TMI Tax Updates - e-Newsletter
February 22, 2018

Case Laws in this Newsletter:

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

TMI SMS

• Service tax on Works Contract @33% - Cost of FOC material cannot be included for exemption u/s 93 since not authorized vide section 67 - SC

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Highlights / Catch Notes

• Income Tax:

  Additions for Advance against depreciation (AAD) - there is a timing difference and that it represents the adjustment in future and that it is therefore not even carried through the profit and loss account - not taxable - no addition can be made - HC
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• Income Tax:

  Extension of time to pay the third installment on the undisclosed income under the Income Declaration Scheme Rules, 2016 - Assertion that the petitioner merely forgot to pay the third installment is unbelievable and a lame excuse - If such excuses were to be accepted, then extension of time would have to be granted as a routine in other cases as well. - HC
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• Income Tax:

  Exemption u/s 10(23C)(iv) denied - proof of charitable activities - The CCIT has come to a wrong conclusion that the Society was making systematic profit. The schools are required to invest in the infrastructure including expansion of building etc - HC
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• Customs:

  The goods imported are “Ethyl Vinyl Acetate”, but during the relevant time, the notification granted the concession only to Ethylene Vinyl Acetate. It is not disputed that these two goods are different - Benefit of concessional rate of duty cannot be granted - AT
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• DGFT:

  Amendment in the Foreign Trade (Exemption from application of Rules in certain cases) Amendment Order, 2017 - Notification
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• IBC:

  Corporate Insolvency Resolution Process - Corporate Debtor - the principal debtor cannot be regarded in default in accordance with law and therefore, no liability of guarantor/surety would arise at this stage. - Tri
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• IBC:

  Corporate insolvency process - eligible debt - Corporate person - Applicant-respondent cannot successfully claim that having accepted deposits he has become financial service provider. Code has not excluded NBFC as a class but has preferred to go by the test of financial service provider. - Tri
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• Service Tax:

  Valuation - works Contract - inclusion of FOC material - exemption u/s 93 can only be granted in respect of those activities which the Parliament is competent to levy service tax - The value of the goods/materials cannot be added for the purpose of aforesaid notification - SC
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• Service Tax:

  Liability of service tax - discount - sub-agent of IATA agents - the nature of transaction between the registered IATA Agents and the subsequent sub-agent, is that of sale and purchase, and accordingly, held that service tax is not required to be paid by the said sub-agent on the discount received - demand set aside. - AT
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• Service Tax:

  Refund of service tax paid on various services used in the export of goods - For the period prior to such amendment by N/N. 33/2008, the condition under Notification is very clear to the effect that the refund under the Notification cannot be paid if said goods have been exported under claim of drawback of service tax paid - AT
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• Service Tax:

  Execution of land acquisition work - any amount received by the assessee from Sahara India would be treated as service and liable to service tax - cost of the land can never be treated as value of the services - AT
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• Central Excise:

  Interpretation of statute - suo moto re-credit - this was not the case of the assessee suomotu availing recredit but a case of mere correction of incorrectly made entries on the very same day - issue is completely factual - HC
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• Central Excise:

  CENVAT credit - capital goods - Under sub-rule (4) of Rule 6 of Cenvat Credit Rules, 2004, capital goods cenvat credit is inadmissible only in respect of those capital goods which are exclusively used in the manufacture of exempted goods. - AT
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• Central Excise:

  Transferring of entire CENVAT credit- closure of one unit - Rule 10 of the CENVAT Credit Rules - no prior permission is needed - as long as the importer has been accounted to the satisfaction of the department, the credit is transferable - credit cannot be denied. - AT
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Articles

• Job-Work Under GST
• Rent-a-Cab in GST- Unfolding the Mystery

Notifications

• Companies Law

• F. No. 1/35/2013 CL-V - dated 16-2-2018 - Co. Law
  Companies (Authorised to Register) Amendment Rules, 2018

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• F. No. 1/34/2013 CL-V, Part-I - dated 16-2-2018 - Co. Law
  Companies (Management and Administration) Amendment Rules, 2018

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• F. No. 1/33/2013 CL-V - dated 16-2-2018 - Co. Law
  Companies (Audit and Auditors) Amendment Rules, 2018

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• Customs

• 14/2018 - dated 19-2-2018 - Cus (NT)
  Customs Tariff (Determination of Origin of Goods under the Comprehensive Economic Partnership Agreement between the Republic of India and Japan) Amendment Rules, 2018

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• DGFT

• 51/2015-2020 - dated 20-2-2018 - FTP
  Amendment in the Foreign Trade (Exemption from application of Rules in certain cases) Amendment Order, 2017

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• GST - States

• SRO 14 - dated 11-1-2018 - Jammu & Kashmir SGST
  Time period for furnishing the details in FORM GSTR-1

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• SRO 13 - dated 11-1-2018 - Jammu & Kashmir SGST
  Amendment in the Jammu and Kashmir Goods and Services Tax Rules, 2017

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• SRO 05 - dated 3-1-2018 - Jammu & Kashmir SGST
  Amendments in notification No. SRO-279 dated 8th of July, 2017

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• SRO 03 - dated 2-1-2018 - Jammu & Kashmir SGST
  Harmonised System of Nomenclature (HSN) Codes

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• SRO. 534 - dated 29-12-2017 - Jammu & Kashmir SGST
  Government constitute the Jammu and Kashmir Goods and Services Tax Advance Ruling Authority

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• SRO. 533 - dated 29-12-2017 - Jammu & Kashmir SGST
  Government constitute the Jammu and Kashmir Goods and Services Tax Appellate Authority for Advance Ruling

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• Income Tax

• 9/2018 - dated 16-2-2018 - IT
  Central Government notifies the Contributory Health Service Scheme of the Department of Atomic Energy for the purposes of the clause clause (a) of sub-section (2) of section 80D of the IT Act 1961 for the assessment year 2018-2019

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• 07/2018 - dated 16-2-2018 - IT
  Corregundum - Notification No. G.S.R. 44(E), dated the 19th January, 2018

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Circulars / Instructions / Orders

• DGFT - Trade Notice No. 24/2018 - dated 21-2-2018
  Information on details of shipping bills in cases where exporters who have inadvertently ticked "N' (for No) instead of "Y' (for Yes) in "Reward" column of shipping bills while filing the EDI shipping bills, but have declared the intent in the affirmative (in wordings) in the shipping bill

News

• Minutes of the Monetary Policy Committee Meeting February 6-7, 2018 [Under Section 45ZL of the Reserve Bank of India Act, 1934]

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• PNB fraud: Centre opposes plea for SIT probe

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• NITI Aayog Budget Allocation Increased by More than 20%

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• RBI Reference Rate for US $

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Case Laws:

• Income Tax

• 2018 (2) TMI 1352
  RTI - information sought for related to allegations of corruption - verification of the affidavits filed by the Members of Parliament (MPs) and Members of Legislative Assembly (MLAs) disclosing their assets to the Election Commission - whether the information sought for by the respondent is excluded from the purview of the Act? - Held that:- It is clear from the above that only such information which would (i) impede the process of investigation; (ii) impede the apprehension or prosecution of offenders, is exempted from disclosure by virtue of Section 8(1)(h) of the Act. In the present case, there is no material to indicate that any investigation is being conducted, which would be impeded by disclosure of the information sought for by the respondent. It is stated by CBDT that the Election Commission of India forwards the affidavits submitted by MPs and MLAs disclosing their assets for verification to CBDT. Such affidavits are forwarded by CBDT to the Directorate General of Income Tax (Investigation) for verification and the outcome of such verification is shared directly by the Directorate General of Income Tax (Investigation) with the Election Commission of India. In the present case, it is difficult to accept that the information sought by the respondent pertains to allegations of corruption, as no such allegations have been made at any stage. The respondent had merely highlighted that the net wealth of certain MLAs and MPs had increased fivefold and the respondent had sought verification of the same in order to bring about a higher level of transparency. No specific or general allegations of corruption were advanced by the respondent. Thus, it is not possible to accept that the information as sought for by the respondent falls within the purview of the Act even though it emanates from the organization which is placed in the Second Schedule. In view of the above, the order passed by the CIC cannot be sustained and is, accordingly, set aside. However, it is clarified that in the event any citizen was to make an allegation of corruption, the information as sought by the respondent would not be excluded from the scope of the Act.

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• 2018 (2) TMI 1351
  Additions for Advance against depreciation (AAD) - MAT - Book profit u/s 115JB - whether is 'income received in advance', thus making the said income subject to 'Charge' under Chapter-II, as business income under Chapter-IV-D read with sub clause (i) of sub-Section 24 of Section 2 of the Income Tax Act? - Held that:- In our view, the matter is covered in favour of the respondent assessee by the judgment in the assessee's case National Hydroelectric Power Corp. Ltd. v. Commissioner Of Income-Tax (2010 (1) TMI 281 - SUPREME COURT) as held advance against depreciation (AAD) was not a reserve nor was an appropriation of profit. The assessee could not use AAD for any purpose (which was possible in the case of a reserve) except to adjust it against future depreciation so as to reduce the tariff in the future years. The AAD was an income received in advance. It was a timing difference. Although the Supreme Court had in that case considered the effect of Explanation-I to Section 115 JB, the observations apply equally to the question before us, namely, whether AAD constitutes income. Although in the context of Explanation-I to Section 115JB, the Supreme Court categorically held that AAD “did not enter the stream of income for the purposes of determination of net profit at all”. It is clear, therefore, that AAD was held not to constitutes income of the year in question. Further the Supreme Court also held that AAD is income received in advance. In other words, it is not income received for the relevant accounting year. It is in that context that the Supreme Court observed that there is a timing difference and that it represents the adjustment in future and that it is therefore not even carried through the profit and loss account. - Decided in favour of assessee.

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• 2018 (2) TMI 1350
  Reopening of assessment - non-service of Statutory Notice under Section 148 of the Act and non- grant of adequate opportunity to raise the objections - Held that:- It cannot be believed that the proceedings initiated right in the Month of March 2016 followed by various notices throughout the period, on 29.03.2016, 02.06.2017, 12.07.2017, 11.10.2017 and 16.10.2017 followed by letter dated 07.11.2017, all have not been issued or served upon the petitioner-company. The stipulation in this regard in the quoted paras above in the impugned order, is a matter on record and this Court has no reason to disbelieve these facts and treat them as falsehood per se merely because the company wants to contend like this. Once an order has been passed against the assessee, the assessee is bound to take recourse to the appellate forums provided in the Act itself. There is a two tier appellate system under the provisions of Income Tax Act, 1961. The first appeal lies before the CIT (Appeals) under Section 246 of the Act and second appeal lies before the ITAT under Section 253 of the Act. Thereafter, on the question of law, an appeal lies to the High Court under Section 260- A of the Act on the substantial questions of law arising from the orders of the Tribunal. The comprehensive Code of Income Tax Act, 1961, provides for a complete mechanism for redressal of grievance of the assessees including the foreign companies and there is no special reason to allow the foreign companies to bypass these appellate forums to directly approach the constitutional Courts by way of writ jurisdiction under Article 226 of the Constitution of India against the reassessment orders which are ex-facie appealable under the provisions of the Act. No good reason to invoke the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India and permit the petitioner-company to lay a challenge to the impugned reassessment order dated 18.12.2017 before this Court at this stage.

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• 2018 (2) TMI 1349
  Extension of time to pay the third installment on the undisclosed income under the Income Declaration Scheme Rules, 2016 - reasons given by the petitioner in her letters seeking extension of time - Held that:- The ground taken by the petitioner, that she is 70 years of age and suffering from ill health which had become a hurdle in her day-to-day work, cannot be a ground to seek an extension of time. Assertion that the petitioner merely forgot to pay the third installment is unbelievable and a lame excuse. Such declarations are unique and made after due deliberation and thought. Amount payable towards the third installment was substantial. Clearly, the petitioner was unable to pay the amount, and thereafter has pleaded and attributed it to loss of memory. The time period fixed was mandatory and had to be adhered to. The petitioner has not made out an extraordinary case which would have justified invoking writ jurisdiction and grant of extension beyond the stipulated time, even assuming that the fixed period of time stipulated under the Scheme could be extended by the Board under Section 119(2) of the Income Tax Act, 1961. If such excuses were to be accepted, then extension of time would have to be granted as a routine in other cases as well.

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• 2018 (2) TMI 1348
  Addition on account of accrued interest on loans which are classified as “Non-performing Assets” - Held that:- The issue involved in this appeal is no more res integra in view of the decision of the Co-ordinate Bench of this Court in the case of Commissioner of Income-Tax and another Vs. Canfin Homes Limited (2011 (8) TMI 178 - KARNATAKA HIGH COURT) as that when an asset becomes non-performing, it ceases to yield income and once a particular asset is shown to be a non– performing asset, then it is nothing but no revenue is yielded. In such cases, paying tax would not arise. Hence, we answer the substantial question of law against the revenue.

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• 2018 (2) TMI 1347
  Exemption u/s 10(23C)(iv) denied - proof of charitable activities - Petitioner society was running 08 school buses to ferry the students - case of the petitioner society was rejected primarily on the ground that the assessee could not produce any evidence that buses were being used for the school only - Held that:- It is evident from a combine reading of Memorandum of Association that the Society has been primarily established to impart education. The school is required to have necessary infrastructure to impart education in an effective manner. The Chief Commissioner of Income Tax has come to a wrong conclusion that the Society was making systematic profit. The schools are required to invest in the infrastructure including expansion of building etc. Every school is required to provide latest facilities to the students and for this purpose, the construction of new building is essential. The business earned by the society is pumped again for raising the infrastructure. The respondent is directed to grant exemption to the petitioner-Society for the relevant assessment year - Decided in favour of assessee

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• 2018 (2) TMI 1346
  Validity of reopening u/s. 147 - addition made by AO holding that provisions u/s. 44BBB are applicable to the payment received by the assessee from Nuclear Power Corporation of India Ltd. - Held that:- Following the order of the Tribunal in assessee’s own case, no infirmity in the order of CIT(A) for deleting the addition so made by the AO holding that provisions of Section 44BBB of the I.T. Act are not applicable to assessee. From the record, we found that during the year under consideration, reopening was on the basis of assessment framed in the A. Y. 2005-06 dated 13/01/2009. Similarly in the A. Y. 2006-07 also on the very same reasoning, assessment was reopened and in the reason so recorded for reopening, AO observed that receipts in pursuance of off-shore service contract are in nature of royalty and in pursuance of the contract for deputation of specialists and off-shore training contracts are in the nature of fees for technical services. Similar reasons have been recorded during the year under consideration. As the facts and circumstances during the year under consideration are parameteria, respectfully following the same, we do not find any merit for reopening of assessment u/s. 147 of the IT Act. - Decided against revenue.

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• 2018 (2) TMI 1345
  Penalty u/s. 271(1)(c) - defective notice - Held that:- We find that the notice dt. 18-03-2013 issued u/s. 274 r.w.s 271 of the Act does not specify the charge of offence committed by the assessee viz whether had concealed the particulars of income or had furnished inaccurate particulars of income. Hence the said notice is to be held as defective. Thus penalty deleted - Decided in favour of assessee.

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• 2018 (2) TMI 1344
  Disallowance u/s 40(a)(i) - non deduction of tds on account of commission paid to non-resident parties - Held that:- DRP has decided a similar issue in favour of the assessee for A.Y. 2011-12 [2016 (7) TMI 1419 - ITAT KOLKATA] by following the Tribunal’s order in assessee’s own case for the earlier years and the Department has not challenged the same by filing an appeal before the Tribunal as held where payments are made to agents of non-resident ship-owners or charters for carriage of passengers etc. shipped at a port in India, since the agent acts on behalf of the non-resident shipowner or charterer, he steps into the shoes of the principal. Accordingly, provisions of Section 172 of the Act shall apply and those of sections 194C and 195 - Decided against revenue Disallowance u/s 14A r.w.r. 8D - Held that:- No disallowance under section 14A was suo motu made by the assessee nor it was the case of the assessee before the Assessing Officer that no expenditure was incurred by it for earning the exempt income. AO, in our opinion, therefore, was not required to record any satisfaction as contemplated in section 14A before making a disallowance under the said provision. We, therefore, find no merit in this contention of the assessee. Merit in the alternative contention raised by the assessee that while working out the disallowance as per Rule 8D(2)(iii), AO should have taken into consideration only those investments on which exempt income was actually earned by the assessee during the year under consideration as it is duly supported by the decision of this Tribunal in the case of DCIT vs. REI Agro Limited [2013 (5) TMI 582 - ITAT KOLKATA]. We accordingly direct AO to re-compute the disallowance under section 14A as per Rule 8D(2)(iii) by taking into consideration only the value of those investments, which actually fetched exempt income to the assessee during the year under consideration.

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• 2018 (2) TMI 1343
  Assessment of income - Revenue earned from a non-resident company on account of provision of technical personnel for executing contracts with ONGC - application of deemed profit rate of 10% u/s 44BB or u/s 44DA/115A read with section 9(1)(vii) - Held that:- The issue is re-covered in favour of the assessee by the order of the Hon’ble Supreme Court in the case of ONGC vs. CIT [2015 (7) TMI 91 - SUPREME COURT] wherein it has been held that the payments for providing various services in connection with prospecting extraction and production of oil would be assessed u/s 44BB and not u/s 44DA. Also decided in assessee's own case [2016 (7) TMI 826 - ITAT DELHI] the facts indicate that the pith and substance of each of the contracts/agreements is inextricably connected with prospecting, extraction or production of mineral oil. The dominant purpose of each of such agreement is for prospecting, extraction or production of mineral oils though there may be certain ancillary works contemplated thereunder. If that be so, we will have no hesitation in holding that the payments made by ONGC and received by the nonresident assessees or foreign companies under the said contracts is more appropriately assessable under the provisions of section 44BB and not section 44D. - Decided in favour of assessee

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• 2018 (2) TMI 1342
  Exemption of claim for Entry Tax - nature of receipt - revenue or capital receipt - Held that:- The issue is covered against the assessee by the decision of Co-ordinate Bench of this Tribunal in the assessee’s own case for the assessment year 2008-09 and 2009-10 [2015 (5) TMI 650 - ITAT KOLKATA] wherein held the assessee could not establish that how this is equivalent to the Industrial Investment Promotion Assistance, the scheme of Govt. of Madhya Pradesh. We find no infirmity in the order of CIT(A) and the same is confirmed. - Decided against assessee. Disallowance u/s 14A r.w.r. 8D - Held that:- CIT(A) had rightly placed reliance on the Co-ordinate Bench of this Tribunal in the case of REI Agro Limited [2013 (5) TMI 582 - ITAT KOLKATA], wherein it was held that only dividend bearing investments were to be considered for the purpose of making disallowance under rule 8D. Accordingly, we do not find any infirmity in the order of Ld. CIT(A) in this regard. While considering the dividend bearing investments , we further hold that strategic investment also should be excluded as admittedly the same were not made with a view to earn dividend income but rather made for the purpose of protecting the business interests arising out business compulsions and accordingly, to be treated as investment made as a measure of commercial expediency. This strategic investment would accordingly to be outside the ambit of the disallowance u/s 14A of the Act read with Rule 8D of the Rules. Disallowance of balance portion of additional depreciation - plant and machinery were put to use for a period of less than 180 days - during the year under appeal i.e. assessment year 2010-11, the assessee claimed further depreciation (i.e. balance 10% which is 50% of 20%) on this plant and machinery on the plea that it is entitled to get the balance depreciation this year also - Held that:- Decided in assessee’s own case for the assessment year 2007-08 [2015 (8) TMI 407 - ITAT KOLKATA] the benefits conferred on the assessee by way of incentive provision cannot be taken away by adopting an implied meaning to second proviso to section 32(1)(ii) of the Act. Since the second proviso to section 32(1)(ii) does not expressly prohibit the allowance of the balance 50% depreciation in the subsequent year, second proviso to section 32(1)(ii) shall not be interpreted to mean that it impliedly restrict the additional depreciation to be allowed in the subsequent assessment year. The assessee now is entitled for 50% additional depreciation, because in the year in which the machinery was first put to use the assessee claimed only 50% of additional depreciation for the reason that the same was put to use for less than 180 days, in this assessment year for the balance of depreciation. See Birla Corporation Limited Vs. DCIT [2014 (12) TMI 436 - ITAT KOLKATA] - Decided in favour of assessee.

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• 2018 (2) TMI 1341
  Levy of penalty u/s. 271AAA - income disclosed u/s. 132(4) - undisclosed income - Held that:- It is not necessary to substantiate manner in which income was derived by assessee from undisclosed source in the given facts & circumstances. It is because no prescribed method to find the manner in such income was generated has been prescribed under the statute. Therefore, respectfully following the same, we hold that the penalty levied by AO and upheld by CIT(A) is not sustainable. We are of the view that the penalty u/s 271AAA of the Act is not leviable on the facts of the present case as the assessee’s case falls under the sub-clause (2) of Section 271AA of the Act. Accordingly, we cancel the levy of penalty - Decided in favour of assessee.

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• 2018 (2) TMI 1340
  Disallowance u/s 14A r.w. Rule 8D - Held that:- CIT(A) had rightly concluded that no disallowance of the interest expenditure was called for in the hands of the assessee under Sec. 14A r.w. Rule 8D(2)(ii). While computing the disallowance as per Rule 8D(2)(iii), the average investments were to be worked out after excluding the said CCD’s. We have given a thoughtful consideration to the issue and are of the considered view that as per 8D(2)(iii) the average value of investments that have to be considered for working out the disallowance are those, the income from which does not or shall not form part of the total income. We are of the considered view that the CIT(A) rightly observing that as the interest received on the Compulsorily Convertible Debentures of Tikona Digital Networks Pvt. Ltd. was taxable, therefore, the same could not be permitted to form part of the average value of investments contemplated in the formula laid down in Rule 8D(2)(iii). We thus finding no infirmity in the directions of the CIT(A) that the disallowance under Sec. 14A r.w. Rule 8D(2)(iii) was to be worked out after excluding the Compulsorily Convertible Debentures of Tikona Digital Networks Pvt. Ltd. of ₹ 49,97,15,040/-, therefore, uphold his order to the said extent.

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• 2018 (2) TMI 1339
  Validity of re-assessment proceedings - change of opinion - addition on account of payment for transport expenses without deducing tax at source and application of provision of section 194C - Held that:- There was no new tangible material available with the AO while resorting to section 147/148 more specifically, while framing original assessment u/s 143(3) there was full disclosure of material facts by the assessee and on the basis of those facts, assessment was completed u/s 143(3) of the Act, therefore, in our humble opinion, the reassessment/reopening u/s 147 of the Act is unjustified as there was no fresh tangible material with the Assessing Officer, while reopening the assessment, therefore, the reopening beyond a period of four years is not permissible, more specifically, when the material facts were disclosed by the assessee and assessment was framed u/s 143(3) of the Act. Thus, the reopening of assessment is bad in law. This ground of the assessee is allowed. On merits of addition any person responsible for paying any sum to any resident for carrying out any work in pursuance to a contract between the contractor and the specified persons. However, there was no contract between the assessee and the transporters and it was merely on truck to truck basis. Therefore, section 194C of the Act has no application to the facts of the present appeal. Any income generated out of the transportation was expected to be included / taxed in the hands of the recipient of such income. As mentioned earlier, each GR can be said to be a separate contract for transportation of goods. Thus, on this issue also the appeal of the assessee deserves to be allowed.

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• 2018 (2) TMI 1338
  Payments of employees’ contribution to PF - Delay in remitting amount within due date - Held that:- Since the payments of employees’ contribution to PF was not remitted within due date or the grace period as extended under the relevant Act. - Decided against assessee. Disallowance u/s 40A(3) on account of payment made in cash to Shri Kantilal Zaveri - Held that:- We are not convinced with the reply of the assessee that payment of Kantilal Zaveri made in exceptional circumstances is not convincible as appellant has not clarified that how exceptional circumstances were there at the time of making cash payment. Therefore, we dismiss this ground of appeal of the assessee. Disallowance of expenditure on payment of commission to C. Doctor India Private Limited - Appellant stated before the lower authorities that commission has been made in consideration of the services rendered by the person in procuring the orders, without whose service, the assessee company could not have procured the orders from BHEL - Held that:- When show-cause notice was issued to the appellant, has not given any reply or explanation in this regard. Since assessee has been failed to give any reply or explanation with regard to commission payment. In our considered opinion, this expenditure was rightly disallowed by the authorities below - Assessee appeal dismissed.

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• 2018 (2) TMI 1337
  TDS u/s 194C - disallowance under Section 40(a)(ia) - furnish information in the prescribed form - Held that:- Section 194C(7) of the Act requires that the assessee has to furnish information in the prescribed form. It is not in dispute that the CBDT notified the form only on 15.10.2010 which is admittedly applicable for the quarterly statement due on 15.10.2010 and not before that. CIT(Appeals) has rightly deleted the addition, hence, this Tribunal do not find any reason to interfere with the order of the lower authority.- Decided against revenue.

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• 2018 (2) TMI 1336
  Penalty u/s 271(1)(c) - disallowance of Deduction u/s.54 and eligibility for set off of brought forward losses - status of the assessee - Held that:- We find a clear observation of the Tribunal that the status of the assessee is Association of Person (AOP). This being so, the assessee was clearly not entitled in law to claim deduction under plain and unequivocal provisions of section 54 of the Act. This finding clearly goes to support that there is no scope whatsoever for any debate on non-availability of deduction of section 54 of the Act. Significantly, we further notice that the assessee itself has treated the aforesaid trust as an ‘AOP’ in line with provisions of s.164 of the Act. As observed, the claim of deduction under s.54 carried is clearly in contravention of statutory mandate and hence cannot be bracketed in league of bonafide action. The assessee has totally failed to demonstrate the bonafide of its action except ex-parte admission of the appeal before the Hon’ble Gujarat High Court against the quantum proceedings. The Hon’ble Gujarat High Court in the case of CIT vs. Dharanshi V.Shah (2014 (7) TMI 98 - GUJARAT HIGH COURT) has held that the admission of appeal is under S.260A per se is inconsequential for determination of imposition of penalty. As we notice that the action of the assessee prima-facie lacks bonafide both on facts as well as on law, the consequences of penalty is inescapable. Therefore, we do not find any error in the conclusion drawn by the CIT(A) On the other aspect namely bonafides of claim of carried forward LTCLs purportedly arose in AY 2006-07 mitigating circumstances exists to prove the bonafides for possibility of carry forward of claim of capital losses under s.80 in the light of the fact that the assessee is assessable entity as an AOP. In the given circumstances, we do not see any culpability or impropriety in claiming set off of carry forward loss claimed as per return of income filed within the extended due date under s.139(1) of the Act. Hence, the plea raised on behalf of the assessee for cancellation of penalty on this issue is quite plausible. The assessee has shown the LTCL in the ROI and also apprised the AO at the time of assessee. Thus, notwithstanding the fact that Capital Loss does not appear in the statutory firm for filing ROI, the benefit of ambiguity must go in favour of the assessee in so far as penalty proceedings are concerned. Consequently, we find merit in plea of assessee for cancellation of penalty on additions made owing to disallowance of carry forward capital losses. We therefore direct the AO to delete the penalty levied on this score. - Decided partly in favour of assessee.

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• Customs

• 2018 (2) TMI 1335
  Classification of Steam Coal and Bituminous Coal - Held that: - Since the final disposal of the appeals rests on the judgment of the Hon ble Apex Court on the classification issue of Steam Coal and Bituminous Coal, therefore, we are not in agreement with the argument of the learned Special Counsel for the Revenue that the Revenue would be free to enforce the demands during the intervening period i.e. after the present order is passed and till the final verdict of Hon'ble Supreme Court delivered. Similarly, the appellants also cannot have the right to claim refund during the same period, if any, accrues to them - the status quo should be maintained i.e. no recovery nor any refund of the amounts involved in these appeals would be processed during this period - appeal disposed off.

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• 2018 (2) TMI 1334
  Valuation - enhancement of value - contemporary prices in NIDB data - Customs authorities took the view that declared values not being based on manufacturer's invoices, hence declared values are required to be enhanced to USD 430 per tonne (or Euro 401/378/385 etc.) based on contemporary prices in NIDB data. Held that: - the invoices issued by the traders from countries like Belgium, Malaysia, Singapore etc. cannot be dismissed peremptorily unless there are justifiable reasons not to accept the genuineness or authenticity of such invoices. In any case, the declared values can be rejected only in terms of statutory provisions and rules governing valuation of imported goods - It is now well settled that NIDB data cannot be made the basis for enhancement of declared import values. Department has not brought out any other material to demolish the transaction value and has also not brought any evidence to prove that the overseas supplier has been paid consideration higher than the amount indicated in the invoices which have been paid through bank channels. Appeal allowed.

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• 2018 (2) TMI 1333
  Benefit of concessional rate of duty - imported “Ethylene Vinyl Acetate” - N/N. 21/2002 dated 01.03.2002 (Sl. No.494) amended by N/N. 11/2006 dated 01.03.2006 - denial of exemption on the ground that the concession is applicable to “Ethyl Vinyl Acetate”, falling under Chapter 39, whereas the goods imported were Ethylene Vinyl Acetate - whether the imported goods are eligible to the concessional rate of customs duty as per the N/N. 21/2002 dated 01.03.2002 (as amended)? Held that: - The goods imported are “Ethyl Vinyl Acetate”, but during the relevant time, the notification granted the concession only to Ethylene Vinyl Acetate. It is not disputed that these two goods are different. Since the imported goods do not find mention in the notification, the concessional rate of duty cannot be extended to them. The Honorable Supreme Court in the case of Gammon India Limited [2011 (7) TMI 17 - SUPREME COURT OF INDIA] has observed that Exemption Notification, being an exception, is to be strictly construed. Appeal dismissed - decided against appellant.

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• Corporate Laws

• 2018 (2) TMI 1332
  Winding up petition - proof of outstanding dues - neglection to pay the balance due - Held that:- A bare reading of the aforesaid Warranty Clause clearly demonstrates that the same was applicable only for any manufacturing defect, bad workmanship or quality for a period of 15 months from the date of supply or 12 months from the date of commission, whichever was earlier. The Warranty Clause does not in any manner cover the short supply. The Warranty Clause would not explain issuance of debit notes dated 31.3.2016 after the supplies were made between August, 2012 and October, 2013. Appellant has failed to place on record or refer to any correspondence after 17.08.2012/31.07.2013 or within 15 months after any alleged short supply. Issue of debit notes was a mere deception and cover up. Reasonable time is a question of fact, as per Section 63 of the Act, and cannot be as long as claimed by the appellant, and as rightly held by the learned Single Judge. In view of the aforesaid discussion and the fact that the appellant has raised the plea of debit notes after about 2½ years clearly proves that the debit notes raised are false and sham. Aforesaid defence regarding debit notes has been raised by the appellant in the Court to deny its liability regarding the balance due to the respondent. Hence, we fully agree with the findings of the learned Single Judge that the appellant has neglected to pay the balance due to the respondent without any cogent, substantial or genuine cause. Therefore, it cannot be said that the appellant has the ability to pay but has chosen not to pay or that it has a lesser liability to pay. As the appellant, at the end, submitted that the appellant is ready to comply with the directions of the learned Single Judge to pay to the respondent company the amount and has already handed over a cheque of ₹ 7,97,182/- to the respondent, in compliance of the order of this Court, as is evident from the order sheet dated 15.9.2017. Hence, the citation may not be published and direction for appointment of the provisional liquidator may be cancelled. The respondent may withdraw the amount as stated hereinabove by the learned counsel for the appellant.

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• 2018 (2) TMI 1331
  Scheme of dissolution - Held that:- There appears to be proper compliance of the provisions of Section 497 of the Act, finds that the prayers sought for in the present report could be granted. In view of above, the company is ordered to be dissolved in terms of Section 497 of the Act. The Ex-directors of the company are directed to pay ₹ 10,000/- being expenses relating to filing of the present report to the office of the Official Liquidator within a period of three weeks from the date of receipt of intimation from the Official Liquidator for payment of such amount to the office of the Official Liquidator. The Voluntary Liquidator shall preserve the books of accounts of the company for a period of five years from the date of the report.

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• 2018 (2) TMI 1330
  Violation of provisions contained in the SEBI Regulations, 2003 - Penalty imposed - failure to comply with the disclosure obligations - Held that:- AO has set out the obligation of the appellant to make disclosures under the aforesaid regulations when the shareholding of the appellant in EIIL stood reduced from 53.01 to 9.91% and thereafter increased from 9.91% to 43.01% on 31.03.2005. Assuming that on 31.03.2005 appellant came to know about the transfer of shares belonging to the appellant, after 31.03.2005 appellant ought to have made disclosures which the appellant failed to do. Similarly, when shares of EIIL in the name of third parties were transferred to the name of the appellant disclosures ought to have been made, but the appellant failed to make disclosures. Thus, in the facts of present case, decision of the AO that the appellant has violated the disclosure obligations contained in the Takeover Regulations and PIT Regulations cannot be faulted. Penalty imposable under Section 15A (b) of SEBI Act for failing to comply with the disclosure obligations under the aforesaid regulations is up to ₹ 1 crore. However, the AO after considering all mitigating factors has imposed penalty of ₹ 5 lac which cannot be said to be excessive or unreasonable. Strong reliance on the statement contained in the SEBI investigation report to the effect that there were no debit and credit entries in the demat statement of the Agrawal family during the investigation period is not acceptable because, admittedly appellant had handed over shares of EIIL in physical form to Shambhu Agrawal. In such a case question of making any debit or credit entry in the demat account does not arise at all. Once it is established that the appellant had adopted a modus operandi for trading in the shares of EIIL belonging to the appellant in violation of the regulations framed by SEBI, then irrespective of the fact that the appellant had received any consideration or not, the appellant is bound and liable to face the consequences for violating SEBI Act and the regulations framed thereunder. Fact that lesser penalty has been imposed on the Agrawal group cannot be a ground to take lenient view towards the appellant, because, the appellant was the chief architect of manipulating a device for committing fraud on the investors in the securities market. Thus appellant who was instrumental in manipulating a device to defraud the investors in the securities market could have been made liable to pay aggregate penalty up to ₹ 51 crores [(up to ₹ 25 crore under Section 15HA, up to ₹ 25 crore under Section 15H(ii) and up to ₹ 1 crore under Section 15A(b)] under the SEBI Act. However, after considering all mitigating factors the AO has imposed aggregate penalty of only ₹ 1 crore on the appellant promoter-director of the company who was the chief architect in manipulating a device which is prohibited under the securities laws. Hence, in the facts of present case, aggregate penalty or ₹ 1 crore imposed on the appellant cannot be said to be exorbitant or unreasonable.

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• 2018 (2) TMI 1329
  Company failure to repay the deposit or part thereof or any interest thereon within time specified - Held that:- When the matter was listed on 22.08.2017, the Tribunal had directed the petitioner to make due payment of the deposits upto principal amount of ₹ 1,00,000/- to the depositors. However, there was a specific undertaking given by the petitioner company on 22.08.2017 that the deposits upto ₹ 1,00,000/- shall be cleared within one week, but the petitioner company seems to have interpreted the undertaking as per its own choice to restrict to the depositors present in the Court. This conduct of the company would ipso facto disentitle the petitioner to any further relaxation. In paragraph 7 of the affidavit, it is re-iterated that the company has made payments to the depositors present in the Tribunal on 22.08.2017. As stated in this affidavit dated 04.09.2017 that the petitioner company may be allowed further extension of two years for making payment of the amount due, but not paid as on 31.08.2017 i.e. the amount of deposits due as per the order of the NCLT Delhi Bench upto 31.08.2017 to be paid by 31.08.2019. It is further prayed in this affidavit that for the deposits payable from 01.09.2017 onwards, the extension of two years more may be granted in addition to the time granted while approving the Scheme on 20.10.2016. Such a prayer made in the matter, which stood disposed of on 20.10.2016 is absolutely not tenable. This would amount to second time extension, which in any case cannot be permissible. No ground for further indulgence in the matter and hold that the petitioner company is bound to comply with the orders dated 20.10.2016 for making payment to the depositors in accordance therewith as further clarified in the order dated 02.02.2017 whereby the extension of time with regard to components of interest and the principal amount was granted. As the instant petition remained pending for quite some time, a direction is issued to the petitioner company to pay the upto date amount for which the petitioner company has defaulted despite the directions dated 20.10.2016 and further clarified on 02.02.2017, by 15.01.2018 and shall file an unconditional affidavit stating strict compliance, with the Registrar of Companies, NCT of Delhi and Haryana, by 24.01.2018.

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• 2018 (2) TMI 1328
  Seeking cancellation of Extra Ordinary General Meeting (EGM) - Held that:- On perusal of the records it is found that one application under Section 8 of the Arbitration and Reconciliation Act, 1996 is pending and fixed for hearing on 09th October, 2017 which is with regard to the maintainability of the main Company Petition. Further, since the applicant has already received notice of the EGM, he/they is/are at liberty to attend the meeting and raise his/their voice, if any. As such I find no reason at this stage to pass any order to restrain holding of EGM by the respondents and if at all there is/are any illegality that can be recorded and can be raised before the bench by the applicants as and when required for redressal of their grievances since the company petition is pending.

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• Insolvency & Bankruptcy

• 2018 (2) TMI 1355
  Corporate insolvency process - eligible debt - Winding up proceeding under the Companies Act or liquidation proceeding under the I & B Code initiated - Held that:- In the present case we find that the Adjudicating Authority has noticed extraneous factors unrelated to Corporate Insolvency Resolution Process which are not required to be disclosed in terms of Section 10 of I&B Code or Form 6. It is not the case of the ‘Financial Creditor’ (Respondent) that a winding up proceeding under the Companies Act or liquidation proceeding under the I & B Code has been initiated against the Corporate Debtor. Therefore, we hold that the Corporate Applicant is eligible to file application under Section 10, there being a debt and default. The impugned order dated 20th June, 2017 cannot be upheld and is accordingly set aside. The case is remitted back to the Adjudicating Authority for admission of the application under Section 10, if the application is otherwise complete.

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• 2018 (2) TMI 1354
  Corporate Insolvency Resolution Process - whether a principal debtor cannot be regarded in default - Held that:- It cannot be concluded that the Corporate Debtor-guarantor could be regarded as defaulter once no default is deemed to be committed by the principal borrower, namely CJSC CHL International. In view of Clause 4 of the Guarantee Agreement, it is only in the event of default on the part of the principal borrower that the guarantor has assumed the liability to repay. All the three Loan Agreements dated 23.09.2010, 26.08.2010 and 18.03.2015 have been suspended, which were between the Financial Creditor and the principal borrower. As been observed in the case of Industrial Finance Corpn of India Ltd.[2002 (4) TMI 943 - SUPREME COURT] that in a case where there is a provision in the agreement to the contrary in respect of co-extensive nature of the liability of a surety then such a provision must be given effect. Therefore, the petition does not warrant admission. We may mention that various other submissions have not been examined as we do not feel the necessity of doing so. We have not been able to persuade ourselves to accept the submissions of Mr. Mehra that there is nothing in the order passed by the Economic Courts at Dushanbe to create a bar for filing of an application under Section 7 of the Code. The arguments with regard to the jurisdiction of the Economic Courts at Dushanbe has not impressed us because the applicant-Financial Creditor has not only surrendered to the jurisdiction but it has filed pleadings. In the present case, we have noticed the orders passed by the Economic Courts at Dushanbe to show the non-existence of liability of ‘Principal Debtor’ and there could not be any default on its part. Therefore, no liability could be fastened on the guarantor-Corporate Debtor. We are not executing those order so as to require fulfilment of various features of Section 13 and Section 44A of the CPC. As already held the principal debtor cannot be regarded in default in accordance with law and therefore, no liability of guarantor/surety would arise at this stage. Petition dismissed.

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• 2018 (2) TMI 1353
  Corporate insolvency process - eligible debt - review petition - Held that:- the instant application, which is in the nature of review, does not warrant acceptance. The non applicant- petitioner had filed a petition under Section 7 of the Code alleging that deposits made by it have remained unpaid and the total amount claimed was more than Rs, 44.50 crores. Such a transaction does not involve an activity which is imputable to an NBFC. The fact that the applicant-respondent is registered as NBFC would not be sufficient to assume that all transaction irrespective of their nature and character would be regarded as activity of a financial service provider. By no stretch of imagination, it could mean that every NBFC is covered by the expression ‘financial service provider’ a license holder as ‘NBFC also have activities other than that of ‘financial service provider’. Applicant-respondent cannot successfully claim that having accepted deposits he has become financial service provider. Code has not excluded NBFC as a class but has preferred to go by the test of financial service provider. It therefore follows that the NBFC ipso facto has not been excluded from the definition of Corporate person as defined under section 3(7) of the Code. Mr. Agarwal has rightly contended that the functional test has been devised by using the expression that a corporate person shall not include any ‘financial service provider’ and an NBFC necessarily would have various facet of other activities would not be covered by the expression ‘Financial Service Provider’. In the case of Forech India (P.) Ltd. v. Edelweiss Assets Reconstruction Co. Ltd. [2017 (11) TMI 1621 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL DELHI] has taken a view that no application under Sections 7, 9 & 10 of IBC, 2016 would be maintainable in case a liquidation order has been passed in respect of the same Corporate Debtor in winding up proceedings either by the High Court or by the Tribunal. In that regard reliance has been placed on the ineligibility clause in Section 11(d) of the IBC and the meaning of the word ‘winding up’ given in Sections 2(23) and 94A. The view of the Hon’ble Appellate Tribunal is binding on us as per the principles of stare decisis and the precedents. Therefore, the aforesaid argument would also not survive for consideration. Review application fails

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• PMLA

• 2018 (2) TMI 1327
  Offence under PMLA - Seeking issuance for a writ of habeas corpus for releasing the Petitioner from custody - Are the PMLA offences cognizable? - Held that:- When Form III uses the word ‘order’ that has to include, as per Rule 2 (1) (h) of the PML Arrest Rules, the grounds of arrest. The basic idea is not merely to inform the person arrested of the grounds of arrest but to also furnish him a copy thereof. Even Rule 3 (1) of the PML Arrest Rules requires the order and material to be forwarded to the Adjudicating Authority. The Court is conscious that in Vakamulla Chandrashekhar v. Enforcement Directorate (2017 (7) TMI 177 - DELHI HIGH COURT) a Division Bench of this Court came to the opposite conclusion and held that notwithstanding the 2005 amendment to Section 45 PMLA, there is no positive indication in Section 45 that the offences under the PMLA had become non-cognizable. Admittedly the arrest of the Petitioner in the present case has taken place without following Section 19 PMLA read with the relevant PML Arrest Rules and Form III. The grounds of arrest were furnished not “as soon as may be” as mandated by Section 19 (1) PMLA but only along with the short reply filed on 13th February 2018 more than two weeks after the arrest. Also, it is doubtful that the said grounds would have been furnished if the present petition had not been filed. That prima facie renders the arrest of the Petitioner illegal. Added to this is the failure to follow the detailed guidelines pertaining to arrest as laid down in D.K. Basu v. State of West Bengal (1996 (12) TMI 350 - SUPREME COURT) which as clarified by the Supreme Court applies with equal force to “other governmental agencies” which expressly included the DOE.. Maintainability of the writ of habeas corpus - Held that:- Finally, on whether a petition seeking a writ of habeas corpus is maintainable, the Court is again unable to subscribe to the view expressed in Moin Akhtar Qureshi (2017 (12) TMI 289 - DELHI HIGH COURT) that only because the trial Court is now seized of the matter and has ordered the remand of the Petitioner, this Court cannot entertain the present petition. Consistent with judicial discipline, since this Bench is of the view that the decisions of the coordinate Bench of this Court in Moin Akhtar Qureshi v. Union of India (supra) and Vakamulla Chandrashekhar v. Enforcement Directorate [supra] require reconsideration, it refers to a larger Bench, the following questions for consideration: (i) Consequent upon the amendment in Section 45 of the PMLA with effect from 1st July 2005, are the offences under the PMLA cognizable or noncognizable? (ii) Do the provisions of Chapter XII Cr PC apply to PMLA insofar as the offences under the PMLA are concerned and if so, to what extent? (iii) Under Section 19 of PMLA read with Rules 2 (h) and 2 (g) of the PML Arrest Rules read with Rule 6 and Form III thereof, does a person arrested under Section 19 (1) of the PMLA have to be furnished a copy of the grounds of arrest? If so, should they be furnished soon enough to enable the person arrested to apply for bail or to oppose the application for remand? What are the consequences of the failure to do so? (iv) Notwithstanding that the remand of the person arrested is under the orders of a Competent Court under the PMLA, will a writ of habeas corpus still maintainable if the initial arrest is itself shown to be unlawful? (v) In the context of the above questions, do the decisions of the Division Bench of this Court in Vakamulla Chandrashekhar v. Enforcement Directorate (supra) Moin Akhtar Qureshi v. Union of India (supra) require reconsideration? The writ petition now be placed before the Hon’ble the Acting Chief Justice for being referred to a larger Bench to answer the above questions. Seeking interim bail - Held that:- The Petitioner has been in custody since 25th January 2018. The DOE had, through orders of the trial Court, his custody extended till 7th February 2018. He now stands remanded to judicial custody by the order of the trial Court. The DOE has not explained why it requires the Petitioner to remain in judicial custody. On the part of the Petitioner, the Court has been assured that he would continue to cooperate with the DOE and appear as and when required subject to whatever terms that the Court may direct. For the aforementioned reasons, the Court directs that the Petitioner be released on bail during the pendency of the present writ petition subject to execution of bond and other detailed formalities.

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• Service Tax

• 2018 (2) TMI 1325
  Valuation of taxable service - works Contract - inclusion of FOC material - Section 67 of Finance Act - Commercial or Industrial Construction Service - lot of materials/goods are also used in the construction of building or civil structure - includibility of material/goods element - N/N. 15/2004-ST dated September 10, 2004 - whether the value of goods/materials supplied or provided free of cost by a service recipient and used for providing the taxable service of construction or industrial complex, is to be included in computation of gross amount charged by the service provider, for valuation of taxable service? Held that: - For valuation of taxable service, provision is made in Section 67 of the Act which enumerates that it would be the gross amount charged by the service provider for such service provided or to be provided by him . Whether the value of materials/goods supplied free of cost by the service recipient to the service provider/assessee is to be included to arrive at the gross amount , or not is the poser. On this aspect, there is no difference in amended Section 67 from unamended Section 67 of the Act and the parties were at ad idem to this extent. Explanation 3 to subsection (1) of Section 67 removes any doubt by clarifying that the gross amount charged for the taxable service shall include the amount received towards the taxable service before, during or after provision of such service, implying thereby that where no amount is charged that has not to be included in respect of such materials/goods which are supplied by the service recipient, naturally, no amount is received by the service provider/assessee. Though, sub-section (4) of Section 67 states that the value shall be determined in such manner as may be prescribed, however, it is subject to the provisions of sub-sections (1), (2) and (3). Moreover, no such manner is prescribed which includes the value of free goods/material supplied by the service recipient for determination of the gross value. The service tax is to be levied in respect of taxable services and for the purpose of arriving at 33% of the gross amount charged, unless value of some goods/materials is specifically included by the Legislature, that cannot be added - exemption under Section 93 can only be granted in respect of those activities which the Parliament is competent to levy service tax and covered by sub-clause (zzq) of clause (105) and sub-clause (zzzh) of clause (105) of Section 65 of Chapter V of the Act under which such notifications were issued. The value of the goods/materials cannot be added for the purpose of aforesaid notification dated September 10, 2004, as amended by notification dated March 01, 2005 - appeal dismissed - decided against Revenue.

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• 2018 (2) TMI 1324
  Liability of service tax - discount - sub-agent of IATA agents - Held that: - this Tribunal in Trade Wings Ltd s case [2017 (9) TMI 257 - CESTAT NEW DELHI] taking into consideration the fact that the nature of transaction between the registered IATA Agents and the subsequent sub-agent, is that of sale and purchase, and accordingly, held that service tax is not required to be paid by the said sub-agent on the discount received - demand set aside. Business Auxiliary Services - software of computer reservation system provided by Gallilieo - Extended period of limitation - Held that: - this Tribunal has already decided the issue [2018 (2) TMI 648 - CESTAT AHMEDABAD], which is against the appellant - the demand in the case of show cause notice dated 23.09.2010, being issued invoking extended period of limitation on the said issue, therefore, as held in the order, it should be restricted to normal period of limitation. Appeal disposed off.

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• 2018 (2) TMI 1323
  Goods Transport Operator Service - recipient of service - Revenue asked the respondent to pay Service Tax in respect of such services received vide leter dated 24.3.2003 pursuant to the amendment made by the Finance Bill, 2003 - Held that: - the identical matter was decided by the Hon'ble Gujarat High Court in the case of Eimco Elecon Ltd. [2010 (7) TMI 477 - GUJARAT HIGH COURT], where it was held that admittedly, the assessee could not be faulted with for not having filed a return after getting himself registered. More particularly, when one considers the language employed in the Proviso below sub-section (1) of Section 68 and the provisions of Section 71A of the Finance Act, 1994, it is not possible to state that the language of the Statute is so clear that any default can be fastened on the respondent-assessee - appeal dismissed - decided against Revenue.

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• 2018 (2) TMI 1322
  CENVAT credit - whether the appellant has availed proportionate cenvat credit attributable to their composite contract, on inputs as well as input service, and has not availed any cenvat credit on inputs and common cenvat credit attributable to input service for supply contract executed by them? Held that: - matter needs examination for verification of the facts and then to allow refund. CENVAT credit - CHA and CFA services - denial on the ground that input service has been availed by the appellant on the basis of invoices which were not issued in the name of their registered premises - Held that: - in earlier round of litigation, the learned Commissioner (Appeals) has held in favour of the appellant. Therefore, in remand proceedings, contradictory view cannot be taken for the authorities below as the order in earlier round of litigation has attained finality. Therefore, on the said ground refund claim cannot be rejected. Refund claim of Cenvat credit on the basis of input which was not issued in their registered office - Held that: - issue has been settled by the various judicial pronouncement namely in the case of National Engineering Ltd. vs CCE [2013 (305) ELT 551] wherein it has been held that as not in dispute the appellant has received the service and used for export of goods, therefore, the refund claim cannot be denied - refund cannot be denied. Appeal allowed by way of remand.

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• 2018 (2) TMI 1321
  Refund of service tax paid on various services used in the export of goods - Denial on the ground that the goods have been exported under drawback claim and hence in terms of the proviso 1(e) of the Notification No. 41/2007, refund is not allowable - Held that: - the refund claims in question cover the period partly prior to 07.12.2008 and part of the claims are for the period subsequent to the date - After the amendment of N/n. 41/2007 by N/n. 33/2008, the condition regarding drawback availment has been deleted and there can be no objection to grant of such refund subsequent to that date if otherwise allowable. For the period prior to such amendment by N/N. 33/2008, the condition under Notification is very clear to the effect that the refund under the Notification cannot be paid if said goods have been exported under claim of drawback of service tax paid. Refund for the period prior to the amendment by N/N. 33/2008 cannot be sanctioned - the cases are remanded to the adjudicating authority for purposes of bifurcating the refund and consider the refund for the period subsequent to the date of such amendment - appeal allowed by way of remand.

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• 2018 (2) TMI 1320
  Business auxiliary service - the commission/fee received by assessee - SCN has been issued on the grounds that the activity rendered by the assessee is covered under the category of "business auxiliary service" only and not under "business support service" - Held that: - we are unable to fathom how the lower appellate authority has taken the view that the assessee were only evaluating prospective customers with respect to their credit worthiness and process their loan applications and present them to ICICI. Based only on this premise, he has concluded that such evaluation activity has the essential character of support service of business or commerce, which became to be taxed only w.e.f. 1-5-2006; that therefore there cannot be any confirmation of service tax on the assessee under Business Auxiliary Services prior to this period - matter remanded to the original authority for denovo consideration

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• 2018 (2) TMI 1319
  Business Auxiliary Service - reverse charge mechanism - the basis of demand is balance sheet figures obtained by the department from the balance sheets of the appellant - Held that: - It is a fact on record that appellant is registered with their Central Excise department as well as under Service Tax and filing their regular returns. No effort has been made to find out how much amount they have paid towards Service Tax and under which head. Moreover appellant has produced CA certificate, no credence has been given to the CA certificate produced by the appellant. Demands cannot be raised merely on the basis of the figures and no amounts mentioned in the balance sheet in terms of decision of this Tribunal in the case of GSP Infratech Development Ltd. v. CCE, C & ST, Belgaum [2015 (12) TMI 331 - CESTAT BANGALORE]. It is the burden on the Revenue to come with evidence that the appellants are receiving taxable service which Revenue has failed to discharge. The matter remanded to the adjudicating authority for fair adjudication after considering all the records placed by the appellant and to give finding in detail on each aspects - appeal allowed by way of remand.

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• 2018 (2) TMI 1318
  Execution of land acquisition work - Whether service tax is liable to be recovered from appellants under Section 73(1) of the Finance Act, 1994 for the payments made by M/s SICCL, which were routed through appellants? - Held that: - any amount received by the assessee from Sahara India would be treated as service and liable to service tax - cost of the land can never be treated as value of the services - demand set aside. Taxability - leveling of soil including of gorges/nallah, removing of shrubs, grass and ruble etc. at Sahara City Homes, Baharaich as per agreement/work order dated 03/11/2003 - Whether service tax is to be recovered from the appellant under Section 73(1) of the Finance Act, 1994 for leveling of soil including of gorges/nallah, removing of shrubs, grass and ruble at Sahara City Homes, Baharaich as per agreement dated 03/11/2003? - Held that: - the site formation and excavation and earth moving and demolition service was introduced in the service tax net on 16/06/2005 and the agreement entered between the respondents with M/s Sahara India dated 03/11/2003 expected the work to be finished within a period of 2 months, which is much prior to 16/06/2005 - demand set aside. Appeal dismissed - decided against Revenue.

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• Central Excise

• 2018 (2) TMI 1317
  Application for Settlement - Settlement Commission, while rejecting the application, by the impugned order, did not allow the application to be proceeded with, in terms of Section 32 F (1) of the Act, as the petitioner did not satisfy the condition in Clause (a) of Section 32 E (1) (a) - Held that: - the petitioner stated that, there was no processing of dyeing blended yarn in the last year, so, they did not file 173 B during that period, and in future, they will commence processing of blended yearn and they will file 173 B return. The petitioner specifically mentioned that they are doing job work, i.e., 100% polyester yarn to M/s Kousalya Thread Mills, Tiruppur, under Rule 57 F (4) transactions and apart from that, they are doing job work of Bleaching and Dyeing for the knitted fabrics and not doing the same process for woven fabrics. Appropriate declaration under Rule 173 (B) was also filed, mentioning the relevant details and furnishing the necessary declaration. The application filed before the Settlement Commission ought not to have been rejected at the threshold - matter is remanded to the first respondent/ Customs & Central Excise Settlement Commission for fresh consideration, with the direction to entertain the application and take a decision on merits - petition allowed by way of remand.

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• 2018 (2) TMI 1316
  Interpretation of statute - suo moto re-credit - Whether in the facts and circumstances of the case and law, the Hon'ble Tribunal has committed substantial error of law in allowing the Appeal of the Respondent and in interpreting provision of Sec. 11 B of Central Excise Act 1944, by allowing to the Respondent to avail suomotu recredit of cenvat, by acknowledging it as only adjustment of books of entry? Held that: - this was not the case of the assessee suomotu availing recredit but a case of mere correction of incorrectly made entries on the very same day - issue is completely factual - appeal dismissed.

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• 2018 (2) TMI 1315
  Whether the penalty under Rule 15(2) Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 which is mandatory in nature can be waived by the CESTAT? Held that: - the Tribunal noted that there were different views of the High Court on the issue of taxability itself - The judgement of the Tribunal seems to be suggesting that the issue itself was not free from doubt. In any case, there is no establishment of allegations of willful fraud on the part of the assessee. Appeal dismissed.

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• 2018 (2) TMI 1314
  Time limitation - CENVAT credit - construction services - suppression or mis-statement with a malafide intention on the part of the assessee - Held that: - Revenue is not disputing the fact of reflection of the credit in the ER-1 returns filed by the assessee. Admittedly, when the returns are reflecting the credit, this leads to inevitable fact that the credit stands reflected in the Cenvat credit account i.e. RG-23A Part II also. The ld. AR fairly agreed that there is no column in ER-1 return to give the break up of various input services, thus casting no obligation on the part of the assessee to give the details of the input service in which such credit stands availed. Such details would be available in RG 23A Part I & Part II accounts being maintained by the appellant and the Revenue is within it powers and jurisdiction to seek such information as regards the input service, if in doubt. The appellant cannot be held guilty of any mala fide suppression or mis-statement. Demand barred by limitation - appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1313
  CENVAT credit - final products cleared for home consumption as well as for export without payment of duty - denial on the ground they had availed Cenvat credit on the capital goods which were exclusively used in the manufacture of exempted goods during the said period - Held that: - it is fact on record that the appellant had also cleared the goods on payment of duty under N/N. 29/2004-CE with effect from 18.06.2005. Hence, there is no fault in the finding of the ld. Commissioner (Appeals) that capital goods were used for manufacture of exempted and duty paid goods. In the identical circumstances, in the appellant s own case [2011 (1) TMI 491 - PUNJAB & HARYANA HIGH COURT ], the Hon'ble Punjab & Haryana High Court has held that it cannot be said that the capital goods, in question, had been used exclusively for the manufacture of fully exempted finished products. Under sub-rule (4) of Rule 6 of Cenvat Credit Rules, 2004, capital goods cenvat credit is inadmissible only in respect of those capital goods which are exclusively used in the manufacture of exempted goods. Demand set aside - appeal dismissed - decided against Revenue.

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• 2018 (2) TMI 1312
  CENVAT credit - by-product - inputs used in the manufacture of dutiable goods and exempted goods - non-maintenance of separate records - case od appellant is that by-products which emerge during the course of manufacture of finished goods cannot be subjected to Rule 6(3) of CCR 2004 - Held that: - As far as applicability of Rule 6(3) to the by-product, the issue is covered by the judgment of Hon’ble Gujarat High Court in the case of Sterling Gelatine s case [2010 (9) TMI 857 - GUJARAT HIGH COURT], where it was held that when no input is specifically used for the purpose of manufacturing Di-Calcium Phosphate, there would be no question of maintaining separate accounts for receipt, consumption and inventory of input - demand set aside - appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1311
  Clandestine removal - finished goods - entire case of the Revenue is on the findings of the lower authorities that two duplicating note books were found which contained information regarding clandestine removal of the goods - Held that: - the two purchasers at the end of the statements itself have stated that they have not received any goods without duty paid documents from the appellant. It seems that the First Appellate Authority has not considered these important/vital evidence that the purchasers statements cannot be relied upon, on the face two purchasers retracted the statements while, two of them denying receipts of goods without documents. The appellant had produced a Chartered Engineer Certificate indicating the production capacity and the details which indicated that the appellant s factory could not have produced the kind of goods allegedly removed clandestinely, during the period in question - the charge of clandestine removal is very serious in nature, and the claim of the appellant s counsel nothing corroborative is brought on record as to unusual consumption of utilities and unaccounted purchase of raw materials, is correct. Appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1310
  Clandestine removal - demand based upon the two chit books recovered during the visit of the officers to main appellant s factory premises - Held that: - the Adjudicating Authority has totally misconstrued the provisions of the law and the law as settled by the various decisions of the Tribunal as to confirmation of the demands on clandestine removal. It is now settled law, clandestine removal is a very serious allegation and needs to be corroborated with solid evidence. The confirmation of demand on clandestine removal on solely a single statement of authorised signatory is totally incorrect and the main appellant s were seeking cross examination of this gentlemen which were not offered to. The law is settled on this point as to if no cross examination is granted in respect of a person them the statement cannot be considered as of any evidentiary value. Penalty on the director - Held that: - in entire proceedings the Adjudicating Authority has not pointed out, any role that could be attributable to the Shri Rajkishore Chaturvedi for visiting him with penalty of ₹ 10 lakhs under Rule 209A of the Central Excise Rules, 1944. As the entire demand raised against the main appellant is set aside, no penalty can be imposed on the director - penalty set aside. Appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1309
  Consulting Engineer Service - reverse charge mechanism - non-payment of service tax for the period May 2008 to February 2009 - Held that: - The Hon ble High Court of Karnataka in the case of Commissioner of Central Excise Vs. Adecco Flexione Workforce Solutions Ltd. [2011 (9) TMI 114 - KARNATAKA HIGH COURT] has held that issue of SCN when entire amount along with interest stands paid is incorrect and bad in law - penalty set aside. CENVAT credit - it was alleged that CENVAT credit availed twice on the same Bill of Entry - Held that: - The credit having not reversed and also having taken again for the second time points out that there is some adverted mistake on the part of the appellant - penalty upheld - however, benefit of reduced penalty of 25% granted. Non-payment of service tax under reverse charge mechanism for the period March 2009 to May 2009 - penalty - Held that: - taking into consideration that there was only delay in discharging the liability of service tax, we are of the view that the penalty on this issue requires to be set aside - penalty set aside. Appeal allowed in part.

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• 2018 (2) TMI 1308
  Refund claim - duty paid on raw materials sent to job workers - time limitation - section 11B of the CEA 1944 - Held that: - The claim filed beyond the period of limitation cannot be overcome by making a refund claim appear to be an application for restoration of CENVAT credit - The credit having been reversed and the appellant having issued sales invoice retrospectively, amending their accounts so as to include the excise duty in the sales invoices, this contention of the appellant that the sale has not taken place does not find favor with us - appeal dismissed - decided against appellant.

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• 2018 (2) TMI 1307
  Transferring of entire CENVAT credit- closure of one unit - penalty u/r 15(1) of the CCR 2004 - denial of credit and imposition of penalty on the ground that they had taken the said credit without permission of the Central Excise officer in terms of Rule 10 of the CENVAT Credit Rules - Held that: - rule 10 has been examined by the Tribunal in the case of Hewlett Packard [2006 (11) TMI 76 - CESTAT,BANGALORE], wherein it has been clearly held that no prior permission is needed. In the said case, it has been held that as long as the importer has been accounted to the satisfaction of the department, the credit is transferable - credit cannot be denied. Credit in unit-III - Revenue view is that the credit in unit-III is doubtful in view of the fact that the appellant had opted for Notification No. 30/2004-CE and hence were required to reverse the credit in their account - Held that: - The said matter would be a different issue, which needs to be dealt with separately. This is not relevant in the present proceeding as the present proceeding relates to credit that was available in unit-III at the material time and if transfer of that credit was admissible or not. Appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1306
  Demand of differential duty - penalty u/s 11AC - Cement - N/N. 4/2007-CE dated 01.03.2007 (as amended) - denial on the ground that clearances are to Andhra Pradesh State Housing Corporation and other construction builders is not covered under the said Notification and since their RSP is printed, which is not required to be printed, will fall under Clause 1C of the said Notification instead of Clause-1A - identical issue decided in the case of COMMISSIONER OF C. EX., HYDERABAD-III Versus SAGAR CEMENTS LTD. [2010 (4) TMI 418 - CESTAT, BANGALORE], where it was held that the requirement of not printing of the retail sale price is not applicable to the respondents, as the goods are sold to APSHCL by indicating the price at which it was contracted on each bag. It is also on record that there was no case of the Revenue that the respondents were not required to declare the retail sale price on the supplied bags - appellant eligible to clear the cement under Clause-1A. Penalty u/s 11AC - Held that: - as the Bench on merits itself allowed the appeals of Penna Cement Industries Ltd, nothing survives in the appeal filed by the Revenue. Appeal allowed - decided in favor of appellant-assessee.

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• 2018 (2) TMI 1305
  Valuation - furniture with ‘Nilkamal’ brand name - principal–job worker arrangement - Revenue held that the value of branded furniture by the appellant supplied to M/s.Nilkamal Ltd. should be in terms of Rule 10A of Central Excise Valuation Rules, 2000 - Held that: - On careful perusal of the MOU, we note that same cannot be considered as arrangement for job work - The fact M/s. Nilkamal has sold the said furniture with much higher price and hence Rule 10A of Central Excise Valuation Rules, 2000, apply to manufacture of the appellant is not tenable. The goods sold by M/s. Neelkamal is on the higher price as it includes expenses like storage, advertisement and sales after the goods were received from the appellant. Hence, the difference between the sale price of the appellant and sale price of Neelkamal by itself will not justify the inference of job work arrangement. Appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1304
  SSI Exemption - use of brand name of others - usage of brand name of client in the manufacture of plastic containers - N/N. 8/03 CE - Held that: - Admitted fact is that brand name is for such packing material only. It is clear that bar of use of brand name will not apply in case the packing material which bear the brand name of another person who uses the said packing material either himself or by on behalf of himself - In the present case, brand is of packing materials itself and not the content thereof. Accordingly, we find that exclusion made by the amendment is not relevant to the present case. Following the normal consistent practice of imposing redemption fine of around 15% of value of confiscated goods, we find the redemption fine can be reduced to around ₹ 1,00,000/- - appeal allowed in part.

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• 2018 (2) TMI 1303
  Applicability of Rule 6(3) (i) of Cenvat Credit Rules, 2004 - Sulphuric Acid, a by-product, emerged during the course of manufacture of dutiable Zinc and Lead - clearance of taxable as well as exempt goods - Held that: - identical issue decided in appellant own case Union of India & Others Versus M/s. Hindustan Zinc Ltd. [2014 (5) TMI 253 - SUPREME COURT], where it was held that the Sulphuric Acid, which has emerged as a technical necessity, which is a by-product, cannot attract the provisions of the said Rule, as the same are applicable only to the “final products”. Generation of sulphur dioxide gas, during the course of manufacture of Zinc and Lead, is a technical necessity and no input service has been used exclusively or commonly in such process. This much is very clear from the verification report. Appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1302
  Rebate - whether the Appellants are entitled to take credit of the rebate amount rejected by the adjudicating authority? - Held that: - After rejection of part of the rebate claim of ₹ 3,29,849/-, the Appellant had not filed Appeal before the ld. Commissioner (Appeals), when in the order of the adjudicating authority, no direction for taking recredit of the rejected amount has been specified - there is no merit in the appeal - appeal dismissed.

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• 2018 (2) TMI 1301
  Benefit of N/N. 64/95 dt. 16.3.1995 - 'Semi-Trailer' cleared to Liquid Propulsion System Centre (LPSC), Department of Space, ISRO - Department took the view that the semi-trailer is not a system or sub-system by itself, that it has not been certified as meant for use in a launch vehicle project - Held that: - identical issue decided in the case of P.L. Haulwel Trailers Vs CCE Chennai [2002 (1) TMI 160 - CEGAT, CHENNAI], where it was held that Any apparatus or equipment or accessories and spare parts of scientific and technical instruments are also covered in the notification. So long as the apparatus and equipment required for using along with the scientific and technical instruments the benefit cannot be denied. Appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 1300
  Penalties u/s 11AC and Rule 173Q - inclusion of installation charges in assessable value - brand name - Held that: - Considering the magnitude of the dispute and also that this is a second round of litigation, the penalty imposed u/s 11AC will be suffice to meet ends of justice in this case - penalty u/r 173Q is set aside - appeal allowed in part.

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• 2018 (2) TMI 1299
  Clandestine removal - excess stock of finished goods - non-accountal of finished goods - Held that: - Merely non-accountal of the finished goods in the RG-1 register pending chemical analysis or the analytical report is not up to the mark would not lead to an inference that the same were kept to be cleared clandestinely and confiscation of the excess stock attributing clearance without payment of duty - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2018 (2) TMI 1298
  Rate of tax - Classification of goods - automotive air conditioning systems - taxable at 4%or 12.5% - Held that: - the goods imported by the petitioner are inputs for the manufacture of car inside the State. Therefore, the appropriate classification should be under Entry 67 of Part B to the First Schedule and not otherwise - In paragraph 13 of the counter affidavit, the respondent took a stand that the industrial input certificates issued by the purchasing dealers do not contain the entire details as per Rule 6(3)(b) of the said Rules. However, this view is incorrect, as all the relevant details have been mentioned in the industrial input certificate. This Court has no hesitation to hold that the correct rate of tax to be adopted in respect of the transactions effected by the petitioner is 4%. Petition allowed - decided in favor of petitioner.

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• 2018 (2) TMI 1297
  Detention of goods - Capsule manufacturing equipment “Omega 20 extruder” - stock transfer - detention on the ground that the said consignment was not accompanied with advance CST waybill of Andhra Pradesh - Held that: - the officer concerned is empowered to exercise the power of detention of goods only where he is prima facie satisfied that the movement of goods is covered by the transaction of sale or purchase and that there is an attempt on the part of the person concerned to evade the tax - When Section-45 of the Act and Rule-55 of the Rules are read together, it is clear that wherever there is any movement of goods in pursuance of sale or purchase, the dealer of that particular State has to generate e-waybill, both for importing into the State or sending outside the State, as the case may be. Therefore, a transaction of sale or purchase is a sine quo non for attracting the provisions of Section-45 of the Act and Rule-55 of the Rules. It is not in dispute that the petitioner is neither a manufacturer nor a purchaser of the detained goods. It was only the machinery which was sent by the petitioner from its Unit at Bachupally to its Manufacturing Unit at Pydibhimavaram for the purpose of erection. This stand of the petitioner is not contradicted by the respondents. There is not even an allegation that the transaction involved sale or purchase of the detained goods (machinery) - This being the admitted position there is no obligation on the part of the petitioner to generate e-waybill of the Commercial tax Department of the State of Andhra Pradesh as, ipso facto Rule-55 of the Rules is not attracted. The detention of goods in the instant case is wholly without any sanction of law and the same is, accordingly, declared as illegal and unauthorised - petition allowed - decided in favor of petitioner.

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• Indian Laws

• 2018 (2) TMI 1326
  Vires of Section 21A of the Banking Regulation Act - What is the scope of Entry 45, List I vis- -vis Entry 30, List II of the Seventh Schedule to the Constitution? - Whether Section 21A can be said to prevail over State Debt Reliefs Acts in the event of a clash between the two? Held that: - It is clear that where Section 21A of the Banking Regulation Act incidentally trenches upon the State Debt Relief Acts, enacted under Entry 30, List II, so far as relief of agricultural indebtedness is concerned, where there is State legislation on the same subject matter which directly clashes with Section 21A, Section 21A will have to give way to the State Debt Relief Acts insofar as relief from agricultural indebtedness due to banks is concerned. Entry 30, List II cannot be read to refer to relief of agricultural indebtedness other than what is specified in List I, as that would be reading into Entry 30 words that are conspicuous by their absence, but which are found in Entries 32 and 63, List II. All this would go to show that where the States have exclusive legislative competence under certain entries of List II, legislation made thereunder cannot be effaced by legislation made under List I, which incidentally trenches upon State legislation made under an exclusive power. It is clear, therefore, that where a matter is not argued at all by the respondent, and the judgment is one of reversal, it would be hazardous to state that the law can be declared on an ex parte appraisal of the facts and the law, as demonstrated before the Court by the appellant s counsel alone. That apart, where there is a detailed judgment of the High Court dealing with several authorities, and it is reversed in a cryptic fashion without dealing with any of them, the per incuriam doctrine kicks in, and the judgment loses binding force, because of the manner in which it deals with the proposition of law in question. Also, the ratio decidendi of a judgment is the principle of law adopted having regard to the line of reasoning of the Judge which alone binds in future cases. Section 21A of the Banking Regulation Act is valid as it is part of an enactment which, in pith and substance, is relatable to Entry 45, List I of the Seventh Schedule to the Constitution.

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