TMI Tax Updates - e-Newsletter
February 21, 2019

Case Laws in this Newsletter:

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

TMI SMS

• Imparting training to the students in manufacturing the sport/ leisure goods without any profit motive is charitable activity u/s 2(15)

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• Classification - Ayurvedic Medicine - merely because it is sold through multi level marketing/MLM it cannot be classified as Food Supplement

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Highlights / Catch Notes

• GST:

  Grant of pre-arrest/anticipatory bail - wrongful availment of input tax credit - the applicant does not deserve to be protected by prearrest bail
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• Income Tax:

  Deduction u/s 35DDA - Retrenchment compensation paid on the closure of the assessee's manufacturing unit in Kalamassery - one unit out of three closed down - claim of deduction cannot be denied.
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• Income Tax:

  Addition u/s 271(1)(c) - In response to a notice u/s 153A assessee furnishes a return disclosing higher income, it could be considered as concealed income only if some incriminating material representing that higher income was found during the course of search.
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• Income Tax:

  Addition u/s 68 - bogus LTCG on sale of shares - The purchase of shares and the sale of shares were also reflected in Demat account statements. The sale of shares suffered STT, brokerage etc. In the facts and circumstances of the case, it cannot be held that the transactions were bogus
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• Income Tax:

  Nature of expenditure - addition made by the AO towards disallowance of travelling expenses incurred on family members of players, confirmed. - However, adhoc disallowance of 10% of hospitality expenses, deleted.
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• Income Tax:

  Exemption u/s 11 - the assessee trust shall not be allowed exemption owing to accumulation of income to the tune of 15% of its income as is provided under second limb of Section 11(1)(a) as its expenditure towards the objects of the trust has already exceeded its income from property held for charitable purposes
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• Income Tax:

  Addition u/s 68 - bogus LTCG - exemption u/s 10(38) - There is no adverse finding by SEBI in relation to the scrip in question has been given to the AO - merely on the basis of preponderance of human probabilities the addition cannot be made in the hands of the assessee without disproving the various documents filed by the assessee.
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• Income Tax:

  Charitable activity - the word ‘education’ is to be given wide interpretation which includes training and developing the knowledge, skill, mind and character of the students by normal schooling - imparting training to the students in manufacturing the sport goods and leisure equipments without any profit motive falls within the definition of education u/s 2(15)
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• Income Tax:

  Disallowance u/s 40A(2) - payment of remuneration to whole time directors - Not disputed that the concerned directors are assessed to tax at the maximum rate of 30%. - the provisions of section 40A(2) are not attracted to the payment made to the directors.
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• Income Tax:

  Reopening of assessment - A bare glance of the reasons recorded gives an impression that the reopening has been carried out on shallow reasonings which is not sustainable in law.
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• Income Tax:

  Abnormal profit in SEZ unit - AO without any justification tried to make the addition considering the addition as income from non special economic zone business without bringing any evidence against the assessee as to how the assessee was doing business activities outside the SEZ area. - Additions deleted.
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• Customs:

  Amendments to the All Industry Rates of Duty Drawback effective from 20.02.2019
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• Customs:

  Remission or abatement of duty - Damage of warehoused goods - appellants should have insured the goods to the extent of duty deferred in respect of the imported goods destroyed in fire. In terms of B-17 bonds executed by the Appellants, they have bond themselves in respect of the imported/ warehoused goods.
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• Customs:

  Duty free import of goods under DEEC scheme - non-fulfillment of export obligation - appellant was a small time manufacturer and he has already closed down his business - The demand of interest and imposition of penalty is not warranted.
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• Customs:

  Licensing of import of Marble Blocks - The Notification not only provides for the scheme of licensing but allows the license to be issued subject to actual user condition - By undertaking the imports of Rough marble Blocks, without proper import license appellants have contravened the provisions - Goods liable for confiscation.
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• Corporate Law:

  Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2019
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• Corporate Law:

  Companies (Adjudication of Penalties) Amendment Rules, 2019
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• Corporate Law:

  NCLT jurisdiction - disputes pertaining to transfer of equity shares - It is contended that, State Bank of India is not a Company registered under the provisions of Companies Act and it is a body corporate constituted and incorporated under SBI Act, 1955 which was enacted before the enactment of Companies Act, 1956 therefore, NCLT would have no jurisdiction - The contention rejected.
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• Indian Laws:

  Dishonor of Cheque - repayment of loan - section 138 of NI Act - There is no presumption that even if an accused fails to bring out his defence, he is still to be considered innocent.
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• IBC:

  Corporate Insolvency Resolution Process - The Adjudicating Authority seriously erred in declining to recognize Appellant as an ‘Operational Creditor’ and in arriving at the conclusion that there was an existence of dispute prior to filing of the petition.
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• Service Tax:

  Maintenance and Repair Services on containers - Merely because the assessee has outsourced the activity of washing and repair of containers to another, it cannot be said that they have not provided any services.
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• Service Tax:

  Penalty u/s 78 - Tax collected but not paid - mere non-payment may not suffice to be clothed with the grave allegations as that of fraud and mis-representation unless and until there is evidence about a positive act on part of appellant, as produced by Department, to prove that appellant had intent to not to pay the duty.
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• Service Tax:

  Transfer of credit - amalgamation - non-compliance with Rule 10 of the Cenvat Credit Rules - Inasmuch as the transfer of the unutilized credit has been done under the approval of the Hon’ble High Court as per the scheme sanctioned by the High Courts, the denial of the same is neither justified nor warranted.
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• Service Tax:

  Reversal of Cenvat Credit - such reversal can be even at the appellate stage and as such would amount to non availment of credit. The expiry of the period of filing the revised ST-3 return has got no relation to the timing of reversal of credit.
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• Central Excise:

  Once, there was no duty on the final goods cleared no question of any exemption available qua the goods manufactured in factory as a job work arises. Therefore, appellant is also not qualifying the remaining two conditions of the N/N. 214/86.
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• VAT:

  Classification of goods - Ayurvedic Medicine or Food supplement? - product is marketed through multi level marketing (MLM) - the literature clearly described the product as an Ayurvedic Proprietary Medicine. Therefore the tribunal could not have adopted the common parlance test.
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Articles

• Complete analysis of National Pension Scheme (NPS) with provision of Income Tax Act
• FAQs on GSTR-3B

Notifications

• Companies Law

• File No. 1/25/2013-CL-V - G.S.R. 131 (E) - dated 19-2-2019 - Co. Law
  Companies (Adjudication of Penalties) Amendment Rules, 2019

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• File No. 1/21 2013-CL-V - G.S.R. 130 (E) - dated 19-2-2019 - Co. Law
  Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2019

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• GST - States

• S.O. No. 2 - 24/2018 – State Tax(Rate) - dated 24-1-2019 - Jharkhand SGST
  Amendment in Notification No. 1/2017-State Tax (Rate), dated the 29th June, 2017

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• ORDER NO.02/2019 - dated 2-2-2019 - Karnataka SGST
  Karnataka Goods and Services Tax (Second Removal of Difficulties) Order, 2019

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• ORDER NO.01/2019 - dated 1-2-2019 - Karnataka SGST
  Karnataka Goods and Services Tax (Removal of Difficulties) Order, 2019

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• (04/2019) No. FD 47 CSL 2017 - dated 29-1-2019 - Karnataka SGST
  Seeks to amend Notification No. (21/2017) No. FD 47 CSL 2017, dated the 15th November, 2017

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• (03/2019) No. FD 47 CSL 2017 - dated 29-1-2019 - Karnataka SGST
  Seeks to amend Notification No. (3) No.FD 47 CSL 2017, dated the 28th June, 2017

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• (02/2019) No. FD 47 CSL 2017 - dated 29-1-2019 - Karnataka SGST
  Seeks to bring into force the CGST (Amendment) Act, 2018

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• (01/2019) No. FD 48 CSL 2017 - dated 29-1-2019 - Karnataka SGST
  Seeks to rescind notification No. (08/2017) No-FD 48 CSL 2017, dated the 29th June, 2017

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• (1/2019) No. FD 47 CSL 2017 - dated 16-1-2019 - Karnataka SGST
  Seeks to amend Notification No. (17/2017) No. FD 47 CSL 2017 dated the 19th October, 2017

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• ORDER NO.03/2018 - dated 31-12-2018 - Karnataka SGST
  Karnataka Goods and Services Tax (Third Removal of Difficulties) Order, 2018

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• ORDER NO. 04/2018 - dated 31-12-2018 - Karnataka SGST
  Karnataka Goods and Services Tax (Fourth Removal of Difficulties) Order, 2018

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• ORDER NO. 02/2018 - dated 31-12-2018 - Karnataka SGST
  Karnataka Goods and Services Tax (Second Removal of Difficulties) Order, 2018

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• ORDER NO. 01/2018 - dated 31-12-2018 - Karnataka SGST
  Karnataka Goods and Services Tax (Removal of Difficulties) Order, 2018

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• (30/2018) No. FD 48 CSL 2017 - dated 31-12-2018 - Karnataka SGST
  Seeks to insert explanation in an item in notification No. (11/2017) No. FD 48 CSL 2017, dated the 29th June, 2017

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• (29/2018) No. FD 48 CSL 2017 - dated 31-12-2018 - Karnataka SGST
  Seeks to amend notification No. 13/2017) No. FD 48 CSL 2017, dated the 29th June, 2017

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• (28/2018) No. FD 48 CSL 2017 - dated 31-12-2018 - Karnataka SGST
  Seeks to amend Notification No. (12/2017) No. FD 48 CSL 2017, dated the 29th June, 2017

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Circulars / Instructions / Orders

• Customs - 05/2019 - dated 20-2-2019
  Amendments to the All Industry Rates of Duty Drawback effective from 20.02.2019

News

• Suggestions/Comments are invited on Draft 'Manifest and Transhipment Regulations (Aircraft), 2019

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• 4TH India-Asean Expo Summit on 21 – 23 February 2019 in New Delhi

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• Cabinet approves Promulgation of the Banning of Unregulated Deposit Schemes Ordinance, 2019

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• Cabinet approves release of an additional instalment of DA to Central Government employees and DR to Pensioners, due from 1.1.2019

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• Cabinet approves Promulgation of the Companies (Second Amendment) Ordinance 2019

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Case Laws:

• GST

• 2019 (2) TMI 1155
  Vires of Section 174 of the KSGST Act - time limitation - Section 25(1) of the KVAT Act - Held that:- The issue decided in the case of M/S. SHEEN GOLDEN JEWELS (INDIA) PVT. LTD. VERSUS THE STATE TAX OFFICER (IB) -1, AND OTHERS [2019 (2) TMI 300 - KERALA HIGH COURT], where it was held that the petitioner's plea is rejected that the State lacks the vires to graft Section 174 into KSGST Act, 2017 - petition dismissed - decided against petitioner.

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• 2019 (2) TMI 1154
  Unable to upload FORM GST TRAN-1 - input tax credit - migration to GST Regime - Held that:- The Ext.P3 is the circular issued by the Government of India for “setting up an IT Grievance Redressal Mechanism to address the grievances of taxpayers due to technical glitches on GST Portal - the petitioner may apply to the 2nd respondent, the Nodal Officer. The petitioner applying, the Nodal Officer will look into the issue and facilitate the petitioner’s uploading FORM GST TRAN-1, without reference to the time-frame - petition disposed off.

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• 2019 (2) TMI 1153
  Vires of Section 174 of the KSGST Act - time limitation - Section 25(1) of the KVAT Act - Held that:- The issue decided in the case of M/S. SHEEN GOLDEN JEWELS (INDIA) PVT. LTD. VERSUS THE STATE TAX OFFICER (IB) -1, AND OTHERS [2019 (2) TMI 300 - KERALA HIGH COURT], where it was held that the petitioner's plea is rejected that the State lacks the vires to graft Section 174 into KSGST Act, 2017 - petition dismissed - decided against petitioner.

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• 2019 (2) TMI 1152
  Unable to upload FORM GST TRAN-1 - input tax credit - migration to GST Regime - Held that:- The Ext.P3 is the circular issued by the Government of India for “setting up an IT Grievance Redressal Mechanism to address the grievances of taxpayers due to technical glitches on GST Portal - the petitioner may apply to the 2nd respondent, the Nodal Officer. The petitioner applying, the Nodal Officer will look into the issue and facilitate the petitioner’s uploading FORM GST TRAN-1, without reference to the time-frame - petition disposed off.

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• 2019 (2) TMI 1151
  Supply of goods and /or services - supply of goods or services or both to or by a Special Economic Zone developer or a Special Economic Zone unit - inter-State trade or commerce - section 7(5) of the Integrated Goods and Services Tax Act, 2017 - validity of levying tax on sales of petroleum crude, motor spirit (commonly known as petrol), high speed diesel, natural gas and aviation turbine fuel to Special Economic Zone units and developers under the Gujarat Value Added Tax Act, 2003 by treating them to be local/intra- State sales within the State of Gujarat. Held that:- Issue Rule returnable on 8th February, 2019.

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• 2019 (2) TMI 1150
  Bail application - grant of pre-arrest/anticipatory bail - wrongful availment of input tax credit - offence under Section 132(1)(b) and (c) of CGST Act - Held that:- It is astonishing to note that, the concerned Advocate on record “Mr.Ritesh Ratnam” has deliberately and with malfide intention not stated in the said letter that there is no interim relief granted in favour of the applicant. The Order dated 24.11.2018 clearly indicates that, the said Advocate Mr. Ritesh Ratnama himself appeared on 24.11.2018 before this Court and in his presence the said Order was passed including the sentence “no interim relief” - It appears that, due to the said deliberate miscommunication by the applicant dated 26.11.2018, the Investigating Agency refrained itself from either arresting or interrogating the applicant. The deplorable practice adopted by the applicant and his Advocate is deprecated. This Court is of the considered view that the applicant does not deserve to be protected by prearrest bail - application dismissed.

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• Income Tax

• 2019 (2) TMI 1149
  Declarations of undisclosed income - Income Declaration Scheme, 2016 - extension of time for making payment of the third installment sought - HELD THAT:- The petitioner is to deposit a sum of ₹ 10,03,036/- (Rupees Ten Lakhs, Three Thousand and Thirty Six only) with interest at the rate of 12% per annum till date with the concerned Income Tax Department. The said deposit to be made within a period of one week from today.

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• 2019 (2) TMI 1148
  Nature of expenditure - Allowability of software expenditure - to be treated as a revenue expenditure OR capital expenditure - nature of the advantage in a commercial sense - HELD THAT:- Special Leave Petitions are dismissed on the ground of low tax effect, leaving the question of law open.

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• 2019 (2) TMI 1147
  Maintainability of appeal - monetary limit - Reopening of assessment - proof of payment of recognized expenditure - eligibility of reasons to believe - assessment beyond period of four years from the end of relevant assessment year - HELD THAT:- The tax effect being less than ₹ 1 crore, in view of Circular no. 3/2018 dated 11 July 2018, we find no reason to entertain the Special Leave Petition under Article 136 of the Constitution of India. The Special Leave Petition is dismissed.

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• 2019 (2) TMI 1146
  Power of ITAT to extend the stay of demand - combined period of stay has exceeded 365 days - Whether the order of the ITAT be treated as void ab initio in light of Third Proviso to Section 254 (2A) of the Income Tax Act, 1961, which provides that stay of demand stands vacated after expiry of a period of 365 days, even if delay in disposal of appeal is not attributable to the assessee? - Held that:- It is stated that the Tribunal has decided the main appeal itself, therefore, this petition is dismissed as having become infructuous.

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• 2019 (2) TMI 1145
  Deduction u/s 35DDA - Retrenchment compensation paid on the closure of the assessee's manufacturing unit in Kalamassery - one unit out of three closed down - assessee did not make any payment of retrenchment compensation during the previous year relevant to the assessment year 2004-05 - HELD THAT:- Tribunal has examined the facts and found that the units at Mettur, Tuticorin and Kalamassery were all dealing in chemicals and the Kalamassery Unit was the largest unit which however, was incurring huge loss. It was hence the assessee decided to close down the Kalamassery Unit so as to facilitate the profitable carrying on of the other two units, situated in Mettur and Tuticorin. The retrenchment compensation provided for was as per the agreement with the labour unions entered into in the relevant previous year and as such it becomes an ascertained liability accruing in the relevant previous year. The payment made in the subsequent years was only for reason of generation of funds by sale of assets being occasioned later to the relevant previous year. Tribunal had found unity of control and management and it is not as if different lines of businesses were carried on in the three units. All the three units were engaged in manufacturing of chemicals and hence the three units were found to be carried on under the very same management as a single business. We are of the opinion that there is no substantial question of law arising from the order of the Tribunal and hence the appeal is rejected. - Decided against revenue

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• 2019 (2) TMI 1144
  Revision u/s 263 - dis-allowance of interest on borrowed funds - AO disallowed only a small portion of the interest claimed as expenditure - Commissioner sought to invoke Section 14A to disallow proportionate interest in the borrowed funds of the assessee, by an order under Section 263 - HELD THAT:- Whether there should have been an examination on facts, going by the dictum of M/s.S.A.Builders Ltd. [2006 (12) TMI 82 - SUPREME COURT] as to whether there was a commercial expediency insofar as the interest free advances made to the subsidiary company and whether Section 14A could have been applied. We find that the order under Section 263 was passed specifically based on Section 14A. As far as the applicability of Section 14A is concerned, Commissioner of Income Tax v. M/s.Essar Teleholdings Ltd.[2018 (2) TMI 115 - SUPREME COURT OF INDIA] held that the machinery provisions having come only from the assessment year 2007-08, the application of Section 14A would be prospective to that. In such circumstances, we reject the appeals and uphold the orders of the Tribunal in both the appeals.

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• 2019 (2) TMI 1143
  Revision of settlement commission order - Time Limit for application under Section 264 - taxability of the subsidy - HELD THAT:- Though the petitioner may have worded the prayer before the Commissioner differently, to grant the prayer of the petitioner would require the Commissioner to travel beyond the order of Settlement Commission which as held by us he could not do. His mere expression that he cannot revise the order of the Settlement Commission, therefore, would not be fatal to the order. Secondly, the writ jurisdiction of the High Court cannot be put in such a straight jacket. High Court is not bound by the reasons sited by the Commissioner. If it is found that the Commissioner has no authority to grant prayer made in the revision petition filed before him, the Court would not ask him to do so merely because he has sited reasons which may not appear to be sound. Thirdly the petitioner would not be satisfied with mere quashing of the order of the Commissioner. The petitioner in order to succeed would require substantive relief. The petitioner after praying for quashing the revisional order of the Commissioner has further prayed that this Hon’ble Court may be pleased to issue a Writ of Mandamus and / or any other appropriate writ order or direction under Article 226 of the Constitution of India directing the respondents to treat the subsidy received under the said scheme as being capital in nature, not eligible to tax, issue the refund of ₹ 24.01 crore with interest in accordance with law and accordingly, allow the revision application. When we find that this prayer could not have been granted by the Commissioner, even if the ground of rejection of the revision petition by the Commissioner may not be entirely convincing, quashing the order of the Commissioner would be issuing a futile writ. We do not understand which order the petitioner seeks revision of. It could not have been the order of Settlement Commission which is clearly the stand of the petitioner, though while explaining delay, the petitioner has taken the order of the Settlement Commission as the starting point for computing delay. If the petitioner seeks revision of the order passed by the Assessing Officer giving effect to the order of Settlement Commission as held by us, such order was not erroneous giving rise to a revisable order. If the petitioner wanted to argue that the benefit should have been given by the Commissioner revising the original assessment (completely ignoring the settlement proceedings), the revision petition was delayed by several years and not 270 odd days as contended by the petitioner. Perhaps conscious of these difficulties, the petitioner in the revision petition has not challenged any specific order. We wonder if in a provision under Section 264 of the Act, the petitioner can seek relief from the Commissioner without seeking revision of any order. Petition dismissed.

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• 2019 (2) TMI 1142
  Claim of depreciation at 100% in the very same year in which the purchase was made - capitalisating the expenses incurred on purchase of tools, can the assessee - assessee admits that it had capitalised the amounts spent on small value tools in the very same year however, noticing the discrepancy reversed it and written off the entire value in the very same year in which they were rendered useless after use in the manufacturing process. The claim in the return was as a revenue expenditure - HELD THAT:- The write off was on account of the tools being rendered useless after use in the manufacturing process. This necessitates frequent purchase of the said tools for continuous manufacturing process. In the nature of the industry, the same is allowable as a revenue expenditure. The adjustment made by the assessee was wrongly understood by the AO at the first instance. If it had been properly understood, then, the entire amounts would have been allowed as a revenue expenditure. In such circumstances, we do not think that there is any cause for interference with the order of the Tribunal. The question framed does not at all arise as one on law. The Income Tax Appeal is, hence, rejected.

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• 2019 (2) TMI 1141
  Allowability of busniss loss on the purchase of Shares on account of diminution value in the Shares - said loss to the extent of about 50% of the purchase value of the Shares by the Assessee Company was deducted by the Appellant/Assessee claiming it as business loss to the Assessee Company - HELD THAT:- we are of the clear opinion that the findings arrived at by the Tribunal and the Authorities below are essentially the findings of fact and business loss in question as claimed by the Assessee by merely devaluing the book value of the Shares purchased by them, during the year in question could not have been claimed by the Assessee as business loss in the year in question. Tribunal, therefore, was justified in disallowing the same and therefore, the Tax Case filed by the assessee has no merit and it deserves to be dismissed.

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• 2019 (2) TMI 1140
  Addition u/s 271(1)(c) - no return filed u/s 139 - in response to a notice under section 153A assessee furnishes a return disclosing higher income - HELD THAT:- As extracted the assessment order nowhere the AO has made reference to any seized material. Meaning thereby, the assumption of the AO that the assessee has concealed the income amounting to ₹ 6,85,480/- is misplaced. He assumed concealment of this figure while comparing with non-filing of the return under section 139. The assumption for considering it as concealed income could only be made if incriminating material qua that was found during the course of search. Explanation 5A could authorise him to visit the assessee with penalty. In the case of Shri Mansukhbhai R. Sorathia [2013 (7) TMI 1124 - ITAT RAJKOT], we have rejected assumption at the end of the Revenue that additional income in the return after search was filed because some incriminating material was found. The assumption of incriminating material cannot be entertained or construed. It should be in physical form. Therefore, the AO has erred in visiting the assessee with penalty by observing that since no return was filed under section 139, therefore it is to be assumed that assessee has concealed the income. This concealed income should be represented by some incriminating material during the course of search. In response to a notice under section 153A assessee furnishes a return disclosing higher income, it could be considered as concealed income only if some incriminating material representing that higher income was found during the course of search. In view of the above we allow appeal and delete penalty. - Decided in favour of assessee.

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• 2019 (2) TMI 1139
  Exemption u/s 11 - carry forward of deficit of earlier years and allowing set off against the income of the succeeding years - whether charitable trust registered u/s 12A of the Income-tax Act, 1961 can carry forward excess application of income over and above income derived from property held under trust to subsequent year or not? - HELD THAT:- The Hon’ble Bombay High Court in the case of CIT vs Institute of Banking & Personnel Selection [2003 (7) TMI 52 - BOMBAY HIGH COURT) has considered an identical issue in the light of provisions of section 11 and held that income derived from trust property has also got to be computed at commercial principles and if commercial principles are applied, then adjustment of expenses incurred by the trust for charitable and religious purpose in the earlier years against income earned by trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purpose in the subsequent year for which adjustment has been made having regard to the benevolent provisions contained in section 11 of the Act and that such adjustment will have to be excluded from the income of the trust u/s 11(1)(a) of the Act. - Decided in favour of the assessee.

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• 2019 (2) TMI 1138
  Penalty u/s 271E - reasonable cause for the repayment of loan in cash by the assessee in violation of section 269T - HELD THAT:- As explained by the assessee during the course of appellate proceedings before the CIT(A), the delay in repayment of loan to SREI was due to weak financial position and this was the reason why the assessee could not repay the loan as per the agreed schedule. Had the assessee was in a position to repay the amount of loan in equal monthly instalments as per the agreed schedule, SREI could not have insisted for cash payment and the question of default u/s 269T would not have arisen. The weak financial position of the assessee resulted in default and delay in repayment of loan by the assessee and since this position was duly supported by the fact that the matter was referred to arbitral Tribunal, we are of the view that the insistence of repayment of loan in cash by SREI was natural corollary and the same constituted a reasonable cause for the repayment of loan in cash by the assessee in violation of section 269T. Keeping in view all these facts and circumstances of the case, we are of the view that it is not a fit case to impose penalty u/s 271E and cancelling the said penalty imposed by the AO and confirmed by the CIT(A), we allow this appeal of the assessee.

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• 2019 (2) TMI 1137
  Penalty u/s. 271(1)(c) - specific charge against the assessee namely as to whether the assessee was guilty of having concealed particulars of income or having furnished inaccurate particulars of income - HELD THAT:- We find that there was no specific charge against the assessee in the notice. Revenue has missed out their opportunity to subject the assessee to the penalty proceeding by not issuing a proper notice. No specific case has been made out by the Revenue as to why the matter should be remanded except that the assessee had not participated properly in the assessment proceedings but for that reason best judgment assessment has been made and the income, which had escaped assessment has been added to the income of the assessee. As incumbent upon the Revenue to make out a specific case for imposition of penalty, on which count the Revenue has failed. - SEE PRINCIPAL COMMISSIONER OF INCOME TAX-19, KOLKATA VERSUS DR. MURARI MOHAN KOLEY [2018 (9) TMI 1 - CALCUTTA HIGH COURT] - Decided in favour of assessee.

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• 2019 (2) TMI 1136
  Addition u/s 68 - bogus LTCG on sale of shares - addition on the basis of some reports of the Investigation Wing and/or the orders of SEBI and/or the statements of third parties - HELD THAT:- Since the purchase and sale transactions are supported and evidenced by Bills, Contract Notes, Demat statements and bank statements etc., and when the transactions of purchase of shares were accepted by the ld AO in earlier years, the same could not be treated as bogus simply on the basis of some reports of the Investigation Wing and/or the orders of SEBI and/or the statements of third parties. The assessee has furnished all evidences in support of the claim of the assessee that it earned LTCG on transactions of his investment in shares. The purchase of shares had been accepted by the AO in the year of its acquisition and thereafter until the same were sold. The off market transaction for purchase of shares is not illegal as was held by the decision of Co-ordinate Bench of this Tribunal in the case of Dolarrai Hemani vs. ITO [2016 (12) TMI 1074 - ITAT KOLKATA] and PCIT Vs. BLB Cables & Conductors Pvt. Ltd. [2018 (8) TMI 525 - CALCUTTA HIGH COURT] wherein all the transactions took place off market and the loss on commodity exchange was allowed in favour of assessee. The transactions were all through account payee cheques and reflected in the books of accounts. The purchase of shares and the sale of shares were also reflected in Demat account statements. The sale of shares suffered STT, brokerage etc. In the facts and circumstances of the case, it cannot be held that the transactions were bogus. - Decided in favour of assessee.

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• 2019 (2) TMI 1135
  Nature of expenditure - expenditure on account of Franchise fees paid to BCCI for RIGHTS to participate in the Indian Premier League (IPL) - revenue or capital expenditure - Held that:- The revenue fails to bring on record any new facts contrary to the facts recorded by the ITAT in the light of certain judicial precedents. The revenue also failed to bring on record any contrary decision in its favour. Therefore, consistent with the view taken by the co-ordinate bench in assessee’s own case for earlier years, we are of the considered view that there is no error in the findings recorded by the CIT(A) while deleting addition made by the AO towards annual franchise fees paid to BCCI. Hence, we are inclined to uphold the order of CIT(A) and dismiss appeal filed by the revenue. Whether travelling expenses incurred on family members of players is incurred wholly and exclusively for the purpose of business and which is related to the business of the assessee was a subject matter of deliberations? - Held that:- Although the AR for the assessee tried to argue the case in light of certain judicial precedents that the presence of spouse of the players and their family members helped in attracting sponsors as well as provide moral support to the players which ultimately helps the business of the assessee. But, considering the fact that the issue and is already considered by the Tribunal keeping in view the judicial discipline, we are not inclined to accept the arguments of the AR for the assessee. Therefore, we affirm the addition made by the AO towards disallowance of travelling expenses incurred on family members of players. Adhoc disallowance of 10% of hospitality expenses - AO has disallowed 10% of hospitality expenses under the head ‘hospitality expenditure’ for providing lunch and other entertainment facilities to individuals in corporate boxes, VVIP area, etc. - Held that:- We are of the considered view that the AO was erred in making adhoc disallowance of 10% of hospitality expenditure. Therefore, we direct the AO to delete addition made towards hospitality expenses.

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• 2019 (2) TMI 1134
  Unexplained expenditure u/s 69C - Held that:- The assessee was involved in providing accommodation entries to 47 parties, but while arriving at final conclusion to delete addition made by the AO towards disallowance of total purchases, directed the AO to delete addition without recording any reasons as to how the profit declared by the assessee is matched with the commission charged on accommodation entries. Notice that the assessee, before the AO, never filed any documents. CIT(A), without appreciating this fact, has accepted the arguments of the assessee that it earns only 1 to 1.5% commission on bogus bills, without further verifying the facts gathered by the AO during the course of assessment proceedings in the light of assessee’s written submission that it has provided similar accommodation entries to another 47 entities. Insofar as disallowance of expenditure, the CIT(A) has allowed 25% adhoc deduction towards expenses on gross commission income without narrating how the assessee has proved expenditure debited to the P&L Account with necessary evidences. Although there is merit in the findings of the CIT(A) that no income could be earned without expenditure, but it is for the assessee to prove expenditure debited to the P&L Account with necessary evidence and also to prove that such expenditure has been incurred wholly and exclusively for the purpose of business. We, therefore, are of the opinion that the findings of the Ld.CIT(A) are not supported by any evidence and are contrary to assessee’s own admission. The issue needs to go back to the AO for further verification in the light of the fact that the assessee is involved in providing similar accommodation entries to another 47 entities for the purpose of ascertaining the true and correct nature of transactions carried out by the assessee. Hence, we set aside the issue to the file of the AO and direct him to redo the assessment after affording reasonable opportunity of hearing to the assessee.- Appeal filed by the revenue allowed for statistical purpose.

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• 2019 (2) TMI 1133
  Exemption u/s 11 - exemption owing to accumulation of income to the tune of 15% of its income as is provided under second limb of Section 11(1)(a) - benefit of carry forward of these losses/deficit being excess of expenditure over income to subsequent years to be set off against surplus arising in subsequent years - Held that:- Respectfully following the aforesaid decision of Hon‟ble Supreme Court in the case of ACIT v. A.L.N.Rao Charitable Trust [1995 (10) TMI 2 - SUPREME COURT], Hon‟ble Bombay High Court decision in the case of Institute of Banking Personnel Selection(IBPS) [2003 (7) TMI 52 - BOMBAY HIGH COURT] and Dawat Institute of Dawoodi Bohra Community [2013 (4) TMI 897 - ITAT MUMBAI] and ITO(E) v. Lakshmi and Usha Mittal (Formerly known as The LNM Foundation)[2012 (10) TMI 1196 - ITAT MUMBAI], we hold that under factual matrix of the case before us, the assessee trust shall not be allowed exemption owing to accumulation of income to the tune of 15% of its income as is provided under second limb of Section 11(1)(a) of the 1961 Act as its expenditure towards the objects of the trust has already exceeded its income from property held for charitable purposes. As provided by Hon‟ble Bombay High Court in the case of Institute of Banking Personnel Selection(IBPS)(supra), the assessee will be entitled for carry forward of excess of expenditure incurred towards objects of the trust in excess of income from property held for charitable purposes , as is allowable as provided under first limb of provisions of Section 11(1)(a). Both Revenue appeal as well assessee's CO stood dismissed.

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• 2019 (2) TMI 1132
  Addition u/s 68 - bogus LTCG - exemption claimed by assessee u/s 10(38) denied - violation of principle of natural justice - denial of cross examination - Held that:- We find merit in the arguments advanced by the Ld. Counsel for the assessee that the shares have been sold at the rate as prevailing on the stock exchange at the time of sale and the share prices of all the scrip are closely monitored by the stock exchange and SEBI. Even if the prices have gone up artificially as alleged by the revenue authorities, however, there is no material to hold that the assessee was involved therein. It is also an admitted fact that although the Assessing Officer had made enquiries from various entities i.e. assessee s banker, depository, broker and the banker of M/s. TCL Technologies Limited, however, nothing adverse have been found. There is no adverse finding by SEBI in relation to the scrip in question has been given to the Assessing Officer - merely on the basis of preponderance of human probabilities the addition cannot be made in the hands of the assessee without disproving the various documents filed by the assessee. Referencing to impact of lack of cross examination and violation of principle of natural justice, have no hesitation to accept the plea of Ld AR that lack of cross examination and violation of principle of natural justice results is total nullity of the entire addition, hence, the additions in dispute is hereby deleted. - Decided in favour of assessee.

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• 2019 (2) TMI 1131
  Addition u/s 68 - bogus LTCG - exemption claimed by assessee u/s 10(38) denied - violation of principle of natural justice - denial of cross examination - Held that:- We find merit in the arguments advanced by the Ld. Counsel for the assessee that the shares have been sold at the rate as prevailing on the stock exchange at the time of sale and the share prices of all the scrip are closely monitored by the stock exchange and SEBI. Even if the prices have gone up artificially as alleged by the revenue authorities, however, there is no material to hold that the assessee was involved therein. It is also an admitted fact that although the Assessing Officer had made enquiries from various entities i.e. assessee’s banker, depository, broker and the banker of M/s. TCL Technologies Limited, however, nothing adverse have been found. There is no adverse finding by SEBI in relation to the scrip in question has been given to the Assessing Officer - merely on the basis of preponderance of human probabilities the addition cannot be made in the hands of the assessee without disproving the various documents filed by the assessee. Referencing to impact of lack of cross examination and violation of principle of natural justice, have no hesitation to accept the plea of Ld AR that lack of cross examination and violation of principle of natural justice results is total nullity of the entire addition, hence, the additions in dispute is hereby deleted. - Decided in favour of assessee.

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• 2019 (2) TMI 1130
  Entitlement to benefit of section 10(37) - acquisition of urban agricultural land - HELD THAT:- The Hon’ble Apex Court in the case of Balakrishnan v. Union of India & Others (2017 (3) TMI 745 - SUPREME COURT OF INDIA) had categorically held merely because the sale price is fixed through a negotiated settlement will not take away the proceedings from the Land Acquisition Act when the relevant provision of the Act are invoked. In the instant case, the entire procedure prescribed under the Land Acquisition Act was followed, only price was fixed upon a negotiated settlement. Therefore we hold that the acquisition of the urban agricultural land was a compulsory acquisition and the same would be entitled to the benefit enumerated in section 10(37) of the I. T. Act

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• 2019 (2) TMI 1129
  Charitable activity - claim of exemption U/S 10(23C)(iiiab) - whether the appellant educational institution is not existing solely for educational purposes? - CIT (A) declined the exemption to the assessee society on the ground that the assessee society does not exist solely for educational purposes - HELD THAT:- Though the main objects of the assessee society are divided into 8 objects but all are interconnected with each other so as to impart the best available trainings to the students to develop new products / business of sport goods and leisure time equipments - when the training imparted to the students is not to produce goods of world standard by making necessary marketing research and by identifying products for domestic and export market, such training would be of no use and the students who have been given training would not be in a position to get placement in the sport goods and leisure time equipments industry. Moreover the entire emphasis is laid by our Government on “skill development” by departing from age old system of imparting academic education and training not as per requirement of the industry. When the assessee society is admittedly getting raw material from the various industries to produce the sport goods for them and the job charges paid by them are again used for running the training institute it can not be said by any stretch of imagination that assessee society is not being run for education / training purpose. Particularly, there is no case of the Revenue that the main objects of the assessee society is profit making rather declining the exemption on the sole ground that the assessee institution is not existing solely for educational purposes. So, we are constrained to record that the word ‘education’ is to be given wide interpretation which includes training and developing the knowledge, skill, mind and character of the students by normal schooling. So, we are of the considered view that assessee society is engaged in imparting training to the students in manufacturing the sport goods and leisure equipments without any profit motive. Thus the assessee society, substantially financed by the Government of India, is engaged only in imparting research based education/ skill training to the students in manufacturing of sports goods and leisure equipments without any profit motive, to enable them to get placement falls within the definition of education u/s 2(15) of the Act, hence entitled for exemption under section 10(23C)(iiiab) - Decided in favour of assessee.

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• 2019 (2) TMI 1128
  Disallowance u/s 40A(2) - payment of remuneration to whole time directors - HELD THAT:- As decided in assessee's own case [2018 (11) TMI 1113 - ITAT MUMBAI] it is evident that the assessee had been showing loss continuously for past several years and the AO has also accepted loss shown by the assessee. That being the case, there cannot be any intention on the part of the assessee to evade tax by shifting profit. It is equally important to note that the remuneration paid to the directors have been offered by them to tax while filing their individual tax returns for the respective assessment years. This fact is evident from the copies of the income tax returns of the concerned directors filed before us by the learned Sr. Counsel. Not disputed that the concerned directors are assessed to tax at the maximum rate of 30%. We are of the considered view that the provisions of section 40A(2) of the Act are not attracted to the payment made to the directors. Thus we are of the view that the disallowance made under section 40A(2)(a) in the impugned assessment years are unsustainable. - Decided in favour of assessee.

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• 2019 (2) TMI 1127
  Reopening of assessment - non-fulfilment of conditions stipulated to invoke jurisdiction under s.147 - loss arising from switching over from one plan of mutual funds to another is of capital nature and therefore, the assessee is not entitled to deduct the aforesaid loss from profits of business activity & the loss arising from derivative contracts are speculative in nature for the relevant AY 2005-06 and therefore the assessee is not entitled to adjust the same against the non-speculative business income HELD THAT:- The action of the AO in formation of such belief after the completion of the assessment appears entirely untenable in the facts and the context of the case. As pointed out on behalf of the assessee, we notice that the assessee has both earned income as well loss on sale of mutual funds. The loss transaction from sale of mutual funds thus cannot be given a differential treatment and singled out from other transactions similarly placed. The AO has not assigned and reasons for do so. It is clearly an unjust act in the circumstances. The belief for escapement of income is thus a pretense and is not sustainable in law. As advert to the second ground for alleged escapement of income i.e. the future contracts of derivative nature in stock market are alleged to be of speculative nature allegation has been made after the completion of the assessment based on appreciation of material already available on record - the reasons recorded are ostensibly abstract without reference to any material. The assessee in the instant case having disclosed the relevant facts at the time of the original assessment has thus discharged its primary onus. Consequently, the onus was shifted on the AO to draw inference thereon. The plausible inference would be that the AO has applied his mind to the facts and concluded that the loss in derivative transactions to be ordinary business loss. The AO could have displaced the original action only upon showing the fallacy therein. As noted earlier, the AO has not recorded anything to suggest as to what change in circumstances prompted him to invoke Section 147 of the Act subsequent to completion of assessment - A bare glance of the reasons recorded gives an impression that the reopening has been carried out on shallow reasonings which is not sustainable in law. The action under s.147 of the Act is thus void ab initio and consequent reassessment order framed thereunder is bad in law - Decided in favour of assessee.

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• 2019 (2) TMI 1126
  Rejection of books of accounts - abnormal profit in SEZ unit - Entitlement for exemption u/s 10AA - assessee was doing business activities outside the SEZ area - purchases made by the assessee firm from the proprietorship concern - Section 80-IA(8) applicability - HELD THAT:- AO in the case of the proprietorship concern in the assessment order u/s 143(3) for assessment year under appeal i.e. 2009-10 accepted the trading results and did not doubt the transactions between the proprietorship concern and the assessee firm. The assessee firm explained the reasons why purchases have been made from the proprietorship concern. No specific defects have been pointed out in maintenance of the books of accounts by the assessee. The assessee also explained that it has purchased semi finished material from the proprietorship concern upon which improvements have been done by the assessee firm and rates are verifiable, which were according to the market rate. The assessee also explained that there is a difference in the activities of the proprietorship concern and the assessee firm. Therefore, their operation and activities are materially different and hence, two units are incomparable. The AO of the assessee firm in subsequent AY 2010-11 examining the same issue in the order u/s 143(3) of the Act accepted the trading results of the assessee, copy of the order is also placed on record. Therefore, Revenue- Department shall have to maintain Rule of consistency in their approach while accepting the book result of the assessee. It, therefore, appears that the AO without bringing any material on record made the addition merely on surmises and guess work. Therefore, there was no justification to reject the book results of the assessee. The Ld. CIT(A) rightly considered and appreciated the facts and material on record for the purpose of deleting the addition. Since, assessee is admittedly entitled for deduction u/s 10AA of the Act, the AO without any justification tried to make the addition considering the addition as income from non special economic zone business without bringing any evidence against the assessee as to how the assessee was doing business activities outside the SEZ area. The findings of the AO are without any basis and without bringing any evidence on record. No discrepancy has been pointed out in maintenance of the books of accounts of the assessee and the documents produced on record, therefore, there was no justification to make the aforesaid addition against the assessee. Considering the evidences and material on record in the light of findings or facts recorded by the Ld. CIT(A), we are of the view section 80IA(8)&(10) are not applicable to the facts and circumstances of the case. - Decided in favour of assessee.

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• 2019 (2) TMI 1125
  Reopening of assessment - materials collected/impounded during survey operation established business connection of assessee with its Indian subsidiary as per provisions of section 9(1)(i) and existence of permanent establishment of assessee through its Indian subsidiary - AO/ Ld. DRP was of opinion that income attributable to permanent establishment in India, has escaped assessment - HELD THAT:- Notice issued under section 148 could not be sustained, once arm’s length price procedure has been followed. Validity of notice u/s 148 was issued to assessee for assessment years under consideration, wherein, AO in draft assessment order held that assessee had fixed place of business PE in India in terms of Article 5(1) and 5(2) of DTAA between India and Japan, which was being used by its employees-expatriates, as premises (at their disposal) for business of assessee. As Hon’ble Supreme Court in assessee’s own case for years under consideration has quashed and set-aside notice of reassessment u/s 148 of the Act, ground No.2 raised by assessee stands automatically allowed. As the notice has been quashed by Hon’ble Supreme Court, reassessment proceedings, pursuant to the said notice and the impugned orders passed by the AO stand automatically cancelled.

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• 2019 (2) TMI 1124
  Capital gain computation - assessee has entered into agreement to sale of its factory line and building on 14/08/2007 wherein consideration of ₹ 27.62 Crores was decided and also received a sum of ₹ 14.39 Crores by cheque at the signing of the agreement - AO proposed to take valuation of property as on the date of registration i.e., 29/04/2009 and thereafter, at the request of the assessee matter was referred to the DVO - whether valuation to be taken as on the date of entering into agreement or as on the date when the sale deed is actually registered - HELD THAT :- From the record, we found that at the time of entering into agreement to sale, the assessee has already received more than 50% of the advance, however, due to certain conditions, the sale deed could not be registered. Finally, it was registered only on 29/04/2009. When agreement to sale is executed between the parties and part consideration is received, approval of the authorities of Section 50C of the Act takes place and computation u/s.48 of the Act will start accordingly. We do not find any infirmity in the order of CIT(A) above for holding that provisions of 50C is applicable as on the date of execution of the agreement to sale. Accordingly, AO is directed to take the fair market value of property as on the date of agreement to sale i.e., on 14/08/2007. We direct accordingly.

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• Customs

• 2019 (2) TMI 1123
  STPI unit - Remission of duty - Damage of warehoused goods - remission claimed denied for the reason that the goods have were cleared under N/N. 52/2003-Cus dated 31,03.2005 by filling a bill of Entry and were in use for period of 3 years and insurance claim has been settled so claim of remission is not acceptable. They should pay the duty on depreciated value - case of Revenue is that in the present case though appellants had claimed remission in terms of Section 23 of the Custom Act, 1962, lower Authorities, Deputy Commissioner has allowed abetment from duty under 22(2) of the Customs Act, 1962 - abatement u/s 22 is allowed to appellant. Held that:- Both sections 58 and 65 stipulate that person depositing the goods in terms of the above section in private bonded warehouse or undertaking operations as specified by the said section, is bound by the conditions specified in the said licenses and also by the Bond executed under Section 59. One of the conditions prescribed by the license is that the appellants shall insure the goods deposited in the warehouse against pilferage, theft, fire accident and other natural calamities - Thus by not executing the bond as required as condition for warehousing license, appellants have violated the conditions of license issued under Section 58. Insurance policy - though the fire incident happened in the premises of Appellant on 08.05.2006, the Insurance Policy has been issued to them on 09.05.2006 effective from 01.05.2006 - Held that:- Even this insurance policy is in the name of Appellants and not in the name of Commissioner Customs as per the condition of license. If such an insurance policy as required in terms of conditions of license was executed by the Appellant, then there would have been no requirement of any remission. Section 23 of the Customs Act, 1962 is a general provision seeking to provide a generalized remedy of remission in case of loss of goods. However section 58 and 65 are specific provisions in relation to the private bonded warehouse etc. By prescribing the condition of insurance coverage to the extent of Custom Duty deferred in respect of the warehoused goods, the Appellants have been insulated from the losses that may occur on this account. However by choosing not to do so Appellants have to be themselves held responsible for any loss that may occur on this account. It is settled position in law, that when a some manner is prescribed in law for performing a function in then that needs to be done in that manner only or not all. Thus appellants should have insured the goods to the extent of duty deferred in respect of the imported goods destroyed in fire. In terms of B-17 bonds executed by the Appellants, they have bond themselves in respect of the imported/ warehoused goods. The entire gamut of case law has evolved on the premise of remission under Section 23 without taking into consideration the provision of Section 22, which allow the abetment of value and duty to the extent of damage suffered. From the reading of both the sections, it is evident that in case of complete loss of goods before clearance of the goods for home consumption remission of duty under Section 23 needs to be considered, however in case of damage to the goods, the duty is abetted by the difference in value of the goods as imported and the damaged value. In case where the lower authorities have themselves allowed the abetment under Section 22(2) there can be no grievance. Appeal dismissed - decided against appellant.

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• 2019 (2) TMI 1122
  Implementation of order - provisional release of the seized goods - Held that:- The equipments are lying at various sites after seizure and, in all probability, abandoned by all unless the respondent-Commissioner had taken steps to ensure that custodians are held accountable for proper upkeep. The applicant is understandably concerned about the condition of the cranes and pleads that their request for release is motivated by the desire to maintain them without loss of value except that attributable to efflux of time. One would expect a similar concern on the part of the respondent-Commissioner too as, in the event of confiscation investing the assets with the Central Government, it is in public interest that these should fetch as high a value as possible. The respondent Commissioner are directed to place on record by 19th February, 2019, a proposal for the best management of these assets while they remain under seizure should the applicant be unable to comply with the terms of the provisional release now ordered.

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• 2019 (2) TMI 1121
  Rectification of mistake - error apparent on the face of record or not - Held that:- The issue remaining unresolved was identified in paragraph 7 by the Tribunal as restricted only to ₨.9,90,790/- and ₨.58,822/- pertaining to bill of entry no. 692876 and no. 724215. In the light of the clear finding that follows of having complied with the test of not being ‘unjustly enriched’, we conclude that the recurrence of the phrase ‘minus ₨.9,90,790/- and ₨.58,822/-’ in paragraph 9 is was an error apparent on the record and which must be rectified. Application for ROM allowed.

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• 2019 (2) TMI 1120
  Duty free import of goods under DEEC scheme - non-fulfillment of export obligation - non-submission of EODC certificate - contravention of N/N. 43/2002 dt. 19/04/2002 - demand of duty with interest - confiscation - redemption fine - penalty - Held that:- It is not disputed that the appellant has not fulfilled and has not realized the foreign exchange and has also not followed the conditions as prescribed in N/N. 43/2002. Tthe submission of EODC issued by JDFT is only a procedural condition and if the appellant can prove by way of other corroborative evidences the factum of export and foreign exchange realization, then the benefit of notification cannot be denied to them - since in the present case, the only prayer of the appellant is for dropping the interest and penalty in view of the facts and circumstances of the present case, considering that appellant was a small time manufacturer and he has already closed down his business and has paid the demand despite the fact that he has fulfilled the export obligation and realized the foreign exchange. The demand of interest and imposition of penalty is not warranted - other part of impugned order upheld - appeal allowed in part.

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• 2019 (2) TMI 1119
  Valuation of imported goods - rejection of declared value - contemporaneous imports - the compared imports are two months old - case of appellant is that the declared CIF value was much above the floor price prescribed by the DGFT - N/N. 36/2009-2014 dated 31.03.2010 - Held that:- It is settled law that the value for determination of Custom Duty in terms of Section 14 of The Customs Act, 1962 is based on the transaction value between the buyer and seller in course of international trade. It only when the transaction value is rejected or cannot be determined that value has to be determined by application of Rule 4 to 9 of Customs Valuation (determination of Value of Imported Goods) Rules, 2007. In terms of the rule 5 the value can be based on the value of contemporaneous imports. Contemporaneous imports for the purpose of Rule 5 can be those imports which are made on or about the same time. In the present case adoption of value in reference to imports made nearly two months back cannot be correct reflection of value of contemporaneous imports. When the compared imports are nearly two months old, and also no similarity has been established vis a vis the country/ place from where imported and quality and quantity the same cannot be said to be contemporaneous imports. The rejection of the transaction value in this case and enhancing the value of the imported goods on the basis of so called contemporaneous imports cannot be justified in this case. Licensing of import of Marble Blocks - N/N. 36/2009-2014 dated 31.03.2010 - Held that:- From the reading of notification it is quite evident, that it provides for entire scheme of licensing of import of Marble Blocks. It not only provides for the scheme of licensing but allows the license to be issued subject to actual user condition. It also provides for a mechanism of application for grant of license and also for monitoring of the imports made in terms of the license. By undertaking the imports of Rough marble Blocks, without proper import license appellants have contravened the provisions of Foreign Trade Policy read with Foreign Trade Regulation Act, 1993 and thus have rendered the goods liable for confiscation under Section 111(d) of the Customs Act, 1962. Appeal allowed in part.

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• Corporate Laws

• 2019 (2) TMI 1118
  Commission of offence under Sections 418/120B of IPC and under Section 447 of the Companies Act, 2013 - HELD THAT:- Definition of fraud provided in the explanation to Section 447 of the Companies Act, 2013 makes it clear that the prosecution is to relate to the companies in the first instance and also to other persons who have in any manner connived in commission of the offence to gain undue advantage. A bare perusal of Section 212 of the Companies Act, 2013 reveals that there is no bar of limitation to proceed under Sections 212 or 447 of the Companies Act, 2013. What is the larger conspiracy cannot be prejudged at this initial stage and is required to be examined at trial. At the summoning stage, limited scrutiny is required to be undertaken. Upon doing so, find no illegality or infirmity in the impugned order. This Court finds that the trial court has jurisdiction to proceed against petitioner, as sanction for the prosecution has already been taken. In the considered opinion of this Court, trial court does not lack the jurisdiction to proceed against petitioner.

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• 2019 (2) TMI 1117
  NCLT jurisdiction to entertain or try the disputes pertaining to transfer of equity shares - It is contended that, State Bank of India is not a Company registered under the provisions of Companies Act and it is a body corporate constituted and incorporated under SBI Act, 1955 which was enacted before the enactment of Companies Act, 1956 therefore, NCLT would have no jurisdiction to entertain or try the disputes pertaining to transfer of equity shares - HELD THAT:- Imperial Bank’ was taken over and named as State Bank of India and the Central Government together with other persons entitled to become shareholder of State Bank of India. It is not in dispute that the ‘Imperial Bank’ was a company under the erstwhile Companies Act and it continued to be company on take over as State Bank of India which is the reason that the Central Government become one of the shareholders. Later on the SBI also came out with an Initial Public Offer (IPO) and allotted its shares to various shareholders including individuals. As perused the Share Transfer Form submitted by the 1st respondent to 2nd appellant for transfer of shares. The said Share Transfer Form is prescribed under Section 108(1A) of the Companies Act, 1956. The said transfer from is being accepted by the 1st appellant. 1st appellant has not submitted any such form which have been prescribed by it for the purpose of transfer. 1st appellant is using the said form which have been prescribed under the Companies Act. As such the argument of the 1st appellant that the Companies Act is not applicable to them is not convincing. On the contrary State Bank of India being a body created by an Act of Parliament it has higher responsibility than the ordinary company to take care of its all stake holders. Thus State Bank of India is a company within the meaning of Companies Act for the purpose of transfer of securities. Therefore, NCLT has the jurisdiction to entertain or try the disputes pertaining to transfer of equity shares. Since we have held that the NCLT has the jurisdiction to entertain or try the disputes pertaining to transfer of equity shares, therefore, Section 430 of Companies Act, 2013 would be applicable. The civil suit filed by the 1st respondent is already withdrawn. When the 1st appellant filed the appeal before this Appellate Tribunal, 1st appellant have also made them parties respondent to the appeal. They have not come forward to agitate the Appeal inspite of service of Notice. It goes to prove that the transferor is not cooperating with the transferee or showing his inability to provide the information to the transferee. Therefore, it is established on the record that the 1st respondent was rightly contesting and claim that he is the rightful owner of these shares by filing Civil Suit and Company Petition before the appropriate Court/Tribunal. It is noted that the combined reading of Section 24 of Companies Act and Regulation 40 of SEBI will show that the principles and compliances to be made under the Companies Act or under the SEBI are complementary in nature and both provisions have to be complied with for a better outcome. The matter under consideration has been hanging over for the last several years. NCLT vide Impugned Order partly disallowed the claim of Respondent No.1, original petitioner, and he has not filed appeal. Appeal needs to be disposed giving directions regarding compliance on the lines of SEBI Circular. In view of the aforegoing observations and discussions the following directions are issued: i) Impugned Order is maintained. However, the shares may be transferred subject to compliance with SEBI Circular No. No.SEBI/HO/ MIRSD/DOS3/CIR/P/2018/139 dated 6th November, 2018. ii) Appellants and Respondent to take prompt action by following the prescribed procedure under the circular noted above. iii) The expenses, if any, incurred by the appellants in following the above procedure will be borne by the 1st respondent.

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• 2019 (2) TMI 1115
  Winding up petition - outstanding partnership debt - HELD THAT:- Though this corporate debtor is a company, since the core agreement is in between a partnership firm and the petitioner herein, we are of the view that jurisdiction lies with the Debts Recovery Tribunal but not with this Bench to deal with this debt either under operational debt or financial debt as mentioned under Part II of the Code. May be, it is true that Part III has not been notified till date but it does not mean that this Bench will get jurisdiction to deal with the debt that fall under Part III because the Tribunals are limited to deal with issues to the extent of jurisdiction conferred upon it. Since this Bench is of the view that this company petition is not maintainable for want of jurisdiction to deal with liability against a partnership, this company petition is dismissed solely on the ground aforesaid without getting into other disputes such as barred by limitation and existence of dispute.

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• Insolvency & Bankruptcy

• 2019 (2) TMI 1116
  Winding up petition - ‘Corporate Debtor’ defaulted in making repayment of ₹ 54,86,09,635 with interest @ 15% p.a. as on 15th August, 2016 till its realization - application under Section 9 of the ‘I&B Code’ against one of the partners of partnership firm - HELD THAT:- It is not in dispute that the amount due to the Appellant is from ‘M/s. Gammon Neelkanth Realty Corporation’. The bill was raised against the said partnership firm namely- ‘M/s. Gammon Neelkanth Realty Corporation’. ‘M/s. Neelkanth Realtors Pvt. Ltd.’, ‘Gammon Housing and Estates Developers Ltd.’ and ‘Neelkanth Mansions and Infrastructure Pvt. Ltd.’ are the partners, therefore, even if one of the partners or more than one partner is the ‘Corporate Debtor’ as the amount is due from the partnership firm, the application under Section 9 of the ‘I&B Code’ against one of the partners of such partnership firm will not be maintainable. In view of the aforesaid position of law, we hold that the Adjudicating Authority has rightly held that the application under Section 9 was not maintainable against one of the members of the partnership firm (Respondent herein) and rightly rejected the said application. We find no merit in this appeal

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• 2019 (2) TMI 1114
  Corporate Insolvency Resolution Process - Held that:- Dispute between the parties could be settled amicably, to which the parties also expressed their willingness for settling the dispute with mutual understanding. Accordingly, the parties have arrived at an amicable settlement and an application has been filed in the instant appeal for taking on record their Settlement Agreement dated 18.12.2018. We have given our consideration to the Settlement Agreement dated 18.12.2018 arrived at between the parties herein. While allowing the interlocutory application, we direct that the said Settlement Agreement shall form part of this order. In consequence thereof, nothing remains for further adjudication in the Civil Appeal and therefore, the appeal as well as other pending applications, if any, shall also stand disposed of.

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• 2019 (2) TMI 1113
  Initiation of ‘Corporate Insolvency Resolution Process’ - Held that:- Given the frame of the suit and the nature of relief claimed therein coupled with the fact that no relief with regard to the subject matter of petition under Section 9 of I&B Code was claimed therein against the Respondent, we are of the considered view that the contention raised by the Respondent does not require further investigation and the dispute raised in reply to the demand notice is a mere bluster. The impugned order passed by the Adjudicating Authority on 26th July, 2018 cannot be supported. The impugned order suffers from grave legal infirmity. The Adjudicating Authority seriously erred in declining to recognize Appellant as an ‘Operational Creditor’ and in arriving at the conclusion that there was an existence of dispute prior to filing of the petition. Having regard to the findings recorded hereinabove the impugned order cannot be sustained and the same is set aside. The appeal is allowed. The matter is remitted back to the Adjudicating Authority to admit the petition filed by the Appellant under Section 9 of the I&B Code after giving limited notice to the Respondent – Corporate Debtor so as to enable it to settle the claim before its admission.

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• 2019 (2) TMI 1112
  Corporate Insolvency process - Delhi Tribunal jurisdiction to entertain and try this application - Outstanding debt - debt barred by limitation - Held that:- The Operational Creditor has issued a demand notice dated 13.03.2018 under section 8 of the Insolvency and Bankruptcy Code, 2016 as per Form 3 as prescribed under in the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 to the Corporate Debtor to pay the unpaid operational debt in full within 10 (ten) days of receipt of the notice. Service affidavit is filed to corporate debtor vide dated 17.08.2018 through both the modes, Speed Post which was duly delivered on March 15, 2018 and also dispatched through email at its registered email id vide email dated March 14, 2018. The Corporate Debtor has neither submitted a reply to the aforesaid notice till date nor made any payment towards the outstanding dues. The applicant filed present Application under section 9 of IBC, 2016 and served the copy of this application which is duly received by the Corporate Debtor as per the affidavit of service filed by the applicant. The Applicant has filed an affidavit affirming that in respect of the amount claimed or any part thereof, the Applicant has not received nor had any person, on its behalf had received in any manner the amount due to them nor has received any notice of dispute raised by the corporate debtor under section 9(3)(b) of the IBC, 2016. The applicant has filed the bank certificate of ICICI Bank dated 20.03.2018 as required u/s. 9(3)(c) of I&B Code. The Applicant further states that in spite of several opportunities given none appeared on behalf of the corporate debtor nor any reply is filed and the matter was listed to be heard exparte on 29.11.2018. The registered office of corporate debtor is situated in Delhi and therefore this Tribunal has jurisdiction to entertain and try this application. The default occurred from 24.12.2017, hence the debt is not time barred and the application is filed within the period of limitation. The present application is complete and the Applicant is entitled to claim its dues, which remain uncontroverted by the Corporate Debtor, establishing the default in payment of the operational debt beyond doubt. In the light of above facts and records, the present application is admitted.

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• 2019 (2) TMI 1111
  RTI Application - appellant sought information pertaining to the Limited Insolvency Examinations - Held that:- The disclosure of corresponding questions would result in IBBI incurring a huge expenditure since the setting up of question papers entails intellectual efforts and related expenditure. As a consequence of the increase in expenditure, the Board may also be required to off-set the estimated surge by increasing the examination fee, to be submitted by potential insolvency professionals, by a considerable amount. Henceforth, the opportunity cost of disclosing the question is vast and against the public interest. Though the Respondents have vehemently opposed providing of question paper and answers in the RTI query. However, in the interest of justice, the Appellant may be allowed inspection of electronic copy pertaining to the information asked for. The CPIO is directed to facilitate the inspection of electronic copy of the same within three weeks of this order at the convenience of the appellant.

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• Service Tax

• 2019 (2) TMI 1110
  Benefit of exemption - services used by the exporters for export of their goods - appellant is availing the commission agent services from the companies located outside India - N/N. 18/2009-ST dated 07.07.2009 - benefit of notification denied on the ground that they have paid commission on export of goods procured through the wholly owned subsidiaries - time limitation - Held that:- The interpretation given by the adjudicating authority that the Notification benefit cannot be extended inasmuch as the export orders have been procured through wholly owned subsidiaries are erroneous. It is well-settled law that a Notification has to be read and interpreted on the basis of the words used therein and it is not permissible to ignore or introduce any word in the language of the Notification. On reading the said clause of the condition of the Notification, it is seen that there is no reference therein to the orders procured by the wholly owned subsidiaries, acting as commission agents, from a foreign land. Admittedly in the present case the appellant has not exported the goods to its own wholly owned subsidiaries or overseas joint ventures. The appellant has paid only commission to its foreign based commission agents, who happened to be their own subsidiary company and has not made any exports to them - the legislative intent beyond the introduction of the above condition is that no exporter would take undue advantage of the exemption on overseas commission agents in respect of the exports made by them to their own companies inasmuch as the export to their own companies would not require the services of any commission agents etc. - the benefit of the exemption Notification No.18/2009 is available to the appellant and the demand of Service Tax is unsustainable. Time limitation - Held that:- Apart from that, appellant was also filing the returns in Form EXP-1 and EXP-2 and as such the entire facts were in the knowledge of the Revenue. Apart from that the issue involved is bona fide issue of interpretation, in which case no mala fide can be attributed to the appellant. Further, the Revenue has not produced any evidence to show that there was any suppression or mis-statement on behalf of the appellant with any mala fide intention so as to justifiably invoke the longer period of limitation - demand barred by limitation. Appeal allowed - decided in favor of appellant.

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• 2019 (2) TMI 1109
  Condonation of delay in filing the appeal beyond the prescribed period of four months - power of Committee of Chief Commissioner to review the Order in Original passed by the Commissioner/ Principal Commissioner - Section 86 (2) of the Finance Act, 1994 - Held that:- The casual approach of revenue in pursuing this matter before Tribunal is evident from the application of “Application for Condonation of Delay” filed by the appellant along with the appeal - From the perusal of the said application it is quite evident that the application has been filed without even specifying the period of delay sought to be condoned or without assigning any substantial reason for seeking such condonation. The sufficient time and opportunity has been given to the Appellant to file and explain the ground for delay in filing the appeal - The only reason that has been stated by the Appellant in their affidavit now filed is that the delay has occurred on account of the reorganization and restructuring of the CBEC on account of introduction of GST. No other ground has been mentioned for seeking such condonation of delay. In the present case when the order in original under challenge was dated 26.03.2018 and was received by the Committee of Chief Commissioners on 25.04.2018, can delay in filing the appeal that was to be filed by 24.04.2018 be attributed to the implementation of GST. GST as stated earlier was implemented with effect from 1st July 2017. In this case the order in original is dated 26.03.2018, i.e. nearly nine months after such implementation. Another interesting feature to be noted in this case is Committee of Chief Commissioner gives an order for review on 23.08.2018, received by the Commissioner on 24.08.2018, i.e. the last date for filing the appeal. When Committee of Chief Commissioner orders for review was received by the Commissioner, that day itself was last day for filing the appeal - This delay in undertaking the statutory obligation caused on the reviewing authority could not be explained in the manner sought to be explained. In the present case no sufficient cause has been shown for delay in presenting the appeal in present case, as is required to be shown in terms of Section 86 (5) of the Finance Act, 1994. In absence of any such justification, there is no merits in the application for condonation of delay - Application for condonation of delay filed by revenue is thus dismissed.

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• 2019 (2) TMI 1108
  Maintenance and Repair Services on containers - demand of service tax - Held that:- Merely because the assessee has outsourced the activity of washing and repair of containers to another, it cannot be said that they have not provided any services. The document issued by the assessee to the customer shows that the bills are raised for washing and repairing of containers. The assessee is liable to pay service tax under this category. However, from the document, it appears that the assessee has billed a consolidated sum to the customer, which includes material costs as well as taxes paid by the contractor. The quantification of demand under this category is therefore incorrect and requires to be revised. For the limited purpose of requantification, the matter is remanded to the adjudicating authority - no penalty is imposable in respect of any final tax liability that may be arrived on this score. Storage and Warehousing Services - Held that:- The assessee has conceded that they are liable to pay service tax under Storage and Warehousing Services. The demand under this category is therefore upheld. Demand of ₹ 33,28,912/- under the category of reimbursable expenses - Held that:- An amount of ₹ 1,13,954/- has been confirmed under this category. Ld. Counsel has submitted that the assessee is not contesting the amount confirmed under this category and therefore, the same is upheld. Composite Penalty u/s 78 - Held that:- The assessee has put forward reasonable cause for non-payment of service tax under this category and therefore, the penalty under Section 78 requires to be set aside by invoking Section 80 of the Finance Act, 1994. Appeal allowed in part.

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• 2019 (2) TMI 1107
  Penalty u/s 78 - Tax collected but not paid - appellant had collected brokerage charges and transaction charges during the period from 1st April, 2007 to December, 2011 from their customers, but not paid - Held that:- It is clear that whenever the element as that of fraud, collusion, willful mis-statement or suppression of fact is apparent on the part of the appellant as a ground for non-payment of the service tax that the appellant is liable to be imposed with the penalties under this section. The appellant herein has taken the ground of bonafide impression for not being liable to pay the service tax on the transaction charges. Though the Department’s case is that the alleged non-payment came to the notice of Department only on audit of records of the appellant by the Department. But there has been catena of decisions that mere non-payment may not suffice to be clothed with the grave allegations as that of fraud and mis-representation unless and until there is evidence about a positive act on part of appellant, as produced by Department, to prove that appellant had intent to not to pay the duty. The apparent fact of the appeal is that the appellant has not contested the liability and in fact has prayed for his sufficient cenvat credit available to be utilized against the said demand - The transaction charges were subjected to levy of tax for the first time w.e.f 16-05-2008 without any intention to amend the "forward contract service" already existing at that time. Further, the CBEC vide Letter F. No. 137/57/2006-CX-4 Dated: May 18, 2007 also issued instruction on transaction charges stating that the same is not liable to Service Tax. Penalty not imposable - appeal allowed - decided in favor of appellant.

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• 2019 (2) TMI 1106
  Benefit of N/N. 16/2004 dated 10.09.2004 - services provided as ‘Enterprise Resource Planning’ (ERP) - case of the department is that since the appellant are registered as Commercial Coaching or Training Service provider, the said service is not eligible for exemption under N/N. 16/2004-ST - Held that:- The appellant have provided ERP software service. ERP software service is explicitly exempted under N/N. 16/2004-ST dated 10.09.2004. The specific service, ERP System provided by a management consultant in connection with management of any organization, in any manner, is exempted. This notification itself endorses that the service of ERP software system is part and parcel of Management Consultancy Service. The only lapse on the part of the appellant is that they have not got the service i.e. Management Consultancy service added in the registration. Only because of this reason, it cannot be said that ERP software system service is not covered under ‘Commercial Training or Coaching Services’, whether the appellant have applied for registration or otherwise in their classification of service, will not change the position - ERP Software system service provided by the appellant is clearly eligible for exemption under Notification No. 16/2004-ST dated 10.09.2004. Appeal allowed - decided in favor of appellant.

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• 2019 (2) TMI 1105
  Franchise services - Failure to discharge service tax - Held that:- This Tribunal in the case of JETKING INFORMATION LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI-I [2006 (11) TMI 595 - CESTAT MUMBAI], where it was held that the appellant was liable to pay service tax on the franchise services. Since the adjudicating authority failed to apply the observation of this Tribunal in the case of Jetking Information Ltd., the learned Commissioner (Appeals), in the impugned order, remanded the matter back to the adjudicating authority to re-determine the liability of tax, interest and penalty in accordance with the Tribunal’s order - appeal allowed by way of remand.

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• 2019 (2) TMI 1104
  Penalty u/s 78 of FA - appellant had paid the entire service tax with interest prior to issuance of SCN - suppression of facts - Held that:- Revenue should have reasons before alleging fraud, suppression etc. and secondly the provisions of Section 78 stand controlled by Section 80 of the Finance Act, 1994, ibid. This makes that for every default, penalty under Section 78 is not automatic. In the case on hand, much before the issuance of show cause notice the assessee has paid the taxes along with applicable interest and there is no dispute on this. In the orders of the lower authorities, the Revenue has but for reiterating the wordings in the Section itself, has not gone beyond that to put on record any reasons on the alleged fraud or suppression etc. - Penalty cannot sustain - appeal allowed - decided in favor of appellant.

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• 2019 (2) TMI 1103
  Services were provided to MSEDCL in relation to transmission and distribution of electricity - N/N. 45/2010-ST dated 20.7.2010, 11/2010-ST dated 27.2.2010 and 32/2010-ST dated 22.6.2010 - Held that:- By virtue of N/N. 45/2010-ST dated 20.7.2010, transmission and distribution of electricity for the period upto February, 2010 has been retrospectively held to be not leviable to Service Tax in exercise of powers conferred by Section 11C of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. Subsequently, the transmission of electricity has been held exempted vide Notification No. 11/2010- ST dated 27.2.2010 and distribution of electricity under Notification No. 32/2010-ST dated 22.6.2010. Benefit cannot be denied - appeal allowed - decided in favor of appellant.

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• 2019 (2) TMI 1102
  Transfer of credit - amalgamation - non-compliance with Rule 10 of the Cenvat Credit Rules - information regarding surrender of registration with Chennai and Mumbai not provided - case of Revenue is also that Transfer could not take place before reversing the credit in the accounts of Chennai and Mumbai entities - Held that:- The show cause notice proposed to deny credit on the ground that no prior permission stands taken by the appellant. However, the said issue stands accepted by the Adjudicating Authority and as such it was not open to the Revenue to deny the credit on further allegations - The legal issue that Adjudicating Authority cannot go beyond the show cause notice is well settled by catena of judgments. Otherwise also, the credit was transferred from Chennai and Mumbai after intimating the Service Tax Authorities, under the orders of the Hon’ble High Court and as such cannot be questioned by the Revenue. The scheme of amalgamation has clearly provided that all the assets of the Transferor Companies would be available to the Transferee Company. Inasmuch as the transfer of the unutilized credit has been done under the approval of the Hon’ble High Court as per the scheme sanctioned by the High Courts, the denial of the same is neither justified nor warranted. Appeal allowed - decided in favor of appellant.

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• 2019 (2) TMI 1101
  Works contract service - composition scheme denied - period October, 2007 to March, 2012 - Demand of duty - Held that:- The effect of exercising the option to pay tax in terms of composition scheme is to let the revenue know about such utilization of the scheme. Having reflected the same in their ST-3 returns, Revenue becomes aware of the said fact, thus, justifying the fact of letting the revenue know about their option - Tribunal in the case of M/s Vaishno Asociates Vs Commissioner of Central Excise & Service Tax, Jaipur-I [2018 (3) TMI 417 - CESTAT NEW DELHI] has dealt with an identical issue and have observed that as the assessee started making payment of service tax under the composition scheme by reflecting the same in the return, such fact would amount to exercise of option and the benefit cannot be denied for reason for failure to file intimation prior to payment of service tax under ‘Works Contract Service’ - decided in favor of assessee. Input tax credit - Revenue has contended that inasmuch as, the appellant has availed composition scheme, it was not permissible to avail the Cenvat credit - Held that:- Though the adjudicating authority has accepted the fact of reversal of the credit but he has not extended the credit by observing that the said credit was not reversed within the time limit prescribed for filing a revised ST-3 return - As per the settled law such reversal can be even at the appellate stage and as such would amount to non availment of credit. The expiry of the period of filing the revised ST-3 return has got no relation to the timing of reversal of credit. Demand of service tax - mobilization charges - Held that:- lmost all the issues stands decided by one or other order of the Tribunal or of other judicial forum. The same are required to be examined, as regards their applicability to the facts of the present case. For said purpose, we set aside the impugned order and remand the matter to Commissioner for fresh decision in the light of law declared in various decisions. Appeal allowed by way of remand.

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• 2019 (2) TMI 1100
  Demand of service tax - appellant engaged in providing the advertising materials to the newspaper, print media etc. - Held that:- The Appellate Authority has, in principle, agreed that the order impugned before him was lacking in so many issues inasmuch as the Revenue itself has not identified the specific category of taxable services - The appellant, in support of their various pleas, have produced the documents before him, which were not produced before the Original Adjudicating Authority. The Appellate Authority should have set aside the impugned order and remanded the matter to the Original Adjudicating Authority for verification of the various documents - appeal allowed by way of remand.

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• Central Excise

• 2019 (2) TMI 1099
  CENVAT Credit - input - Welding Electrodes - Held that:- Reliance placed in the case of COMMR. OF CUS., C. EX. & S.T., BILASPUR VERSUS SINGHAL ENTERPRISES PVT. LTD. [2017 (7) TMI 1112 - CHHATTISGARH HIGH COURT], where it was held that credit on welding electrodes must be allowed - appeal allowed - decided in favor of appellant.

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• 2019 (2) TMI 1098
  Condonation of delay of 110 days in filing revision - condonation sought on the ground that there was a confusion as to where the revision had to be filed - Held that:- The instant petition is completely devoid of any merit - demand raised by the petitioner has already been dropped/cancelled by the Tribunal vide order dated 30.07.2015, therefore, the petitioner ought not to have filed the instant petition. Despite knowledge of above said fact, filing of instant petition by the petitioner, his mala fide action with some ulterior motive and extraneous consideration, best known to him, amounts to grave harassment to the innocent tax payers - Filing of this petition, amounts to gross abuse of the process of law, inasmuch as, after cancellation of demand raised by him from the respondent, this petition was not maintainable. This petition is dismissed with exemplary costs of ₹ 2,00,000/- (Rupees Two Lakhs) to be recovered from the erring officer from his own pocket.

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• 2019 (2) TMI 1097
  CENVAT credit of additional customs duty - duty was discharged on DEPB scrips - Revenue entertained a view that the benefit of the additional Customs Duty is available as credit to the appellant only when the same is paid in cash - extended period of limitation u/s 11-A(1) of the Central Excise Act, 1944 - Held that:- Admittedly the show cause notice for the demand in question stands issued on 09.12.02.2005 for the period October 2003 to August 2004 i.e. by invoking the extended period of limitation in terms of the proviso to section 11A of the Central Excise Act. The said proviso provides that in case duty has not been paid on account of fraud, collusion, willful misstatement, suppression of facts or contravention of any of the provisions of the act or the rules made thereunder with intent to evade payment of duty, the period of five years is available to the Revenue to serve notice on such person for such short paid duty. The invocation of longer period of limitation, which is primarily on the ground that the appellant did not file the duty-paying documents along with ER-1 returns and did not stated in the said returns that the CVD was paid through DEPB. There is no reference to any column or clause in the said ER-1 which requires an assessee to disclose the above information. In the absence of any requirement to disclose in the said returns, the factum of payment of CVD through DEPB, we are of the view that non-disclosure, by itself cannot be made the ground for invocation of extended period - the mere fact that the appellant had not stated in the ER-1 returns as regards payment of duty through DEPB cannot be adopted a valid ground to justifiably invoke the extended period of limitation. The demands having been raised beyond the normal period of limitation are barred - appeal allowed - decided in favor of appellant.

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• 2019 (2) TMI 1096
  CENVAT Credit - outward freight - place of removal is factory gate - period of dispute is from 01.01.2005 to 2007-2008, 2008-2009 and 2009-2010 (Upto November, 2009) - Held that:- The present issue is no more res-integra in view of the recent decision of the Hon ble Supreme Court in the case of Commr. of Central Excise, Belgaum Vs. Vasavadatta Cements Ltd. [2018 (3) TMI 993 - SUPREME COURT], where it was held that rom 01.04.2008, with the aforesaid amendment, the CENVAT credit is available only upto the place of removal whereas as per the amended Rule from the place of removal which has to be upto either the place of depot or the place of customer, as the case may be - credit allowed - appeal allowed - decided in favor of appellant.

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• 2019 (2) TMI 1095
  Clearance of Cement to dealers/retail agencies - N/N. 04/2006-CE dated 01.03.2006 as amended from time to time - benefit denied on the ground that the clearances made directly to various industries like contractors/ builders/ construction companies are not eligible for assessment under Sl.No.1C of the N/N. 04/2006-CE and therefore, proposed to demand duty under Sl.No.1A of the notification. Whether the assessee is entitled to the benefit of N/N. 04/2006-CE (Sl.No.1C) in respect of the cement cleared by them in 50 Kg bags marked as “meant for industrial use” and “not for retail sale” and sold to institutional/ bulk buyers? - Held that:- The issue is no longer res integra and it has been settled by the Tribunal in the case of Mysore Cements Ltd [2009 (5) TMI 445 - CESTAT, BANGALORE] and affirmed by the Hon’ble High Court of Karnataka. Respectfully following the ratio, it can be held that assessee is entitled to the benefit of exemption notification for the cement cleared by them in 50 Kg bags to institutional buyers - benefit of exemption notification 04/2006-CE as amended from time to time is available to the assessee in respect of all the clearances to institutional buyers whether or not the cement is sold in individual bags - The demand on this ground along with interest, if any, is set aside. Whether the same exemption notification is also available to sales, if any, are made to individual consumers by the assessee? - Held that:- As far as sales to individuals are concerned, sale to individual customers does not appear to be covered by the exemption notification - It has been held by the Hon’ble Apex Court in its five member constitutional bench in the case of Dilip Kumar & Co. and others [2018 (7) TMI 1826 - SUPREME COURT OF INDIA], any exemption notification must be strictly interpreted against the person claiming the exemption - The sales to individuals for personal use are not covered by the exemption notification - demand and interest, if any, on account of sales to individuals by the appellant are upheld. Penalties also set aside. The appeals are disposed of by way of remand to the original authority for the limited purpose of determining the duty, if any, payable and interest thereon.

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• 2019 (2) TMI 1094
  Benefit of N/N. 214/86 dated 25.03.1986 - Job-work - benefit of notification denied on the ground that M/s Divya Pharmacy for whom job work is done by appellant is having the benefit of area based exemption - Held that:- N/N. 214/86 provides that exemption to the goods manufactured in the factory as a job work are subject to conditions as specified in the Notification as above i.e. the Notification exempts the job worker from payment of duty subject to fulfilment of the conditions enumerated therein. In the Notification as above, one of the conditions is that such goods should be used by the principal manufacturer in the manufacture of goods which are cleared on payment of duty. In the present case, principal manufacturer i.e. M/s Divya Pharmacy though was getting the plastic containers manufactured on job work basis from the appellant but they were not clearing their final product with those plastic containers on payment of duty as they were availing the area based exemption as per N/N. 50/2003-CE dated 10.06.2003 - Once, there was no duty on the final goods cleared no question of any exemption available qua the goods manufactured in factory as a job work arises. Therefore, appellant is also not qualifying the remaining two conditions of the said notification. We are of the opinion that benefit of N/N. 214/86 is not available to the appellant. Intent to evade exists or not? - Held that:- No bonafide can be attributed to the appellant submission that he was not aware of the condition of the said Notification that the goods are to be cleared after payment of duty to availing the benefit. In the given circumstances, the only possibility for the non payment is the intent to evade the duty. There is no other cogent evidence to support the bonafide. Appeal dismissed - decided against appellant.

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• 2019 (2) TMI 1093
  Process amounting to manufacture - unit had removed the goods on completion of job work without payment of duty under cover of challan - the unit was working under provision of Rule 4(5)(a) of the Cenvat Credit Rules and had not raised any excise invoice under Rule 11 of Central Excise Rules, 2002 - the grounds of appeal are essentially on the issue that the Commissioner has failed to examine if the process undertaken by M/s DASL and to ascertain if such processes amount to manufacture. Held that:- It is seen that the ground of appeal do not deny the fact that M/s GMIL had not filed the requisite declaration under Notification 214/86-CE. The declaration filed by the principal manufacturer under Notification 214/86-CE is not a procedural kind of declaration but a substantial declaration in so far as it transfers duty liability from the job worker to the principal manufacturer. In these circumstances, it is obvious that without declaration being filed by M/s GMIL duty liability would remain with the job worker. In these circumstances, payment of duty by the job worker cannot be challenged. CENVAT Credit - supplementary invoices - Rule 9(b) of Cenvat Credit Rules - Held that:- There is no allegation of suppression of fact, wilful misstatement, fraud etc., in the SCN - in absence of any charge of suppression, mis-declaration etc. provisions of rule 9(1)(b) cannot be invoked. Appeal dismissed - decided against Revenue.

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• 2019 (2) TMI 1092
  CENVAT Credit - common input services used for dutiable goods and exempted services - non-maintenance of separate records - demand of 6% / 5% (whichever applicable) of the value of the exempted input services as per Rule 6(3)(i) of the CENVAT Credit Rules, 2004 - proportionate credit already reversed - Held that:- The appellants have already reversed the proportionate CENVAT credit in terms of Rule 6(3)(ii) read with Rule 6(3A) and therefore, he is not required to pay 5% / 6% of the value of the exempted service as demanded by the Commissioner (A) - appeal allowed - decided in favor of appellant.

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• 2019 (2) TMI 1091
  Benefit of N/N. 5/99 (Sl.No.264) - Electric motors - benefit denied on the ground that exemption was not available to stators, rotors and Electric Shields, etc., as the final products were exempted from payment of duty Held that:- The exemption is applicable to all the goods falling under any chapter except the three listed therein at Sl.No.264. The items discussed in the impugned order are not the one which are in the excluded list. Therefore, the original authority has rightly held that the appellants are eligible to avail the notification - Further, the appellants have been availing the same exemption N/N. 67/95-CE and 06/2000-CE. Classification lists have been accepted by the department for further period. This being the situation, the exemption cannot be denied for the impugned period only for the reason that the appellants have not claimed the same in the declaration - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2019 (2) TMI 1090
  Forfeiture of tax - Section 46A of the Kerala General Sales Tax Act, 1963 - Held that:- A Division Bench of this Court had, considering Section 72 of the Kerala Value Added Tax Act, 2003 which is in pari materia with Section 46A of the KGST Act, found, in Tata Teleservices Ltd. v. State of Kerala Others [2009 (2) TMI 857] that such forfeiture is possible - the question is answered against the assesses and in favour of the Revenue. Ought not the Tribunal have found that the KGST Rules, 1963, specifically Rule 22A, stood amended with effect from 01.04.2000 enabling the deduction of tax to be made in a works contract excluding that portion relating to inter-State transfer of goods? - When the Court declares a provision as ultra vires, it stands deleted from the statute book. The State definitely could have brought a provision in the statute providing such exclusion, thus removing the infirmity pointed out by the Constitutional Court and to bring in past transactions could have also brought in a validation clause. The State having not done so, the prescription in the Rules for exclusion would not enable a proceeding for failure of deduction of tax at source; which obligation is no longer there by reason of the declaration by a Constitutional Court - decided in favor of assessee. Whether the introduction of sub-section (7C) in Section 7 by KGST (Amendment) Ordinance, 2003 dated 24.04.2003 with retrospective effect from 05.08.2002 obliged the assessee to make deductions with respect to works contract from the contractor? - Held that:- With respect to sub-section (7C) of Section 7, as it was brought in with retrospective effect from 05.08.2002; we would not answer the question raised since the issue has been remanded to the Assessing Officer as to whether the contractor of the assessee had applied for compounding or not - We, hence, refuse to answer the question. Whether the further amendment to sub-section (7C) of Section 7 with effect from 01.04.2004 obliged the assessee to make such deductions, excluding the portion of inter-State transfer of goods, on payment to the contractor? - Held that:- As to the amendment brought in which gave rise to question No.(iii), we have to notice that again the amended sub-section (7C) did not have an obligation for deduction of tax at source. In such circumstances, we answer question No.(iii) framed by us against the Revenue and in favour of the assessee. Whether the additions made based on the penalty orders were liable to be deleted along with the actual evasion found in the penalty proceedings when the assessee had not produced any substantiating material to prove their contention of penalty having been imposed on capital goods? - Held that:- There is no independent consideration as to the addition of the turnover on allegation of tax evasion and the addition made with respect to probable omissions and suppressions - We, hence, set aside the deletion of the additions as such made by the Tribunal and direct the Assessing Officer to look into it afresh after verifying the books of accounts, the certificate of registration and any other substantiating materials. We make it clear that the original certificate of registration of the KGST regime having been already surrendered, the Assessing Officer would look into the records and the copy of the connected cases certificates produced by the assessee. Revision allowed in part.

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• 2019 (2) TMI 1089
  Assessment and re-assessment made under the Kerala Tax on Luxuries Act, 1979 - invocation of sub-section (5) of Section 6; which sub-section was brought in, after the subject assessment years, in August, 2006 - constitutional invalidity - re-assessment carried out for the years 2000-01 to 2004-05. Held that:- Under the Income Tax Act on the facts of the present case, the re-assessment would not be possible since the Assessing Officer had looked at the total turnover in the Ayurvedic Centre and Boat Hiring centre etc.,and had consciously excluded a portion of the same as being not covered under the Act. However, we find that the provision under Section 6(5) is in pari materia with the Agricultural Income Tax Act. The Assessing Officer hence is clothed with the power to even interfere with the earlier finding in regular assessment provided it is done within a period of five years as provided under the provisions for re-assessment. There is no reason to so keep in abeyance the demand raised or direct rectification of the assessments carried out on the said ground raised. The accounts of the assessee which were confirmed at the AGM's earlier constituted; when recast can only have implications to the share-holders. The assessment made under the Act of 1976 is only on the receipts of the Hotel which would not at all be altered and the same is based on the books of account as maintained by the Hotel and verified by the Assessing Officer. There can be no alteration of the receipts at this stage when the last of the assessment years we are concerned with is about 14 years prior. Appeal is partly allowed setting aside the re-assessment made for the year 2000-01 but upholding the re-assessment for the other years.

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• 2019 (2) TMI 1088
  Validity of assessment order - levy of tax on the maintenance and repair work on the buildings of P.W.D - levy of tax on payment of wages to labourers which is pure labour work - imposition of penalty - AO has not given an opportunity of personal hearing to the petitioner before imposing such penalty - principles of natural justice. Held that:- The petitioner disputes his liability to pay the tax by contending that such levy on the maintenance work and payment of wages to the labourers is improper. This Court, at this stage, is not expressing any view on such contention since, the petitioner admittedly, has not filed any reply to the notice of proposal. On the other hand, it is stated that the petitioner personally went and met the Assessing Officer and explained him with details. Needless to say that when a notice of proposal was given in writing, it is for the petitioner to give a reply in writing. In this case, the petitioner has not made any such reply. Imposition of penalty - Held that:- It is evident that the Assessing Officer has not indicated any date of personal hearing even in the absence of any reply filed by the petitioner, more particularly, when the Assessing Officer has chosen to impose penalty. At this juncture, it is relevant to refer to a Circular issued by the Revenue in Circular No.7 of 2014 - This Court has considered the scope of the above circular in very many cases and observed that it is the duty of the Assessing Officer to provide such personal hearing - In this case, as it has not been done, this Court is inclined to remit the matter back to the Assessing Officer for redoing the assessment, however, subject to the condition that the petitioner shall pay 15% of the tax liability. Petition allowed by way of remand.

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• 2019 (2) TMI 1087
  Classification of goods - Ayurvedic Medicine or Food supplement? - rate of tax - the stand taken by the Revenue is that what was imported is put into capsules and marketed and there is no manufacturing work - Held that:- The product which was imported is not the product, which was marketed. The Court also took into consideration the various licenses obtained by the said assessee under the various enactments which showed that the product is an Ayurvedic Proprietary Preparation - The decision in the case of M/s. DXN Herbal Manufacturing (India) Pvt. Ltd. [2017 (11) TMI 608 - CESTAT CHENNAI] is a clear answer on which the petitioner was non-suited that the product is an imported product. The tribunal holds that it is not an Ayurvedic Medicine to Food Supplement - Held that:- This finding is not supported by any document, but it appears to be the view of the Tribunal. This finding is incorrect because of the various licenses obtained by the manufacturer namely M/s.DNEX Herbal Manufacturing (India) Pvt.Ltd. which was taken note of in the afore mentioned decision. Furthermore, the literature also clearly described the product as an Ayurvedic Proprietary Medicine. Therefore the tribunal could not have adopted the common parlance test - the product is Ayurvedic Proprietary Medicines and direction was issued to the Assessing Authority to treat the items as Ayurvedic preparations and tax accordingly. We have informed that the order passed by the Kerala Sales Tax Tribunal has attained finality and the appellant therein, the person who purchased the product from the petitioner before us has also been granted refund. Since the product is same, the factual finding will bind the respondent department, though the decision was rendered by a tribunal in the State of Kerala. The revenue has not been able to bring down any material to dislodge the factual finding recorded by the Tribunal duly supported by expert opinion. Therefore, the second ground on which the tribunal refused the relief to the petitioner deserves to be set aside. Third and the last ground is that the product is marketed through multi level marketing and not sold in all the shops - Held that:- This can hardly be a reason to determine the rate of tax payable on the product when it is sold. The manner in which the product is sold cannot be a test to determine the nature of the product of that matter at what rate it has to be taxed. Therefore, the Tribunal misdirected itself in referring to the method of marketing as a reason for imposing a higher rate of tax. It is common knowledge that now a days all products are available through online purchaser. Therefore, the method of purchase at a stretch of imagination cannot be a reason to impose a higher rate of tax. The Tax Case Revisions are allowed - the Substantial Questions of Law are answered in favor of the appellant.

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• 2019 (2) TMI 1086
  Compounding of tax - Section 7 of the Kerala General Sales Tax Act, 1963 - power of rectification - Held that:- As the computation being on the one hand under clause (a) and the other under clause (b), and the liability of the dealer being to pay the tax computed under either of these heads, whichever is higher. The contention raised by the assessee is on the re-opening not being permissible, after the permission has been granted in the commencement of the year and the assessed tax not being contemplated as coming within the provisions of Section 7 - Section 7 is in lieu of the tax payable under Section 5. A dealer desirable of exercising an option under Section 7 has to make an application at the commencement of the year. The application has to be considered and payment of compounded tax permitted by the Department. On such permission being granted, as held by the Honourable Supreme Court in Bhima Jewellery [2014 (10) TMI 411 - SUPREME COURT OF INDIA], there is a bilateral agreement between the parties from which neither can resile from. The assessee cannot claim to be assessed under Section 17, determining tax under Section 5. Nor can the Department resort to such an assessment, based on the turnover of that particular year. However, it cannot at all be said that there is no assessment contemplated insofar as a dealer opting for the compounding provision - The dealer who opts for payment of tax under Section 7 cannot be said to have been absolved of the liability for all the consequences arising from such an assessment made for the previous three years which is the reference point for determining the tax payable in the relevant year under clause (b) of Section 7. The assessees would appear before the AO and necessarily adjustments would be made insofar as the compounding tax computed for the subject assessment years - appeal allowed.

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• Indian Laws

• 2019 (2) TMI 1085
  Arbitration - failure to make payment for the supplied goods to the Respondent - supplies of the Respondent’s copper rods made by the Appellant to Hindustan Transmission Products Ltd. - arbitrability of the dispute under the arbitration clause - Held that:- The majority of the arbitral tribunal as well as the Courts found upon a consideration of the material on record, including the agreement dated 14.12.1993, the correspondence between the parties and the oral evidence adduced, that the agreement does not make any distinction within the type of customers, and furthermore that the supplies to HTPL were not made in furtherance of any independent understanding between the Appellant and the Respondent which was not governed by the agreement dated 14.12.1993. In the Majority Award that the Appellant could not show under what separate agreement it was entitled to commission from such sales other than the agreement dated 14.12.1993, and for what services, if its only role in the transaction was to allow HTPL to lift goods from its godowns - Indeed, it is not the case of the Appellant that it only provided storage services to the Respondent by allowing the Respondent to store its goods in the warehouse of the Appellant (i.e. that it only acted as a warehouse for the Respondent). In fact, a series of correspondences amongst the Appellant, the Respondent and HTPL clearly reveals that the Appellant was also actively involved in the transaction in question entered into between the Respondent and HTPL, and as such was a beneficiary under their agreement. It is not open to the Appellant to argue that the agreement between the Respondent and HTPL was independent of the agreement dated 14.12.1993 between the Appellant and the Respondent and that the latter did not apply to such transaction - Moreover, as noticed in the Majority Award and also by the Courts, the oral evidence of the officers of the Appellant indicates that the Appellant did not make any effort to ensure that the letters of credits pertaining to the supplies made to HTPL were honoured, pointing towards gross negligence on the part of the Appellant. The view taken in the Majority Award, as confirmed by the High Court in the exercise of its powers under Sections 34 and 37 of the 1996 Act, is a possible view based upon a reasonable construction of the terms of the agreement dated 14.12.1993 between the Appellant and the Respondent and consideration of the material on record - also, the dispute was covered under the agreement between the Appellant and the Respondent dated 14.12.1993, and as such the dispute is governed by the arbitration clause under the said agreement. There is no reason to disturb the Majority Award on the ground that the subject matter of the dispute was not arbitrable - appeal dismissed.

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• 2019 (2) TMI 1084
  Dishonor of Cheque - repayment of loan - section 138 of NI Act - Held that:- The offence under Section 138 of the NI Act is an offence in the personal nature of the complainant and since it is within the special knowledge of the accused as to why he is not to face trial under section 138 N.I. Act, he alone has to take the plea of defence and the burden cannot be shifted to complainant. There is no presumption that even if an accused fails to bring out his defence, he is still to be considered innocent. If an accused has a defence against dishonour of the cheque in question, it is he alone who knows the defence and responsibility of spelling out this defence to the Court and then proving this defence is on the accused. In this case, notice under Section 251 Cr.PC. has already been framed against the petitioner and she has pleaded not guilty and claimed trial. An application under Section 145(2) of the NI Act filed by the petitioner was allowed. The Authorized Representative of the complainant has already been cross-examined by the counsel for the petitioner and was discharged. Jurisdiction - Held that:- The Court, in exercise of its jurisdiction under Section 482 Cr.PC. cannot go into the truth or otherwise of the allegations made in the complaint or delve into the disputed question of facts. The issues involving facts raised by the petitioner by way of defence can be canvassed only by way of evidence before the Trial Court and the same will have to be adjudicated on merits of the case and not by way of invoking jurisdiction under Section 482 Cr.PC. at this stage. In the facts of the present case, this Court does not find any material on record which can be stated to be of sterling and impeccable quality warranting invocation of the jurisdiction of this Court under Section 482 Cr.PC at this stage. More so, the defence raised by the petitioner in the petitions requires oral as well as documentary evidence, which cannot be appreciated, evaluated or adjudged in the proceedings under Section 482 of Cr.PC. - The bare assertions of the learned counsel for the petitioner that the petitioner has already paid the amount or the respondent has already received or realized the cheque amount or the cheques are without consideration as well as the other contentions raised in the petitions, are only bald submissions at this stage which are required to be proved by way of oral and documentary evidence on record, by the petitioner. This Court, at this stage, neither can interfere nor can intervene nor can quash the proceedings pending before the Trial Court. Petitions are dismissed with cost of ₹ 5,000/- in each case.

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