assessment - absence of fresh intangible material - Held that:- Special Leave Petition is dismissed on the ground of low tax effect.
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2018 (11) TMI 1064
Claim of deduction u/s 10B - whether mere processing of the iron ore in a plant and machinery located outside the bonded area will not disentitle the assessee from deduction where the iron ore was excavated from the mining area belonging to an export oriented unit - location of the ‘SESA Plant’ outside the EOU and customs bonded area - Held that:- SLP dismissed.
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2018 (11) TMI 1063
Power of transfer u/s 127 - reasons given in impugned order is "decentralization of cases from central charges" and should be taken a "sufficient reason"- Requirement of reason under Section 127 - Held that:- Special Leave Petition is dismissed on delay as well as on merits.
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2018 (11) TMI 1062
Deduction u/s 80IB - mere fact that nut blanks were purchased from Unit I cannot be a reason to deny deduction under Section 80IB, vis-a-vis Unit II - both Units were formed by splitting and reconstruction of existing undertakings - Computation made by the AO in respect of deduction claimed by the Assessee under Section 80IA - Held that:- Special Leave Petitions are dismissed.
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2018 (11) TMI 1051
TDS u/s 195 - non deduction of tds on commission paid - Held that:- The sum paid to the foreign agents for commission is not chargeable to tax in their hands in India and accordingly said expenditure is not liable to deduction of tax at source. Hence, in our opinion order of the Ld. CIT(A) on the issue in dispute is well reasoned and we do not find any error in the same . The disallowance made under section 40(a)(i) is thus accordingly directed to be deleted. The grounds raised by the Revenue are accordingly dismissed.
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2018 (11) TMI 1050
Disallowance made u/s 14A - expenditure debited in the taxable divisions of the assessee - Held that:- We find that the assessee had not derived any exempt income in the form of dividend and hence there is no question of applicability of provisions of section 14A thereon. See CIT VERSUS M/S. CHETTINAD LOGISTICS PVT. LTD.[2017 (4) TMI 298 - MADRAS HIGH COURT]. We find no infirmity in the order of the CIT-A deleting the disallowance u/s 14A. Accordingly, the Ground No. 1 raised by the revenue is dismissed.
Disallowance u/s 14A made towards agriculture division - Held that:- We find that the assessee had provided segmental annual statement of accounts for each of its divisions. The assessee had claimed agricultural income as exempt after reducing the expenditure attributable to agriculture division from the gross receipts of agriculture division. The assessee had not claimed exemption towards agricultural income on its gross receipts. As claimed exemption u/s 10(1) only for the net agricultural income. We hold that there is no need to take into account any direct or indirect expenses of the agriculture division and apply the provisions of section 14A of the Act thereon. We hold that the CIT-A had rightly deleted the disallowance u/s 14A of the Act in the sum of ₹ 21,13,761/- which does not call for any interference. Accordingly, the Ground No. 2 raised by the revenue is dismissed.
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2018 (11) TMI 1049
Computation of deduction u/s 80IB(9) - profit of eligible and non-eligible units - Held that:- The deduction u/s 80IB(9) has to be computed in terms of sec.80IB of the Act. Sec. 80IB(13) of the Act provides that the provisions of sec. 80IA(5) shall apply and under the provisions of sec.80IA(5), the profits and gains of eligible business, for the purposes of sec. 80IB, shall be computed as if such eligible business were the only source of income of the assessee.
In view of these provisions, the deduction u/s 80IB(9) has to be computed after ascertaining profits and gains of eligible business in terms of sec 80IA(5) of the Act. Hence there is no scope to adjust expenses relating to other “undertakings” while computing deduction u/s 80IB(9) of the Act. Hence, we are of the view that the decision rendered by CIT(A) does not call for any interference and accordingly we uphold the same.
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2018 (11) TMI 1060
Disallowance u/s 14A - calculation of disallowance of expenditure attributable to exempted income to be made under Section 14A - whether for assessment year 2006-07 the assessing Officer could rely upon Rule 8D of the Rules for working out the disallowance of expenses under Section 14A? - Held that:- Rule 8D of the Rules is prospective in operation and could not have been applied to any assessment prior to assessment year 2008-09. Hence, the issue is decided against the revenue.
Whether the Tribunal was justified in restricting the disallowance made under Section 14A of the Act to ₹ 5 lakhs without any sound and valid reason, the same need not be gone into as the assessee-company has not challenged the order. Moreover, it would be pertinent to mention here that the AO in the assessment order recorded that there is no prescribed method for working of disallowance and thereafter only relied upon Rule 8D of the Rules.
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2018 (11) TMI 1059
Addition on account of unexplained trade creditors and expenses - Held that:- CIT (Appeals) had examined the evidence and material produced to establish and show identity, nature and genuineness of the expenditure. In respect of four parties, namely, Jyoti Metal (India), M/s Steam Radiators Corp, M/s Committed Cargo Care Private Limited, M/s Nova Home Appliances Private Limited and M/s Chetra Trading LLC, no confirmations were filed during the course of the assessment proceedings and in the appellate proceedings.
Contention of the Revenue that the AO was not allowed any opportunity to counter the claim of the assessee during the proceedings before the first appellate authority was rejected, observing that transactions were examined in the next year and were ascertained and found to be genuine and with known parties. Thus, failure to seek remand report of the assessing officer, who had in the next year examined the same issue and had on verification accepted genuineness of the expenditure, would not warrant interference.
Revenue has not filed copy of the AO for the Assessment Year 2011-12. Papers or documents which were filed before the CIT (Appeals) or the Tribunal have also not been filed. In the absence of said papers/documents and in view of the factual findings recorded by the CIT (Appeals) and also noticing the short order passed by the assessing officer, we are not inclined to interfere with the factual findings.
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2018 (11) TMI 1058
Tribunal's territorial jurisdiction - Whether Chandigarh Bench of the Tribunal did not possess the territorial jurisdiction to hear and decide the appeal? - Grant of registration u/s 12AA denied - Held that:- The contention of learned counsel for the assessee that the order of the Tribunal has not been challenged on merits and the same is sustainable in law does not enhance the case of the assessee. If the Tribunal lacks territorial jurisdiction, the order passed is nullity being without jurisdiction.
Here, there is no dispute that Amritsar Bench of the Tribunal had the territorial jurisdiction to hear the appeal. The orders dated 29.12.2011 and 28.10.2015 (Annexures A-1 and A-2) passed by the Chandigarh Bench of the Tribunal are, thus, set aside and the matter is sent to the Amritsar Bench of the Tribunal to decide the appeal afresh. The questions claimed are answered accordingly.
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2018 (11) TMI 1057
Disallowance u/s 14A - Method for determining amount of expenditure in relation to income not includible in total income - principle of apportionment of expenses - Held that:- In view of the ratio in Maxopp Investment Ltd.[2018 (3) TMI 805 - SUPREME COURT OF INDIA], Holicim India P.Ltd. (2014 (9) TMI 434 - DELHI HIGH COURT) and Cheminvest Ltd.[2015 (9) TMI 238 - DELHI HIGH COURT] no substantial question of law that arises for consideration wherein held that Section 14A will not apply if no exempt income is received or receivable during the relevant previous year. - Decided in favour of assessee.
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2018 (11) TMI 1061
Depreciation claim to assessee trust - Allowability of depreciation on capital assets acquired for the purposes of carrying out charitable activities and set off of deficit of earlier years against income of the current year - Held that:- Miscellaneous Application is dismissed,leaving the question of law open in terms of prayer made in the application.
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2018 (11) TMI 1056
Cancellation of registration of assessee charitable trust u/s 12AA(3) - assessee trust had received some foreign remittances and made over the said remittances to another charitable trust which was newly constituted and known as M/s. Malankara Catholic Diocese of Puttur - Held that:- No negative stipulation in the memorandum of association by the assessee trust prohibiting any such transfer of funds to another charitable trust which was also registered under the provisions of the Income-tax Act although some of the remittances were transferred to them prior to its registration.
No evidence for misuse of such foreign contribution/donation is brought on record by the Revenue authorities before cancelling such registration. The assessee clearly stated before the authority that since the remittances were received for the specific purpose of being made over to the said M/s. Malankara Catholic Diocese of Puttur, therefore they transferred the funds. The admission of the error on the part of the assessee- trust appears to have been, though uncalled for, made in right earnest and in a bona fide manner. No violation of any terms of the clause of the trust deed or memorandum of association is admitted or otherwise established on record - No ultra vires or illegal activity on the part of the respondent-trust - decided in favour of assessee.
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2018 (11) TMI 1055
Charitable activities - exemption u/s 11 - income derived from property held under the trust for charitable or religious purposes to the extent to which such income is "applied" to such purposes in India - payments made to the professors of Ohio University, USA for which the requisite provision was made in the books of account of the previous year, but actual payment was made in the next assessment year - Held that:- We are of the opinion that in view of the findings of fact recorded by the learned Tribunal that a provision was made to the Ohio University for charitable activity by way of education being imparted in India and the fact of the actual payment made to the Ohio University in the very next year and that too offered for taxation in India being undisputed, no such substantial question of law arises for our further consideration.
Depreciation claim - the matter is squarely covered by a decision of the cognate Bench of this court in the case of CIT v. Society of the Sisters of St. Anne [1983 (8) TMI 44 - KARNATAKA HIGH COURT]wherein the cognate Bench of this court held that even the depreciation not involving any cash outflow is also in the character of expenditure and therefore such depreciation is nothing but decrease in the value of property through wear and tear, deterioration or obsolescence and the allowance made for that purpose in the books of account were deemed to be the application of funds for the purpose of section 11 of the Act.
Allowing any expenditure of the earlier year which has been brought forward and set off in the year under consideration, is a justified finding of fact based on the correct interpretation of law and the judgment relied upon by it rendered by the cognate Bench. Therefore, the same does not call for interference. A similar view was also taken by the Division Bench of the Bombay High Court in CIT v. Institute of Banking [2003 (7) TMI 52 - BOMBAY HIGH COURT] wherein the Division Bench of the Bombay High Court held that the income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied, then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year. No substantial question of law - decided against revenue
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Corporate Laws
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2018 (11) TMI 1043
Competition commission - Overlap in production and supply of films to third-party distributors and exhibitors for theatrical release in India - proposed combination relates to the acquisition of 21CF, including its film and television studios, cable and international TV businesses, by TWDC - whether horizontal overlaps resulting from the proposed combination are not likely to result in any appreciable adverse effect on competition in any of the business segments - Held that:- Markets is characterized either by insignificant presence of the Parties or presence of significant competitors. Therefore, the Commission is of the view that post combination, the Parties would not have the ability to foreclose the market for other competitors.
In addition, the vertically related markets involving upstream segment of operation and wholesale supply of TV channels and downstream segment of retail supply of audio visual content through DTH are also identified for possibility of any vertical foreclosure.
In the upstream segment relating to operation and wholesale supply of TV channels, for reasons already discussed above it is noted that there is no likelihood of AAEC in this business segment as well as in its various sub-segments. Further, for the downstream segment, the Commission notes that though 21CF holds certain equity shares of Tata Sky but the proposed combination is not likely to foreclose the market for other competitors as TRAI has issued various regulations, tariff orders and directions, etc. to generate competition and ensure fair play in the industry. Further, there are competitors of the Parties such as Tata Sky, Dish TV, Airtel DTH, Sun Direct etc. that would continue to provide competitive constraint to the Parties, post-combination. Therefore, the abovesaid vertical relationship is not likely to result in any vertical foreclosure.
Considering facts on record, details provided in the notice given under sub-section (2) of Section 6 of the Act and assessment on the basis of factors stated in sub-section (4) of Section 20 of the Act, the Commission is of the opinion that the Proposed Combination is not likely to have an appreciable adverse effect on competition in India. This order shall stand revoked if, at any time, the information provided by the Acquirers is found to be incorrect.
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2018 (11) TMI 1044
Conversion of the status of the company from “Public Limited” to “Private Limited”- Held that:- It transpires from records that the Board of Directors of the Company has passed a resolution in the meeting held on 05.05.2017 approving the conversion to Private Limited Company. A Special Resolution has also been passed on 05.06.2017 with the unanimous approval of 8 shareholders of the Petitioner Company. The said Special Resolution passed at the EOGM on 05.06.2017, has been filed by the company on 15.06.2017 through e-form MGT-14, which has been approved. The Company is stated to be an unlisted public company and is not registered under section 8 of the Act, 2013. Neither the ROC, West Bengal nor any member or creditor of the Company has any objection to the proposed conversion from Public Limited to Private Limited.
As regards compliance of the required Rule 68 of NCLT Rules, 2016, it may be noted that the company has published notice of the petition both in English and Bengali Newspapers on 28.12.2017 indicating the intention of conversion from Public to Private status; in spite of public notice the company has not received any objection either from its members, creditors or any persons with regard to the proposed conversion of status of the company; and all the members of the company attended the EOGM on 05.06.2017 and approved the Special Resolution passed at the said meeting.
Having regard to since all the requisite statutory compliances have been fulfilled, the conversion of the status of the company from “Public Limited” to “Private Limited” as per Special Resolution passed at the EOGM on 05.06.2017 is hereby approved in the interest of the company and such change of status of the company shall not cause any prejudice either to the members or the creditors or any other related party of the petitioner company.
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Insolvency & Bankruptcy
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2018 (11) TMI 1046
Corporate Insolvency Resolution Process - applicant bank coming within the definition of Financial Creditor - Held that:- In the present case applicant bank had sanctioned and disbursed the term loan amount recoverable with applicable interest by entering in to loan agreements with the corporate debtor. The corporate debtor had borrowed the credit facility against payment of interest as agreed between the parties. The loan was disbursed against the consideration for time value of money with a clear commercial effect of borrowing. Moreover the debt claimed in the present application includes both the component of outstanding principal and interest. In that view of the matter not only the present claim comes within the purview of ‘Financial Debt’ but also the applicant bank can clearly be termed as ‘Financial Creditor’ so as to prefer the present application under Section 7 of the Code.
The applicant bank clearly comes within the definition of Financial Creditor. The material placed on record further confirms that applicant financial creditor had disbursed various loan facilities to the respondent corporate debtor and the respondent has availed the loan and committed default in repayment of the outstanding financial debt. On a bare perusal of Form - I filed under Section 7 of the Code read with Rule 4 of the Rules shows that the form is complete and there is no infirmity in the same. It is also seen that there is no disciplinary proceeding pending against the proposed IRP. We are satisfied that the present application is complete in all respect and the applicant financial creditor is entitled to claim its outstanding financial debt from the corporate debtor and that there has been default in payment of the financial debt.
As a sequel to the above discussion and in terms of Section 7(5)(a) of the Code, the present application is admitted.
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2018 (11) TMI 1045
Corporate Insolvency Resolution Process - violation committed by the ex-management or any tainted/illegal transaction by ex-directors or anyone else the Interim Resolution Professional/Resolution Professional - Held that:- Corporate Debtor-Respondent would reveal that a design effort has been made to impede the insolvency proceedings by seeking time over and over again for filing reply. The leniency shown by the Bench has been misused to the hilt. Order dated 28.08.2018 was passed whereby direction was issued that in case reply was not filed then the defence of the respondent was to be struck off and no reply was to be taken on record, and, inspite of said specific direction no reply has been filed. Corporate Debtor-Respondent deliberately delayed the proceeding so as to avoid the initiation of Corporate Insolvency Resolution Process. This case thus is a classic example of such a conduct. We say no more on this issue.
The office is directed to communicate a copy of the order to the Financial Creditor, the Corporate Debtor, the Interim Resolution Professional and the Registrar of Companies, NCR, New Delhi at the earliest but not later than seven days from today. The Registrar of Companies shall update his website by updating the status of ‘Corporate Debtor’ and specific mention regarding admission of this petition must be notified to the public at large.
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2018 (11) TMI 1047
Restructuring - entitlement to seek remedies under the IBC - respondent banks to infuse additional working capital in terms of the JLRA - Held that:- This Court is unable to accept that any directions are required to be issued to the RBI for implementing the Circulars to enforce the JLRA. The additional funding was always to be at the discretion of the respondent banks. It is also relevant to note that Article 4 of the JLRA also provides for prepayment of the facilities. The petitioner was expressly permitted to re-finance the Facilities on terms and conditions not more onerous than the terms and conditions of the Facilities being prepaid. The petitioner could also seek funding from other sources.
There is no reason not to believe that the petitioner did require additional working capital for meeting the projections as set out in the D&B TEV Report. PNB had also agreed to enhance the working capital and had sanctioned a sum of ₹ 59.68 crores. It had also disbursed ₹ 30 crores. However, it is contended on behalf of PNB that the same was a separate transaction. Be that as it may, even if it is accepted that PNB had released additional working capital based on the assessment of the petitioner's requirement for such capital in terms of the projections set out in the D&B TEV Report, it is difficult to accept that the same was part of its obligations under the JLRA.
Even if it is accepted (which this Court does not) that the respondent banks were obliged to provide additional working capital as claimed by the petitioner and have defaulted in their obligation, the relief as sought for by the petitioner cannot be granted. The petitioner seeks enforcement of the Circulars dated 26.02.2014 and 05.05.2017. This is in the context of the JLRA and, essentially, the petitioner seeks specific enforcement of the JLRA, which entails (i) restraining ICICI Bank from proceeding under the IBC; and (ii) direction to provide additional working capital.
This Court is unable to accept that any such directions for providing additional working capital to the respondent banks can be issued by this Court or the RBI. As noticed above, in terms of the Circular dated 26.02.2014, the respondent banks were obliged to form the JLF for exploring the CAP. In the present case, even if the respondent banks are directed to once again examine an appropriate CAP, it is apparent that the result would be different. The respondent banks had already agreed to change the CAP to Recovery instead of Restructuring in a meeting held on 08.02.2017. Although, the petitioner has raised several disputes in relation to the minutes of the aforesaid meeting, it is apparent that the consensus amongst the respondent banks is to proceed with recovery. This is also reflected in their stand in these proceedings.
There is much controversy with regard to the proceedings for a S4A Scheme. The petitioner claims that the respondent banks had no intention to adopt any S4A scheme and had intentionally delayed the implementation of the same. Undisputedly, the said scheme is not feasible where the revenue generated is insufficient to service the same. This is accepted by the petitioner and is evidenced from its agreement to accept the S4A Scheme (where the level of sustainable debt is not less than 50% of the total debt can be adopted).
The PNBISL TEV Report suggests an S4A scheme which provides for conversion of debt into Equity and Convertible Debentures. It is material to note that the additional funding is limited only to ₹ 24 crores and it does not provide for infusion of additional working capital beyond that amount.
It was also contended on behalf of the respondent banks that the petitioner had defaulted in performance of its obligations under the JLRA and, therefore, the same could not be implemented. The respondent banks claim that the petitioner had defaulted in its obligations to route all transactions through the TRA; to pay interest and repayments; and the promoters' contribution upfront. All the aforesaid contentions are disputed by the petitioner. It is claimed that there was no default in interest payment in terms of the JLRA and subsequent defaults were the result of the failure of the respondent banks to release the additional working capital.
In terms of sub-paragraph 7.3.1 of the JLRA, the lenders were required to inform the JLF about the event of default and the action proposed to be taken by such lenders. In terms of sub-paragraph 7.3.2, occurrence of an event of default would result in the principal and approved interests on the facilities being due and payable forthwith. Prima facie, it does not appear that any such notice of default had been issued and, therefore, the contention that the respondent banks ought not to be permitted to raise any such issue in these proceedings appears merited.
This Court is not called upon to adjudicate any of the aforesaid contentions. These are plainly disputed questions of facts and it is also apposite to examine the same in these proceedings. In this view, this Court is refraining from commenting upon the same and has considered this matter on the assumption that there is no default on the part of the petitioner in complying with its obligations under the JLRA.
The relief as sought for by the petitioner cannot be granted. First of all, for the reason that this Court finds it difficult to accept that the respondent banks were obliged to provide additional working capital in terms of the JLRA. The respondent banks cannot be compelled to provide additional funds, as the decision whether to do so rests exclusively with them. Secondly, it is not possible to grant specific performance of the JLRA - which, essentially, is the nature of the relief sought by the petitioner, albeit couched as seeking a direction to the RBI for implementing its circulars vis-à-vis the JLRA -by directing grant of additional working capital. This is so as the fundamental parameters on which the JLRA is based has changed in view of the petitioner's debt exceeding the sustainable levels.
In the present case, this Court is unable to find that there is any obligation on the part of the respondent banks to infuse additional working capital in terms of the JLRA. The respondent banks had not issued any letter sanctioning additional working capital as discussed earlier. The JLRA also does not oblige the respondent banks to disburse additional working capital. And, even if it is accepted that the respondent banks had an obligation to provide additional working capital, no such directions to provide additional funding can be granted, as there is a fundamental change in the financials of the petitioner company and the petitioner company is admittedly, not in a position to service its existing loans.
The obligation of the corporate debtor was, therefore, unconditional and did not depend upon infusing of funds by the creditors into the appellant Company. Also, the argument taken for the first time before us that no debt was in fact due under the MRA as it has not fallen due (owing to the default of the secured creditor) is not something that can be countenanced at this stage of the proceedings. In this view of the matter, we are of the considered view that the Tribunal and the Appellate Tribunal were right in admitting the application filed by the financial creditor ICICI Bank Ltd.'
The indebtedness of the petitioner towards the respondent banks was never in dispute. Admittedly, the petitioner was obliged to repay the loan and the interest thereon. The fact that the petitioner's claim for additional assistance was denied does not absolve the petitioner from its liability to repay the amounts borrowed along with interest. If the petitioner is able to establish that there is an obligation on the part of the respondent banks to disburse additional funds and the same has been breached, the petitioner may be entitled to claim damages. However, it cannot repudiate its liability to repay its loans.
The present petition is dismissed. All the pending applications are also disposed of. In view of the order passed by this Court on 22.05.2018 directing status quo to be maintained with regard to proceedings initiated before the NCLT, Chandigarh, it is directed that the period from 22.05.2018 till date be excluded from considering the time lines set for proceedings under the IBC.
It is also clarified that the NCLT shall consider the application before it independently and uninfluenced by any observations or findings of this Court in the petition. Thus, all contentions of the parties are reserved and the petitioner is not precluded from raising any contention including the ones considered in this petition before the NCLT.
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Service Tax
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2018 (11) TMI 1041
Penalty u/s 77(2) & 78 of the Finance Act, 1994 - works contract services - supply of manpower services - bonafide dispute of legal interpretation - partial reverse charge mechanism - N/N. 30/2012-ST dated 20.06.2012 - Held that:- The governing body of Central Excise, CBEC had issued clarification in the education guide that in the partially reverse charge method, the service provider shall issue an invoice indicating the name, address and registration of the service provider and that of the service receiver, to mention the description of service as well as value of taxable service provided or agreed to be provided and the service tax payable thereon inclusive of service tax payable by service provider. Notification 33/12-ST dated 30.06.2012 indicates that if the turnover of the service provider is less than 10 lakhs, the service recipient shall be obliged to pay his share of service tax (of the service provider also) under the partial reverse charge mechanism.
There is no denial of the fact that the idea behind introduction of this procedure was to bring unorganised sector on record so that the proper books of account are maintained by them, even though they are not aware about - 6 - ST/85989/2018 the various statutory liability cast on them and the same will remove the difficulty of the government in tracing out the service provider who are liable to pay service tax.
Further no documents/invoices concerning such payment being made to the service provider is produced before the lower authorities, so as to conform if the invoice(s) were raised in conformity to the procedure meant for compliance of such Notification No. 30/2012-ST and nothing is found from the record to indicate that tax component has been fully realised from the service receiver by the service provider and paid to the Government in order to avoid situation like double taxation on the same service.
The issue is a bonafide dispute of legal interpretation of the newly introduced provision coupled with transaction concerning availment of such services has been reflected in ST-I monthly return, no malafide can be attributed to the assessee to call for imposition of penalty of any kind - penalty set aside.
Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1024
Demand of Service Tax - brokerage and Commission income received from the shipping lines - sale and purchase of freight space - extended period of limitation - penalty - Held that:- The issue is covered by the decision in the case of Karam Freight Movers [2017 (3) TMI 785 - CESTAT NEW DELHI], where it was held that The surplus earned by the respondent arising out of purchase and sale of purchase and sale of space and not by acting for client who has space or not on a vessel. It cannot be considered that the respondents are engaged in promoting or marketing the services of any ‘client’ - demand of service tax on the above amount is set aside.
Extended period of limitation - penalty - Held that:- Having held that there was a reasonable cause for non-payment of duty, it is just to set aside the invocation of extended period of limitation also in the instant case - penalty also set aside.
Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1023
Levy of service tax - mobilization advance received - amount received from Indian Navy for the purpose of upgrading their infrastructure at the shipyard so as to facilitate they undertaking future refits for Indian Navy - Held that:- These are not linked to the present contract and hence can only be termed mobilization advances not linked to any signed contract for rendering services. Of course, in future Indian Navy may award the appellant contracts and the amounts now paid will be adjusted against such contracts. At this stage it is not clear as to what contracts will be signed and whether they will be liable to service tax during that period - there is no ground to charge service tax on the mobilization advance received by the appellant - demand set aside.
Liability of service tax - Amounts received towards reimbursement of income tax and VAT paid including the TDS paid by the appellant and reimbursed by the Indian Navy - Held that:- These are in the nature of reimbursable expenses and hence cannot be included in the value of taxable services as has been held by the Hon’ble Supreme Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. [2018 (3) TMI 357 - SUPREME COURT OF INDIA] - Demand set aside.
Liability of service tax - amounts received towards RTDs - Held that:- These are clearly goods received by the appellant on behalf of Indian Navy and were imported by filing a bill of entry and no service tax can be levied on the goods - demand set aside.
Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1022
Cargo handling services - Silo Charges - demand of service tax - Held that:- From the records it is seen that the appellant has paid sales tax not only on the transaction price of coal but also on the silo loading charges - there is no justification for the demand of service tax - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1040
Rectification of mistake - typographical error - Held that:- In page 2 at 20th line, the word ‘Director’ should be read as ‘Director’s son’ - the mistake is rectified and the expression ‘Director’ occurring in page 2 at 20th line should be read as ‘Director’s son’ - MA(ROM) allowed.
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2018 (11) TMI 1039
Extended period of limitation - Penalty - Failure to discharge to service tax - repair and maintenance service of automation machines - Held that:- It is not in dispute that the appellant had provided ‘management, maintenance or repair service’ during the relevant period but failed to discharge service tax even though the same was collected along with their service charges.
Neither in the appeal memorandum nor during the course of hearing the appellant has produced evidences to rebut the said findings of the Learned Commissioner. Since during the relevant period the appellant had collected service tax but not deposited with the Government, there is no reason not to invoke the extended period of limitation and impose penalty under Section 78 and other provisions of Finance Act, 1994 as has been done by the adjudicating authority in the order impugned.
Appeal dismissed - decided against appellant.
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2018 (11) TMI 1038
Rectification of mistake - error apparent on the face of record or not - Held that:- The error is apparent on record and the final order is modified to the extent referred - ROM Application allowed.
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2018 (11) TMI 1037
Construction of Residential Complex Service - short payment of service tax - according to Revenue, appellant were not entitled for availing abatement - Held that:- The learned Commissioner while passing the said Order-In-Original dated 27 November, 2015 examined all conditions for admissibility of abatement under said notification and held that appellant had fulfilled all the conditions required for availing the said N/N. 01/2006-ST dated 01 March, 2006 - for the period covered by the present appeal appellant was entitled for said abatement - demand set aside - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1036
Renting of immovable property service - non-discharge of service tax - case of appellant is that area occupied by TNPL is only 9 acres. Hence, as per the agreement, the monthly rent for the 9 acres of land i.e. 9 acre x ₹ 1200 and not as 40 acre x ₹ 1200 as alleged in the notice.
Held that:- The appellant has been contending right from the reply to the SCN that the agreement in question is only for renting of 9 acres of land as per their letter dt. 06.02.2001 addressed to TNPL and also have submitted TNPL’s confirmatory letter dt. 10.02.2001 - sufficient proof has been submitted by the appellants in support of their contention.
Thus, the appellants have only rented out 9 acres of land to TNPL and that service tax liability for the impugned period has already been discharged by them - demand set aside - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1029
CENVAT Credit - duty paying invoices - credit availed on the basis of supplementary invoice issued by the service provider - Held that:- It is the service provider who had opted for VCES, 2013 and having opted, he had issued supplementary invoice to the appellant - Department having accepted the declaration in terms of VCES and having issued acknowledgement of discharge, cannot seek to recover or deny CENVAT Credit, which would amount to double taxation.
The denial of CENVAT Credit by the Revenue is bad and unsustainable - appeal allowed - decided in favor of appellant.
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Central Excise
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2018 (11) TMI 1035
CENVAT Credit - input services - outward transportation charge under GTA service - place of removal - period January, 2005 to December, 2011 and July, 2013 to February, 2016 - Held that:- In view of changed definition of input service after April, 2008 the appellant is liable to pay service tax as per the prevalent rate only.
Penalty - Held that:- The issue was mired in confusion and the issue was resolved only with the decision in the case of COMMISSIONER OF CENTRAL EXCISE SERVICE TAX VERSUS ULTRA TECH CEMENT LTD. [2018 (2) TMI 117 - SUPREME COURT OF INDIA] - thus this is not a fit case to impose penalty.
Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1021
Clandestine manufacture and removal - case of Revenue is that the respondent has set up a factory in Arunachal Pradesh, but has not bothered to take registration from jurisdictional Central Excise Authorities - Held that:- Even though the area where the respondent’s factory is located falls within the Area Based Exemption under the Central Excise Notification No.32-33/99-CE dated 08.07.1999, it is incumbent on the respondent to complete formalities specified in the Notification and claim the benefit of such Area Based Exemption. In the absence of such course of action, the central excise duty becomes payable on the goods manufactured and cleared by the respondent.
Demand of Interest and penalty - Held that:- Since the central excise duty has been held as payable, and the same has not been paid, the interest applicable under Section 11AB will also required to be paid by the respondent - the conduct of the respondent is to be viewed as suppression of facts and hence the penalty under Section 11AC will also be liable to be paid - interest and penalty upheld.
Appeal allowed - decided in favor of Revenue.
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2018 (11) TMI 1020
Classification of goods - coated paper of three varieties i.e. Coated Front, Coated Back and Coated front and back sides - Initially, the appellant themselves classified the product under 4809 but had subsequently revised the classification under CETH 4810 - whether the paper manufactured by the appellant is to be classified as self copy paper under CETH 4809 or as a coated paper under CETH 4810?
Held that:- A plain reading of CETH 4809 only indicates that it should be capable of making copies and it can be either in the form of rolls or sheets and it can be printed or otherwise. In this case, the paper in question is not printed and it is sold in rolls or sheets.
The essential characteristics of the self copy paper are present in the paper in the form it is removed from the factory gate; simply because it is not printed or the papers are not made into appropriate sets, self copying paper does not cease to be so. On the other hand, CETH 4810 deals with the paper coated with kaolin which is also one of the materials used for coating in this product but the description of this CETH would indicate that it covers other forms of paper such as art paper, chrome paper, imitation art paper, insulating paper, kraft paper etc. There is no entry corresponding to paper which makes copies or imprints in this heading.
CETH 4809 is a more specific entry for the product in question and therefore the appellant’s product has been correctly classified by Revenue under CETH 4809.
Penalty - Held that:- Since a classification dispute is involved, we do not find sufficient grounds to allege malafide and to impose penalty upon the appellant - penalty set aside.
Appeal disposed off.
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2018 (11) TMI 1019
CENVAT Credit - time limitation - it was alleged that appellant had wrongly availed credit to the tune of ₹ 21,35,493/- beyond the time limit of six months / one year in contravention of Rule 4(1) of CENVAT Credit Rules, 2004 - Held that:- The assessee has to avail credit on the invoices within a period of six months /one year from the date of issue of the invoices / documents - In the present case, it is seen that all the invoices are issued even prior to 11.7.2014. The department has issued the show cause notice on the wrong interpretation of the provisions that credit has been availed by the appellant after 11.7.2014. The amended provision has no retrospective effect.
Demand cannot sustain - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1018
100% EOU - levy of excise duty - clearance of Plastic used packing material wherein they received input - Held that:- Identical issue decided in the case of M/S NOVODIGM LTD, RUBAMIN LABORATORIES LTD VERSUS C.C.E. & S.T., VADODARA-I [2018 (8) TMI 355 - CESTAT AHMEDABAD], where it was held that as per the nature of the packing material there is no doubt that the said plastic drums are durable and re-useable, therefore the clearance of such empty drum liable for payment of duty as per N/N. 22/2003-CE dated 31.03.2003 and 52/2003-CUS dated 31.03.2003 - demand upheld - appeal dismissed - decided against assessee.
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2018 (11) TMI 1017
Clandestine removal - raw material/finished goods - whether the 21 clearances are of raw material or finished goods? - Held that:- As regards the demand on 4 clearances mentioned at Serial No. 1 in Para 3 above, I find that on perusal of Note Book 141 seized from the premises of recipient unit (SGS) did record the description of SN-180 or SPP 450, which is of raw material. Therefore, in this fact, the charge of the department that appellant cleared finished goods under these 4 clearances is not sustainable.
Regarding the 17 clearances covered under demand shown at Serial No. 2, in table given in Para 3 above, the department has solely relied upon the transporters Lorry Receipts wherein the description of goods mentioned as SOG which is for finished goods. However, on perusal of the Lorry Receipt, I find that the acknowledgment given by the recipient unit clearly mentioned that they have received raw material as description of raw material such as SN-500, SN-180 and SPP-450 mentioned in the acknowledgement stamp. In this position, when there is no clarity coming out from the document and because in the Lorry Receipt, the description is in respect of finished goods i.e. SOG, but the acknowledge receipt shows the goods received by the recipient is raw material, therefore, in my considered view, the benefit of doubt must go to the assessee - in absence of any such evidence and the discrepancy in the Lorry Receipt, it cannot be concluded that the appellant have clandestinely cleared their finished goods.
The department could not make out a clear case of clandestine removal beyond doubt against the appellant - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1034
SSI Exemption - valuation - inclusion of value of supplies made to merchant exporters in the value of clearances - Held that:- The issue is decided in the case of JAI JAWALA PROCESSORS VERSUS COMMISSIONER OF CENTRAL EXCISE, ROHTAK [2014 (12) TMI 1318 - CESTAT NEW DELHI], where reliance placed in the case of Universal Packaging v. CCE, Mumbai-V [2010 (9) TMI 561 - CESTAT, MUMBAI] and it was held that carton/packaging material cleared to exporter, who used the same for packaging of exported material, which was admittedly exported in terms of Rule 19(1) of Central Excise Rules, 2002, has to be held as clearances for export and value of the same is not required to be added in the value of home clearances.
Thus, the clearances to merchant exporters, which itself is not disputed, is to be excluded from the computation of total clearances - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1033
Clandestine removal - shortages of raw material and finished goods - demand based on printouts of data retrieved from CPU - statement of various persons - admissible evidence or not - allegation that CPU contained software enabling generation of same number of invoice repeatedly - admissible in respect of expert opinion or not.
Held that:- Hon'ble Allahabad High Court has ruled in the case of Commissioner of Central Excise, Meerut-I vs. Parmarth Iron Pvt. Ltd. [2010 (11) TMI 109 - ALLAHABAD HIGH COURT] held that if Revenue chooses to rely on the statements then in that event the persons whose statements are relied upon have to be made available for cross examination for the evidence or statements to be considered - further, Hon'ble Supreme Court in the case Bareilly Electricity Supply Co. Ltd. [1971 (8) TMI 221 - SUPREME COURT] has ruled that if a letter or other document is produced to establish some evidence which is relevant to the enquiry the writer must be produced or his affidavit in respect thereof be filed and opportunity accorded to the Opposite Party who challenges this fact and that the same is in accordance with the principle of natural justice as also in accordance with the procedure under order 19 of the Civil Procedure Code and the Evidence Act.
Section 45A of Evidence Act, 1872 requires opinion of examiner of electronic evidence in respect of any matter relating to any information stored in any computer resource - Shri Vinod Kumar Mishra and the other transporters were not produced for cross examination by the appellant and that it was responsibility of Revenue to produce them for cross examination since same were prosecution witnesses. In the present case, therefore, the statements given by Shri Vinod Kumar Mishra and other transporters cannot be relied for arriving at any decision against the appellant.
Further the allegations were that the computer printouts were perused and signed by Shri Vinod Kumar Mishra and the contention of appellant was that Shri Vinod Kumar Mishra was not produced for cross examination. Therefore, the printouts are doubtful as evidence.
Further, in the absence of expert opinion by examiner of electronic evidence the allegations that the computer was capable of repeatedly generating invoices with the same number is not established beyond doubt.
The allegations made against the appellant are not sustainable - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1032
Manufacture or not - manufacture of “Greenhouse”/ “Polyhouse” taking place or not - case of appellant is that they have carried out only the job of erection and commissioning for which service tax has been discharged by them on the bought out materials, subjected to processes which does not amount to manufacture.
Held that:- Separate SCNs were issued to the appellant, for the same period, demanding service tax on the activity of erection and commissioning of Greenhouse and Polyhouse at site and the same was confirmed on adjudication. The appellant has admitted and service tax discharged along with interest on the said activity of erection and commissioning of Greenhouse/Polyhouse at site - From the records it is not clear whether the service tax was paid on separate activities or it is a part of assembling of Greenhouse/ Polyhouse at site out of the fabricated item cleared from their factory.
It is prudent to remand the matter to the adjudicating authority - appeal allowed by way of remand.
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2018 (11) TMI 1031
Rectification of mistake in the preamble of the order - The appeal was arising out of Order-in-Appeal, passed by Commissioner (Appeals) Noida, whereas it stands typed in the order as Commissioner (Appeals) Allahabad - Held that:- Inasmuch as, the mistake is a typographical type of mistake, the mistake is rectified and same is replaced in preamble of the said order - ROM Application allowed.
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2018 (11) TMI 1030
Extended period of limitation - penalty - deduction on account or sales tax, octroi from the sale price - Rule 9 of the Central Excise Valuation Rules, 2000 claimed in excess - Held that:- The appellant had cleared ‘post mix canisters’ manufactured by them to their related company claiming excess deduction on account of sales tax and octroi duty against the actual amount paid, which resulted into short-payment of duty. This short-payment came to the notice of the department on scrutiny of the records subsequently - demand invoking extended period and penalty rightly upheld.
The appeal is partly allowed to the extent of allowing to discharge 25% of the penalty under Section 11AC of the Central Excise Act, 1944 subject to fulfillment of conditions prescribed under the said provision - appeal allowed in part.
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2018 (11) TMI 1016
Clandestine removal - allegation mainly based upon the electricity consumption, the project report furnished to bank for procurement of loan, capacity of machine installed in the factory, statements of Director as also the other workers of the factory - penalty.
Held that:- Findings of clandestine removal are based upon the calculations, which in turn are based upon the working of machines and consumption of electricity. Such findings which are based upon the consumption of electricity have been held to be as no sustainable for arriving at the findings of clandestine removal - The observations of the Adjudicating Authority is that the buyers reflected in some of the invoices were found to be non-existing. We find that same cannot be adopted as a reason for arriving at findings of clandestine removal inasmuch as such sales were effected on the basis of Central Excise invoices.
It is well settled law that the onus to prove the clandestine removal is upon the Revenue and is required to be discharged by production of sufficient and positive evidence - In the present case there is no evidence at all produced by the Revenue to show that the appellant had clandestinely manufactured and cleared their final product - demand not sustainable.
Appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1015
Clandestine removal - Chewing Tobacco & Pan Chatani - entire case of the Revenue is based upon the statement of one Shri Suresh Kumar Dubey, an employee of the Transport Company - burden to prove - penalty.
Held that:- Apart from the said statements of Shri Dubey there is virtually no evidence on record to show that all the goods booked in the name of M/s S.K. Traders for the period in question were in fact cleared by the appellant from their factory without payment of duty. The Revenue has made investigations/inquiries and had also recorded statements of concerned persons. No incriminating evidences stand produced by Revenue to establish, beyond doubt that the S.K. Trader‟s GRs issued by the transporters were in fact, in respect of the goods cleared from the assessee‟s factory.
No statement of the owner of the transport company, so as to seek clarification from them, was recorded. Not only that the names of the consignee of the goods as shown in the invoices of S.K. Traders and G.R. of the transport company were available with the Revenue. Only a meager attempt to contact them by writing letters to their counterpart Central Excise Officers having jurisdiction over the premises of the said consignee was made, which was never responded by them. The statement of the buyers was never recorded.No statement of the owner of the transport company, so as to seek clarification from them, was recorded. Not only that the names of the consignee of the goods as shown in the invoices of S.K. Traders and G.R. of the transport company were available with the Revenue. Only a meager attempt to contact them by writing letters to their counterpart Central Excise Officers having jurisdiction over the premises of the said consignee was made, which was never responded by them. The statement of the buyers was never recorded.
The settled law the allegations of clandestine removal are required to be upheld on the basis of positive and tangible evidences indicating such activities on the part of the manufacturing unit - the entire case of the Revenue is based upon the sole statement of Shri Suresh Kumar Dubey and there is no corroborative evidence on record to establish that the clearances made under the name of Shri. S.K. Traders was made by the present manufacturer.
Admittedly, onus to prove and establish clandestine removal is on the Revenue, which is required to be discharged by effectively investigating the matter and by producing relevant sufficient evidences so as to tilt the weight of the same in favour of the Revenue - in the present case, there is virtually no evidence on record to show any clandestine activity on the part of the assessee.
The findings of clandestine removal resulting in confirmation of demand of duty of ₹ 2,53,31,825/- are unsustainable.
Penalty upon Shri Jai Kumar Arya, partner of the manufacturing unit - Held that:- Inasmuch as we have set aside the confirmation of demand, such penalty is required to be set aside.
Similarly, penalty of ₹ 10 lakhs imposed upon M/s Mehra Transport Company, the same is required to be set aside - there is no justification for imposition of penalty on the said transporter in respect of the goods on which the duty stand confirmed by us inasmuch as the said non duty paid goods were only received by him in his premises, expecting excise documents to be received subsequently and no GR was prepared by him and the same were not in the process of being transported.
Penalty of ₹ 10 lakhs on M/s Prabhat Zarda International - Held that:- here is no evidence on record to show that M/s Prabhat Zarda International was aware of the fact that the said truck lended by them to the appellant would be used by them for clearances of the goods without payment of duty. The Truck has already been confiscated with an option to redeem the same on payment of redemption fine and in the absence of any evidence to reflect clearance of goods without payment of duty by M/s s Prabhat Zarda International, imposition of penalty upon them is not justified.
Appeal disposed off.
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2018 (11) TMI 1028
CENVAT Credit - input service - Product Liability insurance - Held that:- The issue covered by the decision in appellant own case of M/S. RANE BRAKE LINING LTD. VERSUS COMMISSIONER OF GST & CENTRAL EXCISE [2018 (7) TMI 611 - CESTAT CHENNAI], where it was held that The insurance is for covering the financial loss of the appellant / manufacturer and it cannot be considered as a post-manufacturing activity - credit allowed - appeal allowed - decided in favor of appellant.
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2018 (11) TMI 1027
CENVAT Credit - input services - Rent paid for storage of materials at TVS Logistics godown, Puzhal, Chennai - Air Travel Agent Services - post 01.04.2011 - denial on account of nexus - Held that:- This ground of appellant is dismissed for the reason that the appellant has not produced any documents in support before the lower authorities and the only irresistible conclusion that could be drawn is that the appellant has not proved nexus and therefore hit by Rule 2(l) as amended - decided against appellant.
CENVAT Credit - input services - Manpower Supply Service - Held that:- The provision of the above services being related to labour welfare legislation, the denial of credit is held unjustified - credit allowed - decided in favor of appellant.
CENVAT Credit - input services - Testing Charges - only case of Revenue is that the service was rendered at the sub-contractor’s end - Held that:- It is not the case of the Revenue that the same is not an eligible input service or that the above service was hit by the amended Rule 2(l) of the CENVAT Credit Rules, 2004 - denial is made on assumptions - decided in favor of appellant.
CENVAT Credit - input services - Repair Charges for Canteen - Held that:- When running of canteen itself is held to be an allowable input service; maintaining is also a necessary service with timely repair work, etc. - denial of credit not justified - decided in favor of appellant.
Penalty - Held that:- There is no mala fides attributed in respect of the disputed CENVAT Credits - penalty set aside - decided in favor of appellant.
Appeal allowed in part.
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CST, VAT & Sales Tax
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2018 (11) TMI 1026
Penalty u/s 8-D (6) of U.P. Trade Tax Act, 1948 - assessee have cleared the default of TDS together with interest prior to issuance of any notice before penalty - Held that:- At present though it is admitted to the assessee that the net amount of TDS required to be deposited by the assessee was ₹ 1,44,068/- for the A.Y. 1990-91, however, the amount of interest that became due on that amount (since the assessee failed to make timely deposit of the same) is not borne out from any of the order accompanying the present revision application - The amount of interest would have bearing on the outcome of this revision inasmuch as if it is found that the assessee had deposited the entire amount of TDS together with due interest before issuance of penalty notice under Section 8-D(6) of the Act the penalty may not be imposable at all inasmuch as in such case, the assessee necessarily would have to be held to have cleared the default on its own without the same coming to the notice of the relevant authority.
Since the Tribunal has not recorded any finding as to the date when the penalty proceedings were instituted or the amount of interest that became due against the assessee and the date when the entire due amount had been paid the present order of the Tribunal is set aside and the matter remitted to the Tribunal to pass a fresh order - revision placed on remand.
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Wealth tax
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2018 (11) TMI 1025
Validity of initiation of reassessment proceedings u/s.17 - AO was correct in treating the said lands as ‘urban land’ and consequently the said lands are liable to be included in the net wealth of the assessee and be exigible to wealth-tax - ‘urban lands’ or ‘agricultural lands’ - Held that:- On the issue that since said land is situated in BIAPPA which is an ‘authority’, the said land is urban land and therefore, a capital asset exigible to wealth-tax, we find that the said issue is covered in favour of the assessee. BIAPPA does not qualify to be local authority and therefore, the said lands are agricultural lands and not urban land or capital assets as canvassed by Revenue. Consequently, ground No.3 of Revenue’s appeal is dismissed.
Reckoning of urbanization as a factor for prescribing the distance is of significance which would yield to the principle of measuring distance in terms of approach roads rather than by straight line or horizontal plane or as per crows flight’. Thus, it is clear to us that for the period under consideration, in the appeals before us i.e. assessment year 2007-08 & 2009-10 the distance has to be calculated by road and not as the crow flies or by straight line. In this factual and legal matrix of the case, as discussed above, there is no merit in the contention of the revenue.
As regards conversion of land from Agricultural use to non agricultural use, the Tribunal in Assessees own case dealt with this issue in paragraph 7.3 to 7.3.10 and held that though the subject land was converted into non-agricultural purposes, cultivation of the land for agricultural purposes till the date of sale continued unabated and as such, the land should be treated as agricultural land. These findings will equally apply for the AYs in these appeals as the character of the land in question remained the same in these AYs also.
Respectfully following the decision of the co-ordinate bench of this Tribunal in the assessee’s own case for assessment year 2005-06 and of another co-ordinate bench in the case of Shri M.R.Seetharam in we hold that the said lands in question are not ‘urban lands’ but ‘agricultural lands’ and hence not exigible to wealth-tax. Consequently, Revenue’s appeals are dismissed.
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Indian Laws
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2018 (11) TMI 1042
Partition of property - private injury - dishonor of the cheques issued by the OPs and cancellation of development agreement - contravention of the provisions of Sections 3 of the Act or not? - Held that:- The Commission notes that though the Informant has alleged contravention of the provisions of Sections 3 of the Act, yet looking at the nature of the allegations, the provisions of Section 3 of the Act have no application to the present case as the Informants and the OPs are neither operating at the same level in the market, i.e Section 3(3) of the Act, nor are they part of the same production/ supply chain, i.e. under Section 3(4) of the Act.
The facts disclosed in the instant case are purely a consumer/ contractual dispute, beyond the purview of the Act. The allegation of non-performance of the conditions of the Development Agreement, does not raise any competition concern as there is no Appreciable Adverse Effect on competition from the same. Further, dishonor of the cheques issued by the OPs and cancellation of development agreement, as alleged in the instant case, are not the mandate of the Commission - the facts disclosed in the instant case are purely a consumer/ contractual dispute, beyond the purview of the Act. The allegation of non-performance of the conditions of the Development Agreement, does not raise any competition concern as there is no Appreciable Adverse Effect on competition from the same.
The Commission is of the opinion that no case of contravention of the provisions of Sections 3 of the Act is made out against the OPs - application disposed off.
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