TMI Tax Updates - e-Newsletter
February 23, 2019

Case Laws in this Newsletter:

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

TMI SMS

• Deduction u/s 80IC - if substantial expansion is undertaken in 8th year 100% deduction to be allowed for 3 years i.e., 8th,9th & 10th AYs

  ---

Articles

1. GST ON SKIN CARE PRODUCTS

   By: Dr. Sanjiv Agarwal

2. COMPENSATORY AFFORESTATION FUND – PART I

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Finance Act, 2019

2. Suresh Prabhu dedicates 1000 Crore worth Commerce & Industry Ministry projects to the Nation

3. Indo-Canada Chamber of Commerce and TPCI to work closely to develop bilateral trade

4. Advisory Council of the Fifteenth Finance Commission meets

5. 4th India-Asean Expo and Summit Inaugurated

6. Banning of unregulated deposit schemes ordinance, 2019

Notifications

Companies Law

1. F. No. 01/16/2013 CL-V (Pt-I) - G.S.R. 143 (E) - dated 21-2-2019 - Co. Law

Companies (Registration Offices and Fees) Amendment Rules, 2019

2. F. No. 01/13/2013 CL-V,Part- I , Vol II - G.S.R. 144 (E) - dated 21-2-2019 - Co. Law

Companies (Incorporation) Amendment Rules, 2019 - Active Company Tagging Identities and Verification (ACTIVE)

GST - States

3. 25/GST-2 - dated 15-2-2019 - Haryana SGST

Corrigendum Notification No. 17/GST-2 dated 31.01.2019 under the HGST Act, 2017

4. 17/GST-2 - dated 31-1-2019 - Haryana SGST

Haryana Goods and Services Tax (Second Amendment) Rules, 2019

5. 172-F.T - dated 29-1-2019 - West Bengal SGST

Seeks to appoint 01.02.2019 as the date on which section 3 of the West Bengal Taxation Laws (Amendment) Act, 2018 comes into force

Circulars / Instructions / Orders

DGFT

1. Policy Circular No. 20/2015-2020 - dated 22-2-2019

Clarification on eligibility of Exports made from SEZ/EOU units on behalf of the DTA units, but not through DTA units

Customs

2. 07/2019 - dated 21-2-2019

Discontinuation of printing of Advance Authorisations/Export Promotion Capital Goods (EPCG) Authorisations on security paper by DGFT for authorisations issued with EDI ports as port of registration

Highlights / Catch Notes

Income Tax

• Section 80IC: 100% Tax Deduction for Substantial Expansion in 8th Year, New Initial Assessment Year for 3 Years.

  Case-Laws - SC : Deduction u/s 80IC - if substantial expansion is undertaken, say, in 8th year by an assessee such an assessee would be entitled to 100% deduction for the first five years, deduction @ 25% of the profits and gains for the next two years and @ 100% again from 8th year as this year becomes ‘initial assessment year’ once again. However, this 100% deduction would be for remaining three years, i.e., 8th, 9th and 10th assessment years.
  Visit to Get Source

  ---

• Retired partners' compensation for property value appreciation deemed deductible; revenue's appeal dismissed, affirming partnership deed provisions.

  Case-Laws - HC : Deduction on account of payments made to the retired partners as admissible expenditure under the provisions of the partnership deed - compensation to the outgoing partner towards the appreciation in the value of the immovable properties - Revenue appeal dismissed.
  Visit to Get Source

  ---

• Fraudulent Depreciation Claim Denies Assessee Relief in Reopened Assessment Case.

  Case-Laws - HC : Reopening of assessment - bogus claim of depreciation - the assessee is guilty of fraud and has perpetuated fraud todefraud the revenue - no relief can be granted.
  Visit to Get Source

  ---

• Exemption u/s 54F allowed for LTCG despite plot in mother's name; Grampanchayat NOC supports assessee's claim.

  Case-Laws - AT : Disallowance of exemption u/s 54F - LTCG - construction of bungalow on the plot of land was in the name of mother - approval for house construction and NOC has been given by the Grampanchayat in the name of assessee - Benefit of exemption allowed.
  Visit to Get Source

  ---

• Loan Waiver by TamilNad Mercantile Bank Not a Trading Liability Cessation u/s 41(1) IT Act.

  Case-Laws - AT : Addition u/s 41(1) - amount waived by TamilNad Mercantile Bank Limited representing Term Loan - waiver of loan does not amount to cessation of trading liability - No additions.
  Visit to Get Source

  ---

Customs

• DGFT Stops Printing Advance and EPCG Authorisations on Security Paper for EDI Ports to Boost Efficiency.

  Circulars : Discontinuation of printing of Advance Authorisations/Export Promotion Capital Goods (EPCG) Authorisations on security paper by DGFT for authorisations issued with EDI ports as port of registration
  Visit to Get Source

  ---

• Petition for Release of Confiscated Goods Denied as Items No Longer Exist, Cannot Grant Requested Relief.

  Case-Laws - HC : Release of confiscated goods subsequently warehoused - the present petition seeking relief of release of goods which are no longer in existence cannot be granted
  Visit to Get Source

  ---

• Demurrage Charges Excluded from Valuation of Imported Goods for Customs Duty Assessment per Customs Law.

  Case-Laws - AT : Valuation of imported goods - inclusion of Demurrage charges - In no stretch of imagination the demurrage can be included in the value of the goods for the purpose of assessment of customs duty
  Visit to Get Source

  ---

Corporate Law

• Late E-Form ACTIVE Submission Costs Rs. 10,000 After April 25, 2019, Under Companies Law ACTIVE Initiative.

  Notifications : Fee payable on e-form ACTIVE, if delayed beyond 25.4.2019 is ₹ 10,000 - Active Company Tagging Identities and Verification (ACTIVE)
  Visit to Get Source

  ---

• ACTIVE Compliance: Companies Must Verify Office Details or Face "Non-Compliant" Status Under Amendment Rules 2019.

  Notifications : Companies (Incorporation) Amendment Rules, 2019 - Active Company Tagging Identities and Verification (ACTIVE)
  Visit to Get Source

  ---

Service Tax

• Cenvat Credit Denied for Errors & Omissions Insurance Policy Costs Attributable to Foreign Entities.

  Case-Laws - AT : Cenvat credit on the proportionate consideration of the amount on Errors & Omissions Liability Insurance Policy attributable to their foreign entities, is not available.
  Visit to Get Source

  ---

• Corporate Guarantees Not Subject to Service Tax: Demand Overturned in BOFS Case on Service Commission Transactions.

  Case-Laws - AT : Banking and Other Financial Services” (BOFS) - providing corporate guarantee for a consideration / commission - demand of service tax set aside.
  Visit to Get Source

  ---

• TDS Excluded from Assessable Value Under Reverse Charge for Foreign Services; Demand Overturned.

  Case-Laws - AT : Valuation - non-inclusion of TDS amount in assessable value - reverse charge mechanism - services received from foreign service provider - TDS has been borne by the appellant, is not the part of consideration - Demand set aside.
  Visit to Get Source

  ---

• Section 67 Amendment: Service Tax Applies to Non-Monetary Consideration on Property Settlements in Agreements.

  Case-Laws - AT : Levy of service tax - immovable property given in settlement of agreement - the amendment to Section 67 proposes to include consideration received not wholly in terms of money - amount represented towards consideration is taxable.
  Visit to Get Source

  ---

• Court Allows CENVAT Credit for Input Services on Overseas Mediclaim Insurance for Employees Working on International Projects.

  Case-Laws - AT : CENVAT Credit - input services - Overseas Mediclaim Insurance Policy for employees who were sent for undertaking works in their project abroad - Credit allowed.
  Visit to Get Source

  ---

Central Excise

• Buyer Denied Excise Duty Refund Due to Time Limitations u/s 11B; Highlights Importance of Statutory Deadlines.

  Case-Laws - SC : Refund of central excise duty claimed by the buyer - duty was paid under protest - applicability of time limitation - The scheme of Section 11B makes a distinction between right of the manufacturer to claim refund from right of the buyer to claim refund treating them separate and distinct - Period of limitation application - Refund not allowed.
  Visit to Get Source

  ---

• Cash Discounts Not Availed Must Be Excluded from Goods Valuation for Excise Purposes per Sale Agreement Terms.

  Case-Laws - AT : Valuation - inclusion of value of cash discount not availed by the buyers - Cash discount which is not at or prior to clearance of goods being contained in agreement of sale between assessee and buyers must, therefore, be deducted from sale price
  Visit to Get Source

  ---

• Yarn Twisted or Texturized Before Weaving Faces Central Excise Duty; Untwisted Yarn May Avoid Tax Liability.

  Case-Laws - AT : Captive consumption - if the yarn produced at the intermediate stage is twisted /texturised before use for weaving the same is liable to Central Excise duty. However, if twisted/terturised yarn does not come into existence before weaving, it may not be taxable
  Visit to Get Source

  ---

• Classifying 12-Hydroxy Stearic Acid: Over 90% Concentration Falls Under Chapter 29 for Central Excise Tax Purposes.

  Case-Laws - AT : Change of classification of he product - 12 Hydroxy Stearic Acid - Ricinoleic Acid - if the concentration of “12-Hydroxy Stearic Acid” is above 90%, the product will be classifiable under Chapter 29, otherwise not
  Visit to Get Source

  ---

• Principal Supplier Liable for Duty Payment in Job Work Case; Manufacturer Not Responsible Per Central Excise Rules.

  Case-Laws - AT : Job Work - even though in normal course, a manufacturer is supposed to pay duty but, in this case, the principal supplier of Raw material is legally liable to pay the duty. Therefore, the demand confirmed on the principal is in principle upheld.
  Visit to Get Source

  ---

• CENVAT Credit Eligibility Confirmed for Maintenance Charges on Industrial Plot as Essential Manufacturing Input.

  Case-Laws - AT : CENVAT Credit - inputs - maintenance charge - availability of suitable industrial plot is an essential requirement for the manufacture of the goods of the appellant - The maintenance charges are also the eligible inputs.
  Visit to Get Source

  ---

• Appellant's Factory in Industrial Area: SSI Unit Pays Duty on Branded Goods, Claims Exemption on Others.

  Case-Laws - AT : SSI Exemption - unit is situated in rural area or not - the Appellant’s factory being situated in notified Industrial area which is governed by the GIDC is not a unit located in rural area - SSI unit has correctly paid the duty on branded goods and availed exemption on other goods.
  Visit to Get Source

  ---

• A second interest demand notice is illegal if a prior notice was ruled time-barred by the Tribunal.

  Case-Laws - AT : Demand of Interest - Since the show cause notice for the demand had already been issued and the same was held to be time-barred by the Tribunal, for the same demand, second show cause notice is bad in law and is illegal
  Visit to Get Source

  ---

• Extended Limitation Period Unjustified: No Malafide Intent in Duty Payment Evasion Based on Bona Fide Belief.

  Case-Laws - AT : Extended period of limitation - The earlier view (bonafide belief) of the department, was entertained by the appellant which cannot be construed as malafide intention to evade the payment of duty, therefore, the demand for the extended period cannot be raised.
  Visit to Get Source

  ---

• Excise Department to Determine CENVAT Credit Eligibility on Capital Goods for Power Plants Based on Case Facts.

  Case-Laws - HC : CENVAT credit - capital goods purchased for its Power Plants - Right of a manufacturer to avail CENVAT Credit is dependent upon hoards of factors and such right is to be adjudicated and determined by the Officers of the Excise Department on the touch stone of the statutory provisions and existing facts.
  Visit to Get Source

  ---

VAT

• Public Sector Company Challenges Conditional Interim Order on Stay of Penalty Recovery in VAT and Sales Tax Case.

  Case-Laws - HC : Validity of conditional interim order - stay of recovery proceedings - The petitioner, being a Public Sector Company cannot be imposed with such onerous condition for granting stay of recovery of penalty
  Visit to Get Source

  ---

Case Laws:

• GST

• 2019 (2) TMI 1286
  Release of detained goods alongwith vehicle - submission of petitioner is that petitioner has already paid the required tax for the goods which were being transported. In fact more tax amount has been deposited - Held that:- As per Rule 140, in case the owner of the goods furnishes the security in the form of Bank Guarantee equivalent to the amount of applicable tax, interest and penalty payable, the authorities can consider the release of the goods and vehicle. The writ petition is disposed of with the observation that petitioner shall furnish the security in the form of Bank Guarantee before the authority concerned, the concerned authority, thereafter may consider the release of of the goods and the vehicle and pass appropriate orders expeditiously say within a period of ten days thereafter.

  ---

• Income Tax

• 2019 (2) TMI 1285
  Deduction u/s 80IC - substantial expansion - exemption at the same rate of 100% beyond the period of five years on the ground that the assessee has now carried out substantial expansion in its manufacturing unit - HELD THAT:- Objectives for which Section 80-IC was enacted, an irresistible conclusion would be to grant 100% deduction of the profits and gains even from the year when there is substantial expansion in the existing unit. After all, this substantial expansion involves great deal of investment which has to be, at least 50% in the plant and machinery, of the book value thereof before taking depreciation in any year. With an expansion of such a nature not only there would be increase in production but generation of more employment as well, which would benefit the local populace. It is for this reason, carrying out substantial expansion by itself is treated as initial assessment year . It would mean that even when an old unit completes substantial expansion, such a unit also becomes entitled to avail the benefit of Section 80-IC. If that is the purpose of the legislature, we see no reason as to why 100% deduction of the profits and gains be not allowed to even those units who had availed this deduction on setting up of a new unit and have now invested huge amount with substantial expansion of those units. Judgment in the case of Mahabir Industries v. Principal Commissioner of Income Tax [2018 (5) TMI 1278 - SUPREME COURT OF INDIA] would, in fact, help the assessee. The fine distinction pointed out in Classic Binding Industries elopes thereby. To recapitulate, in Mahabir Industries, it was held that if an assessee get 100% exemption under Section 80-IB of the Act for five years and thereafter carries out the substantial expansion because of which said assessee becomes entitled to exemption under the new provision i.e. Section 80-IC of the Act, the assessee would be entitled to deduction @ 100% even after five years. This ruling was predicated on the ground that there can be two initial assessment years, one for the purpose of Section 80-IB and other for the purposes of Section 80-IC of the Act. Once we find that there can be two initial assessment years, even as per the definition thereof in Section 80-IC itself, the legal position comes at par with the one which was discussed in Mahabir Industries. Order:- Judgment of Classic Binding Industries case [2018 (8) TMI 1209 - SUPREME COURT OF INDIA] omitted to take note of the definition initial assessment year contained in Section 80-IC itself and instead based its conclusion on the definition contained in Section 80-IB, which does not apply in these cases. The definitions of initial assessment year in the two sections, viz. Sections 80-IB and 80-IC are materially different. The definition of initial assessment year under Section 80-IC has made all the difference. Therefore, we are of the opinion that the aforesaid judgment does not lay down the correct law. An undertaking or an enterprise which had set up a new unit between 7th January, 2003 and 1st April, 2012 in State of Himachal Pradesh of the nature mentioned in clause (ii) of sub-section (2) of Section 80-IC, would be entitled to deduction at the rate of 100% of the profits and gains for five assessment years commencing with the initial assessment year . For the next five years, the admissible deduction would be 25% (or 30% where the assessee is a company) of the profits and gains. In case substantial expansion is carried out as defined in clause (ix) of sub-section (8) of Section 80-IC by such an undertaking or enterprise, within the aforesaid period of 10 years, the said previous year in which the substantial expansion is undertaken would become initial assessment year , and from that assessment year the assessee shall been entitled to 100% deductions of the profits and gains. Such deduction, however, would be for a total period of 10 years, as provided in sub-section (6). For example, if the expansion is carried out immediately, on the completion of first five years, the assessee would be entitled to 100% deduction again for the next five years. On the other hand, if substantial expansion is undertaken, say, in 8th year by an assessee such an assessee would be entitled to 100% deduction for the first five years, deduction @ 25% of the profits and gains for the next two years and @ 100% again from 8th year as this year becomes initial assessment year once again. However, this 100% deduction would be for remaining three years, i.e., 8th, 9th and 10th assessment years. - Decided in favour of assessee.

  ---

• 2019 (2) TMI 1284
  Unabsorbed depreciation/business loss - MAT computation - HELD THAT:- The assessee has raised a question on this in the present appeal only because the remand report of the AO had specifically indicated the facts. In any event, the last fact finding authority, the Tribunal, having remanded the matter, holding the issue in favour of the assessee, and there is no appeal by the Revenue; we would not interfere such consideration by the AO in accordance with the order of the Tribunal. There is no question of law arising from the aforesaid issue. Provision for interest in a Bank loan made for the earlier years being permissible as a deduction under Explanation 1(i) to Section 115JB(2)- HELD THAT:- As noticed that the assessee's specific claim was that though the interest was shown as a provision in the earlier years, the same was disallowed under Section 43B. It is also contended that in computation of the MAT under Section 115JB, this amount was added back as an unascertained liability in the earlier years. The assessee had been communicating with the Bank as to a One Time Settlement [OTS] during the said period. Eventually in the previous year relevant to the subject year, 2006-07, the matter was settled with the Bank. The entire interest was waived by the Bank and also a portion of the principal. The interest so debited to the profit and loss account for the earlier years was, hence, debited from the reserve and credited to the profit and loss account for the subject year. The same had to be deducted under Explanation (i) to Section 115JB(2). The Tribunal found that the interest is an unascertained liability and ought not to have been disallowed in the earlier years. When the AO as per the remand report at Annexure-C specifically states that it is disallowed under Section 43B, it was not proper for the Tribunal to have taken such a view. GOI (Taxes) also argues that as of now it is not clear as to whether the same was added back under Section 115JB. The earlier issue having been remanded, it is only proper that the AO considers this issue also looking at the facts. We make it clear that the question of law raised as to whether the same was unascertained liability or ascertained liability is answered in favour of the assessee; if the same has been disallowed under Section 43B as an unascertained liability in the earlier years.

  ---

• 2019 (2) TMI 1283
  Deduction on account of payments made to the retired partners as admissible expenditure under the provisions of the partnership deed - compensation to the outgoing partner towards the appreciation in the value of the immovable properties held by the assessee firm to the extent of his share of the partnership - HELD THAT:- Undisputed facts are that the partnership firm envisaged payment to a outgoing partner on the basis that the partner would have rendered service during his tenure as a partner of the firm but could not enjoy the fruits thereof on account of the fact that the work having remained incomplete, the concerned client had not been billed for the work already done. In similar circumstances, the courts have held that payment to the partner would amount to diversion of income at source by overriding title. No substantial question of law arises for our consideration. The income tax appeal is dismissed.

  ---

• 2019 (2) TMI 1282
  Disallowance of sub-brokerage and sub-brokerage - assessee had failed to prove that any services were rendered by the parties to whom sub-brokerage was paid - HELD THAT:- The Tribunal, on the basis of the evidence on record, came to the conclusion that there was confirmations from the recipients regarding the payments as well as of rendering services. Additionally, we notice that in case of sub-brokerage charges of Rs. 82.27 Lacs (rounded off) which were part of larger disputed figure of Rs. 89.32 Lacs (rounded off) was offered to tax by the assessee in the later assessment year 1999-00 on the ground that due to denial of permission for remission of payment by Reserve Bank of India by order dated 20.11.1997, such payments could not be made. This is an additional reason why we would not interfere with the order of the Tribunal. Addition u/s 40A2(b) - Disallow 50% of the sub-brokerage charges paid by the assessee to related parties - HELD THAT:- Tribunal, while giving relief to the assessee, observed that the Assessing Officer had made disallowance without any reason. In the earlier assessment years, such expenditure was recognized and accepted. However, the Assessing Officer had not built up a case that payment was excessive so as to apply Section 40A(2)(b) of the Income Tax Act, 1961. In view of such findings of the Tribunal, no question of law arises. Disallowance of interest expenses - interest bearing funds of the company were used for purchase of shares on behalf of directors & family members of the directors - HELD THAT:- In the present case, the balance sheet of the company would show that the company's net worth was arrived at principally by taking into account its share capital, reserves and surplus and application money after adjusting the amounts transfered to profit & loss account. Thus, the facts involved in the present case are substantially similar to those examined in the case of Reliance Utilities and Power Ltd ( 2009 (1) TMI 4 - BOMBAY HIGH COURT) in which also to arrive at the amount of interest free funds available to the company, reference was made to its share capital, reserves and surplus and depreciation reserves. No question of law arises.

  ---

• 2019 (2) TMI 1281
  Unexplained cash credit - bogus claim of share application money - HELD THAT:- No merits in any of the contentions of the petitioner. Firstly, as noted, merely because the AO had examined the transactions during the original assessment proceedings, would not preclude him from subsequent inquiry it is shown on the strength of additional material establishing prime-facie that the disclosures made by the assessee were not true. If the entire claim is bogus and so established to be, the assessee would fail the test of true and full disclosure. Requirement of true and full disclosure runs through the entire assessment and it does not end on filing of return. Action against Shirish C, Shah provided certain information which was also processed by the AO before forming the belief that income chargeable to tax had escaped assessment. The entire reasons when read as a whole, more than sufficiently demonstrate the belief of the Assessing Officer that the entire assessment goes on bogus claim of share application money having been received by the assessee company. Therefore, lack of true disclosures is writ large on the face of the reasons. Mere non recitation of such expression would not invalidate the reasons or the fact that the reasons are based on allegations of lack of true and full particulars. AO had issued notice to Prabhav Industries under Section 133(6) of the Act which was replied and had not remained unreplied as suggested in the reasons. Firstly, this aspect has emerged in the rejoinder. Secondly, at this stage, in a writ jurisdiction, we would not entertain such disputed question since it is well settled that sufficiency of the reasons at the end of the Assessing Officer to form a belief that the income chargeable to tax had escaped assessment would not be within the purview of examination of writ court at this stage.

  ---

• 2019 (2) TMI 1279
  Notice issued by the authorities under Section 142 (1) - HELD THAT:- The petitioner received the notice only in the afternoon of 27.12.2018, though the hearing was supposed to be at 11 Am. As an element of bonafide conduct on the petitioner's part, notice that the very next day the petitioner filed its objections and sought ten more days time. Perhaps to avoid the technical tangles, the respondent authority completed the assessment proceedings by 31.12.2018. It will only serves the interest of justice if the petitioner is given one more opportunity. I, therefore, set aside the Ext.P6 assessment order and remand the matter to the respondent for fresh adjudication. Standing Counsel proposes that if the Court fixes a date, the Income Tax Officer will take up the matter on that date, when the petitioner's representative could appear before the authority. I reckon the proposal is feasible. Therefore, as a matter of mutual convenience for the parties, fix 26.02.2018 as the date of hearing before the Income Tax Officer.

  ---

• 2019 (2) TMI 1278
  Disallowance u/s 14A - HELD THAT:- Section 14A cannot be applied for the year, since the machinery provisions have not been brought in. As per the decision of the Hon'ble Supreme Court in C.I.T. v. ESSAR Teleholdings Pvt.Ltd., [2018 (2) TMI 115 - SUPREME COURT OF INDIA] Section 14A has application only from the year 2007-08. Hence, the question raised is answered against the Revenue and in favour of the assessee. MAT - addition made by AO for computation of the book profits under Section 115JB, adding on the provision for diminition in the value of assets as claimed by the assessee in its return - Held that:- Though the assessee claimed a larger provision in its return, the Assessing Officer has specifically declined the same and allowed in accordance with the accounting principles, in the regular assessment made in the case of the assessee. In such circumstances, it is only proper that the allowance as made by the Assessing Officer alone is added back for the purpose of computing the book profits under Section 115JB. The Assessing Officer cannot blow hot and cold and with respect to the very same claim there cannot be an amount disallowed in regular assessment which is added back under Section 115JB. The provision for upward revision by virtue of the specific item found in Section 115JB can only be of that permissible as a deduction in regular assessment. We, hence, uphold the order of the Tribunal and answer the question on facts against the Revenue and in favour of the assessee. Write back of excess provision - Held that:- The assessee on the basis of a dis-allowance made in the previous year, wrote back the amounts, which were shown as provision for that year. The Tribunal found that there was no possibility of the assessee being aware of the provision being disallowed when the returns were filed. Hence, it was held that there was no relevance to the decision in Goetze (India) Ltd. v. CIT, (2006 (3) TMI 75 - SUPREME COURT ). We also find that the tax effect for the subject year only increases by the write back from the provision. We do not find any question of law to be answered on the said issue Disallowance of claim of bad debts - Held that:- Tribunal, on facts, found that the assessee had claimed bad debts in excess of that found in the provision for bad and doubtful debts. However, to the extent, there was provision for bad and doubtful debts, it debited that account and the excess claimed was debited in the profit and loss account. We do not find any infirmity in the orders passed by the Tribunal on facts and find no question of law arising.

  ---

• 2019 (2) TMI 1277
  Penalty u/s 271(1)(c) - claiming excess loss of textile unit even after the said unit was demerged - HELD THAT:- At the time, when the assessee filed the return, the scheme for demerger was in pipeline. The assessee, therefore, had to make the claim in the return filed as if the profit or loss belongs to the company. The scheme of demerger was approved by the High Court which would take effect from earlier date. The assessee promptly brought these developments to the notice of the Assessing Officer and invited the order of reassessment making necessary adjustments in terms of the order of demerge - while filing the return itself, the assessee had brought to the notice of the Revenue that the scheme of demerger was pending before the High Court. The Tribunal, therefore, correctly deleted the penalty - Decided in favour of assessee.

  ---

• 2019 (2) TMI 1276
  Gain on sale of share - business income or capital gain - HELD THAT:- Tribunal was influenced by the facts that the claim of the assessee was accepted in the assessment order passed after scrutiny, that the assessee had dealt with few scrips for purchase and sale, that the assessee was a senior citizen and retired bank employee who had invested funds in different scrips in his individual capacity as well as in the capacity of a Karta of HUF and lastly that the assessee has not utilized any borrowed funds for making such investments. The investment was out of his own capital. In view of such relevant facts noticed by the Tribunal, we do not see any error in the view taken by the Tribunal

  ---

• 2019 (2) TMI 1275
  Condition imposed by the Tribunal for grant of stay - HELD THAT:- While granting an interim order, what is required to be seen is as to whether the assessee made out a prima facie case, as to whether the balance of convenience is in favour of the assessee and as to whether the assessee will be put to irreparable hardship if the interim order is not granted. Further, the Tribunal does not record any finding that the assessee has not made out a prima facie case. So far as the aspect of hardship is concerned, the Tribunal itself was conscious of the fact that on account of attachment of the bank account, the assessee was put to hardship. The third aspect namely balance of convenience has not been adverted to by the Tribunal. If the entire balance outstanding is directed to be paid, it may render the appeal petitions themselves as infructuous. Therefore, while granting a reprieve to the assessee, we also intend to protect the interests of the Revenue by slightly modifying the order passed by the Tribunal. Accordingly, the writ petitions are disposed of by directing the petitioner to pay a sum of Rs. 3,00,00,000/- (Rupees three crores only) in two instalments. The first instalment of Rs. 1,00,00,000/- (Rupees one crore only) shall be paid on or before 31.1.2019. The remaining amount of Rs. 2,00,00,000/- (Rupees two crores only) shall be paid either in one lumpsum or in two instalments on or before 15.3.2019.

  ---

• 2019 (2) TMI 1274
  Reopening of assessment - bogus claim of depreciation - HELD THAT:- Tribunal in the instant case after taking note of all the factual details, in our view, rightly held that the entire transaction was bogus and the assessee claimed depreciation on a lease to M/s Bellary Steels & Alloys Ltd,which were also bogus. Further, the Tribunal rightly held that the intention of the assessee was clearly malafide from the beginning. It manufacture evidence which fell flat in the face of deposition of related parties and other evidence brought in by the Assessing Officer. With these findings, the Tribunal rightly confirmed the order passed by the CIT(A). Since the assessee has engaged in fraudulent activity by making a bogus claim of depreciation. The assessee's intention is tainted with malafide and it attempted to create evidence which was self serving as related parties had uttered the truth. It defies logic as to how the cargo of 67,700 kgs could have been transported in two lorries. The transporter who is said to have been transported only SGCI rolls has stated that he never transported any rolls but transported only scrap. Therefore, the assessee is not entitled for any relief. As already held that the assessee is guilty of fraud and has perpetuated fraud todefraud the revenue. The assessee having resorted to unscrupulous and illegal activity is not entitled to any indulgence. Further, the Tribunal has noted that identical transaction was done even in the year 2008 where penalty was levied respect of similar transaction making a bogus claim for depreciation on SCGI rolls from the very same M/s Bellary Steels & Alloys Ltd. [2014 (1) TMI 1641 - KARNATAKA HIGH COURT] and this order of penalty was confirmed by the High Court in the case of CRN Investments (P)Ltd vs. CIT [2007 (2) TMI 166 - MADRAS HIGH COURT]. - Decided against assessee.

  ---

• 2019 (2) TMI 1273
  Unexplained investment in properties - assessment was made in the case of the assessee on the strength of documents recovered on a search conducted in the premises of one P.P.Bhaskaran - HELD THAT:- There was no ground for appeal for the assessee- P.P.Bhaskaran on the aspect of undisclosed investment with respect to Kuthuparamba property insofar as the same having been deleted by the Tribunal. Hence, as of now, the remand order would prevail and the observations made in the judgment dated 16.12.2016 later to the judgment directing remand, would have no effect. The issue with respect to the respondent herein would also stand remanded to the Tribunal. The Tribunal would consider the issue afresh. Other addition is with respect to undisclosed income in the property in Mahe - assessee points out that the issue in the case of Jafees Mohammed, P.P.Baskaran, and Abdul Gadhafi for the assessment year 2005-06 have been remanded back to the Assessing Officer. No warrant for deciding on the questions raised in this appeal. We merely direct the Tribunal to decide on the question of undisclosed investment with respect to the property in Kuthuparamba and the Assessing Officer to decide on the question of undisclosed income with respect to the property at Mahe.

  ---

• 2019 (2) TMI 1272
  Revision u/s 263 - scope of Commissioner's power under Section 263 - HELD THAT:- The Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd., vs. CIT [2000 (2) TMI 10 - SUPREME COURT] held that in order to revise an order under Section 263 of the Act, it must be erroneous and prejudicial to the interest of the Revenue. Tribunal rightly found that the completion certificate could be available only when the project is physically completed and as far as assessee's case is concerned, they had produced the completion certificate with reference to the previous year 2007-08 relevant to the assessment year 2008-09. Considering the factual aspects, we are of the view that the Revenue has not made out any case for interference with the order passed by the Tribunal. No substantial question of law.

  ---

• 2019 (2) TMI 1271
  Disallowance of exemption u/s 54F - LTCG - construction of bungalow on the plot of land was in the name of mother - AO observed that, no exemption u/s 54F could be allowed to the assessee for the expenditure incurred on the construction of the bungalow - HELD THAT:- The perusal of documents filed by the assessee reflect that the Grampanchayat had issued permission for construction of the said plot of land in the name of assessee and his brother vide Certificate dated 10.12.2010. The assessee has entered into construction agreement with M/s. Nirmitee Construction dated 24.12.2010 and had invested the whole consideration. The said amounts were paid to the builder and the receipts of payments are available. The assessee has also filed approved construction plan at page 3 of Paper Book and which is in the name of assessee and his brother. Further, the completion certificate dated 11.03.2013 has also been issued by the Grampanchayat which is also in the name of assessee and his brother, wherein it is clearly mentioned that approval for house construction was given on 10.12.2010 and the construction was completed on 03.03.2012. In such facts and circumstances, there is merit in the claim of assessee that against the capital gains arising in his hands the assessee is entitled to claim the deduction on account of his share of construction of the said property as per provisions of section 54F of the Act. Thus the assessee is held to be entitled to claim deduction under section 54F - decided in favour of assessee.

  ---

• 2019 (2) TMI 1270
  Undisclosed turnover - Turnover including capital disclosed during the course of survey - entire suppressed turnover was made as an income of the appellant u/s 68 - HELD THAT:- There is no dispute that this assessee is a commission agent / wholesaler in onion agricultural produce. The argument raised at the department’s behest is that of treatment of entire turnover amounting to Rs.1,13,00,000/- as undisclosed income of the taxpayer’s. We find no merit to agree with the Revenue’s instant sole substantive ground. The fact remains that this assessee deals with very highly unorganized business sector is an admitted fact. And also that the impugned turnover represents both cost of material as well as income component. The Revenue fails to rebut the fact that the assessee’s accepted profit margin as per records is @ 4% only. The CIT(A) has precisely adopted the said margin only to be assessee’s undisclosed income. We hold in these peculiar facts and circumstances that the learned lower appellate authority has neither committed any illegality nor irregularity in adding only the profit element in undisclosed turnover to be income of the impugned assessment year. We therefore decline Revenue’s both quantum appeals

  ---

• 2019 (2) TMI 1269
  Claim of deduction u/s 80P - assessee was Co-operative Society and had furnished the return of income declaring Nil income after claiming the deduction under section 80P - HELD THAT:- First reference is made to section 80P(2)(e) of the Act, wherein it is clearly provided that where the income is derived by Co-operative Society from letting of godowns and warehouses for storage / processing or facilitating the marketing of commodities, then whole of such income is exempt under section 80P(2)(e) of the Act. The interpretation of the CIT(A) in this regard was that the words used in the said sub clause are for income derived from letting of godowns or warehouses for different purposes i.e. storage, processing and also facilitating the marketing of commodities. There is no merit in the observations of CIT(A) in this regard. The assessee has clearly pointed out that it was solely engaged in the purchase and sale of fertilizers, seeds and pesticides. It was also pointed out that during the year, the storage plant of assessee was closed. The profits earned on purchase and sale of fertilizers, seeds, i.e. from its members to its members was claimed as exempt under section 80P(2)(e) of the Act and the same was allowed in the hands of assessee. However, the receipts on account of hamali of Rs. 5,71,378/- and commission income of Rs. 4,72,710/- was held to be not eligible for the aforesaid deduction under section 80P(2)(e) of the Act. With regard to said charges received during the year, it may be pointed out that the Central Government had appointed the assessee as sub-agent and had directed it to purchase pulses from NAFED and supply it to the farmers, against which it has received the aforesaid hamali and commission. The activity undertaken by the assessee was in line with the activity carried on by it vis-à-vis its members i.e. procurement of pulses and selling the same to its members. Here, the procurement was at the directive of the Central Government and for such services, the assessee received hamali and commission income. The said receipts in the hands of assessee are in line with the business activity carried on by it and hence, eligible for deduction under section 80P(2)(e). The issue raised in the present appeal is covered by the dictate CIT Vs. Bhandara Zilla Sahakari Kharedi Vikri Sangh Ltd. (1992 (1) TMI 13 - BOMBAY HIGH COURT), in the first instance, wherein it has been held that commission on sale of fertilizers is part of warehousing activity and exempt in the hands of Co-operative Society. Applying the said ratio to the facts of present case, we hold that the assessee is entitled to the deduction u/s 80P(2)(e) on the aforesaid hamali and commission income earned by it. The ground of appeal raised by assessee is thus, allowed.

  ---

• 2019 (2) TMI 1268
  Deduction u/s 80P for interest on Bank deposits with nationalized banks - HELD THAT:- After considering the ratio laid down by the Hon’ble High Court of Delhi in Mantola Co-operative Thrift & Credit Society Ltd. Vs. CIT [2014 (9) TMI 833 - DELHI HIGH COURT] of interest accrued on surplus funds, the issue was decided in favour of assessee - direct the Assessing Officer to allow deduction under section 80P(2) of the Act on FDR interest accrued / received from the nationalized banks. However, the said deduction is not allowable on Saving Fund interest received by the assessee, if any. The grounds of appeal raised by assessee are thus, allowed.

  ---

• 2019 (2) TMI 1267
  Unexplained income from undisclosed sources u/s 68 - substantial gain between the withdrawals and re-deposits in the Bank accounts - HELD THAT:- The assessee filed cash flow statement before A.O. which is supported by bank entries contained in both the Banks showing withdrawal of the amount in cash on different dates. The assessee also filed copy of the Agreement to Sell and cash receipts on sale of the car. Assessee referred to all the documents in the paper book and referred to the same items in the cash flow statement prepared by assessee. All the entries in the cash flow statement have not been doubted by the authorities below which are supported by documents on record. Thus, assessee has availability of cash with him. A.O. rejected the explanation of assessee because it was observed that once assessee has withdrawn the cash, it must be used somewhere else because of some necessity. CIT(A) found some substantial gain between the withdrawals and re-deposits in the same Bank accounts. Thus, onus was put upon assessee to prove that he has not spent the amount somewhere on withdrawal of the amount. However, the authorities below never doubted the documents on record and the cash flow statement filed by assessee. In this case the deposits were made after 4-5 years and it was directed that Revenue should show that assessee’s explanation should not be accepted, therefore, onus upon assessee would not lay to prove that amount withdrawn from the Bank have not been spent on some other items. A.O. has not brought any evidence on record that the amount withdrawn from the Banks have been spent by assessee somewhere else. There was no justification to reject the explanation of assessee on assumption and presumptions without bringing any evidence on record. Since the assessee is able to explain the source of the cash deposited in the Bank accounts through the cash flow statement, therefore, there was no justification to make the addition. There was no justification for the authorities below to calculate 2% of the expenses for earning of the income. Set aside the Orders of the authorities below and delete the entire addition. - Decided in favour of assessee.

  ---

• 2019 (2) TMI 1266
  Addition invoking Section 41(1) - amount waived by TamilNad Mercantile Bank Limited representing Term Loan for the purchase of machinery and for building construction - HELD THAT:- In view of the principles laid down in the cases of Commissioner Vs. Mahindra And Mahindra Ltd.[2018 (5) TMI 358 - SUPREME COURT] wherein as categorically held that Section 41(1) of the IT Act does not apply since waiver of loan does not amount to cessation of trading liability, the Tribunal is of the considered opinion that the findings of the Ld.CIT(A) on this issue stand confirmed. - Decided against revenue

  ---

• 2019 (2) TMI 1265
  Dismissal of appeal in limine for delay - statutory notices issued by the assessing officer could not be served on the assessee - HELD THAT:- As could be seen from record, assessment for the impugned assessment year was completed under section 144 of the Act since the statutory notices issued by the assessing officer could not be served on the assessee. It is also evident, learned Commissioner (Appeals) has dismissed the appeal filed by the assessee in limine on the ground that the appeal was filed beyond the period of limitation prescribed under the Act. On a perusal of the impugned order of Commissioner (Appeals) it is evident, though, in paragraph 3 of the order he has referred to the date of assessment order and date of filing of appeal before him by the assessee, however, he has not specifically mentioned when the assessment order along with the demand notice was served on the assessee. He has also not mentioned the quantum of delay. It appears, Commissioner (Appeals) himself was not sure about the actual delay, if any, in filing the appeal. There is no delay in filing the appeal before the Commissioner (Appeals). Therefore, in our considered opinion, Commissioner (Appeals) has erroneously dismissed assessee's appeal in limine on the ground of delay. In view of the aforesaid, we are inclined to set aside the impugned order of learned Commissioner (Appeals) and restore all the issues arising in the present appeal to learned Commissioner (Appeals) for de novo adjudication on merits.

  ---

• 2019 (2) TMI 1264
  Addition made towards unexplained cash deposit made in the bank account - CIT-A deleted the addition and directing the ld. AO to add only commission @0.25%on the total transactions - HELD THAT:- As find from the facts of the instant case, we deem it fit and appropriate, to remand the appeals to the file of AO for de novo adjudication with a direction to the assessee to co-operate with the ld. AO for presenting the true facts - the adjudication of commission percentage whether at 0.25% or 0.10%, becomes premature at this stage. Hence the cross objection preferred by the assessee is also remanded back to the file of AO. Since de novo adjudication of this entire issue is directed to the file of the ld. AO, the assessee is given full liberty to adduce fresh evidences, if any, in support of its contentions. Accordingly, grounds raised by the revenue in this regard and grounds raised by the assessee in cross objection in this regard are allowed for statistical purposes. Addition made towards unexplained liabilities in the form of share application money, sundry creditors - CIT(A) upheld this addition for want of evidences from the assessee - HELD THAT:- It is not the caes of the revenue that these creditors, share application moneys were not received by cheques by the assessee company. Hence these transactions might even be credited in the bank account i.e. Royal Bank of Scotland which is directed hereinabove to be verified by the ld. AO afresh. Hence, we deem it fit and appropriate, in the interest of justice and fair play, to remand this issue also to the file of ld. AO for de novo adjudication in accordance with law.

  ---

• 2019 (2) TMI 1263
  Addition u/s 41(1) on cessation of liability - addition in respect of sundry creditors - HELD THAT:- There was no dispute in respect of the liability of Rs. 1,37,860/- shown against M/s. S. I. International Ltd., and the amount is offered to tax as cessation of liability u/s 41(1) of the Act. In these circumstances, the finding rendered in impugned order of the learned CIT(A) on this issue in respect of Rs. 1,37,860/- is upheld and to this extent the assessee’s appeal is dismissed. For the other sundry creditor, the addition u/s 41(1) of the Act on account of cessation of liability is to be sustained only to the extent of Rs. 2,54,550/- and I hold and direct accordingly. - Decided partly in favour of assessee

  ---

• 2019 (2) TMI 1262
  Unexplained cash credits u/s 68 - unexplained share capital / premium - HELD THAT:- Mr. Tiwari is fair enough in not disputing all the intervening developments during the course of hearing. More particularly the clinching fact that sec. 131 process issued to the investors entities stood unresponded during scrutiny. We adopt the above detailed reasoning mutatis mutandis in this factual backdrop to restore the instant sole substantive issue back to Assessing Officer for factual verification as per law after affording adequate opportunity of hearing to the taxpayer. - Decided in favour of revenue for statistical purposes.

  ---

• 2019 (2) TMI 1219
  Addition on account of estimation of profit on sales not recorded in the books of accounts - AO made additions relying on the documents seized during search and the statements of witnesses recorded - HELD THAT:- Tribunal has arrived at conclusions which are purely factual in nature. The Tribunal concurrently came to the conclusion that there was no evidence in support of the additions made by the AO which was collected during search operations. The documents relied upon by the AO did not clearly bring about the on money transactions. During the remand report the parties to whom the property was sold were examined who clarified that no cash payments were made by the Assessee bringing on record no contrary material. In the absence of any perversity in the factual findings of the Tribunal, we see no question of law arises. - Decided against revenue.

  ---

• Customs

• 2019 (2) TMI 1261
  Principles of natural justice - non-consideration of the reply dated 17.01.2019, given by the petitioner to the show cause notice dated 17.10.2018 - Section 28 of the Customs Act, 1962 - Validity of SCN - Held that:- Only in cases where the show cause notice was issued without jurisdiction, this Court can exercise the power under Article 226 of the Constitution of India - In the instant case, after receipt of the reply from the petitioner, the respondent has fixed a date for personal hearing on 14.02.2019. Whatever defences available to the petitioner, including the additional defence than what was stated in the reply dated 17.01.2019, can be placed during the personal hearing before the respondent also. Ultimately, if the respondent fails to consider the submission of the petitioner in its final order under Section 124 of the Act, the petitioner has got alternate efficacious statutory remedy under the Act to redress his grievance. This Court is of the considered view that the Writ Petition filed by the petitioner is too premature and is devoid of any merits - this Court is inclined to direct the respondent to duly consider the reply dated 17.01.2019 to the show cause notice issued under Section 28 of the Customs Act, in accordance with law by giving the petitioner adequate opportunity during the personal hearing - petition disposed off.

  ---

• 2019 (2) TMI 1260
  Release of confiscated goods subsequently warehoused - the petitioner had paid the redemption fine as also demurrage charges to CONCOR - now the goods do not exist - Held that:- It is evident that when imported, there was doubt as to whether the goods answering to the description in the bills of entry could be permitted to be re-exported. It is not disputed that after 100% inspection which was made after detention of the goods, the customs authorities made the order on 8-6-2017. The order, in fact, imposed redemption fine which was apparently satisfied. The petitioner also paid demurrage charges to the CONCOR - there is no doubt that the petitioner’s grievance, in one sense, is justified. There is no doubt that the petitioner’s grievance, in one sense, is justified. However, as to the appropriateness of the remedy it seeks, the production of goods or their equivalent or some kind of compensation, this Court is of the opinion that the nature of dispute is such that it cannot be adjudicated in writ proceedings - The Court is of the opinion that the present petition seeking relief of release of goods which are no longer in existence cannot be granted - petition disposed off.

  ---

• 2019 (2) TMI 1259
  Valuation of imported goods - Styrene Monomer - rejection of declared value - enhancement of value - Held that:- The appellant had placed an order at the price of USD 872.50 which was almost 30% and 40% below the prevailing price. If the price was arrived at as per the agreement entered into between the supplier and the buyer, the price would have been USD 1333 PMT - there are significant force in the arguments in the impugned order to reject the price declared by the appellant - appeal dismissed - decided against appellant.

  ---

• 2019 (2) TMI 1258
  Concessional rate of countervailing duty (CVD) - N/N. 04/2006-CE dated 01.03.2006 as amended - Import of Cement in 50 kg bags - denial of concession on the ground that they were neither industrial nor institutional consumers - whether the initiation of proceedings by the Revenue to deny the benefit of Notification No. 04/2006-CE will pass the test of law or not? Held that:- What is not disputed is that in all these cases the Bills-of-Entry filed by the appellants herein, claiming various Clauses of Notification No. 04/2006-CE for concessional rate of CVD, were assessed and allowed clearance for home consumption. At this stage, there is no merit in one of the contentions of the Ld. Counsel that the concept of self-assessment of Customs Duty inter alia in respect of imported goods by the importer came into effect only by the Finance Act, 2011 with effect from 08.04.2011. The new Section 17 of the Customs Act, 1962 which came to be introduced with effect from 08.04.2011 provided for self-assessment of duty on imported goods by the importer himself. As per the clarifications given in Board Circular No. 17/2011-Cus. dated 08.04.2011, the importer, at the time of self-assessment, will ensure that he declares the correct classification, applicable rate of duty, value of benefit of exemption Notification claimed, if any, in respect of the imported goods while presenting Bill of Entry. Time Limitation - Held that:- The SCN have been issued at least more than one year after the disputed imports. In the other cases, Show Cause Notices have been issued more than two years after the imports had been made. At the same time, we note that the Show Cause Notices have been issued on the premise that the differential duty is liable to be recovered under Section 28 of the Customs Act, 1962 for the extended period of five years - there is no cogent evidence that has been unearthed by the Department to corroborate the allegations that the importers have sold the imported cement at higher rates, in retail, etc - the Department has not been able to establish ingredients like suppression, mis-statement of facts, etc., with incontrovertible evidence to justify invocation of extended period of limitation to initiate the impugned proceedings. The very same issue has already been addressed by the Tribunal in the case of M/s. Diamond Cement Vs. Commissioner of Central Excise, Bhopal [2017 (1) TMI 1476 - CESTAT NEW DELHI] on the matter of eligibility to concessional rate under serial number 1C of Notification No. 04/2007-CE. has held that the sale to the individual without any intermediary person is entitled for concessional rate of duty. The demands will not survive, both on limitation as well as on merits - It is seen that penalties have been imposed on the CHA alleging they have abetted in wrongly availing the benefit of exemption. Since the demands are set aside, the penalties on CHA also cannot sustain - Appeal allowed - decided in favor of appellant.

  ---

• 2019 (2) TMI 1257
  Valuation of imported goods - TX4000/2014-LINGS / FULL Stack (HW only) - rejection of declared value - enhancement of value based on similar goods - Rule 6 of Customs Valuation Rules, 1988 - scope of SCN - Held that:- In the first place, the demand of differential duty under Section 28 of the Act is not sustainable as the same has not been invoked in the show-cause notice and therefore the demand is beyond the show-cause notice. The products which were imported by the appellant were only hardware whereas the products compared with other importers were loaded with software also - Further Revenue has not been able to bring on record that the appellant and the supplier were related parties and there was any flow back from the appellant to the supplier. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (2) TMI 1256
  Refund of SAD - Unjust enrichment - rejection of refund on the ground that the burden of proof of having borne the incidence of 4% of special additional duty on import of steel rails had not been discharged - Held that:- The test of exclusion from receivables is meaningless without examining the corresponding entry for goods lying unsold and the logical trajectory of the lower authorities is patently erroneous. It is admitted that all the goods were not sold in the year of import and no evidence is on record to controvert this finding. Accordingly, the inclusion of the said amount in the balance sheet for the financial year 2008-09 suffices to establish that the burden of special additional duty had not been passed on to the buyers in the preceding years. Denial of refund not justified - appeal allowed - decided in favor of appellant.

  ---

• 2019 (2) TMI 1255
  Valuation of imported goods - inclusion of Demurrage charges in the assessable value - Held that:- The Customs (Valuation) Rules, 1988 was superseded by the Customs (Valuation) Rules, 2007 w.e.f. 10/10/2007. The Customs (Valuation) Rules, 1988 did not have specific provision for inclusion of ship demurrage charges. Such provision stands inserted only w.e.f. 10/10/2007. As such, there is no mandate for inclusion of the ship demurrage charges upto 10/10/2007. This issue was considered at length by the Larger Bench of the Tribunal in the Grasim Industries [2013 (10) TMI 246 - CESTAT AHMEDABAD], where it was held that In no stretch of imagination the demurrage can be included in the value of the goods for the purpose of assessment of customs duty under Section 14(1) of the Customs Act, 1962 or any other provision of the said Act. The Lower Authority is directed to re-assess Bills of Entry of the appellant for the period 02/03/2001 until 09/10/2007 (both days inclusive) without including the ship demurrage charges in the assessable value of the goods - appeal allowed - decided in favor of appellant.

  ---

• Insolvency & Bankruptcy

• 2019 (2) TMI 1254
  Contempt of Court - corporate insolvency resolution process - reliance Companies filed a writ petition in this Court as asked for quashing/closure of the corporate insolvency resolution process in view of settlement of disputes between them and Ericsson - HELD THAT:- The contempt of this Court needs to be purged by payment of the sum of INR 550 crore together with interest till date. As stated by the letter dated 21.01.2019, subject to any calculation error, an amount of INR 453 crore must be paid to Ericsson in addition to the deposit of INR 118 crore made in the Registry of this Court. The Registry of this Court is directed to pay over the sum of INR 118 crore to Ericsson within a period of one week from today. The RCom group is directed to purge the contempt of this Court by payment to Ericsson of the sum of INR 453 crore within a period of four weeks from today. In default of such payment, the Chairmen who have given undertakings to this Court will suffer three months’ imprisonment. In addition to the aforesaid sum being paid, a fine amounting to INR 1 crore for each Company must also be paid to the Registry of this Court within four weeks from today. This sum will be paid over to the Supreme Court Legal Services Committee. In default of payment of such fine, the Chairmen of these Companies will suffer one month’s imprisonment.

  ---

• Service Tax

• 2019 (2) TMI 1253
  Classification of services - business auxiliary services or commercial training and coaching services? - appellants provided service to Duke CE USA by providing training to the clients of Duke CE USA under exchange of programme support - Held that:- The nature of service is not under dispute. The appellants are providing service to the third parties who are clients of M/s Duke CE USA who in turn is their client. The payment received by the appellant from Duke CE USA is in convertible foreign exchange. From the above it is apparent that the training provided by the appellants is not provided to the employees of M/s Duke CE USA but to the clients of M/s Duke CE USA on their behalf. In these circumstances, the service provided by them would be properly classifiable as BAS as the expression “provision of service on behalf of the client” specifically covered under Clause (vi) of the definition of BAS. It is apparent that the appellants are providing the training to the clients of Duke CE USA on behalf of the Duke CE USA and receiving remuneration in convertible foreign exchange. Thus, the service provided by the appellant is rightly classifiable as BAS. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (2) TMI 1252
  Refund of unutilized Credit - export of services - Rule 5 of CENVAT Credit Rules, 2004 - rejection on the ground of nexus and also on the ground of non production of documents - Held that:- Appellant admits that they were not able to produce the documents but will be able to do so now. These documents, when submitted by the appellant, need to be considered by the adjudicating authority to decide the admissibility of refund on this count. Denial on account of nexus - Held that:- once the credit of CENVAT is allowed, refund of the same cannot be denied. In fact when the CENVAT credit is wrongly availed, the same needs to be recovered from the appellant, by issuing of an appropriate show cause notice. As far as the cases where credit was taken when the specific service clearly excluded from Rule 2(l) of CCR 2004 is concerned, it is true that the credit first be denied. However, where the appellant is not entitled to the credit in the first place, it is inconceivable to refund the same. Denial on the ground that the invoices were not in the name of the appellant - Held that:- What is relevant is whether the appellant had received those services in production of their output services, even if there is some error/omission in the name and address in the invoices. As long as the input services/inputs were actually used by the appellant in production of their output services, credit cannot be denied merely on the ground that invoice was not in their name. This requires examination of records in respect of each of such invoices to ascertain factual position - matter remanded. Appeal allowed by way of remand.

  ---

• 2019 (2) TMI 1251
  CENVAT Credit - input services - Errors Omissions Liability Insurance Policy obtained by the appellant for themselves as well as to their subsidiaries - Held that:- Admittedly, the amount of insurance policy paid by the appellant is not wholly utilized by the appellant but the same includes proportionate amount paid by the appellant on behalf of the subsidiaries. It is also a fact on record that the amount attributable to the local subsidiaries, the appellant has paid service tax which shows that the appellant was having considered view that the proportionate amount attributable to the subsidiaries, the appellant is not entitled to take cenvat credit, therefore, the appellant charged amount of service tax from the subsidiaries located within India. Further, the contention of the Ld. Counsel for the appellant is that the appellant is providing Business Support Service to their subsidiary companies is not acceptable as the insurance policy has been obtained by the appellant as a global policy for their subsidiaries located in India as well as outside India and appellant is only recovering the consideration attributable to those subsidiaries by issuance of the debit notes on cost basis and charging service tax for the subsidiaries located in India. In that circumstances, it cannot be said that the appellant is provided any business support service to their subsidiaries. Therefore, the said contention of the appellant is not acceptable. The last contention raised by the Ld. Counsel that there foreign entities and the appellant are same, therefore, they are entitled to take cenvat credit. If the said contention is taken to be correct, in that circumstances, why the appellant has recovered proportionate amount of consideration form their subsidiaries. If the appellant is recovering any amount attributable to their subsidiaries, therefore, the appellant itself is considering their subsidiaries are all together different from the appellant. In that circumstances, also the appellant is not entitled to take cenvat credit for the services availed by third party - the appellant is not entitled to avail cenvat credit on the proportionate consideration of the amount on Errors Omissions Liability Insurance Policy attributable to their foreign entities, therefore, the same is required to be reversed by the appellant. Extended period of limitation - Held that:- The appellant has taken the cenvat credit in the guise of export of services which was well within the knowledge of the appellant that for the services which has been provided by Insurance Company on account of third party, the appellant is not entitled to take cenvat credit - extended period rightly invoked. There is no infirmity in the impugned orders qua demand on account of reversal of cenvat credit and imposition of penalty - appeal disposed off.

  ---

• 2019 (2) TMI 1250
  Penalty u/s 77 and 78 of FA - entire service tax demand along with interest before issuance of the show cause notice - Manpower Recruitment and Supply agency Service - Held that:- It is brought out from the records that the entire service tax liability along with interest has been paid up by the appellant before issuance of the show cause notice. Sub-section (3) of Section 73 states that when the service tax along with interest is paid up as pointed out by the officers or on own ascertainment by the assessee, no penalty are to be imposed. Tribunal in the case of Onward E-Services Ltd. Vs. Commissioner of Service Tax, Mumbai [2018 (5) TMI 323 - CESTAT MUMBAI] has also held that Section 73(3) would apply when service tax along with interest has been paid up by the assessee. Penalty set aside - demand with interest upheld - appeal allowed in part.

  ---

• 2019 (2) TMI 1249
  Banking and Other Financial Services (BOFS) - providing corporate guarantee for a consideration - whether the commission received / paid by the appellant for providing / receiving corporate guarantees (CGs) to/from their associate / subsidiary companies would be exigible to service tax under the category of BOFS for the purpose of Finance Act, 1994? Held that:- There is no allegation that the appellant herein has performed any of the category of services listed in Sl. No. (i) to (viii) under section 65(12)(a) ibid. The activity of providing bank guarantee under section 65(12)(ix) ibid under which head the show cause notice has premised the proposed demand, is under the residual category of services listed as other financial services . But here also, a comprehensive and specific list of such residual services has been given and made absolute by usage of the word namely before such listing - only the services which are listed in Section 65(12)(a)(ix) ibid will be exigible to service tax under that group. A corporate guarantee is a guarantee given by the corporate to cover their own exposure or exposure of some other related entity to their bank. Bank guarantees are issued by Bank on a regular basis as part of their business of Banking. It is nobody s case that appellant is doing the business of providing corporate guarantee on a regular basis. The corporate guarantee that was entered into by appellant is only for the limited purpose of securing loans to its subsidiaries. Corporate guarantees are issued in order to safeguard the financial health of their associate enterprises and to provide it support. For banks, providing bank guarantee is part of their regular course of business and they charge rate on the higher side. Further, these are fool proof instruments of security of the customer and failure to honour the guarantee is treated as a deficiency of services of the bank under banking laws. Corporate guarantee is actually an in-house guarantee and is not issued to customers generally. There is no merit in the propositions of Revenue that the guarantee issued by the appellant was only providing bank guarantee by a body corporate and secondly, the commission received / paid for issue / receipt of such guarantees to / from associate / subsidiary companies are exigible to service tax liability under section 65(12)(a)(ix) of Finance Act, 1994. The activity of issue of corporate guarantees by the appellant from their associate / subsidiary companies in India and also the procurement / receipt of corporate guarantee from their parent / associate company abroad will not come within the fold of section 65(12)(a) ibid and in particular sub-clause (ix) of that provision. The appellant succeeds on merits. Time limitation - revenue neutrality - Held that:- The show cause notice dated 22.4.2010, 22.10.2010 and 19.9.2011 have been issued for the periods 2004 2011. The appellant has furnished the documents with regard to the audits conducted. The audit report conducted from 18.6.2007 to 29.6.2007 has not raised any objection of non-payment of service tax for providing corporate guarantee. Prior to this an audit was conducted from 19.9.2006 to 21.9.2006 and the report does not show any such objection. All these would go to show that the appellant has not suppressed any facts with intention to evade payment of tax - SCN invoking extended period cannot sustain - appeal succeeds on limitation also. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (2) TMI 1248
  Valuation - non-inclusion of TDS amount in assessable value - reverse charge mechanism - services received from foreign service provider - Held that:- The appellant has furnished documents to show that though TDS amount is deposited the same is borne by the appellant and has not been made part of the consideration. On perusal of documents, we are convinced that TDS has been borne by the appellant - reliance placed in the case of M/S. MAGARPATTA TOWNSHIP DEVELOPMENT AND CONSTRUCTION CO. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-III [2016 (3) TMI 811 - CESTAT MUMBAI] - the demand of service tax alleging that TDS has not been included in the gross value is incorrect on facts and cannot sustain. Valuation - inclusion of the expenses of air fare, accommodation service and other incidental expenses incurred for the foreign service provider in assessable value - Held that:- Service tax is payable on the gross amount charged as consideration which will include the expenses for rendering service also. The appellant has not been able to establish that these expenses are reimbursable expenses. When the expenses are incurred for providing the services, these are definitely includable in the value for discharging the service tax liability - demand upheld. Classification of services - GTA Services or clearing and forwarding agency service? - appellant has contended that the services were provided as part of clearing and forwarding service - Held that:- It is seen that the CFS agent has charged the appellant separately as freight charges for GTA service. When the appellant has paid the freight charges for transportation of the goods, they are liable to discharge the service tax under this category as service recipient - demand set aside. Penalty - Held that:- It is seen that they have been paying service tax as well as filing the returns regularly. The non-payment of service tax under these two categories was with regard to bonafide belief as to the interpretation that the appellant entertained - penalty do not sustain and is set aside. Appeal allowed in part.

  ---

• 2019 (2) TMI 1247
  Vocational institute or not - professional training to individuals in the field of foreign trade for a consideration at Madurai, Coimbatore and Chennai - Department was of the view that the appellant’s institute is not a vocational institute as the participants do not immediately qualify for employment or for self-employment - Held that:- The appellant has rendered professional training relating to various procedures and statutory compliances to be made in relation to export / import of goods in the field of foreign trade. The training course is designed in such a way that all procedures, statutory requirements, foreign trade policy of the Government, prospective industries and area of export / import etc. are made familiar to the participants - they squarely fall within the definition of vocation training institute in the Explanation (i) of Notification 9/2003-ST dated 20.6.2003 and 24/2004-ST dated 10.9.2004 to qualify for exemption from taxability under Commercial Training or Coaching Service. There cannot be any tax liability for the predominant period of dispute, except for the period between 1.7.2004 and 9.9.2004 under Commercial Training and Coaching service - However, for the period from 1.7.2004 to 9.9.2004, the matter requires to be remanded back to the adjudicating authority to calculate the tax liability for that period - appeal allowed by way of remand.

  ---

• 2019 (2) TMI 1246
  Levy of service tax - immovable property given in settlement of agreement - operation and licence agreement - termination of the agreement - demand of service tax raised on the value of immovable property which was given to them as part of settlement deed - Held that:- After 18.4.2006, it can be seen that even if consideration is received as kind or other than money, the value of such kind other than money is also subject to levy of service tax. The value of any immovable property received as consideration would be subject to levy of service tax after 18.4.2006. In the present case, the appellants have received consideration in the nature of money as well as in the nature of immovable property. They paid up the service tax on the consideration received in the form of money. Even if the value of the immovable property is shown in the books of accounts in terms of money, it will not change the nature of the consideration received. The amendment brought forth with effect from 18.4.2006 makes it clear that prior to this date there was no intention to levy service tax on consideration received in the nature other than money. After the final settlement, undisputedly there has been no service provided by the appellant to SHRIL. Though part payments might have been received, such payments including the immovable property is for the services provided (or settled) upto 1.3.2006. It is also to be mentioned that prior to 2011, the service tax has to be discharged on receipt basis and not accrual basis. Though balance payments in the nature of money was received after 1.3.2006, the appellant is liable to pay service tax on such amounts since even prior to 18.4.2006 the consideration in money is taxable. For the immovable property received after 1.3.2006, there can be no levy of service tax since the provision of service is complete on 1.3.2006. The Board vide Letter No. 334/4/2006-TRU dated 28.2.2006, in para 8(1)(f) has clarified that the amendment to Section 67 proposes to include consideration received not wholly in terms of money. The demand of service tax on the value of immovable property to the tune of Rs. 30,60,000/- with the penalties thereon cannot sustain and requires to be set aside - As the assessee is not contesting the demand of service tax of Rs. 33,53,890/- with interest thereon, no interference is made in respect of this demand, however, penalty set aside. Appeal allowed in part.

  ---

• 2019 (2) TMI 1245
  Wrong availment of Cenvat credit - discrepancy in the figures shown in the ST-3 Returns as compared with the figures in the financial statement of the appellant - reverse charge mechanism - Held that:- The demand of the amount of Rs. 1,39,322/- arose out of calculation mistake in the year 2014-15, while deducting-commission paid of Rs. 49,434/-which has been inadvertently added twice (Table-II) and CENVAT Credit of Rs. 3,689/- and Rs. 10,883/- had been allowed less in the year 2013-14 and 2014-15, respectively, thereby causing demand of Rs. 1,39,322/- which is not payable by the appellant and the demand of Rs. 1,39,322/- is liable to be set aside - Further, Security Service charges under reverse charge mechanism, 75% of Service Tax on gross amount which should be Rs. 9,10,180/- and service tax arises thereon Rs. 1,12,500/- instead of Rs. 1,23,563/- as wrongly calculated by the Department which requires rectification in the demand. Under the above circumstances, no demand was payable by the appellant. Penalty - CENVAT Credit - common input service of “Security Agency Service” - providing the exempted service namely “Trading of Goods” and taxable service such as vehicle repairing service and business auxiliary service - Held that:- The element of mis-statement, suppression of facts etc. with an intent to evade payment for service tax. Accordingly the penalty imposed under Section 78 is liable to be set aside - penalty set aside. Appeal disposed off.

  ---

• 2019 (2) TMI 1244
  CENVAT Credit - input services - Overseas Mediclaim Insurance Policy for employees who were sent for undertaking works in their project abroad - Held that:- The definition of “input service” with effect from 01.04.2011 excludes life and health insurance services availed for personal use or for personal consumption of employees - The definition of “input service” with effect from 01.04.2011 excludes life and health insurance services availed for personal use or for personal consumption of employees The Hon’ble jurisdictional High Court in the case of M/s. Ganesan Builders Ltd., [2018 (10) TMI 269 - MADRAS HIGH COURT] has analysed the very same issue with regard to the definition of “input service”, after 01.04.2011 and held that credit on such insurance services is eligible. - appeal allowed - decided in favor of appellant.

  ---

• Central Excise

• 2019 (2) TMI 1243
  Refund of central excise duty - duty was paid under protest - applicability of time limitation - Section 11B of the Central Excise Act, 1944 - whether the period of limitation of six months shall apply where the refund of central excise duty has been claimed by the buyer and paid by the manufacturer(M/s. Fenner (India) Ltd.) under protest? Held that:- Section 11B deals with the claim of refund of duty as paid on his own accord by any person for refund of such duty to the competent authority before the expiry of six months from the relevant date as prescribed but where the duty was paid under protest in terms of the 2nd proviso to Section 11B(1), the period of limitation may not apply. Although the buyer can also apply for refund provided the duty of excise is borne by the buyer and he had not passed on the incidence of such duty to any other person as referred to under Section 11B(2)(e) and the application has been moved within the period of six months from the relevant date of purchase of the goods by such person in terms of Section 11B(5)(B)(e) of the Act - The scheme of Section 11B makes a distinction between right of the manufacturer to claim refund from right of the buyer to claim refund treating them separate and distinct for making an application for refund exercising their right under Section 11B of the Act. In the instant case, indisputedly the application was filed by the appellant as a buyer of the goods(conveyor belts) from M/s. Fenner (India) Ltd. who paid the duty under protest much after a period of limitation(six months) as prescribed under the mandate of law disentitles the claim of refund to the appellant - appeal dismissed - decided against appellant.

  ---

• 2019 (2) TMI 1242
  Restoration of appeal - Benefit of CENVAT Credit - Credit on sugar cess - CENVAT credit taken on Sugar Cess paid as countervailing duty or CVD - Held that:- The application for restoration is allowed.

  ---

• 2019 (2) TMI 1241
  Restoration of appeal - appeal was dismissed for noncompliance of pre-deposit order under Section 35F of the Central Excise Act, 1944 and Section 86 of the Finance Act - Held that:- The substantial questions of law raised in this appeal has been considered by the Hon ble Division Bench of this Court in the case of Classic Builders (Madras) Pvt. Ltd. Vs. CESTAT, Chennai [2016 (4) TMI 687 - MADRAS HIGH COURT] and the substantial questions of law were answered in favour of the assessee - it was held in the case that Even if no pre-deposit is made, the appeal may not be heard, but the dismissal of the appeal for non-compliance of pre-deposit does not permit the appellate authority to refuse to restore the appeal upon compliance being shown. This appeal is allowed and the order passed by the Tribunal is set aside and the appeal is restored to the file of the Tribunal and to be heard and decided on merits.

  ---

• 2019 (2) TMI 1240
  Levy of excise duty - loss of molasses in a fire - Held that:- When an excisable commodity is lost on account of fire, Assessee is not absolved of obligation of payment of duty but circumstances wherein duty can be remitted are provided in Rule 147 of Central Excise Rules, 1944 - In the present case, dispute relates to molasses which are capable of getting lost due to auto combustion, which is a natural phenomena. However, if certain preventive measures are to be taken and such measures were not taken by Assessee, no remission of duty can be done. If loss is attributable to negligence of assessee, he may be liable to pay duty. It is evident that factum that molasses is capable of auto combustion is an admitted fact and it is also admitted that it is a natural phenomena but remission has been denied to the petitioner on the ground that he failed to take preventive measure but what preventive measure could not be taken by petitioner to prevent loss of molasses due to fire, nothing is stated in the notice issued earlier nor in the order of adjudication dated 03.01.1989 - Since department never confronted that petitioner has not taken such preventive measures as required and impugned order has been passed by assuming that such preventive measures have not been taken, the order is non speaking and unsustainable. Matter needs reconsideration - appeal allowed by way of remand.

  ---

• 2019 (2) TMI 1239
  Valuation - inclusion of value of cash discount not availed by the buyers in assessable value - case of the department is that the cash discount which was not availed by the buyers is part and partial of the transaction value - Held that:- Cash discount is additional discount that in case the buyer make the payment within 4 days from the date of sale, 2% discount is given and in case payment is made in 14 days, 1% discount is given. Being conditional discount operated only when time line given, but the discount is not given to if the payment is not made within the stipulated time i.e. 4 days or 14 days, as the case may be, the scheme of discount is not operated, in such a case - Amount of discount initially offered by the appellant, which was subsequently paid by the buyer shall become part and partial of transaction value falling under the definition of transaction value given in Section 4 of Central Excise Act 1994. Cash discount which is not at or prior to clearance of goods being contained in agreement of sale between assessee and buyers must, therefore, be deducted from sale price in order to know the value of excisable goods at time. Hence, cash discount was deductible. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (2) TMI 1238
  Demand of Central Excise duty - duty free procured indigenous raw materials (Polyester Yarn - POY) - Demand on the premise that appellant had shown exaggerated production capacity with intent to procure excess duty free raw materials and had diverted the same in the open market, without payment of duty - ex-aprte order - principles of natural justice - Held that:- The order was passed ex-parte and no hearing was conducted. The repeated request of the appellant for cross-examination of witnesses whose statements were recorded, was not geven any heed. The entire case was passed on theoretical calculation made on the basis of a formula certified by the Chartered Engineer and some statements of job workers. In these facts, it was necessary on the part of the Adjudicating Authority to provide cross-examination of the witnesses and it is mandatory under Section 9D of the Central Excise Act, 1944. The impugned order passed without allowing the cross-examination and without conducting effective personal hearing is in gross violation of principles of natural justice. Therefore, the impugned order cannot be sustained - matter remanded to the Adjudicating Authority for passing a fresh order after conducting examination/ cross-examination of the witnesses - appeal allowed by way of remand.

  ---

• 2019 (2) TMI 1237
  Demand of Central Excise duty - yarn manufactured within the factory and consumed for manufacture of Narrow Woven Fabrics - Captive consumption - benefit of SSI Notification No. 8/2003-CE dated 01.03.2003 - Held that:- There is contradiction in the claim that the appellant. They have stated that they did not have twisting machine. In the statement of Shri Jitendra Kumar P. Mansuriya, Partner of the appellant, it has been stated that they did not have twisting machine but the appeal memoranda suggests that they have the machine. The facts therefore needs verification. It is obvious that Narrow Woven Fabrics cannot be manufactured using unstable yarn which is not twisted. The appellant in their appeal memoranda also have themselves stated that unstable yarn cannot be used for multifilament and Narrow Woven Fabrics is produced by the process of weaving - The law is very clear, if the yarn produced at the intermediate stage is twisted /texturised before use for weaving the same is liable to Central Excise duty. However, if twisted/terturised yarn does not come into existence before weaving, it may not be taxable - the facts needs verification. Appeal allowed by way of remand.

  ---

• 2019 (2) TMI 1236
  Change of classification of he product - 12 Hydroxy Stearic Acid - Ricinoleic Acid - change of classification from Chapter heading 2915 and 2916 to Chapter heading 3823 - Held that:- The classification of products depend on the purity. For classification under Chapter heading 29, the product has to be separate chemically defined organic compound . The perusal of the test report shows that the sample consists of Ricinoleic Acid (by GC)= 85.70%, Linoleic Acid (by GC)=4.39%, Oleic Acid (by GC)=3.00%, Palmitic Acid (by GC)= 1.10% and Stearic Acid(by GC) =1.66%. Thus the samples contain total of 95.85% fatty acid. Similarly the other sample consists of 12-Hydroxy Stearic Acid(by GC)=85.20%, 12-Keto Stearic Acid (by GC)=1.48%, Stearic Acid (by GC) = 10.40% and Palmitic Acid (by GC)=1.20% i.e. it contains of total of 98.28% of fatty acid - reliance is placed on Chapter note 1(a) which clearly holds that separately defined organic compounds are to be decided in Chapter 29 even if they contains impurities. The treatment to be given to mixtures of isomers is clarified in Chapter note 1(b). In the instant case, the mixtures is not as isomers and are different acids and not isomers. In these circumstances, the criteria for classification would be the percentage of Ricinoleic Acid and 12-Hydroxy Stearic Acid - If we apply the exclusion clause to Chapter heading 2915 and 2916 to the above facts, it transpires that the product containing less than 90% of Ricinoleic Acid or 12-Hydroxy Stearic Acid would be classifiable under Chapter 3823 and not under Chapter 2915 or 2916. Thus, if the concentration of 12-Hydroxy Stearic Acid is above 90%, the product will be classifiable under Chapter 29, otherwise not - appeal allowed - decided in favor of appellant.

  ---

• 2019 (2) TMI 1235
  Job work - duty liability is on Job worker or on principal - readymade garments (trousers) - Neither M/s Ayush Apparel nor Job worker M/s S.P. Associates paid the duty on the said readymade garments - Revenue’s contention is that the cum duty benefit extended by the Commissioner is not correct - Held that:- During the relevant period, in terms of Rule 7 AA of Central Excise Rules, 1944, there is a specific provision that in case of Job work, the principle was supposed to pay the duty unless and until he authorizes the job worker to discharge the duty. In the present case, the principal that is M/s Ayush Apparels has not authorized the job worker M/s SP associates to discharge the Excise Duty. Therefore, the M/s Ayush Apparels was legally liable for payment of duty even though he did not manufacture the goods and the job worker has manufactured the goods. Accordingly, there is no doubt that the principal M/s Ayush Apparels is liable to pay the duty. As regard the submission of Ld. Counsel that the manufacturer alone has to discharge the duty, it has no force for the reason that as per section 3 of Central Excise Act, 1944, it is provided that “there shall be levied and collected in such manner as may be prescribed a duty of excise”. As per this provision, the Government has power to prescribe the manner of levy and collection of duty. In the case of readymade garments, the Government has prescribed the manner by way of Rule 7AA in the Central Excise Rule, 1944. Therefore, by this specific provision even though in normal course, a manufacturer is supposed to pay duty but, in this case, the principal supplier of Raw material is legally liable to pay the duty. Therefore, the demand confirmed on the principal M/s Ayush Apparels is in principle upheld. Cum-duty benefit - Held that:- There is nothing wrong in that benefit given by the Commr. (A) as the same was on the basis of Hon’ble Supreme Court judgment in the case of Maruti Udyog Ltd. [2002 (2) TMI 101 - SUPREME COURT]. Appeal allowed in part.

  ---

• 2019 (2) TMI 1234
  CENVAT credit - common input services for dutiable as well as exempt goods - advertisement service is commonly used for Jammu and Kashmir unit as well as Kadi unit - at Jammu and Kashmir, appellant are availing exemption Notification No.56/2002 and 57/2002 both dated 14.11.2002 - Held that:- Even though there are two units of one assesse, prior to insertion of clause (d) in Rule 7 of the Cenvat Credit Rules 2004, there was no compulsion that in case of more than one unit the distribution of the cenvat credit should be done on the turnover of individual units. Therefore, prior to the said amendment i.e. before 01.04.2012 if the assesse has more than one unit entire credit can be taken in any one of the unit - However in the facts of the present case, the two units are located one in J&K and other in Kadi. As regard the J&K Unit, the appellant are availing exemption Notification 56/2002-CE. Any credit availed by unit who is availing the exemption notification 56/2002-CE the said credit can be utilized only for payment of duty on final product in respect of which exemption under the said respective notification is availed of - In the facts of the present case the credit attributed to J&K Unit was availed by the appellant in their Kadi Unit wherein Notification No. 56/2002-CE is not applicable. Consequently the appellant was neither entitled to take the credit nor able to utilize the same in the Kadi Unit - Therefore, the appellant for wrongly availed and utilized the cenvat credit in respect of advertisement service attributed to J&K unit. The appellant has wrongly availed the cenvat credit in respect of advertisement service attributed to the J&K Unit - appeal dismissed - decided against appellant.

  ---

• 2019 (2) TMI 1233
  Default in payment of Central Excise duty - applicability of Rule 8 (3A) of the Central Excise Rule, 2002 - Revenue was of the view that during the period of default, the appellant was required to make payment of Central Excise duty on consignment to consignment basis under Rule 8 (3A) without utilizing the cenvat credit, which has not been complied with - Held that:- The Jurisdictional High Court at Calcutta, in the case of Goyal MG Gases Pvt. Ltd has followed the decision of the Gujarat High Court in Indsur global Ltd. V. Union of India [2014 (12) TMI 585 - GUJARAT HIGH COURT] and has held the portion of rule 8 (3A) as ultra vires. There is no bar in making use of the accumulated Cenvat Credit in making payment of Central Excise Duty even during the default period - appeal allowed - decided in favor of appellant.

  ---

• 2019 (2) TMI 1232
  Demand of Interest u/r 14 of Cenvat Credit Rules, 2004 - Excess availed CENVAT Credit on imported goods reversed - Rule 3 (i) of CCR, 2004 - Held that:- The interest liability under Rule 14 of Cenvat Credit Rules, 2004 if read with Section 11B of the Central Excise Act, 1944, is applicable when there is delay in payment of duties. The provisions make it clear that no liability to pay duty arises at the time of availment of cenvat credit. It arises only at the time of utilization thereof. Thus, it becomes clear that where the credit has wrongly been availed but has been reversed prior it being utilized by the assessee, no question of any interest liability at all arises. Hon’ble Apex Court in the case of Commissioner, Excise, Mumbai vs. Bombay Dyeing and Manufacturing Co. Ltd. [2007 (8) TMI 2 - SUPREME COURT] has held that where the entry has been reversed before utilization thereof, it amounts to not taking of the credit. Hence, the question of payment of interest does not at all arise. Time Limitation - Held that:- The Department was entitled to invoke the proviso thereof to have the extended period of limitation, but only in the case where there is any apparent act on the part of the appellant to evade the payment of duty/interest - But present is the case of voluntary reversal of the cenvat credit, that too, before utilization thereof. Question of any malafide intent or the mensrea to evade the duty does not at all arise - invocation of extended period was not justified on the part of the Department. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (2) TMI 1231
  CENVAT Credit - inputs - maintenance charge paid by the appellant against the lease for establishing and running the factory - Held that:- The consideration paid under the lease deed is classified as annual lease rent as well as the annual maintenance charges for the development of the industrial area. It is observed that the said lease annual rental has been acknowledged as the eligible input for availing cenvat credit. Since the maintenance charges, irrespective for industrial area, are very much the part of the same lease document thereby forming the part of annual lease rental, to my opinion, falls into the same category as that of annual lease rental - the adjudicating authority has denied the credit on these maintenance charges by wrongly holding the said amount towards the construction services. Otherwise also it is apparent from the lease deed itself that the said maintenance charges though are for the maintenance of the industrial area beyond the impugned factory but are calculated at the rate of per square meter of the leased factory wherein the final product of the appellant has to be manufacture - Availability of suitable industrial plot is an essential requirement for the manufacture of the goods of the appellant. The maintenance charges are also the eligible inputs - credit allowed - appeal allowed - decided in favor of appellant.

  ---

• 2019 (2) TMI 1230
  SSI Exemption - unit is situated in rural area or not - use of brand name of others - clearance of goods on behalf of “loan licensee” where the goods were cleared under brand name of loan licencee - unit falling in rural area or not - Held that:- The appellant’s factory is located at GIDC (Gujarat Industrial Development Corporation) area - The Appellant has produced certificate issued by the GIDC which makes it clear that the appellant has been allotted land by the GIDC on lease hold right basis for purpose of industrial activities. The GIDC has acquired the land by Land acquisition act provisions of industrial activities. It effectively means that the land has become an industrial land and is a notified area for industrial activities - once the area is declared as industrial area it would also be deemed notified area under the Gujarat Municipality Act, 1963. This is a deeming fiction and does not take any other formality and the notified area is ipso facto governed by the provisions of Gujarat Municipalities Act, 1963. This also means that such area has come out of the purview of Gram panchayat that it does not remain the rural area. The survey number of the land where the appellant’s unit is located have been acquired for establishment of GIDC and the land falls under GIDC for which notification has been issued - even though place falls under village, but if it has been notified like in the present case as an industrial area under GIDC such village will no longer to be rural area in terms of the definition given above. Therefore, it is absolutely clear that the place i.e. GIDC-Dholka where appellant’s unit is located is not rural area. Accordingly, the contention of the Revenue is baseless and without support of any evidence contrary to the various evidences produced by the appellant. The Hon’ble Apex Court in the case of Saij Gram Panchayat Vs. State of Gujarat & Othrs. [1999 (1) TMI 531 - SUPREME COURT] has held that the notified area for industries are Industrial townships and are thus do not fall under the ambit of Gujarat Panchayats Act, 1961. In view of such findings of the Apex Court, it can be said that the Appellant’s factory being situated in notified Industrial area which is governed by the GIDC is not a unit located in rural area. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (2) TMI 1229
  CENVAT Credit - common input services used in the manufacture of excisable goods as well as for trading activity - non-maintenance of separate records - demand of 5%/ 6% of the value of exempted i.e. trading activities - Rule 6(3)(ii) of Cenvat Credit Rules - Held that:- The appellant before issuance of show cause notice, reversed the Cenvat credit of Rs. 87,682/-, the proportionate credit as per the statement was Rs. 1,82,426/-, however, as there was dispute on the quantification, after passing the adjudication order the appellant have reversed an additional amount of Rs. 4,55,232/-. Thus, a total amount of Rs. 5,42,914/- was reversed, which was the total credit availed on the common input service. Once proportionate credit is reversed along with interest if any arise due to delay, reversal of the demand under Rule 6(3)(ii) cannot be made - In the present case, though it appears that appellant have reversed the credit however, no evidence was produced regarding payment of interest. Since a part reversal was made after passing the order by original adjudicating authority, the correctness of the reversal was not verified by the Adjudicating Authority. The Adjudicating Authority is directed to reconsider the whole issue particularly, if it is found that the appellant have paid the Cenvat credit of attributed to common input services used in the trading activity and interest on such credit, then the demand would not sustain - appeal allowed by way of remand.

  ---

• 2019 (2) TMI 1228
  Demand of Interest - delay in clearance of goods from the warehouse - finalization of provisional assessment of Bills of Entry - whether the demand of interest made subsequent to finalization of the assessment of Bills of Entry, is correct and legal for delay in clearance of goods from the warehouse, under Section 61? - Held that:- The said demand was set-aside by the Tribunal in INDIAN OIL CORPORATION LTD. VERSUS COMMISSIONER OF C. EX., VADODARA [2007 (9) TMI 127 - CESTAT, NEW DELHI] - the very same demand of interest has been set-aside by the Tribunal even against the provisional assessment of Bills of Entry and since the department has not challenged the Tribunal’s order, the same attained finality. Validity of second SCN - Held that:- Since the show cause notice for the demand had already been issued and the same was held to be time-barred by the Tribunal, for the same demand, second show cause notice is bad in law and is illegal. Therefore, the demand in the show cause notice in the present case itself is illegal. Appeal dismissed - decided against Revenue.

  ---

• 2019 (2) TMI 1227
  CENVAT Credit - inputs - steel materials such as Angels, Channels, TMT Bars, etc. - Held that:- As regard steel material used for structure of plant and machinery, the credit is admissible as per Hon’ble Chhattisgarh High Court judgment in the case of M/s Vandana Global Ltd [2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT], particularly for the reason that the exclusion in respect of steel material for support structure was brought under definition of input w.e.f. 07.07.2009 whereas period in the present case is prior to 07.07.2009. Material used for factory shed - Held that:- The cenvat credit is not admissible as per the judgment of Hon’ble Chhattisgarh High Court who allowed the cenvat credit only in respect of steel material used for support structure. Since the fact of use of material has not been verified by the adjudicating authority, the matter needs to be remanded to the adjudicating authority. Appeal allowed by way of remand.

  ---

• 2019 (2) TMI 1226
  SSI exemption - Benefit of N/N. 01/93-CE dated 01.03.21993 denied - manufacture of ‘Rolled Products’ from the ship breaking materials - Exemption denied by the department on the ground that for the earlier period, though the appellant was claimed Exemption N/N. 202/1988-CE from the whole of the duty which is not eligible to them, therefore, the value of the clearance on which N/N. 202/1988-CE was claimed should be taken for the purpose of eligibility thresh hold limit of 2 Crore in the preceding financial year. Held that:- For the purpose of availment of the exemption notification, the condition prescribed is that in the preceding financial year, the total aggregate value should not exceed Rs. 2 Crore. The department considered the turnover of the preceding financial year as other then exempted for the reason that N/N. 202/1988-CE is not eligible to the appellant. Since the issue of N/N. 202/1988-CE is not yet decided in the appellant case as the SCN are still pending, therefore, the present case cannot be decided at this stage. The matter is remanded to the adjudicating authority for passing afresh order only after the outcome of the SCN issued for denial of Exemption N/N. 202/1988-CE. - appeal allowed by way of remand.

  ---

• 2019 (2) TMI 1225
  CENVAT credit - imported input cleared as such - process of manufacture taken place or not - the case of the department is that since the imported input sold as such on which credit was taken, the appellant is require to reverse the actual cenvat credit - extended period of limitation - Held that:- It is clear that re-packing/re-labelling activity which was carried out by the appellant alone will not amount to manufacture but along with re-packing/re-labelling there should be an activity i.e. conversion from bulk pack to retail pack to render the product as manufactured goods. This issue has been settled in the case of M/s Amritlal Chemaux Ltd [2015 (5) TMI 700 - SUPREME COURT] wherein the identical Chapter Note has been dealt with and the Hon’ble Supreme Court held that the activity of re-packing/re-labelling alone does not amount to manufacture - Accordingly, the appellant’s activity being only re-packing/re-labelling of imported goods does not amount to manufacture, therefore, the clearance of such goods shall be correctly treated as removal of input as such. Extended period of limitation - Held that:- It is not only the appellant but also department throughout in the case of M/s Amritlal Chemaux Ltd and even in the case of CCE, Mumbai Vs. Johnson & Johnson Ltd. [2005 (9) TMI 85 - SUPREME COURT OF INDIA] taken a stand that the activity similar to the activity carried out by the appellant is amount to manufacture. The issue was finally settled by the Hon’ble Supreme Court, therefore, when the department itself was of the view that the activity of re-packing/re-labelling alone is amount to manufacture - The same bonafide belief was entertained by the appellant which cannot be construed as malafide intention to evade the payment of duty, therefore, the demand for the extended period cannot be raised. In the present case, demand of the period 2006-07 to 2007-08 was raised by SCN dated 16.02.2009, therefore, the entire demand is under extended period, hence the same will not sustain on the ground of limitation - appeal allowed on the ground of limitation.

  ---

• 2019 (2) TMI 1224
  CENVAT Credit - duty paying invoices - invoices issued by 100% EOU as per the formula prescribed in Rule 3(7) of Cenvat Credit Rules, 2004 - Held that:- here is an apparent error in applying the formula - the demand quantified in the SCN appears to be prima facie incorrect. The lower authority submits that the judgments relied upon the by the appellant only by saying that facts are different, however, nothing was discussed how the facts in the relied upon judgments and of this case are different - matter needs reconsideration - appeal allowed by way of remand.

  ---

• 2019 (2) TMI 1220
  CENVAT credit - capital goods purchased for its Power Plants - Board s Clarification dated 18.09.2012 - discontinuance of inquiry and/or investigation of settled issue - principles of res-judicata - Held that:- Since pursuant to the summons issued to the petitioner Company and in compliance of the order dated 06.01.2016 passed by this Court in petitioner s own writ petition, the petitioner and its representatives have appeared before the Officers of the Excise Department, the enquiry has been completed, and the same has culminated into issuance of the show-cause notice dated 20/22.07.2016, the writ petition against the summons has been rendered infructuous. We have no hesitation in holding that once a show-cause notice has been issued in furtherance of the summons, nothing remains to be adjudicated in a writ petition, which had been filed against the summons. No sweeping declaration as prayed for by the petitioner in its prayer can be made. Right of a manufacturer to avail CENVAT Credit is dependent upon hoards of factors and such right is to be adjudicated and determined by the Officers of the Excise Department on the touch stone of the statutory provisions and existing facts. We outrightly decline to pronounce upon the petitioner s entitlement to avail CENVAT Credit on the available facts. Petition dismissed.

  ---

• CST, VAT & Sales Tax

• 2019 (2) TMI 1223
  Doctrine of merger - Restoration of protective assessment order - revisional order set aside - delay in initiating the revisional proceedings - Held that:- It is emphasized that what had to be considered by the Additional Commissioner of Commercial Taxes was as per the direction issued by the co-ordinate Bench of this Court on remand of the matter. The direction was not to initiate revisional proceedings with regard to a regular Assessment being made. Therefore, the Commissioner of Commercial Taxes, by the impugned order dated 10.11.2014 passed under Section 64(2) of the KVAT Act, has rightly set aside the order dated 31.12.2013 passed by the Additional Commissioner of Commercial Taxes and remanded the matter to him for de nova proceedings under Section 64(1) of the KVAT Act in the light of the observations made in his order. Further, this Court had observed that the revisional authority to reconsider the entire matter afresh in accordance with law, which means that the revisional authority had to consider the regular Assessment Order and to consider the protective order in light of the regular Assessment Order. The revisional authority could not proceed at a tangent and deviate from the directions issued by this Court. The remand was a limited remand to the revisional authority to look into the regular assessment for the purpose of revision and its effect in accordance with law. The protective Assessment Order and the reassessment order were passed in different fields in different spheres. In the circumstances, the revisional authority by order dated 10.11.2014 was justified in setting aside the order passed by the Additional Commissioner of Commercial Taxes on 31.12.2013 and remanding the matter to the said authority for de nova proceedings under Section 64(1) of the KVAT Act. Appeal dismissed - decided against appellant.

  ---

• 2019 (2) TMI 1222
  Validity of assessment order - principles of natural justice - main grievance of the petitioner against these impugned assessment orders is that the same were passed without application of mind to the objections raised by the petitioner before the Enforcement Officials - Held that:- Perusal of the impugned orders would show that the Assessing Officer has not discussed about the objections raised by the petitioner before the Enforcement Official. In any event, when the notice of proposal is sent, the petitioner, irrespective of the fact that they filed their objections before the Enforcement Officials, ought to have filed their reply to the notice of proposal - In this case, it has not been done so. However, since the Assessing Officer has also not considered the objections raised by the petitioner before the Enforcement Officials, this Court is of the view that the interest of justice would be met, if one opportunity is given to petitioner to file objection and the case be reheard - appeal allowed by way of remand.

  ---

• 2019 (2) TMI 1221
  Validity of conditional interim order granted by the second respondent - direction to furnish bank guarantee for the disputed penalty in respect of each assessment year - Held that:- The petitioner, being a Public Sector Company cannot be imposed with such onerous condition for granting stay of recovery of penalty - Reliance placed in the case of Bharat Petroleum Corporation Ltd., Vs. Commissioner of Sales Tax and Others [2008 (8) TMI 554 - SUPREME COURT OF INDIA], where the Oil Corporation was given the relief of providing personal bond instead of furnishing bank guarantee, under similar circumstances. The impugned orders of the second respondent are modified to the effect that the petitioner, instead of furnishing Bank guarantee, shall furnish personal bond for the disputed penalty of Rs. 55,82,85,736/-, Rs. 10,61,45,912/- & Rs. 5,83,95,585/- respectively to the satisfaction of the Assessing Officer - petition allowed.

  ---

• Indian Laws

• 2019 (2) TMI 1280
  Acknowledgement of a specified liability - payments to the plaintiff of the amount received by the defendant from NEC - defendant relies on the rate agreed by the parties in the MoU while the petitioner relies on the rate of 5% which the petitioner claims has been continuously followed in the transactions subsequent the MoU - defendant had indeed agreed on 95% of the bill amount from the plaintiff and had therefore admitted to 5% commission in relation to the RA bills enumerated in the email - HELD THAT:- A party by way of a clear acceptance of responsibility towards an act which that party has made voluntarily and with an intention to have a binding effect on its future course of action. The complex calculations put forth by the plaintiff and the consequent struggle to simplify arithmetics would itself caste a spanner in pronouncing judgment of an ascertained amount. Inviting the court to decipher the Forms 26AS and number-crunch on the amounts mentioned therein is itself a roadblock to pronouncing judgment of an ascertained sum of money. In the present facts, having regard to the discussions under the individual heads of the documents relied upon by counsel for the plaintiff for a judgment on admissions, it cannot be said that either the TDS certificates or the e-mail dated 19th February, 2016 or even the working notes constitute admissions which are clear, unambiguous and free from giving any scope to the defendant to explain or account for the same. It cannot be said that the documents relied upon by counsel clearly and unequivocally demonstrate that the defendant had admitted (by such documents) that it was ready to agree on a commission of 5% for the entire transaction or had agreed to alter the 12.50% commission in clauses (f) and (g) of the MOU dated 26th March, 2013, in respect of the entire transaction between the plaintiff and the defendant. [At this point in time, this court cannot place any weightage on the significance of a possible counter claim to be filed by the defendant or of the alleged breaches on the part of the plaintiff.] As pointed out that since the e-mail dated 19th February, 2016 and the working notes show that the defendant had indeed agreed on 95% of the bill amount from the plaintiff and had therefore admitted to 5% commission in relation to the RA bills enumerated in the email, the plaintiff would be entitled to claim 95% of the bill amount in respect of the RA bills disclosed by the parties being series 32-39 and be entitled to a decree of the total amount of these RA bills keeping aside 5% of the amount raised in each of these bills as the defendant’s commission. There will accordingly be a decree in favour of the plaintiff to the extent of the total amount of the RA bills as indicated above less 5% on each of the bills.

  ---