TMI Tax Updates - e-Newsletter
December 7, 2019

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

TMI SMS

• Territorial Jurisdiction - vessel is used in the territorial waters - situs of the deemed sale is in Mangalore - tax liability confirmed

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• Interest on delayed refund cannot be recovered from the salary of VAT officer, since no opportunity to defend has been given to him

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Articles

1. December 2019 STATUTORY COMPLIANCE CALENDAR

   By: Sandeep Rawat

2. PROVISIONAL ATTACHMENT – DIFFERENCE BETWEEN INCOME TAX ACT, 1961 AND CGST ACT, 2017

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Nationwide GST Stakeholder Feedback Diwasfor New GST Returns to be observed tomorrow

2. Establishment of Technology and Innovation Support Centres

3. IPAB'S Non Provision to appeal to Supreme Court

4. Draft National Logistic Policy

5. Development of Special Economic Zones

Notifications

FEMA

1. S.O. 4355 (E) - dated 5-12-2019 - FEMA

Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2019

GST - States

2. Order No. 9/2019-State Tax - dated 5-12-2019 - Gujarat SGST

Gujarat Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019

Income Tax

3. 102/2019 - dated 4-12-2019 - IT

U/s 280A(1) of IT Act 1961, Central Government, in consultation with the Chief Justice of the Himachal Pradesh High Court designates Special Court in the Hamirpur

Circulars / Instructions / Orders

RBI

1. RBI/2019-2020/110 DOR.NBFC(ARC) CC. No. 8/26.03.001/2019-20 - dated 6-12-2019

Acquisition of financial assets by Asset Reconstruction Companies from sponsors and lenders

GST - States

2. 6/2019 - F.3 (250)/Policy-GST/2019 /518-24 - dated 19-11-2019

Clarification on various doubts related to treatment of secondary or post-sales discounts under GST

3. 5/2019 - F.3 (283)/Policy-GST/2019 /509-14 - dated 8-11-2019

Clarification regarding determination of place of supply in certain cases

4. 4/2019-20 - F.3 (279)/Policy-GST/2019 /487-92 - dated 4-11-2019

Clarification in respect of goods sent/taken out of India for exhibition or on consignment basis for export promotion

Highlights / Catch Notes

GST

• Court Grants Anticipatory Bail for Fraudulent Tax Credit Case u/ss 72 & 73 of Jharkhand GST Act 2017.

  Case-Laws - HC : Grant of Anticipatory Bail - illegal and fraudulent Input Tax Credit - Section 72 of 73 of the Jharkhand Goods and Services Tax Act, 2017 - This is a fit case where the above named petitioner be given the privilege of anticipatory bail.
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Income Tax

• CIT's Section 263 Revision Reasons Deemed Superficial; Raise Suspicion Without Firm Conclusion or Supportive Evidence.

  Case-Laws - AT : Revision u/s 263 - The materials (reasons) referred by the CIT are superficial, which at the most can rise a suspicion only. No firm conclusion can be drawn nor support the stand taken by the ld.Commissioner
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• Tax Authority Upholds Disallowance of Chartered Flight Expenses Due to Lack of Business Purpose Justification by Assessee.

  Case-Laws - AT : Disallowance of hire charges for hiring chartered flight - assessee failed to prove that the expenditure was wholly and exclusively laid out for the purpose of business. Apart from the above, the chartered flight was engaged from Kolkata to Hyderabad and Hyderabad to Delhi and the assessee failed to furnish the reasons for making visit to Delhi. - Additions confirmed.
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• Weighted Deduction Denied: Form 3CL Approval Missing for Section 35(2AB) Claim, AO Lacks Authorization to Grant Deduction.

  Case-Laws - AT : Claim of weighted deduction u/s.35(2AB) - The assessee has furnished Form No.3CK to the Department of Scientific and Industrial Research(DSIR) but till date the approval of expenditure in form 3CL was not received by the department. - The AO is not permitted to grant the weighted deduction, when Rule prescribes to grant deduction on receipt Form 3CL.
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• Income Tax Act Section 10(26B) Grants Benefits to Manual Scavengers and Sanitation Workers, Promoting Caste and Class Inclusion.

  Case-Laws - AT : Benefit of section 10(26B) - it could be said that any category of members in the activity of Manual Scavengers or Safai work could fall in any of these three categories. Section 10(26B) contemplates not only the caste but also class.
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• Section 263 Revision Invalidated: Original Assessment Order Deemed Void Due to Timing Issues u/ss 143(3) and 153(1).

  Case-Laws - AT : Revision u/s 263 - Transfer pricing (TP) adjustments - passing an order u/s 143(3) r.w.s 144C after the prescribed time limit u/s 153(1) r.w.s 92CA - When the original Assessment Order passed u/s. 143 (3) of the Act was null and void in the eyes of law, the Commissioner could not have assumed jurisdiction under law to make revision of a non-est order
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• Court Rules No Income Tax Act Violation in Off-Market Share Sale Resulting in Long-Term Capital Loss.

  Case-Laws - AT : Long term capital loss on sale of shares - off-market transaction - The transaction has been levelled as ingenuine, manipulated without taking into consideration this particular aspect of the matter that there is no provision in the Act which would prevent the assessee from selling loss making share.
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• Tax Dispute: Land Classification Shift from Capital Asset to Stock in Trade u/s 153A Income Tax Act.

  Case-Laws - AT : Nature of land - capital asset or stock in trade - assessment u/s 153A - Assessee has declared the plot as capital asset - But after search, the same was shown as stock in trade and shown the income as business income - Assessee is not prevented from making a claim to its advantage in the proceedings u/s 153A of the Act unlike u/s 147 of the Act.
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Customs

• Customs Broker Avoids Penalty: No Malicious Intent Found in Import License Case u/ss 112(d) and 114AA.

  Case-Laws - AT : Imposition of penalty u/s 112 (d) and 114AA of the Customs Act, 1962 on Customs Broker - appellant was only a Customs Broker and not the importer - the only allegation levelled against the appellant is that the appellant did not inform the Revenue that the importer did not possess licence for import of R-22 gas - Revenue has not been able to establish the mala fides - No penalty.
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• Customs broker's license revocation overturned; security deposit forfeiture and penalty upheld due to KYC verification failures.

  Case-Laws - AT : Revocation of customs broker Licence - the customs broker should have exercised a due diligence in verifying KYC norms and the identity of the exporter and their persons and could have found out the difference in the name of the exporter. However, for this purpose, revocation of licence is not warranted. - The forfeiture of security deposit and imposition of penalty upheld - the revocation of licence set aside.
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• Refund Claim for Unjust Enrichment: Delay in Posting Vouchers vs. Duty Payments Not Affected by Unjust Enrichment.

  Case-Laws - AT : Refund - unjust enrichment - there is a lapse of two to seven months in posting the general voucher vis-a-vis the payments made as duty is only an assumption and the balance sheet as on 31.3.2016 very clearly shows these amounts as receivables under current assets from the department and that this was an ample proof that the application for refund is not hit by unjust enrichment.
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• Court Allows Amendment of Shipping Bills for MEIS Claim After Initial Denial of No Objection Certificate Request.

  Case-Laws - AT : Amendment in the shipping bills - request of the appellant for ‘No Objection Certificate’ for claiming MEIS by amendment of reward option from ‘No’ to ‘Yes’ in the shipping bills is denied - amendment allowed.
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FEMA

• India Updates Rules for Foreign Investments in Non-Debt Instruments to Streamline Compliance and Enhance Regulatory Framework.

  Notifications : Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2019
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Corporate Law

• Court Allows Deregistered Company's Name Restoration for Limited Purpose; Bank Account to Become Operational Again.

  Case-Laws - Tri : Revival of company and restoration of company's name in the Registrar of Companies - Seeking relief to make the bank account operational - this appeal being a Liquidator of the deregistered company - name restored for limited purpose.
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Indian Laws

• Petitioner's Waiver Request Denied: No Financial Hardship Shown for 50% Pre-Deposit u/s 21 of Recovery Act.

  Case-Laws - HC : Waiver of the requirement of pre-deposit under Section 21 of the Recovery of Debts and Bankruptcy Act, 1993 - no plea was advanced about the Petitioner being in any financial hardship and not being able to make the pre-deposit of 50% of the amount found due by the DRT. - Petitioner‟s prayer for waiver of the pre-deposit declined.
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IBC

• Court Rejects Plaintiff's Suit Filed During Moratorium; Legal Bar Assessed Solely on Plaint's Averments.

  Case-Laws - HC : Suit filed by Plaintiff during existence of Moratorium is barred by law. No doubt only plaint averments are required to be seen to find out whether suit appears to be barred by any law. However when the law itself prohibits the institution of the suit which has not been disclosed in the plaint and suppressed. The Court can still reject the plaint on the basis of the bar contained in the law
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Service Tax

• Assessee Entitled to CENVAT Credit Despite Retaining Performance Guarantee u/r 4(7), Cenvat Credit Rules, 2004.

  Case-Laws - HC : CENVAT Credit - service tax on that portion of value of services which was not paid by the assessee at the time of taking credit and was retained as performance guarantee - Rule 4(7) of the Cenvat Credit Rules, 2004 - The question of law is answered against the Revenue
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• Significant Delay in Hearing Violates Natural Justice; Case Remitted for Fresh Proceedings and Personal Hearing Opportunity.

  Case-Laws - HC : Principles of Natural Justice - long time gap between the date of order passed and date of personal hearing - this is a fit case to remit the matter back to the respondent for redoing after affording an opportunity of personal hearing afresh to the writ petitioner
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• Penalties on Security Agency Service Lifted Due to Proven Financial Struggles and No Suppression of Facts u/ss 76 & 78.

  Case-Laws - AT : Imposition of penalties - Security Agency Service - Once the appellant has shown the duty liability in their Books of Accounts which clearly means that there was no suppression of material fact to evade the payment of tax and non-payment was on account of financial difficulties which has been proved by the assessee on record - penalty u/s 76 and 78 set aside
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• Revenue Didn't Prove Appellant as Intermediary Per Rule 2(f); Rule 9 Argument on Service Location Fails.

  Case-Laws - AT : Intermediary services or not - Revenue has not shown as to how the Appellant has acted as intermediary between the two persons namely service provider and service receiver of the main service - Since the nothing has been brought on record to show that appellants were providing the intermediary services to the recipient in manner as defined by Rule 2(f) we do not find any merits in the submissions of the revenue that place of provision of services in the present case will be location of service provider as per Rule 9
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Central Excise

• CENVAT Credit Allowed on Auto and Education Cess as They Are Considered Duties Despite Goods Being Exempted.

  Case-Laws - HC : CENVAT Credit - Tribunal observed that, though auto cess and education cess were duties of excise, yet the goods on which they were paid, continued to be exempted goods as basic excise duty was not payable thereon? - Order of tribunal is not correct - Credit allowed since Cess is also duty.
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• Rule 6(3) Cenvat Credit Applies Only to Manufacturers Using Common Inputs for Dutiable and Exempted Goods.

  Case-Laws - HC : Cenvat Credit - Scope of Rule 6 - Sub-rule (3), applies only to those cases, where the manufacturer in question uses common inputs for manufacture of dutiable as well as exempted goods; it does not apply to a manufacturer of exempted goods, who uses exclusive inputs for such manufacture. This is implicit in Rule 6, read in the light of all its sub-rules together.
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• Credit for "Input Services" Under CCR Broadly Defined; Credit Shouldn't Be Denied if Primary Conditions Met.

  Case-Laws - AT : The definition of “input” or “input services” in the CCR is very much wide and as long as the primary conditions like, use of input or input service in or in relation to the manufacture of final products or output service is not disputed, the credit cannot be denied
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VAT

• KST Act's Sales Tax Jurisdiction Questioned: Does It Extend to Karnataka's Territorial Waters? Agreement Signed in Mangalore.

  Case-Laws - SC : Territorial Jurisdiction - Levy of sales tax - it argued that the KST Act does not extend to territorial waters of India situated adjacent to the landmass of the State of Karnataka - the agreement has been admittedly signed in Mangalore, and the vessel is used in the territorial waters - It makes no difference as the situs of the deemed sale is in Mangalore. Thus, the liability to pay tax under the Act cannot be countenanced.
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• Coal Sales Taxed at 8% Without Form-C, 10% Rate u/s 8(2-b) Deemed Unjustified.

  Case-Laws - HC : Rate of tax - the tax on the sale of coal within the said limit was @ 4 %. In view of Section 8 (2) (a) of the CST Act, sale of coal made by the revisionist without Form-C can be taxed at twice as the rate applicable in State i.e. @ 4 +4 =8 % and not above that. - imposing the tax on the sale of coal without Form-C @ 10 % treating the same under Section 8 (2-b) as undeclared goods is not justified.
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• State Government Liable for Interest on Delayed VAT Refund; Personal Liability of Officer Overturned Due to Lack of Notice.

  Case-Laws - HC : Recovery of interest on delayed refund from fourth respondent (VAT officer), personally, from out of his salary - specific notice of writ petition ought to have been served to the fourth respondent in the writ petition in his personal capacity before directing him to pay interest from out of his salary - Liability is of the state government not of the officer.
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Case Laws:

• GST

• 2019 (12) TMI 275
  Interest on delayed payment of GST - short paid interest for not depositing the tax within time - HELD THAT:- In the present case, though it is submitted by learned counsel for CGST that since the tax was paid, Section 73 (1) of the Act shall not be attracted in the case of the petitioner, but the fact remains that the tax was not paid by the petitioner Company in the Government account within the due date, and accordingly it is a case of tax not being paid, within the period prescribed, or when due. In that view of the matter, we are unable to accept the contention of learned counsel for CGST that no show-cause notice was required to be given in this case. In the present case, admittedly amount of Rs. 11,58,643/-, i.e., the amount of short paid interest has already been realised from the petitioner, after freezing the bank account of the petitioner, and after the payment of the said amount, the bank account has also been defreezed - We treat the letter dated 6.2.2019, as contained in Annexure-3, to be a show-cause notice issued under Section 73(1) of the CGST Act. The petitioner shall be given an opportunity of being heard by the adjudicating authority, who shall give a hearing to the petitioner, whether the petitioner was liable to pay the short paid interest amount or not. Application disposed off.

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• 2019 (12) TMI 274
  Grant of Anticipatory Bail - illegal and fraudulent Input Tax Credit - Section 72 of 73 of the Jharkhand Goods and Services Tax Act, 2017 - HELD THAT:- This is a fit case where the above named petitioner be given the privilege of anticipatory bail. Hence, in the event of his arrest or surrender within a period of four weeks from the date of this order, he shall be released on bail on depositing cash security of Rs. 1,00,000/- and on furnishing bail bond of Rs. 2,00,000/- with two sureties of the like amount each to the satisfaction of learned S.D.J.M., Jamshedpur, with the condition that the petitioner will cooperate with the investigation of the case and appear before the Investigating Officer as and when noticed by him and will furnish his mobile number and a copy of his Aadhar Card in the court below with the undertaking that he will not change his mobile number during the pendency of the case and other conditions laid down under section 438 (2) Cr. P.C. Application disposed off.

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• 2019 (12) TMI 273
  Profiteering - purchase of a flat in the Respondent s project Arawali Homes situated at Sector-4, Sohna, Gurgaon, Haryana - applicant had alleged that the Respondent was collecting wrong GST post implementation of GST and was not refunding GST collected in the wrong manner, even after sending clarification that the GST was not applicable to Affordable Housing , as the GST amount could be adjusted against the Input Tax Credit (ITC) - reduction in the rate of tax on the construction service provided by the Respondent w.e.f. 01.07.2017 or not - whether net additional benefit of ITC which has accrued to the Respondent which was required to be passed on by him or not - violation of the provisions of Section 171 of the CGST Act, 2017. HELD THAT:- Perusal of the Report dated 26.02.2019 furnished by the DGAP shows that after taking into account the benefit of credit available during the pre-GST period from April, 2016 to June, 2017 to the taxable turnover received during the above period the ratio of ITC to turnover has been computed by the DGAP as 2.42% of the turnover as per Table-B supra. Similarly, the above ratio has been calculated as 10.70% for the post-GST period from 01.07.2017 to 31.08.2018. Accordingly, the DGAP has claimed that the Respondent has benefited to the tune of 8.28% of the turnover which he is required to pass on to his buyers - this Authority determines the profiteered amount as Rs. 4,35,53,927/- (inclusive of applicable GST @ 12% or 8%) for the 1075 residential units for the period from 01.07.2017 to 31.08.2018 as per the details furnished by the DGAP vide Annexure-20 of his above Report. The above amount includes an amount of Rs. 1,74,24,547/- including the GST @ 12% w.e.f. 01.07.2017 to 24.01.2018 and an amount of Rs. 2,61,29,380/- including the GST @ 8% for the period from 25.01.2018 to 31.08.2018. However, the Respondent has passed on Rs. 2,52,63,079/- as benefit of ITC to the above flat buyers as has been duly verified by the DGAP in Table-D. Therefore, the balance profiteered amount of Rs. 1,82,90,848/- [4,35,53,927/- (-) 2,52,63,079/-] is required to be returned to the eligible recipients as per the details furnished by the DGAP vide Annexure-21 of the above Report. It is also established from the perusal of the above facts of the case that the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondents as he has failed to pass on the benefit of additional ITC to his customers. Accordingly, he is directed to pass on an amount of Rs. 11,863/- to the above applicant and an amount of Rs. 1,82,78,985/- (Rs. 1,82,90,848 - Rs. 11,863/-) to the other flat buyers who are not Applicants in the present proceedings as per the details given by the DGAP in Annexure-21 - it is clear that the Respondent has profiteered by an amount of Rs. 4,35,53,927/- during the period of investigation. Therefore, this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above. The present investigation is only up to 30.08.2018 therefore, any additional benefit of ITC which shall accrue subsequently shall also be passed on to the buyers by the Respondent. In case this additional benefit is not passed on to the Applicant No. 1 or other buyers they shall be at liberty to approach the State Screening Committee Haryana for initiating fresh proceedings under Section 171 of the above Act against the Respondent. Penalty - HELD THAT:- t is evident from the above that the Respondent has denied the benefit of ITC to the buyers of the flats being constructed by him in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus profiteered as per the explanation attached to Section 171 of the above Act. Therefore, he is liable for imposition of penalty under Section 171 (3A) of the CGST Act, 2017 - a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under the above sub-Section should not be imposed on him. Application disposed off.

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• Income Tax

• 2019 (12) TMI 272
  TPO - Comparability analysis - functional analysis - HELD THAT:- The tax effect in the present matter being less than two crores, in view of the CBDT Circular dated 8.8.2019, we see no reason to interfere. The special leave petition is dismissed.

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• 2019 (12) TMI 271
  Power of Tribunal - AO made addition as non-genuine purchases of two parties - enquiry letters issued to the aforesaid two parties, had been returned unserved - CIT(A) direct AO to conduct an inquiry with the AO having jurisdiction over the PAN of the said parties and ascertain whether return of income has been filed for the relevant year by the party and if so, he had disclosed the turnover of business in such return, in excess of amount of purchases, shown by the assessee, as have been made from the said party - HELD THAT:- SLP Dismissed.

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• 2019 (12) TMI 270
  Exemption u/s 11 denied - charging of fee from members or non-members for rendering services like training, conducting seminars - HELD THAT:- The tax effect in the present matter being less than two crores, in view of the CBDT Circular dated 8.8.2019, we see no reason to interfere. The special leave petition is dismissed.

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• 2019 (12) TMI 269
  Disallowance u/s 14A - Interest on receivables, beyond the contractual credit period - TPA - Comparable selection - HELD THAT:- Special leave petition is dismissed on the ground of low tax effect. Question of law is left open.

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• 2019 (12) TMI 268
  Characterization of income - revenue or capital receipt - HELD THAT:- The substance of the admission is that the appellant was holding the post of Secretary of the Institution [Paramahamsa Foundation (R) Trust] until 1996 but he left the institution after new members were elected as the managing committee. That being the case, the question of appellant invoking the principle of capital asset does not arise. It may have been a different matter if it was a case of life time appointment of the appellant as Secretary of the concerned Institution. No such evidence was produced by the appellant before the assessing officer or before us. Taking over-all view of the matter, we uphold the conclusion reached by the High Court that the amount received in the hands of appellant-assessee cannot be treated as capital receipt. Thus, the order of the Assessing Officer is affirmed. Hence, no interference is warranted in this appeal.

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• 2019 (12) TMI 267
  Addition u/s 36(1)(v)(a) read with section 2(24)(x) - disallowances being employees contribution to PF Account / ESI Account - HELD THAT:- A perusal of the impugned order passed by the Tribunal reveals that the Tribunal has merely applied the decision of this court in the case of Commissioner of Income Tax vs. Gujarat State Road Transport Corporation [ 2014 (1) TMI 502 - GUJARAT HIGH COURT] it is held that the learned tribunal has erred in deleting respective disallowances being employees contribution to PF Account / ESI Account made by the AO as, as such, such sums were not credited by the respective assessee to the employees accounts in the relevant fund or funds (in the present case Provident Fund and/or ESI Fund on or before the due date as per the explanation to section 36(1)(va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees contribution to the employees account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act. No question of law

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• 2019 (12) TMI 266
  Reopening of assessment u/s 147 - as argued notice is beyond the period of 4 years from the end of the relevant assessment year as the assessment was completed u/s 143(3) - HELD THAT:- As submitted that the notice is not hit by the first proviso to Section 147 of the Act. However, the petitioner points out that the impugned notice proceed on the basis that the consideration received for the sale of shares was Nil. This is factually incorrect. According to the petitioners they had sold the same at market value at the stock exchange and the same was subject to examination during regular assessment proceedings leading to an order under Section 143(3) of the Act. The respondents have not disputed the same. In the above view, a prima facie case has been made out by the petitioner that the above indicates non-application of mind to the facts in issuing the impugned notice and also a case of change of opinion. Thus, the Assessing Officer could not have any reason to believe that income chargeable to tax has escaped assessment. Therefore, prima facie without jurisdiction.

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• 2019 (12) TMI 265
  Reopening of assessment u/s 147 - HELD THAT:- We find that the reasons in support of the impugned notices which are identical (save difference in figures and addition of one more party in the subsequent Assessment Year 2012-13), were a subject matter of consideration by the Assessing Officer during the regular assessment proceedings leading to an order passed under section 143(3) of the Act. During the regular assessment proceedings in both the Assessment Years the very parties mentioned in the reasons for reopening leading to reason to believe that income chargeable to tax had escaped assessment were the subject matter of consideration while passing the order under section 143(3) of the Act. Therefore, prima facie the impugned notices appear to be based on change of opinion. Besides, there being no failure on the part of the Petitioner to disclose truly and fully all material facts necessary for assessment during regular assessment proceedings, the impugned notices are hit by the proviso to section 147

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• 2019 (12) TMI 264
  Undisclosed income admitted in the Settlement Application was a commission earned from accommodation transaction - HELD THAT:- It is not in dispute that the transactions pertaining to the undisclosed income of Umed C.Mehta is also the subject matter of the Settlement Application in the case of Parasmal Jain. If that being so, there is a possibility that such a subsequent consideration by the Settlement Commission could be deemed as double taxation, in case the order dated 23.10.2009 passed by the Settlement Commission, in the case of Umed C.Mehta, is upheld. Order passed in the case of Parasmal Jain by the Settlement Commission has become final. While that being so, if the objections of the learned Standing Counsel for the respondents is to be accepted, the possibility of double taxation for one transaction may occur. This Court is of the view that the issue in the case of Umed C.Mehta could be reconsidered, in the light of the subsequent development through the orders passed by the Settlement Commission in the case of Parasmal Jain. It would not be appropriate to interfere with the present impugned notice at this stage, but, it would be appropriate to await the decision of the Settlement Commission, after remand, in the case of Umed C.Mehta.

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• 2019 (12) TMI 263
  Revision u/s 263 - scope of SCN issued for revision order - whether the AO has applied the mind after making inquiry - The charge of the ld.Commissioner is that the assessment order is erroneous because the AO failed to examine certain material viz. outcome of the survey; details reflected in NSEL data base; report of S TA and thus, such assessment order has caused prejudice to the interest of the revenue, and therefore, it deserves to be set aside. - CIT in the order u/s 263 directed the AO to reframe the assessment orders after conducting inquiries. Held that:- ld.Commissioner has merely raised suspicion on the basis of certain information which were already in the knowledge of the AO, not only in this assessment year, but in earlier assessment years. The ld.Commissioner has not conclusively recorded any finding as to what is the ultimate impact of this information on the assessability of these appellants, and how non-consideration of this made the assessment order as erroneous. The AO has taken note of all these things, because these very materials were available in the immediately preceding year. The only addition made and confirmed by the ld.CIT(A) in the Asstt.Year 2013-14 has been struck down. Thus, the ld.Commissioner ought to have looked into order of the ITAT, and thereafter, analysed the details, whether any income has escaped on account of failure of the AO to conduct adequate inquiry (in the opinion of CIT). The ld.Commissioner nowhere made out that case. Therefore, as far as first compartment of show cause notice is concerned, we are of the view that the ld.Commission failed to point out any reasons which can suggest that the assessment orders are erroneous. The materials referred by him are superficial, which at the most can rise a suspicion only. No firm conclusion can be drawn nor support the stand taken by the ld.Commissioner. Regarding the second compartment of the show cause notice - Held that:- We have minutely examined each and every reason assigned by the ld.Commissioner under serial no.VI of the reasons given by him in the show cause notice. It is discernible that all these details were submitted before the AO during the course of assessment proceedings. The assessment proceedings continued for almost more than eight to nine months, and the accounts were provided before the AO. The ld.Commissioner just made narrations in the show cause notice, but has not conducted any inquiry, and has not held how assessment order is erroneous by pointing out short-comings of these accounting entries. Had an elaborate discussion available, then that would be an ideal situation for the higher appellate authorities to appreciate, what has operated in the mind of the AO while passing the assessment. But in the absence of such discussion, it has to be ascertained from the questionnaire and the replies submitted by the assessee. Explanation -2 can be invoked when no inquiry was conducted by the AO Revision order quashed.

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• 2019 (12) TMI 262
  Penalty u/s 271(1)(c) - defective notice - AO has just ticked on the option of concealment of income or furnishing inaccurate particulars of such income - Held that:- notice issued by the AO u/s. 271(1)(c) read with Section 274 of the Act is bad in law as it does not specify which limb of section 271(1) of the Act, the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars. Therefore, the penalty in dispute is not sustainable in the eyes of law - Penalty deleted.

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• 2019 (12) TMI 261
  Addition u/s 68 - Corpus donation received from 54 members on the ground that the assessee was unable to file any confirmation of any of the parties - CIT(A) rejected the additional evidences filed before him in shape of affidavits of all members giving corpus donation - HELD THAT:- Addition on account of advances given to six parties it is an admitted fact that the assessee had filed the copy of confirmation and the bank statement of the assessee. It was also submitted before the AO that the advances were returned back in the subsequent year. However, in absence of copy of the bank account of the relevant period, the AO did not accept the same. Before the CIT(A), the assessee had filed all the details and the CIT(A) had called for a remand report from the AO. The availability of funds with the assessee to the tune of Rs. 53 lakhs is not in dispute. It is also not the case of the Revenue that there is any misappropriation of funds since had there been any misappropriation of funds, the AO would have disallowed the claim of exemption u/s 11/12 and 12A which has not been done in the instant case. Addition made by the AO and sustained by the CIT(A) is not justified. However, since the allegation of the AO is that the assessee had not given any bank statement of the subsequent year to substantiate that the amount had been refunded back, therefore, we restore the issue to the file of the Assessing Officer with a direction to verify the bank account of the assessee of the subsequent year and once the assessee proves that the amounts were, in fact, returned by those parties in subsequent year, the Assessing Officer is directed to delete the addition. So far as the decision relied on by the ld.CIT(A) in the case of CIT vs. Shree P. Subramoniam Religious Trust [ 2008 (12) TMI 374 - KERALA HIGH COURT] is concerned, the same, in our opinion, is not applicable to the facts of the present case since, in that case, the Hon ble High Court has observed that the advance is only siphoning off funds and even after a gap of 5-6 years of expiry of the assessment year when the appeal was heard before the CIT(A), it was not proved that the advances so made were utilized for the purpose for which it was advanced. In the instant case, the advances which were given for purchase of plot for construction purpose were returned back immediately in the subsequent year and, therefore, the decision relied on by the CIT(A) is distinguishable and not applicable to the facts of the present case. The ground of appeal No.2 and 3 filed by the assessee are accordingly allowed for statistical purposes. Addition being corpus donation received from the members of the society are concerned, we find the Assessing Officer disallowed the same on the ground that the assessee did not file any confirmation from the said persons. We find the ld.CIT(A) did not accept the additional evidences in the shape of affidavits filed before him and sustained the addition so made by the Assessing Officer. We find merit in the submission of the ld. counsel for the assessee that corpus donation from members cannot be treated as income of the assessee. However, the same needs to be substantiated in the shape of confirmations from the member donors of the society. We, therefore, restore this issue to the file of the Assessing Officer with a direction to grant opportunity to the assessee to file the confirmations of the said donors and, in case the assessee is able to furnish the confirmations of the donors, the Assessing Officer shall consider the allowability of the same as per law. We hold and direct accordingly.

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• 2019 (12) TMI 260
  Rectification of mistake/Review of order - interest allowance under section 24(b) from 31.01.2008 - assessee is now seeking review of the order by changing its stand - HELD THAT:- While making submission on 30.04.2019, the ld. AR of the assessee claimed that assessee made payment of Rs. 5.28 crore to Vedant Properties Pvt. Ltd. on 14.02.2008, which is duly recorded in para-10 of the order, which is based on the submission of ld. AR of the assessee. After accepting the submission of assessee, we have allowed the interest allowance under section 24(b) from 14.02.2008. The assessee is now seeking the review of the order, which is beyond the scope of section 254(2) of the Act - there are no merit in the application filed by the assessee and the same is dismissed. Rectification of mistake - failure to disclose the date of acquisition of different share of Dhanwatay House in earlier Assessment Years - absence of documentary evidence for capitalization of interest for A.Y. 2010-11 2011-12 - HELD THAT:- Perusal of order dated 31.05.2019 reveals that the ld. AR of the assessee while making his submission stated that no interest was capitalized in the A.Y. 2009-10 2010-11 as initially the property was acquired from interest free fund. It was pointed out that point in dispute between assessee and Assessing Officer was with regard to amount of interest capitalized pertaining to the property sold during the year - The material/submission of Paper Book, filed along with the Miscellaneous Application is already on record of appeal folder. The assessee is now seeking the review of order which is beyond the scope of the application under section 254(2), hence, the application filed by assessee is devoid of merit and is dismissed. Application dismissed.

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• 2019 (12) TMI 259
  TDS u/s 194H on incentive paid to stockists - commission versus discount - Held that:- the assessee has stated that the stockists themselves are buying the goods and it cannot be said that they are rendering any services in the course of such buying of goods which will render any payment to them as commission. - The assessee also did not prove with the books of accounts the nature of payment. - Matter restored before AO for verification. Addition towards opening stock generated during trial run production - the said opening stock was not found in the closing stock of the immediately preceding assessment year. - Held that:- the assessee has not placed any evidence relating to the stock transfer of trial run production to the trading account, with stock register. In the subsequent year, the AO has called for the details of sales made out of trial run production but the assessee could not furnish the evidence before the AO. When the assessee claims that both expenditure on the trial run production and the stocks were transferred to the trading account, it is incumbent upon the assessee to establish the transfer of stocks. However, the assessee did not establish the sales or transfer of stock relating to trial run production to the stock account with the stock and sales registers. - Matter restored before AO for re-consideration. Commission paid to the Director - Held that:- Payment of commission is the business decision of the company and the assessing officer has no role in it. Therefore, there is no reason to make the disallowance of payment of commission - Decided in favor of assessee. Claim of weighted deduction u/s.35(2AB) - The assessee has furnished Form No.3CK to the Department of Scientific and Industrial Research(DSIR) but till date the approval of expenditure in form 3CL was not received by the department. - The AO allowed the actual expenditure and disallowed the weighted deduction claimed by the assessee for want of Form 3CL. - Held that:- quantification of expenditure required to be verified and certified by DSIR to prevent the misuse of the benefit. For this purpose, assessee has to submit the audit report along with Form 3CK and then only after satisfying the correctness, genuineness of expenditure and the quantification of expenditure the Government of India (DSIR) would issue form 3CL. On receipt of the Form 3CL the assessee would be entitled to weighted deduction. The AO is not permitted to grant the weighted deduction, when Rule prescribes to grant deduction on receipt Form 3CL. - Decided against the assessee. Disallowance of hire charges for hiring chartered flight - Held that:- Though the assessee stated that the chartered flight was engaged in connection with AGM, the assessee did not show the business expediency for engaging the chartered flight since it was a planned event. In the absence of the terms and conditions of employment and the business expediency, we are unable to accept the contentions of Ld.AR that the expenditure was wholly and exclusively laid out for the purpose of business. Apart from the above, the chartered flight was engaged from Kolkata to Hyderabad and Hyderabad to Delhi and the assessee failed to furnish the reasons for making visit to Delhi. - Additions confirmed. Disallowance of amount paid for copyright infringement in out of court settlement with the Microsoft - Held that:- In the instant case, the assessee paid for copyright of Microsoft using the software without proper authorization. Therefore, the Microsoft had initiated the legal action, which was settled out of court. Since the copy right was used for the purpose of business, though there was an infringement, which was settled out of court, we are of the opinion that the expenditure is required to be allowed. Depreciation on wind mill - date of commencement - wind mill stated to be commissioned on 31.03.2011 and run for 25 minutes. - Held that:- As per the power generation report, the grid was available 100% on all these days. Once, the wind mill is commissioned properly, there is no reason for non functioning of the plant after commissioning. The assessee also did not explain the reasons for non functioning of the wind mill on 31.03.2011 after 17:15 hrs. The wind mill was operated from 16:50 hrs to 17:50 hrs and did not function from 17:50 hrs onwards till 03.04.2011. - Further, the issue with regard to installation and commissioning of WEG plant required to be examined in detail before allowing the depreciation and the additional depreciation for the year under consideration. - Matter restored before the AO. Depreciation on computer software - Held that:- Assessee has purchased the computer operating system, which is part and parcel of the computer. Without the operating system, the computer cannot be operated and the purpose would not be served. It is a settled issue that the computer software is not intangible asset and forms part of the computer. - assessee is entitled for depreciation @60%

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• 2019 (12) TMI 258
  Benefit of section 10(26B) - both the authorities below held that the assessee is a Section 25 Company fully owned by the Government of India - HELD THAT:- As names suggests the assessee has been engaged in the work of development of the National Safai Karamcharis who are involved in the upliftment of Safai Karamcharis Manual Scavengers who belong to Scheduled Caste, Scheduled Tribe or Other Backward Classes and also in the inhumane practice of scavenging and other sanitation activities. Safai Karamcharis Manual Scavengers are the poorest of the poor in the society and it does not require any Certificate to know the said fact. Further, Section 10(26B) clearly says that the target group could be the members of the Schedule Castes or the Scheduled Tribes or other backward classes or any two or all of them. It, therefore, makes the things clear that if an entity is a corporation established by a Central or State Act is engaged in the upliftment of SC or ST or OBC or a mix of them is entitled to claim benefit u/s 10(26B). As we have observed above, it could be said that any category of members in the activity of Manual Scavengers or Safai work could fall in any of these three categories. Section 10(26B) contemplates not only the caste but also class. Letter dated 22.03.2000 clinches the issue wherein the state agency clearly stated that the finances from the assessee to the State agency was exclusively for the benefit of SC community inhabiting the Delhi area and possessing the Certificate to such an effect. It also stated therein that a general agreement was on this aspect between the assessee and state agency. These circumstances do not admit of any doubt as to the entitlement of the assessee to claim the benefit under section 10(26B) and with that view of the matter we find it difficult to agree with the view of the authorities below. We, therefore, set aside both the orders and direct the AO to allow the assessee to benefit of section 10(26B) - Appeal of the assessee is allowed.

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• 2019 (12) TMI 257
  Appropriate head for taxability of income - interest on short term deposits made from borrowings - interest on deposits placed as margin money for letter of credit and bank guarantee - assessable under the head income from other sources or not - HELD THAT:- In the case of Autokast Ltd., supra, it was observed that the interest income on money borrowed for purchase of plant and machinery and placed in short term deposit in bank till payment was made and used in bill discounting was taxable as income from other sources . Deduction of interest - case of assessee is that the interest paid on borrowings should be deducted as an expenditure U/s.57 from the interest income as it was incurred wholly for earning such interest income - HELD THAT:- There are merits in the grounds raised by the assessee - the issue is remanded back to the Assessing Officer to verify and assess the net interest income. The appeal of the assessee is treated as partly allowed for statistical purpose.

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• 2019 (12) TMI 256
  Levy of penalty u/s penalty u/s 271(1)(b) - addition of penalty expenses on account of excise duty - Concealment of income or not - non-disclosure of material facts - HELD THAT:- During the course of assessment proceedings the AO asked the assessee about the expenses on account of excise duty of Rs. 2,01,285/- made being penalty which was detected by the AO during the course of assessment proceedings and assessee has accepted and paid the tax thereon and did not file any appeal before the Ld. First Appellate Authority against the addition in dispute on which the penalty has been imposed. The assessee has concealed its income and has not disclosed in the return of income and not paid the tax thereon. But only on asking by the AO about the expenses on account of excise duty amounting to Rs. 2,01,284/-, the assessee accepted his fault thereon and did not file appeal against this addition also. Even otherwise the amount in the nature of penalty for violation of excise law which the assessee has paid is not a business expenses. These facts also not disclosed in the return of income and were detected during the assessment proceedings. Therefore, that it was also a case of non disclosure of material facts which attracts Explanation 1 to section 271(1)(c) of the Act. No interference is called for in the well reasoned order passed by the Ld. First Appellate Authority - the grounds raised by the Ld. CIT(A) is rejected - appeal of assessee dismissed.

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• 2019 (12) TMI 255
  Estimation of income - hawala transaction - Reduction of addition made on account of non genuine purchases to 5% - assessment year 2007 08 - HELD THAT:- Undisputedly, though, the Assessing Officer had observed that the assessee was not able to prove the genuineness of purchases, however, ultimately, he has estimated profit on such purchases @ 20% for the purpose of making the addition - the learned Commissioner (Appeals) has restricted the addition to 5% of the non genuine purchases. Appeal dismissed - decided against Revenue.

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• 2019 (12) TMI 254
  Levy of penalty u/s 271(1)(c) of the Act - exemption claimed u/s 54 of the IT Act - AO opined that the assessee has made an incorrect claim of deduction resulting in furnishing inaccurate particulars of income by not brought forwarding the correct income for the AY 2008-09 - HELD THAT:- A glance of provision of section 271(1)(c) would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The instant case was not the case of concealment of the income, but, the case of wrong claim. The revenue argued that submitting an incorrect claim in law would amount to giving inaccurate particulars of such income. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars. Thus, making a wrong claim by the assessee cannot be said to be furnishing of inaccurate particulars of income by the assessee - the order of CIT(A) set aside - penalty levied u/s 271(1)(c) of the Act set aside - appeal allowed - decided in favor of assessee.

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• 2019 (12) TMI 253
  Revision u/s 263 - Transfer pricing (TP) adjustments - passing an order u/s 143(3) r.w.s 144C after the prescribed time limit u/s 153(1) r.w.s 92CA - an order which is erroneous and prejudice of revenue - CIT was of the view the AO has not made any enquiries during the assessment proceedings and he has not applied his mind to the issues. - CIT directed the AO to conduct proper investigations and frame fresh assessment. Held that:- the provisions of section 92CA(1) of the Act, mandates the approval of Commissioner before making any reference to the TPO by the Assessing Officer - the third proviso to section 153(1) of the Act which gives extended time limit to pass the Assessment Order where a reference under sub section (1) of section 92CA was made, the time limit for completion of assessment was prescribed as three years from the end of the Assessment Year. Even assuming that the extended time limit is available for passing an order under third proviso to sub section (1) of section 153 the outer time limit for passing Assessment Order was 31.03.2015, however the assessment in this case was admittedly made on 10.04.2015 and is beyond the period of limitation making the Assessment Order a nullity. When the original Assessment Order passed u/s. 143 (3) of the Act was null and void in the eyes of law, the Commissioner could not have assumed jurisdiction under law to make revision of a non-est order and therefore the impugned order passed u/s. 263 of the Act by the Commissioner is also nullity in the eyes of law. Further, we do not see any minimal enquiries conducted by the Ld. Pr.CIT before coming to the conclusion that the Assessment Order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. The detailed submissions made by the assessee along with the evidences were not even examined by the Ld. Pr.CIT before arriving at the conclusion that the Assessment Order passed is erroneous. Thus, in view of the above reasons the order passed u/s.263 of the Act by the Ld. Pr.CIT is hereby quashed.

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• 2019 (12) TMI 252
  Reopening of assessment u/s 147 - income chargeable to tax has escaped assessment on the basis of information and details available on record - HELD THAT:- All the material necessary for assessment was duly produced before the AO at the time of scrutiny assessment, and it is on the basis of such material that the AO has considered the claim of the petitioner for deduction u/s 80IB (3) of the Act. By no stretch of imagination can it be said that there was any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the year under consideration, so as to attract the first proviso to section 147 of the Act. Under the circumstances, in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment, the AO is not justified in reopening the assessment beyond a period of four years from the end of the relevant assessment year. On both counts the petition must succeed, namely that the reopening of assessment is based on a mere change of opinion; and the assumption of jurisdiction by the AO u/s 147 beyond a period of four years from the end of the relevant assessment year without there being any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment, is invalid. The impugned notice issued under section 148 of the Act, therefore, cannot be sustained.

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• 2019 (12) TMI 251
  Long term capital loss on sale of shares - cost of acquisition - off-market transaction - AO observed that the said transaction of purchase and sales of the shares within the group was a mere artifice or device so as to reduce the tax liability of the assessee-company - Held that:- It appears that only because of the reason that the shares were sold to the related parties. The transaction has been held to be colorable devise in order to evade tax tough the entire books of accounts were placed before the authorities below where the entire transaction was reflected. The transaction has been levelled as ingenuine, manipulated without taking into consideration this particular aspect of the matter that there is no provision in the Act which would prevent the assessee from selling loss making share even in the present facts and circumstances of the case. - Additions made by the AO deleted.

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• 2019 (12) TMI 250
  Nature of land - capital asset or stock in trade - assessment u/s 153A - Assessee has declared the plot as capital asset - But after search, the same was shown as stock in trade and shown the income as business income - adventure in the nature of trade or not - whether the assessee is entitled in law to take a different position about the character of income in the return filed under section 153A of the Act or not - assessee submitted that, the assessee and the co-owners got the said land converted into non-agricultural land in August 2008 i.e. barely few months later and put up the residential housing plot scheme known as Krish Villa while providing for common infrastructure and internal roads. Held that:- The narrated sequential action clearly seeks to pronounce the indomitable intention of the appellants to acquire/approach land parcels with commercial motives. From the real, substantive and systematic course of activity or conduct with a set purpose clearly underscores the real intent of the assessee. The concrete material on record leaves no manner of doubt that the acquisition of land under sale was induced by commercial spirit. At this juncture, it will be pertinent to observe that the intention of the assessee is to be judged not with reference to the income declared under a particular head of income as prescribed in the statute, but is required to be decided on the basis of commercial principles. The assessee has moved swiftly and did everything possible to exploit the divided land commercially at the first available opportunity. This type of activity cannot be, in our considered opinion, regarded as capital acquisition taxable under the head capital gains . Such organized course of commercial exploitation of land portfolio carries all trappings of adventure in the nature of trade, commerce etc. and thus falls within the ambit of expression business as defined under section 2(13) of the Act. In so far as the taxability of an income under the appropriate head is concerned, the question is answered by the Hon ble Gujarat High Court in the case CIT v. Pranjay Mercantile Ltd. [ 2014 (2) TMI 793 - GUJARAT HIGH COURT] In the light of the decision of the Hon ble Gujarat High Court, it is trite that the income of the assessee is to be assessed under different heads enumerated in Section as per the true nature and character of income and not merely on the basis of classification given by the assessee. We thus find considerable merit in the plea of the assessee herein for eligibility of claim of the assessee for taxability of profits arising on sale of plots under the head business income as claimed in the return filed under section 153A of the Act. We however now turn to the yet another related aspect in controversy. It is the case of the Revenue that the provisions of Section 153A of the Act are for the benefit of the Revenue in the light of the decision of the Hon ble Supreme Court in case of Sun Engineering Works [ 1992 (9) TMI 1 - SUPREME COURT] . - It is thus claimed on behalf of the Revenue that assessee is not permitted to make a fresh claim or alter its original stand to its advantage in the course of assessment proceedings pursuance to search. We do not see any force in such plea either. The decision of the Hon ble Supreme Court in Sun Engineering (supra) was rendered in the context of Section 147 of the Act which seeks to assess the chargeable income escaped assessment. Assessee is not prevented from making a claim to its advantage in the proceedings under section 153A of the Act unlike Section 147 of the Act. - Decided in favor of assessee.

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• Customs

• 2019 (12) TMI 249
  Jurisdiction - power to issue SCN - whether the Tribunal was right in allowing the appeals on the ground that the jurisdiction issue has to be decided by the Hon ble Supreme Court in the appeal filed against the decision of the High Court of Delhi, in the case of MANGALI IMPEX V. UNION OF INDIA [ 2016 (5) TMI 225 - DELHI HIGH COURT ]? - maintaining status quo till a final decision is arrived at - HELD THAT:- The Court held that the Tribunal was not justified in allowing the appeal and consequently directing status quo till the final decision of the Hon ble Supreme Court and the appropriate procedure that should have been adopted is to keep the appeals pending and await the decision of the Hon ble Supreme Court in the appeals filed against the decision in Mangali Impex. Therefore, we are inclined to take similar view in these appeals as well. The appeals are restored to file of the Tribunal and the Tribunal shall keep the appeals pending and await the decision of the Hon ble Supreme Court - appeal allowed.

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• 2019 (12) TMI 248
  Imposition of penalty u/s 112 (d) and 114AA of the Customs Act, 1962 on Customs Broker - appellant was only a Customs Broker and not the importer - the only allegation levelled against the appellant is that the appellant did not inform the Revenue that the importer did not possess licence for import of R-22 gas - HELD THAT:- A conjoint reading of provisions of section 112 and section 114AA, makes it clear that there should be an intentional or deliberate act or omission and even the motive is attributable to the act of abetment to do any act or omit to do any act. Hence, the requirement of mens rea becomes sine qua non for imposing penalty on the Customs Broker. Admittedly, the appellant being the Customs Broker has been fastened with the penalties on the ground that its activities amounted to abetment. Also abet or abetment is not defined in the Customs Act. In the Order-in-Original, the Adjudicating Authority has inter alia confirmed the allegations with regard to non-presentation of the imported goods for examination and that the appellant had not informed the Customs Authorities about the non-possessing of licence by the importer for importing the R-22 gas while processing the amended Bill-of-Entry. It is also a fact borne on record contrary to the above findings that the cargo was under detention from 01.04.2016 onwards and hence, there was nothing that the appellant being the Customs Broker was able to present. These allegations per se are not sufficient to fasten with the penalty of the nature impugned. The appellant has performed its duties as per the CBLR in terms of the licence granted to it. A perusal of the impugned Order-in-Appeal makes it evident that the appellant did advise the importer as to the requirement of import licence, which appears to be a sufficient compliance insofar as Regulation 11 (d) is concerned because, getting the required licence was, in any case, the duty of the importer. Further, from a bare reading of Section 114AA it is evident that the said Section could be invoked only on the establishment of the fact that the declaration, statement or document made/submitted in transaction of any business for the purposes of the act is false or incorrect and therefore, without establishing that such declaration, statement or document was false or incorrect in any material particular, this Section cannot be invoked. Revenue has not been able to establish the mala fides which is the quintessence of Sections 112 (a) and 114AA ibid. and therefore, the impugned penalties are required to be deleted - Appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 247
  Smuggling - gold biscuits of foreign markings - unaccounted cash - seizure under Section 132 of the Income Tax Act - burden of proof that the goods were smuggled goods - HELD THAT:- During the joint search operation by DRI and Income Tax official at the residence of the appellant, 17 gold biscuits were seized and out of 17 gold biscuits, 6 biscuits have markings of MMTC, PAMP and HDFC Bank on them. As per the RBI guidelines, the said organizations are authorized to import and sell gold. Therefore, the adjudicating authority has rightly held that the 6 gold biscuits were legally possessed and has not confiscated the same. As far as remaining gold biscuits are concerned, they have the foreign markings and the appellant while making statement to the DRI officer under Section 108 of the Customs Act has stated that they have purchased the said biscuits from M/s. Davanam Jewellers but the same has been refuted by the Davanam Jewellers when the Department made enquiry from them - Further, in his statement made twice before the DRI officer, he has not stated anything regarding the purchase of these biscuits from M/s. Sai Thirumala Jewellers and M/s. Adya Jewellers. He has not even named the jewellers in his statement at all. The invoices issued by these jewellers were brought on record for the first time while replying to the show-cause notice and therefore the Department could not investigate from the said jewellers regarding the authenticity of these invoices. Further, the retraction of the statement by a Sworn Affidavit is not valid because the said alleged affidavit was not produced before any authority and it was only executed before a Notary. Authenticity of invoices - HELD THAT:- The purchase invoices from the local jewellers were not produced during the investigation. Therefore, the Department could not verify the authenticity of those invoices. There is no infirmity in the impugned order which is upheld - appeal dismissed - decided against appellant.

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• 2019 (12) TMI 246
  Revocation of customs broker Licence - forfeiture of security deposit - imposition of penalty - misdeclaration of imported goods - Red Sanders were being smuggled under the guise of Natural Slate Stone - provisions of Regulation 11 and Regulation 17 (9) of CBLR, 2013 - allegation based mainly on statements of personnel of Customs Broker - HELD THAT:- It is clear that the customs broker has filed a shipping bill for the purported export of natural slate stone on behalf of M/s.Amrita Export. The same has been permitted to be stuffed into the container; after due examination by the Preventive Officer posted in the CFS, a onetime bottle seal has also been affixed. The allegations against the appellants appear to be based on the statements of personnel of the customs broker. Shri S. Muthukrishnan in charge of customs broker in his statement dt.28.8.2017 and Shri N.V.S. Prasad, General Manager of the customs broker in his statement dt. 1.9.2017 have accepted that they have never met the exporter and have not verified the KYC details and genuineness of the IEC holder and failed to notice the difference in the name of the exporter There is certain force in the argument of the appellant that the non-verification of KYC documents per se has not resulted in the committal of any grave offence because of the fact that the goods declared in the said shipping bill were correct as per declaration; the same goods were allowed to be stuffed into the container by the Preventive Officer and the container was sealed - Admittedly, the offence has taken place after stuffing of the container and sealing of the same that is beyond the involvement of the customs broker. However, the only issue on which the appellant appear to have erred and were not in a position to identify Shri Rajesh Kumar who was projecting himself as the person in charge of the exporter. Their knowledge, if any, could have helped the administration in nailing the person who has arranged for the transportation and took away the container - Understandably, the verification of KYC norms would not have stopped occurrence of the offence going by the facts of this case. However, we find that the customs broker should have exercised a due diligence in verifying KYC norms and the identity of the exporter and their persons and could have found out the difference in the name of the exporter. However, for this purpose, revocation of licence is not warranted. Revocation of licence is a serious penal action which takes away the livelihood of the customs broker and several employees depending on them. Therefore, the penal action, if any, should commensurate with the lapses occurred and the contribution of such lapses in the commission of the offence - In view of the discussions, it is found that though forfeiture of security deposit and imposition of penalty are sustainable, revocation of customs broker licence cannot be sustained. The forfeiture of security deposit of Rs. 50,000/- and imposition of penalty of Rs. 50,000/- is upheld - the revocation of licence of the customs broker is set aside - appeal allowed in part.

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• 2019 (12) TMI 245
  Refund - unjust enrichment - Valuation of imported goods - non-coking coal and Bituminous coal - High Seas Sale - rejection of transaction value - Asst. Commissioner held that importer could not prove the excess duty paid and thus could not satisfy the conditions of Section 18 (5) of Customs Act, 1962 - HELD THAT:- The respondents have discharged duty on the transaction value arrived on the basis of final quantity of coal in terms of the contract. It is not the case of the department that the respondents have paid any amount over and above such transaction value. Therefore, in terms of Section 14 of the Customs Act, 1962, the transaction value requires to be accepted as done by the Ld. Commissioner (Appeals). Ld. Commissioner (Appeals) has categorically held that there is a lapse of two to seven months in posting the general voucher vis-a-vis the payments made as duty is only an assumption and the balance sheet as on 31.3.2016 very clearly shows these amounts as receivables under current assets from the department and that this was an ample proof that the application for refund is not hit by unjust enrichment. There is no reason as to why we should interfere with the order of the Ld. Commissioner (Appeals) - the orders passed by Commissioner (Appeals) are legally tenable and sustainable - appeal dismissed - decided against Revenue.

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• 2019 (12) TMI 244
  Amendment in the shipping bills - request of the appellant for No Objection Certificate for claiming MEIS by amendment of reward option from No to Yes in the shipping bills is denied - HELD THAT:- The Commissioner has failed to notice that the appellant has declared their intention to claim MEIS benefits in all the shipping bills which have been produced on record. The only lapse on the part of the appellant was that they have mentioned in the reward column as N instead of Y , which is only a procedural defect. Further, it is found that otherwise the appellant is entitled to claim MEIS benefit as per the export policy. Failure to mention Y in the reward column of the shipping bill for availing the benefit under MEIS scheme can be corrected by amending the shipping bill as held by the Hon ble Madras High Court in the case of Pasha International vs. Commissioner of Customs [ 2019 (2) TMI 1187 - MADRAS HIGH COURT ]. The rejection of request for amendment of shipping bill by the Commissioner is not sustainable in law and therefore the impugned order is set aside and it is directed that the Custom Authorities to allow the amendment in the shipping bill as per the request of the appellant on production of certified copy of this order - appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2019 (12) TMI 243
  Revival of company and restoration of company s name in the Registrar of Companies - Seeking relief to make the bank account operational - HELD THAT:- The appellant preferred this appeal being a Liquidator of the deregistered company. Hence, he is competent for filing the same, to seek restoration of the company s name in the register of the ROC. By perusal of the material available on record it is evident that the main reason shown for striking off the name of the Company, i.e. M/S. J. R. Diamonds Pvt. Ltd. was that the deregistered company had failed in filing its statutory returns (e.g. Balance Sheets, Annual Returns) before the ROC. However, when the order impugned for striking off the name of the company was passed, the company was under the C.I.R.P. and thereafter gone into liquidation process by an order dated 01.10.2018 of the NCLT passed under Section 33 of the I.B. Code. Hence, the liquidator took over the charge of the assets of the Corporate-Debtor-Company (now under deregistration). Hence such impugned action cannot be treated a legally valid and just action on the part of ROC to strike off the name of the Company during Corporate Interim Resolution Process, which is reported to have pending litigation. The impugned order dated 06.08.2018 to strike off the name of the company, so far as it relates to the present company is set aside - the present Company Appeal deserves to be allowed and the name of the company, i.e. M/S. J. R. Diamonds Pvt. Ltd. to be restored in the statutory register of Companies being maintained by the Respondent, ROC, Gujarat for above mentioned limited purpose - the present appeal is conditionally allowed.

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• Insolvency & Bankruptcy

• 2019 (12) TMI 242
  Suit for recovery of money for supply of goods/services - alleged amount is an operational Debit and the Respondent/Plaintiff is an Operational Creditor as defined under Section 5(20) and 5(21) of the IBC - pre-existing creditor - Plaint can be rejected only with the averments made in the plaint do not disclose a cause of action or on a reading thereof the suit appears to be barred under any law - contention of the learned counsel for the applicant/defendant is that by order dated 26.07.2017, the Adjudicating Authority under Section 14 of the Insolvency and Bankruptcy Code, 2016 had declared moratorium prohibiting/barring institution of suit. HELD THAT:- Though no circumstance pleads in the plaint to find out whether the suit is maintainable or not or liable to be rejected, it is to be noted that suit has been originally filed against M/s.Bhusham Steel Ltd., as the defendant. During the pendency of the suit in the place of defendant M/s. Tata Steel BSL Ltd., was substituted as defendant. The M/s. Tata Steel BSL Ltd., is none other than the resolution applicant approved by NCLT - this Court can easily come to the conclusion that the resolution plan was in force and newly substituted defendant is none other that resolution applicant approved by NCLT. It is also relevant to note that the suit has been presented before this Court on 28.11.2017. It is admitted by both sides with regard to the proceedings before the NCLT the Company petition was filed before NCLT against the defendant under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the Adjudicating authority of the National Company Law Tribunal on 03.07.2017. It is also not disputed by the plaintiff herein that the Company Petition was admitted on 26.07.2017 and moratorium under Section 14 of the Insolvency and Bankruptcy Code was admittedly declared by the Adjudicating Authority. When the institution of the suit itself prohibited by an order of moratorium passed in the given case and such suit has been filed during the existence of moratorium. Merely because these facts has not been stated in the plaint it cannot be said that the Court cannot go into maintainability of the suit or rejecting the suit. Merely because these averments in the plaint do not reveal any bar under law the Court is without any power to go into the question, the literal interpretation of the provision under Order VII Rule 11(d) C.P.C to be given - The Court has to apply the relevant law to determine that the plaint is liable to be rejected on the ground of bar under law. The proceedings before Insolvency and Bankruptcy Code is not disputed before this Court. Such being the position the Court can take Judicial notice of such proceedings. It is thus clear from a reading of the proviso to Section 14(4) that the cessation of moratorium is linked to approval of a Resolution Plan under Section 31 (1) of an Order for Liquidation of the CD under Section 33. A resolution plan will be approved by an Adjudicating Authority only if it is in compliance of the requirements of such a plan, as set out in Section 30 of the Insolvency and Bankruptcy Code - In the present instance, the Resolution Plan submitted by the Resolution Applicant was approved by the Adjudicating Authority and as such the relevant provision is Section 31 (1) of the Code. This Court is of the view that suit filed by Plaintiff during existence of Moratorium is barred by law. No doubt only plaint averments are required to be seen to find out whether suit appears to be barred by any law. However when the law itself prohibits the institution of the suit which has not been disclosed in the plaint and suppressed. The Court can still reject the plaint on the basis of the bar contained in the law - this court hold that the suit is not maintainable. Accordingly, the plaint is rejected. Application dismissed.

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• PMLA

• 2019 (12) TMI 241
  Issuance of notice prior to arrest - Grant of anticipatory Bail on certain terms - while disposing of the application for anticipatory bail has passed the direction that the petitioner agency shall serve three working days notice, on proposing to arrest the petitioner in this case - whether the Court has power to direct the Investigating Agency to issue notice prior to arrest? HELD THAT:- The terms arrest is neither defined in the Code of Criminal Procedure, 1973 nor in the Indian Penal Code, 1960 nor there is any enactment dealing with offences demanding arrest. The word arrest is derived from a French word ARRATER . It means to stop, to restrain a person. Arrest is thus restraining of a person, obliging him to be obedient to law. Anticipatory bail being an extraordinary remedy available in special cases, this power has been conferred on the higher echelons of judicial service, namely, the Court of Sessions or the High Court. Keeping in view the reports of the Law Commission, Section 438 was inserted in the present Code. Sub-section (1) of Section 438 enacts that when any person has reason to believe that he may be arrested on an accusation of having committed a non-bailable offence, he may apply to the High Court or to the Court of Session for a direction that in the event of his arrest he shall be released on bail, and the Court may, if it thinks fit, direct that in the event of such arrest he shall be released on bail - Sub Section (2) of 438 lays down that when the High Court or the Court of Sessions makes a direction under sub- section (1), it may include such conditions in such directions in the light of the facts of the particular case, as it may think fit. Sub Section (3) of 438 lays down that if such person is thereafter arrested without warrant by an officer in charge of a police station on such accusation, and is prepared either at the time of arrest or at any time while in the custody of such officer to give bail, he shall be released on bail; and if a Magistrate taking cognizance of such offence decides that a warrant should issue in the first instance against that person, he shall issue a bailable warrant in conformity with the direction of the Court under sub- section (1). The ratio of judgment of the Hon ble Supreme Court in the case of PN Aggarwal [ 2008 (10) TMI 1 - SUPREME COURT ] that the Court has power to grant or not to grant anticipatory bail. But the court has no power to direct the IO to issue notice prior to arrest. The impugned order dated 13.04.2017 passed by the ASJ is hereby set aside - Petition allowed.

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• Service Tax

• 2019 (12) TMI 240
  CENVAT Credit - service tax on that portion of value of services which was not paid by the assessee at the time of taking credit and was retained as performance guarantee - Rule 4(7) of the Cenvat Credit Rules, 2004 - main argument of the Revenue is that withholding of amounts towards performance guarantee is not covered by the circular but the other forms of payment withheld from service provider might be - circular dated 30.04.2010. - HELD THAT:- This Court is of the opinion that the argument of the Revenue that performance guarantee amounts withheld by the asseessee are not per se covered by the circular, is incorrect. A clear reference to amounts withheld towards various counts including security, in the opinion of the court, comprehends the withholding of amounts towards performance guarantee. The question of law is answered against the Revenue - Appeal dismissed.

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• 2019 (12) TMI 239
  Principles of Natural Justice - long time gap between the date of order passed and date of personal hearing - demand of service tax - Section 73 of Finance Act - HELD THAT:- As it would be evident from the proceedings dated 07.08.2019, personal hearing was held on 15.06.2016 and the impugned order has been passed on 07.08.2018 (more than 20 months i.e., more than 1 years later). In this regard, circular No.1053/2/2017-CX., dated 10.03.2017 issued by the Central Board of Excise and Customs, New Delhi [CBEC] forming part of Ministry of Finance (Government of India) is of relevance. There is no disputation or disagreement before this Court that this circular is operating. This Court is of the considered view that this is a fit case to remit the matter back to the respondent for redoing after affording an opportunity of personal hearing afresh to the writ petitioner the order assessing service tax after - petition disposed off by way of remand.

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• 2019 (12) TMI 238
  CENVAT Credit - rental premises - contravention of provisions of Rule 2 (l), Rule 3 and Rule 9 (6) of the CENVAT Credit Rules, 2004 - Extended period of limitation - HELD THAT:- The Show Cause Notice/Statement of Demand has been issued without any whisper as to invoking the larger period of limitation, much less any whisper as to suppression, fraud, etc. - Admittedly, the proposal to raise the demand was for a much earlier period. If the proposal to raise the demand is for an earlier period beyond one year, then the authority has to invariably invoke the extended period of limitation and invoking the larger period could be possible only if there is suppression, fraud, etc., played by the assessee, to justify such invocation of larger period. In view of this, the appellant should succeed on this ground alone. The Revenue has not been able to justify the invocation of extended period of limitation as there is not even an allegation as to suppression, fraud, etc., and hence, the demand cannot sustain - Appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 237
  Refund claim - refund has been rejected since the premises in which the input services were availed were not a registered premises - HELD THAT:- The issue whether credit is eligible on input services availed in unregistered is settled by the decision of Hon ble Jurisdictional High Court in the case of COMMISSIONER OF SERVICE TAX-III, CHENNAI VERSUS CUSTOMS, EXCISE SERVICE TAX APPELLATE TRIBUNAL, CHENNAI M/S. SCIOINSPIRE CONSULTING SERVICES (INDIA) PVT LTD, CHENNAI [ 2017 (4) TMI 943 - MADRAS HIGH COURT] where it was held that Rule 5 of the 2004 Rules does not stipulate registration of premises as a necessary prerequisite for claiming a refund. The appeal filed by the department is without merits - Appeal dismissed.

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• 2019 (12) TMI 236
  Imposition of penalties - Security Agency Service - amount of service tax collected was not paid to the Department - the appellant has paid all the taxes along with interest before the issue of SCN - HELD THAT:- The appellant did not pay the service tax and also did not file the return and short payment of service tax was detected by the Department during the audit from the Books of Accounts of the assessee or the appellant wherein the appellant has shown the duty liability of service tax payable to the Department. As soon as the Department audit pointed out the short payment of duty, the appellant along with interest has paid the duty before the issue of show-cause notice. Further, the original authority after considering all the evidences has confirmed the duty along with interest and also appropriated the amount of duty and interest paid by the appellant but the original authority dropped the penalty under Section 76 and 78 by exercising their discretion under Section 80 after observing that there was no mens rea on the part of the appellant not to pay the service tax. Penalty u/s 76 and 78 of FA - HELD THAT:- Once the appellant has shown the duty liability in their Books of Accounts which clearly means that there was no suppression of material fact to evade the payment of tax and non-payment was on account of financial difficulties which has been proved by the assessee on record by producing sufficient documentary evidence - no penalty is imposable under Section 76 and 78 if there is a reasonable cause for not paying the service tax. Penalty u/s 77 is upheld - penalty u/s 76 and 78 set aside - appeal allowed in part.

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• 2019 (12) TMI 235
  Classification of services - services of retreading of worn-out tyres of automobiles - Maintenance or Repair Service or not - demand alongwith penalty - HELD THAT:- Various Benches of the Tribunal has consistently held that retreading of tyre falls under the category of Maintenance, Management and Repair Service and is liable to service tax - Further, the Apex Court has also in the case of SAFETY RETREADING COMPANY (P) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, SALEM, M/S TYRESOLES INDIA PRIVATE LMITED VERSUS THE COMMISSIONER OF CENTRAL EXCISE, GOA AND M/S LAXMI TYRES VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE [ 2017 (1) TMI 1110 - SUPREME COURT] has specifically held that retreading of tyre is a service which falls under the category of Management, Maintenance and Repair Service . Penalty u/s 76 - HELD THAT:- The issue relates to interpretation of the service and there were divergent views during the relevant time, therefore the benefit of Section 80 to the appellant is allowed and penalty dropped. There is no infirmity in the impugned order which is upheld by dismissing the appeal of the appellant to the extent of service tax which the appellant is liable to pay - penalty set aside - appeal allowed in part.

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• 2019 (12) TMI 234
  Refund claim of the accumulated CENVAT Credit - input services - export of goods General Insurance service - Club or Association service - Banking and Financial service - Telephone service - Legal Consultancy service - Management, Repair Maintenance service - denial on account of nexus - HELD THAT:- The learned Commissioner (Appeals) has rejected the refund claim observing that the Appellants failed to establish by adducing the documentary evidences that there has been nexus between the input service and output service, on which the refund has been claimed during the relevant period - The learned Advocate submits that the said documents have been filed on 29.08.2017 after conclusion of hearing before the learned Commissioner (Appeals). However, the same were not considered since the order was passed on 31.08.2017. The matter to be remanded to the learned Commissioner (Appeals) to consider the document/evidences produced by the Appellant in support of their claim that there has been nexus between the input service and output service, which were ultimately used in the export services, hence eligible to refund of the accumulated CENVAT Credit - Appeal allowed by way of remand.

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• 2019 (12) TMI 233
  CENVAT Credit - Benefit of abatement - construction activities - Inasmuch as, the respondents availed the Cenvat credit in respect of inputs as also input services and simultaneously availed the benefit of Notification No.1/2006-ST, as amended, revenue initiated proceedings against them for denial of the credit - HELD THAT:- The service tax assessee providing construction services is entitled to either the Cenvat credit or the benefit of abatement in terms of N/N.1/2006-ST. If both the facilities are availed by an assessee simultaneously, one of them has to be denied - In the present case, the revenue, at the time of issuance of show cause notice accepted the assessee s option of availment of Notification No.1/2006. In such a scenario, the credit availed by the assessee was required to be reversed, for which purpose show cause notice was issued. The respondent cannot be allowed to avail both the benefits i.e. availment of the Cenvat credit as well as the abatement. The show cause notice has extended the larger benefit of abatement to the assessee in terms of the notification and in that context directed them to pay back the Cenvat credit so availed by them. The assessee cannot be allowed to retain both the benefits on the technical grounds that the notice disallowed the Cenvat credit which was availed prior to availment of abatement of notification - there are no merits in the above reasoning of the lower authorities and accordingly reverse the said decision. The benefit of abatement Notification No. 1/2006-ST, as amended, is more beneficial to them and they should be allowed to retain the benefit of the same - Cenvat credit so availed by them is required to be reversed - appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 232
  Export of services - place of provisions of services - Intermediary services or not - Nature of amount credited in the books of account - reimbursement in respect of the losses incurred by them - Appellants have claimed that these amounts were received by them is respect of operating expenses incurred by them in order to manage the existing sales of the products imported and not for provision of service. - Revenue has in appeal sought to compare the un-comparables i.e. goods with services or tangibles with intangibles HELD THAT:- From 27.02.2010, the condition in respect of provision of service in India and usage outside India was omitted from the Export of Service Rules, 2005 in respect of category III services. Thus for determining whether a service provided which falls in Category III is Export of Service or not the relevant conditions to be satisfied were that- (a) The services should be provided in relation to business or commerce to a recipient located outside India; and (b) Payment for such services should be received by the service provider in convertible foreign exchange. Commissioner has in impugned order found that both these conditions were satisfied in respect of the transactions under question and has accordingly held that the services provided by the appellant are export of services. Revenue has not disputed by stating that the conditions specified by the Export of Service Rules, 2005 were not satisfied, they have sought to state that the Commissioner should have decided the matter independently without referring to these rules, in terms of general definition of exports ort by referring to Article 286 of Constitution. Intermediary services - HELD THAT:- The term intermediary has been defined by the Rule 2(f) ibid and the phrase intermediary services used in Rule 9(c) will have to be interpreted accordingly. Revenue has not shown as to how the Appellant has acted as intermediary between the two persons namely service provider and service receiver of the main service - Since the nothing has been brought on record to show that appellants were providing the intermediary services to the recipient in manner as defined by Rule 2(f) we do not find any merits in the submissions of the revenue that place of provision of services in the present case will be location of service provider as per Rule 9 - commissioner has correctly determined the place of provision of service by application of Rule 3 as the location of the service recipient. There are no merits in the appeal filed by the revenue - appeal dismissed - decided against Revenue.

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• Central Excise

• 2019 (12) TMI 231
  Maintainability of appeal - requirement with the pre-deposit - Section 35F of the Central Excise Act, 1944 - it was held by High Court that prayer of the petitioner for being permitted to prosecute its appeal before the CESTAT without complying with the condition of mandatory pre-deposit, cannot be granted - HELD THAT:- There are no merits in the present SLP - SLP dismissed.

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• 2019 (12) TMI 230
  CENVAT Credit - Tribunal observed that, though auto cess and education cess were duties of excise, yet the goods on which they were paid, continued to be exempted goods as basic excise duty was not payable thereon? - HELD THAT:- Having regard to (i) the nature of the various duties or cesses (which are in addition to the duty of excise leviable under the Act or additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957), which are nothing but levies of excise, and (ii) the overall scheme of Cenvat credit, as contained in the Rules of 2002 as well as 2004, there is no obvious or self-evident reason why the expression duty of excise used in the definition of exempted goods should not include these other levies. It matters not that these additional duties or cesses are not to be traced to the Act or are provided for by other enactments such as Finance Acts, or that they are levied as an increment, or are expressed as a proportion, to an existing tax (namely, basic duty of excise). Once it is seen that these cesses and duties are also excise duties and on that basis are included in the Cenvat credit scheme, as indicated by Rule 3 itself, the fact that these are referred to as cesses or duties looses its significance altogether; it is hardly determinative for construing the expression duty of excise . The substantial question of law is answered in the negative, i.e. in favour of the Assessee and against the Revenue. Whether ten percent (eight percent, under the earlier Rules) of the sale price referred to in clause (b) of Sub-rule (3) of Rule 6 is to be included in the total price of final goods exigible to duty or is it eligible for deduction as a tax from such total price. - Held that:- In Chhata Sugar Co.Ltd. [ 2004 (2) TMI 67 - SUPREME COURT ], the Supreme Court has held that to compute excise duty as a predetermined amount without making permissible deductions for reducing the cum-duty selling price was a fallacy both legally or mathematically. These observations are clearly apposite in the present case. After payment of ten or eight percent amount, as the case may be, which, as we have seen above, is noting but tax, the assessable value can be derived from such cum-duty price only after making permissible deductions, that is to say, deduction inter alia of the tax component, namely, ten or eight percent of the amount, as the case may be, of the selling price of the goods. - this question is answered in the negative, i.e. in favour of the Assessee and against the Revenue. Whether the Tribunal justified in holding that Cenvat Credit could be utilized by the Assessee, where common inputs were used along with non-common inputs in manufacture of exempted goods, as Explanation-III added to Rule 6 (3)(b) of Cenvat Credit Rules inserted w.e.f. 16 May, 2005 was prospective in nature? - HELD THAT:- Rule 6 of Cenvat Credit Rules of 2002 and 2004 inter alia provides for obligations of manufacturers who manufacture both dutiable and exempted goods, if they are to claim Cenvat credit. Sub-Rule (1) makes it clear that Cenvat credit is not available on inputs used in the manufacture of exempted goods. Sub-rule (2) is an exception; it provides for circumstances in which Cenvat credit on inputs used in the manufacture of exempted goods can be availed of. Where inputs are used for manufacture of dutiable as well as exempted goods, the manufacturer may take credit on that quantity of inputs which is intended for use in the manufacture of dutiable goods. This is, however, subject to a condition that the manufacturer maintains separate accounts for receipt, consumption and inventory of input meant for use in the manufacture of dutiable goods and quantity of input meant for use in the manufacture of exempted goods. Sub-rule (3), applies only to those cases, where the manufacturer in question uses common inputs for manufacture of dutiable as well as exempted goods; it does not apply to a manufacturer of exempted goods, who uses exclusive inputs for such manufacture. This is implicit in Rule 6, read in the light of all its sub-rules together. Explanation III merely underscores this position. It makes explicit what was already implicit. It is purely and simply clarificatory or declaratory; it does not alter the old law in any manner or, in other words, introduce a new element in it which did not exist earlier. It must apply, accordingly, retrospectively. This question is answered in the negative, i.e. in favour of the Revenue and against the Assessee.

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• 2019 (12) TMI 229
  Maintainability of appeal - Appropriate forum - Jurisdiction of High Court - Refund or adjustment of the excise duty paid - Benefit of exemption in terms of notification No.56/2002-CE dated 14.11.2002 with reference to subsequent notification Nos.19/2008-CE dated 27.03.2008 and 34/2008? HELD THAT:- A perusal of Section 35-G of the Act shows that an appeal lies to this Court from every order passed in appeal by the Tribunal except in a case where the order relates, among other things, to determination of any question having relation to the rate of duty of excise or to the value of goods for purpose of assessment. While excluding the jurisdiction of the High Court to deal with the aforesaid issues, appeal has been provided directly from the order of the Tribunal, on the aforesaid issues, to Hon ble the Supreme Court, as provided for in Section 35-L of the Act. Delhi High Court in Bharti Airtel Limited s case [ 2013 (4) TMI 376 - DELHI HIGH COURT ] had opined that for the purposes of consideration of the issue regarding maintainability of appeal before the High Court, nature of the order has to be considered and not the issue sought to be raised by the appellant. In fact this is evident from the plain language of Section 35-G of the Act, which provide that an appeal shall lie to the High Court from every order passed by the Tribunal not being an order relating to determination of any question having relation to the rate of duty of excise or to the value of goods for purpose of assessment. Thus, the consistent opinion of the courts is that the dispute, as to whether or not the assessee is covered by the exemption notification, relates directly or proximately to the rate of duty applicable thereto for the purpose of assessment, hence, High Courts will not have jurisdiction to entertain appeal pertaining to that, it being in exclusive jurisdiction of Hon ble the Supreme Court - there are no substance in the argument raised by the learned counsel for the revenue that judgment of this Court deciding the validity of a notification will be a judgment in personam and not in rem and will apply only to the petitioners before the Court. As the opinion expressed by this Court was declaration of law, it will apply uniformly to all the assesses concerned without any exception, irrespective of the fact whether any party had approached the Court or not. The issue involved is regarding interpretation of exemption notifications dated 14.11.2002, 27.03.2008 and 10.06.2008, which will have effect or valuation of goods for the purpose of levy of duty, hence appeals before this Court will not be maintainable - appeal before this Court against the order passed by the Tribunal will not be maintainable as the jurisdiction to entertain the same would lie before Hon ble the Supreme Court.

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• 2019 (12) TMI 228
  CENVAT Credit - input services - Business Auxiliary Service - BAS (Export of Goods) - Consulting Engineers - Landscaping services and Warehousing services - Housekeeping service - Fabrication and Boiler Services - Bio Medical Waste Disposal Service - Pest Control used in canteen, welding of canteen tables, servicing of steam boilers - denial of credit availed on certain input services on the premise that they do not have nexus to the manufacturing activity - HELD THAT:- The definition of input or input services in the CCR is very much wide and as long as the primary conditions like, use of input or input service in or in relation to the manufacture of final products or output service is not disputed, the credit cannot be denied - Moreover, the term in or in relation is very wide and covers the entire gamut of activities undertaken by the appellants. Credit cannot be denied - appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 227
  Clandestine removal - manufacture and clearance of bags and soft luggage items - non-accounting of goods - confiscation - penalty - HELD THAT:- For the impugned goods, another show-cause notice was issued to the appellant which was finally decided by the Commissioner(Appeals) vide his order dt. 14/06/2019 wherein the Commissioner(Appeals) has held that the demand in respect of the goods seized on the premises of Outshiny Kodigehalli was not sustainable since there was no evidence to prove that the appellant were attempting to clear them without payment of duty - Further, there is no dispute about the fact that the goods in question i.e. 1000 numbers of bags were found lying in the assessee s own premises and there is no evidence placed on record that the appellant had intended to clear the same without payment of duty from the premises of Outshiny Kodigehalli. Therefore unaccountal of the goods by the appellant at best is only a technical breach. The impugned order holding that the seized goods is liable to be confiscated is bad in law and unsustainable - the imposition of penalty on the appellants and Outshiny Kodigehalli (appellant No.2) are liable to be set aside - Appeal allowed - decided in favor of appellant.

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• 2019 (12) TMI 226
  Irregular availment of MODVAT Credit - recall of order - section 129 of Customs Act, 1962 - HELD THAT:- As the scope and jurisdiction of the Tribunal emanates from section 129 of Customs Act, 1962 for the for the limited purpose of deciding upon the legality and appropriateness of a confirmed demand, denial of refund or other penal consequences under Customs Act, 1962, Central Excise Act, 1944 and Finance Act, 1994, it is not within our competence, or expertise, to foray into awards and determination of such other statutory bodies. The provisions of Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982 are amply clear - With the expiry, or cessation, of an appellant, the appeal comes to an end. A miscellaneous application for alteration of cause title can be entertained only if an entity with potential for finding itself to be obligated by unfavourable future decision of the Tribunal seeks to substitute for an appellant on record to enable it to be heard before being saddled with detriment. Such a responsibility or obligation cannot be imposed by an existent appellant on to another entity whose involvement in the proceedings is not on record in the show cause notice. Hence, the application for incorporation of M/s Larsen Toubro Ltd in the appeal is dismissed. Application disposed off.

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• CST, VAT & Sales Tax

• 2019 (12) TMI 225
  Territorial Jurisdiction - Levy of sales tax - Karnataka Sales Tax Act - company filed a writ petition on the ground that the KST Act does not extend to territorial waters of India situated adjacent to the landmass of the State of Karnataka. Whether the State of Karnataka has jurisdiction to levy sales-tax under section 5C of the KST Act in respect of the Charter Party Agreement dated 8.1.1998? Whether the agreement dated 8.1.1998 constitutes transfer of the right to use ? Whether the State of Karnataka has the competence to levy sales tax on the agreement, which is effective within the territorial waters? HELD THAT:- A reading of the definition of sale makes it crystal clear that every transfer of property in goods by one person to another in the course of trade or business, includes the transfer of right to use any goods for any purpose. Section 5C of the Act also provides levy of tax on the transfer of the right to use any goods - A tax on the sale or purchase of goods includes a tax for transfer of right to use goods as that is deemed to be a sale. Whether there is a transfer of the right to use the vessel? - HELD THAT:- It has to be considered in view of the charter agreement entered into between the company and the Port Trust. The tender documents pursuant to which agreement has been entered into contains the conditions and instructions to tenderers. The prequalification criteria provide that the tenderer has to submit the documents regarding ownership or possession of tug on bareboat/committed demise charter hire of tugs. In case he does not own the tug, he has to provide documents to prove that he has entered into a lease for charter hire of tug(s) for deploying them in the Port Trust during the period of the contract. The tenderer should have experience of manning and harbor practice for one year during the last 3 years. Tugs should be deployed at harbors at New Mangalore Port during the contract period. As per the Charter Party Agreement, Annexure I, the vessel has been taken by the Port Trust for various lawful services required by the chartered Port Trust, including towing, docking, and undocking at the Port round the clock for the contract period of 6 months - The charterer shall have the use of all outfits, equipment, and appliances on board the vessel at the time of delivery. Insurance charges have to be borne by the contractor. The vessel shall be kept insured by the contractors at their expense against protection and indemnity risks. The whole reach and burthen of the vessel, including the lawful capacity to be kept at the charterer s disposal. There is no dispute as to the vessel and the charterer has a legal right to use the goods, and the permission/licence has been made available to the charterer to the exclusion of the contractor. Thus, there is complete transfer of the right to use. It cannot be said that the agreement and the conditions subject to which it has been made, is not a transfer of right to use the goods, during the period of six months, the contractor has no right to give the vessel for use to anyone else. Thus in view of the provisions inserted in Article 366(29A) (d), section 5C, and definition of sale in section 2 of the KST Act, there is no room for doubt that there is a transfer of right to use the vessel. Merely by the provisions mentioned as to license, its production/change of ownership etc., it cannot be said that the owner has not transferred the right to use the vessel. The ownership in such a deemed sale is retained by owner. He does not cease to be an owner by transferring right to use the property. Merely by the fact that a license to be obtained with certain stipulations and to be produced by Tindal on being demanded and change incapacity to be reported to the Deputy Conservator, the provisions are not of any help for interpreting the Charter Party Agreement, and to decide the question whether there is a transfer of right to use the vessel. Whether the State of Karnataka has power under section 5C of the Act to exact sales tax though charter-party has been signed in Mangalore in view of the fact that vessel was to be used in territorial waters, it was open to the State Government to impose and realize the salestax on the basis of situs of agreement? - HELD THAT:- This Court has observed that the location of the delivery of goods cannot be made the basis for the levy of tax on the sale of goods. Where a party has entered into a formal contract, and the goods are available for delivery irrespective of the place where they are located, the situs of sale where the property or goods passes, would be at the place where the contract has been entered into. This Court in the 20TH CENTURY FINANCE CORPN. LTD. AND ANOTHER VERSUS STATE OF MAHARSHTRA [ 2000 (5) TMI 980 - SUPREME COURT ] has considered for Article 366(29A)(d), the taxable event is the transfer of the right to use the goods regardless of when or whether the goods are delivered for use. The deemed sale takes place at the site where the right to use the goods is transferred. It is of no relevance where the goods are delivered under the right to transfer to use them - In the present case, the agreement has been admittedly signed in Mangalore, and the vessel is used in the territorial waters, which is as per the submission of the company, fully in territory of the Union of India. It makes no difference as the situs of the deemed sale is in Mangalore. Thus, the liability to pay tax under the Act cannot be countenanced. The Charter Party Agreement tantamount to a deemed sale as there was a transfer of right to use the vessel as provided in Article 366(29A)(d) read with section 5C or section 2(j) of the Karnataka Sales Tax Act. Thus, the transaction is liable to be taxed by the concerned authorities in the State of Karnataka - Appeal dismissed.

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• 2019 (12) TMI 224
  Rate of tax - sale of coal without Form-C - Whether tribunal was justified in law to impose tax @ 10 % on sale of coal against the provisions of section 8 (2) of CST Act? - HELD THAT:- Bare perusal of Sections clearly shows that the declared goods sold without Form -C can be subjected to tax twice as the rate of tax applicable in the appropriate State. Section 14 (ia) of the Act also declared coal as a special importance goods i.e. coal is a declared goods - By Notification- TIF-2-2372/XI-9 (251)/97-UP Act 15/48-order 98, dated 23.11.1998 the State of Uttar Pradesh has prescribed the rate of tax on the sale of coal @ 4 %. The aforesaid notification has been amended from time to time but the rate of tax on the sale of coal has remained unchanged. The records reveals that the dispute in relation to sale of coal has admittedly been made without requisite Form -C as prescribed under the Act and it is not disputed that the coal is a declared commodity under Section 14 (ia) of the Act and rate of tax as per the above notification is only @ 4 % which is leviable in the State of Uttar Pradesh - the tax on the sale of coal within the said limit was @ 4 %. In view of Section 8 (2) (a) of the Act, sale of coal made by the revisionist without Form-C can be taxed at twice as the rate applicable in State i.e. @ 4 +4 =8 % and not above that. The Tribunal was not justified in imposing the tax on the sale of coal without Form-C @ 10 % treating the same under Section 8 (2-b) as undeclared goods - question of law is answered accordingly in favour of the assessee and against the department - revision allowed.

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• 2019 (12) TMI 223
  Permission for withdrawal of appeal - Substantial questions of law raised in the appeal - HELD THAT:- Appeal dismissed as withdrawn.

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• 2019 (12) TMI 222
  Liability to deduct interest on delayed refund from fourth respondent (VAT officer), personally, from out of his salary - Direction issued by the Single Member Bench of the HC - section 50 of Karnataka VAT Act - HELD THAT:- There was no specific concession by the learned Additional Government Advocate that it was the fourth respondent in the writ petition who was liable to pay interest in terms of Section 50 of Karnataka Value Added Tax Act. In second paragraph, a direction was issued to the fourth respondent in the writ petition to refund the amount. Further direction was issued to the fourth respondent to refund the amount and to pay simple interest at the rate of 6% p.a., from out of his salary. No reasons have been assigned by the learned single Judge as to why fourth respondent in the writ petition was personally liable to pay interest from out of his salary. Therefore, it was necessary for the writ petitioner to implead the appellant in writ appeal No.1430/2019 in his individual capacity so that notice could have been issued to the said officer and he could have been heard by the learned single Judge on the liability to pay interest from his salary. It is directed that specific notice of writ petition ought to have been served to the fourth respondent in the writ petition in his personal capacity before directing him to pay interest from out of his salary Paragraph 2 of the impugned order dated 29th October, 2015 is hereby quashed and set aside; - the direction contained in Paragraph 3 of the impugned order is against the revenue authority which is binding on the State Government and the said direction is not against any specific officer. - appeal allowed.

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• Indian Laws

• 2019 (12) TMI 221
  Waiver of the requirement of pre-deposit under Section 21 of the Recovery of Debts and Bankruptcy Act, 1993 - whether the DRAT was justified in declining the Petitioner s prayer for waiver of the pre-deposit? HELD THAT:- A plain reading of the provisions of section 21 of RDB Act indicates that there is an absolute bar on the DRAT entertaining an appeal, unless the pre-deposit is made with the DRAT by the Appellant of 50% of the amount due from such Appellant as determined by the DRT under Section 19 of the RDB Act. The proviso to Section 21 permits the DRAT to reduce the amount of pre-deposit up to 25% of the amount of such debt but not beyond that. In other words, the discretion of the DRAT is only to reduce the amount of pre-deposit from 50% of the amount of debt to 25% of the amount of debt, but not to waive the requirement of pre-deposit - It should be noticed that appeals to the DRAT can be preferred not only against order of the DRT under Section 19 of the RDB Act but also against the orders of the DRT under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act). Section 21 of the RDB Act is more or less identical to Section 18 of SARFAESI Act. In both provisions, for an appeal to be entertained before the DRAT, it is mandatory for the Appellant to make a pre-deposit of 50% of the amount of debt due from such Appellant. While under the RDB Act the amount of debt is that determined by the DRT, under the second proviso to Section 18(1) of the SARFAESI Act it could be 50% of the amount of debt as claimed by the secured creditors or determined by the DRT, whichever is less - In either instance there is no discretion with the DRAT to waive the pre-deposit. Unlike Section 21 of the RDB Act, the first proviso to Section 35F of the CE Act requires the Commissioner (Appeals) or the CESTAT to consider if the deposit of duty demanded or penalty levied would cause undue hardship to such person and gives the power to the Commissioner (Appeals) or the CESTAT to dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interest of the revenue. This discretionary power to waive the deposit is missing in Section 21 of the RDB Act. Even before this Court, no plea was advanced about the Petitioner being in any financial hardship and not being able to make the pre-deposit of 50% of the amount found due by the DRT. In the circumstances, the Court is unable to find any error having been committed by the DRAT in declining to grant a waiver of the pre-deposit - there are no merits in the petition - petition dismissed.

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• 2019 (12) TMI 220
  Grant of bail - Money laundering - siphoning of funds - case of the CBI revolves around the allegation that all the accused conspired amongst themselves to run collective investment schemes in the name of the accused company; and by inducing the public to invest under these schemes with the allure of high returns, collected funds amounting to Rs. 255,91,00,541/, but did not repay the amount to the tune of Rs. 15,69,35,003/, thereby cheating the investors of such amount. HELD THAT:- This Court is conscious of the need to view such economic offences having a deeprooted conspiracy and involving a huge loss of investors money seriously. Though further investigation is going on, as of now, the investigation discloses that the Respondent played a key role in the promotion of the chit fund scam described, thereby cheating a large number of innocent depositors and misappropriating their hardearned money. Thus, if the Respondent continues on bail, there is little chance of realising any amount by selling the properties of the Tower Group of companies, since he may use unlawful tactics to keep prospective buyers away. Moreover, it is relevant to note that the investigating agency has not yet assessed the exact total amount invested by the people of Orissa in the accused company, so as to find out the specific liability of the company in that regard. Having regard to the material on record, and since a huge amount of money belonging to investors has been siphoned off, as well as for the aforesaid reasons, the High Court should not have released the Respondent on bail. The impugned order granting interim bail to the Respondent stands set aside. His bail bonds are cancelled - Appeal allowed.

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