TMI Tax Updates - e-Newsletter
March 19, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Securities / SEBI
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
GST
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Classification of supply - supply of transport tank by mounting the same on chassis - the mounting process undertaken by it mainly involves bolting and the mounted ‘Transport Tank’ can be easily de-mounted - classifiable under Chapter Heading 7311 of the CTA, 1975.
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Classification of goods - rate of CGST - “Papad and papad pipes” of different shapes, sizes and varieties (commonly known as un-fried Fryums) - the ‘Un-fried Fryums’ are not classifiable as ‘Papad’ under Tariff Item 1905 90 40.
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Classification of services - royalty - lease transfer agreement for obtaining mining lease - The applicant is liable to discharge tax liability under reverse charge mechanism - GST rate is 18%
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Input tax credit (ITC) - Post purchase discount - The Applicant can avail Input Tax Credit only to the extent of the invoice value less the discounts.
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Exempt service or not - Whether the conduct of marathon events by the Trust through which donations are raised for charity is an exempted service under GST? - they are liable to register under CGST /TNGST Act.
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Classification of goods - rate of tax - vadams made of maida - Papad - They are not edible as such and the final consumer has to fry in oil before making them edible. - the product is to be classified under 1905 05 40 - Benefit of exemption available.
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Classification of supply - The agreement for wet leasing of Robotic spot welding machine and Laser cutting and welding machine as per Schedule V(a) and Schedule V(b) is not a works contract though it is a composite supply.
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Classification of goods - Salwar/Churidhar sets, comprising of three sets of Tops, Bottom and Dupatta - whether partially stitched/ neck work done, or not - Model 1 is classifiable as Fabrics - Other model of alwar/chudidar sets are classifiable as made up articles
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The testing of animal feed services rendered by the Applicant is not eligible for the exemption - the services are not covered under the purview of SAC 9986. The services are more appropriately classified under 998346 Technical testing and Analysis services.
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Classification of goods - VAYA TYFFN (lunch boxes) and VAYA Drynk (bottle) - Vaya Tyffn and Vaya Drynk are double walled stainless steel articles which perform temperature retention and are more specifically classified under Heading 96170019.
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Services provided under the category of Information and Communication Technology (ICT) @ School Project - OKCL is neither the State Government nor a part of the state Government of Odisha or the Central Government and therefore the supplies by the applicant to OKCL should not be held to be a supply to Government.
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Taxability - activities of cleaning of the various Agriculture produce like Saunf (Fennel), Dhaniya (Coriander), Jeera (Cumin seeds), etc. or the like goods which are brought to them by the farmers or by the traders - By no stretch of imagination activity of mechanized cleaning falls under intermediate production process as job work in relation to cultivation of plants.
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Levy of GST - valuation - supply of electricity - tolerating the act of dishonor of cheques - cheque dishonor charges, being a supply of service and not exempted anywhere, appropriate GST is chargeable on the value of its supply.
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Search and seizure operation carried out - UPGST Act - reasons to believe - The petitioner has thus failed to even establish that the procedure followed during the search was illegal or tainted with mala fides. - writ petition failed.
Income Tax
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Exemption u/s 10(23 C)(vi) denied - Charitable activity or not - The petitioner can only make a positive assertion. - Revenue failed to prove any ground to reject the same.
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Eligibility to deduction u/s 35D to the Bank - High Court should have frame substantial question of law before hearing appeal bipartite - issue remanded to High Court for consideration the substantial question of law that whether the respondent Bank is an industrial undertaking so as to entitle them to claim deduction u/s 35D.
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Unexplained cash credit - addition u/s 68 - entry operator - taxing the total turnover of the entries as an unexplained cash credit in the hands of the an entry provider is not correct in cases where the beneficiaries are identified, the entire amount should be brought to tax in the respective hands of the beneficiaries.
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Capital gain computation on sale of shares - only because of one of the condition was not satisfied for transfer of CCDs, therefore, assessee had to sell the shares at a lower price - Merely because transaction was carried-out within the Group concerns, by itself, is no ground to reject the explanation of assessee.
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Validity of assessment in absence of proper sanction as required u/s 153D - no application of mind - in absence of valid approval/sanction by the Addl. CIT, u/s 153D entire assessment order is vitiated and is null and void.
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Addition u/s 41(1) - cessation of liability of Sundry Creditors of timber business which was closed more than 10 years back- non production of written confirmation from such trade creditors - concurrent finding of facts by all authority below - 'common sense principles' application - addition absolutely justified.
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Depreciation on two wheeler vehicles and Car purchased in the name of directors - beneficial owner of asset - only registration in the name of director is not sufficient to disallow depreciation.
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Taxing the right person - land transaction done by the partnership firm - assessment in the hands of partners or partnership firm - sale consideration received by partnership firm is reflected in their books of account and also offered for taxation - tax in the he hands of the individual partners as ultimate beneficiary is not permissible.
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Scope of CIT in Revision u/s 263 - Restricted to issues raised in SCN or can enlarge the scope - it is not allowable and open to the CIT to set out one reason for revising the assessment order but actually revising the assessment order on some other ground in addition to grounds which found place in the notice u/s 263.
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Receipts of Non-Compete Agreement - capital gain or business receipt - The Non-Compete Agreement was part and parcel of the sale of the business and cannot be seen in isolation - the sale of assets(business) held by the Assessee in excess of 36 months - receipt was capital nature and it gave rise to long term capital gain.
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Penalty u/s. 271(1)(c) - exemption under sections 11 and 12 denied - CIT(A) deleted the penalty on the ground that assessee has succeeded before the Gujarat High Court in quantum additions. Same was the view expressed by the Tribunal and confirmed by HC - SLP dismissed.
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Levy of penalty u/s. 271(1)(c) - Addition of LTCG - Assessing Officer while recording satisfaction has invoked both the charges of section 271(1)(c) - ambiguity and vagueness in the mind of Assessing Officer while recording satisfaction - at the time of levy of penalty, the Assessing Officer stick to only one charge i.e. concealment of income - penalty deleted
SEBI
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Declaration or branding of shell company - no person can be condemned unheard. Therefore, before branding petitioner No.1 as a shell company, it was obligatory on the part of respondent No.1 to have issued notice and to have heard petitioner No.1.
Service Tax
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SEZ Unit - refund of service tax - credit was distributed by the ISD - Rule 7 of the Cenvat Credit Rules - the adjudicating authority has acted completely in accordance with law while processing the claim for refund in the manner prescribed in the refund Notification.
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Valuation - reimbursement of expenditure - establishment of a subsidiary - The building belongs to the appellant and, therefore, the payment of rent, rates and taxes, labour charges, repair and maintenance, generator expenses and insurance premium are all liabilities of the appellant and not of the subsidiary. Thus, these payments are not in the nature of reimbursements.
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Classification of services - Supply of Tangible Goods services or rent-a-cab services - it cannot be said that right of possession and effective control is retained with the fleet owner. Therefore, such supply of buses by the appellants to MSRTC & PMPML is in the nature of supply of tangible goods.
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Classification of services - Hiring of Heavy Earth Moving Equipment - Whether the activity performed by the appellant would fall under the category of ‘Site formation services’? - Held No
Central Excise
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Rebate claim - Rule 18 of the Central Excise Rules, 2002 - in absence of the respondents doubting the veracity of the ARE-1 forms, the adjudicating authority ought to have allowed the claim for rebate as made by the petitioner.
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Valuation - Job Work - the value of raw material as adopted for determination of assessable value is not correct - commissioner should have determined the value of same by applying the principles consistent with the norm of metal recovery from the waste tubes supplied for reprocessing.
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CENVAT credit - ISD - entire credit distributed to one unit / Hazira Plant - services utilized for the drilling activities undertaken at Mumbai offshore fields - credit cannot be denied.
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Recovery of erroneous refund - the order for refund of the excise duty u/s 11B of the Act had attained finality - No appeal was filed against the order of refund - Thus, Section 11A cannot be resorted to by the Department for recovery of duty / refund.
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Valuation - place of removal and place of delivery - the cost of transportation from the place of removal upto the place of delivery of excisable goods is excluded from the computation of excise duty provided it is charged to the buyers and separately shown in the invoices.
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Classification of goods - Mehandi Cone/Paste and Mehandi Powder - No active ingredients are present to heena powder to make the heena paste other than the said oil or liquid.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2019 (3) TMI 931
Classification of supply - supply of transport tank by mounting the same on chassis - whether amounts to tank classifiable under Heading 7311 or supply of motor vehicle classifiable under Heading 8704 in the GST regime? - Explanation (iii) and (iv) of the Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 - Held that:- On going through the Chapter Notes of Chapter 87 of the First Schedule to the CTA, 1975, it is observed that there is no Chapter Note in the said Chapter analogous to Chapter Note 5 of Chapter 87 of the CETA, 1985. In absence of any Chapter Note in Chapter 87 of the CTA, 1975 analogous to Chapter Note 5 of Chapter 87 of the CETA, 1985, the Transport Tank , even if mounted or fitted on the Chassis of customer, would not fall under Chapter 87 of the CTA, 1985. Therefore, the product Transport Tank would have to be independently classified without having any bearing on the fact whether the same has been mounted or fitted on the Chassis of customer or otherwise. The product Container for compressed or liquefied gas, of iron or steel is specifically covered under Chapter Heading 7311 - the mounting process undertaken by it mainly involves bolting and the mounted Transport Tank can be easily de-mounted - the product Transport Tank mounted on chassis of customer is appropriately classifiable under Chapter Heading 7311 of the CTA, 1975.
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2019 (3) TMI 930
Classification of goods - rate of CGST - Papad and papad pipes of different shapes, sizes and varieties (commonly known as un-fried Fryums) - sale to intra state and inter-state dealers - N/N. 1/2017 Central Tax (Rate) dated 28.06.2017 - Held that:- What is Papad has not been defined or clarified under Customs Tariff Act, 1975, the Central Goods and Services Tax Act, 2017 (herein after referred to as the CGST Act, 2017), the Gujarat Goods and Service Tax Act, 2017 (herein after referred to as the GGST Act, 2017 ), Integrated Goods and Services Tax Act, 2017 (herein after referred to as the IGST Act, 2017 or the Notifications issued under the CGST Act, 2017 / GGST Act, 2017 / IGST Act, 2017 - It is now well settled principle of interpretation of statue that the word not defined in the statute must be construed in its popular sense, meaning that sense which people conversant with the subject matter with which the statue is dealing would attribute to it . It is to be construed as understood in common language. The Determination Orders under section 80 of the Gujarat Value Added Tax Act, 2003 were not pertaining to classification under First Schedule to the Customs Tariff Act, 1975 and therefore are not applicable in the present case - the Un-fried Fryums are not classifiable as Papad under Tariff Item 1905 90 40. Appropriate classification of Unfried Fryums - Held that:- Heading 2106 is an omnibus heading covering all kind of edible preparations, not elsewhere specified or included. Chapter Note 5 provides an inclusive definition of this heading and covers preparations for use either directly or after processing, for human consumption. Chapter Note 6 pertaining to Tariff Item 2106 90 99 also provides inclusive definition and products mentioned therein are illustrative only - the product Un-fried Fryums is appropriately classifiable under Tariff Item 2106 90 99. Goods and Service Tax rate of 18% (CGST 9% + GGST 9% or IGST 18%) is applicable to the product Un-fried Fryums as per Sl. No. 23 of Schedule III of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended, issued under the CGST Act, 2017 and Notification No. 1/2017-State Tax (Rate) dated 30.06.2017, as amended, issued under the GGST Act, 2017 or IGST Act, 2017.
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2019 (3) TMI 929
Classification of services - royalty - lease transfer agreement for obtaining mining lease - N/N. 11/2017-CT (Rate) dated 28.06.2017 - to be classified under 9973 specifically Licensing services for the right to use minerals including its exploration and evaluation or as any other service? - Held that:- The activity undertaken by the applicant is classifiable under Heading 9973 (Leasing or rental services, with or without operator), as mentioned in the annexure at Serial No. 257(Licensing services for the right to use minerals including its exploration and evaluation) sub heading 997337 of notification number 11/2017-CT (Rate) dated 28.06.2017. The applicant is liable to discharge tax liability under reverse charge mechanism vide N/N. 13/2017-CT (Rate), dated 28.06.2017 (as amended from time to time) of the CGST Act, 2017. The activity undertaken by the applicant attracts 18% GST (9% CGST+ 9% SGST).
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2019 (3) TMI 928
Input tax credit - Post purchase discount - Whether the MRF Ltd can avail the ITC of the full GST charged on the supply of invoice or a proportionate reversal of the same is required in case of post purchase discount given by the supplier of the goods or services? - Section 16 of CGST Act 2017/TNGST Act 2017. Held that:- Section 16(1) states that a registered recipient is eligible to take credit on the input tax charged on any supply of goods or services. As per Section 9(1) of the act, CGST tax is leviable on the value of supply as determined by Section 15 of the Act - Time of supply of goods as per Section 12 is the earlier of the following dates, namely the date of issue of invoice by the supplier or the last date on which he is required, under sub-section (1) of section 31, to issue the invoice with respect to the supply or the date on which the supplier receives the payment with respect to the supply. In the instant case, the invoices are all raised before the payment dates, so the time of supply is the date of raising invoices. The discount is given after the invoices are raised and supply of goods is made and no discount is recorded in the invoice. Hence, Section 15 (3) (a) does not apply. All the invoices are uploaded by the supplier in the C2FO software after they are raised. Based on various parameters such as desired annual percentage discount rate, cash availability set by the recipient and the varied offers of discounts made by the suppliers based on their need for an early payment, C2FO software optimizes the dates of early payment for each invoice and determines the final discounted transaction value of a particular invoice - the value of supply in such transactions is the full undiscounted value mentioned on the invoice. Proviso to Section 16 states that where a recipient fails to pay to the supplier of goods or services or both, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, and the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon - In the instant case, the value of supply is the full undiscounted value indicated in the tax invoice and the recipient / Applicant only makes payment to the extent of invoice value less the discount thrown up by the C2FO software. As per proviso to Section 16, the recipient is entitled to avail the credit of input tax on the payment made by him alone and if any amount is not paid as per the value of supply and the recipient has availed full input tax credit, the same would be added to his output tax liability. The Applicant can avail Input Tax Credit only to the extent of the invoice value less the discounts asper C2FO software. If he has availed input tax credit on the full amount, he should reverse the difference amount equal to the discount, to avoid adding to his output liability.
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2019 (3) TMI 927
Exempt service or not - Whether the conduct of marathon events by the Trust through which donations are raised for charity is an exempted service under GST? - When the Trust is approved under Sec 12AA of the Income Tax Act 1961 which means that the service of the Trust is charitable in nature, does it not automatically become a charitable activity that is exempted under GST? - Clause 2(r) of Notification No. 12/2017 -Central Tax (Rate) - Are donations received from participants of the marathon event exempted from GST as it is money paid for conduct of a marathon event for raising funds for charity? Held that:- The Applicant is a Trust with the object to organize events for charitable Cause like Marathon, Blood Donation Camp, Organ Donation Camp, Eye Donation Camp, Health Awareness Camp, Etc., and utilize the fund raised for the charitable cause like funding to Non-Governmental Organisations(NGOs), Hospitals, Trust and other Charitable Organizations. They are registered under Section 12AA of the Income Tax Act 1961 and the receipts are exempted under Section 80 G of the Income Tax Act. The Applicant is conducting Marathon and the receipts of the event are utilized for conduct of the event and the balance left is donated to the cause for the support of providing prosthetic legs - In the instant case, the Applicant collects an amount from participants registered to for the marathon, treating them as donations . It is seen from the balance sheet that From these collected amounts, the expenses of paying the registration partner, event management expenses, prize money, expenses for conducting the marathon, are met and some portion of the balance is given as donation for various activities such as donating to Freedom Trust, a NGO who in turn provide prosthetic limbs to the less privileged public in Tamil Nadu apart from direct beneficiaries like Avvai Home, a school for poor and orphans and Olcott Memorial School. The activity in question is the Applicant organizing a Marathon. The money collected by the Applicant, from the participant in the Marathon is used for the expenses of organizing the Marathon in terms of paying the registration partner, event management charges, prize money, publicity, other organizing expenses such as T-shirts, banners and other related materials etc. as seen in their balance sheets. Therefore, the money collected from the participants is a consideration towards the supply of service of organizing and conducting the marathon for the participant s conduct of marathon event and the same is liable to GST. The activity of conduct of Marathon event by the Applicant does not fall under the definition for Charitable activities mentioned under clause 2(r) of Notification 12/2017-Central Tax(Rate) dated 28th June 2017 and Notification No. II(2)/CTR/532(d-15)/2017 vide G.O. (Ms) No. 73 dated 29.06.2017,. Therefore, though the Applicant is an entity registered under Section 12 AA of the Income Tax Act and conducts the Marathon events for raising funds for charitable activities, the exemption under Sl.No. 1 of these notification does not apply to the activity of organizing the marathon by the Applicant - In the instant case, the Applicant s annual turnover is more than ₹ 20 lakhs and they are providing the taxable supply of organizing marathon events. Hence, they are liable to register under CGST /TNGST Act.
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2019 (3) TMI 926
Classification of goods - rate of tax - vadams made of maida - Held that:- The product is made out of dough of maida as main ingredient along with preservatives. The mixed dough is cut into desirable shapes and dried in oven. The Applicant uses machinery for making the same. The products are sold by the Applicant in retail packing which have s shelf life of around 6 months as they have added preservatives are not fully cooked and are not ready to eat. On purchase byte consumer, they are to be fried in edible oil before consumption. It is seen from the samples and photographs produced during the hearing, that the items are indeed edible only after frying in oil which is not done by the Applicant but those who purchase it. Whether the product in question is Papad falling under Ch. 1905 or a namkeen falling under Ch. 2106? - Held that:- Chapter 21 only covers edible preparations and Namkeens which are ready to eat are covered under the same. In the instant case, Maida vadam/papads are made of Maida, Sugar and Vanaspathi , Edible Salt, preservatives and dried in oven. They become edible only after frying in oil which is done by the ultimate consumer and the Applicant only supplies the dried/ semi - cooked version of it. Hence, they are not covered under Chapter 21. Papad is specifically specified under 1905 05 40 and papad are preparations of various flours or lentils which are dried, traditionally in the sun or made by machinery in commercial scale. They are not edible as such and the final consumer has to fry in oil before making them edible. This is the case. in respect of the goods supplied by the Applicant too. Therefore, the product is to be classified under 1905 05 40 - Sl.no. 96 of Notification No. 02/2017-CT (Rate) dt 28.06.2017 as amended and Notification No. II(2)/CTR/532(d-5)/2017 vide G.O. (Ms) No. 63 dated 29.06.2017 exempts Pappad, by whatever name it is known, except when served for consumption from CGST and SGST respectively.
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2019 (3) TMI 925
Classification of supply - composite supply or not - Whether the works awarded by Integral coach Factory, Chennai for Construction of shed, provision of M Ps in ICF Shell/ furnishing Division, retro-fitment / re-conditioning / re-sitting /disposal of obsolete M Ps of shell division including wet leasing of M Ps and associated Electrical works on turn-key basis to the applicant is composite supply of services? - benefit of sl.No.3 (v) (a) as well as Sl.no. 3(vi) (a) of Notification No. 11/2017-C.T. (Rate) as amended - raising of invoice on completion of events/milestones - value of invoice. Held that:- This agreement is for supply of more than one taxable supply involving supply of goods and services such as machinery (both mechanical and electrical), construction, erection, installation, commissioning service etc. These supplies are bundled together in the agreement which is on turnkey basis and are required to be supplied together. Further, these activities are for an immovable property which is the factory here and involves transfer of property of all the goods involved in executing it. Therefore, this constitutes a supply of composite supply of works contract by the Applicant which is a supply of service as per Schedule II of CGST Act 2017. The agreement for wet leasing of Robotic spot welding machine and Laser cutting and welding machine as per Schedule V(a) and Schedule V(b) for a period of 10 years is a supply of right to use the equipment along with manpower service maintenance service etc. As multiple taxable supplies of services are involved, this is a composite service of service. However, this is not a works contract as there is no immovable property nor transfer of title of goods is involved. As per explanatory notes to classification of services for SAC 9973. The agreement of wet leasing of machinery falls under this classification of SAC 997319 for leasing of machinery with or without operator etc. - The agreement for Comprehensive Annual Maintenance Contract (CAMC) of Mechanical Electrical under Schedule VI (a) and VI (b) will involve supply of goods, spares etc. and services and hence is a composite supply. This maintenance is in relation to the factory being erected, commissioned involving transfer of goods and hence is a composite supply of works contract which is a supply of service as per Schedule II of CGST Act 2017. Whether the benefit of SI.No.3 (v) (a) 3(vi) (a) of notification no. 11/2017 as amended vide Notification 20/2017 - Central Tax (Rate) is applicable to subject works? - Held that:- The agreement for erection, commissioning, installation of plant and machinery for a factory to manufacture stainless steel coaches covering Schedule I, II, III, it is for supply of machine, plant and equipment s including commissioning spares in Schedule I, erection and commissioning of all civil structures in Schedule Il, supply of electrical equipment including commissioning spares in Schedule Ill which is a composite supply of works contract for original works of construction, erection, commissioning, or installation pertaining to railways, is taxable at 6% CGST and as per Sl.No. of Notification No. 11/2017 -C.T.(Rate) and 6% SGST as per Sl.No. 3(v)(a) of Notification No. II(2)/CTR/532(d-14)/2017 vide G.O. (Ms) No. 72 dated 29.06.2017 as amended with effect from 22.08.2017. Prior to that, it is taxable at 9% CGST and as per Sl.No. 3(ii) of Notification No. 11/2017 -C.T.(Rate) and 9% SGST as per Sl.No. 3(ii) of Notification No.ll(2)/CTR/532(d-14)/2017 vide G.O. (Ms) No. 72 dated 29.06.2017 as amended - The agreement for wet leasing of Robotic spot welding machine and Laser cutting and welding machine as per Schedule V(a) and Schedule V(b) is not a works contract though it is a composite supply and hence is not eligible for SI.no. 3(v)(a) of this notification. Whether the applicant is required to raise invoice on completion of events/ milestones and remit the tax? - Held that:- As per Section 97 (2) of the CGST Act, time of raising invoices is not covered under the question on which Advance Ruling can be sought. Therefore, we are not examining this issue in this order. What is the value on which invoice has to be raised in case of event/milestone invoicing is required? - Held that:- The agreements prescribe the value of the various supplies of goods or services in the respective Schedules. It also prescribes the payment schedule and the delivery schedule for such works. The Applicant will be raising invoice based on the agreements in terms of Section 31 of CGST Act. The value of supply for each such invoice will be the transaction value and should include the amounts, if any, as specified in Section 15(2) and exclude the discounts, if any, as specified in Section 15(3) of CGST ACT 2017.
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2019 (3) TMI 924
Valuation of supply of services - services provided from July 1, 2017 - two separate agreements, viz., one for Sale of undivided share of land and the other for Construction with the customers - CGST ACT 2017 read with Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017(as amended from time to time) - Held that:- Though there are two Agreements with separate consideration for this transaction, it is a single supply which is squarely covered under Sl.5 (b) of Schedule II making this transaction a supply of service as Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly where consideration is being paid while construction. For the Supply of Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier , the value of the supply of service has been notified by the Government as per Section 15(5) of the CGST Act as the total amount charged for such supply less the value of land or undivided share of land, as the case may be, and the value of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply where the total amount means the sum total of consideration charged for construction service and amount charged for transfer of undivided share of land, as the case may be. The value of supply of services provided by the Applicant in the project One Crest in Chennai, wherein the Applicant has entered into two separate agreements, viz., one for Sale of undivided share of land and the other for Construction with the customers, the measure of levy of GST on the supply of service of Construction shall be 2/3rd of the total value charged for construction service and amount charged for transfer of undivided share of land, as per entry No. 3(i) of Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 as amended and No.II(2)/CTR/532(d-14)/2017vide G.O. (Ms) No. 72 dated 29.06.2017 as amended.
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2019 (3) TMI 923
Classification of goods - Salwar/Churidhar sets, comprising of three sets of Tops, Bottom and Dupatta - whether partially stitched/ neck work done, or not - whether the impugned goods would remain as fabrics under Chapters 50,52,54,55 based on the constituent material and attract a total 5% GST; or they are classifiable under Chapters 61 to 63, thereby attracting a total of 5% if their sale price is less than ₹ 1,000 and 12 % GST if their sale price is more than ₹ 1,000? Held that:- It is seen from Note 7 (a) to Section XI of Customs Tariff that made up means cut otherwise than into squares or rectangles. The Top in Model 2 of the Applicant is fabric already cut into the shape of a salwar top but is not completely stitched. This means that this is not a fabric in square or rectangle shape and hence is a made up . The Top in Model 4 is also not a fabric in square or rectangle but has the neck portion cut and worked on. This too would qualify as a made up . It is seen from Note 7 (O to Section XI of Customs Tariff that made up means assembled by sewing, gumming or otherwise. The top in Model 3 is fully stitched or assembled by sewing and hence would be a made up . Thus, Model 2,3 and 4 is a set containing made up articles of textiles for Top of salwar suit and pieces of fabrics for Bottom and Dupatta of salwar suit. Model 2, 3 and 4 have some additional cutting and stitching on the Top made up article which is either a complete Top of salwar, in case of Model 3, or is an unfinished Top of a salwar suit, in case of Model 2 and 4. They are also sold as Chudi material by the Applicant which contains made up article of Top and fabrics of Bottom and Dupatta. Together all three constitute an unstitched salwar suit containing made up articles of textile. As per Rule 2 to the general Interpretative Rules above, the incomplete articles has the essential characteristic of a made up article of a salwar suit and are not mere pieces of fabric. Therefore, Model 2, 3 and 4 would be classifiable as a salwar suit. Dependng on the textile material, Model 2, 3 and 4 would be classified under various subheadings under Tariff heading of 6211 i.e 621142 / 621143/621149. Model 1 salwar/chudidar sets supplied by the Applicant is classifiable as Fabrics under Chapter 50 to 55 depending on the material. The applicable rate of tax would be 2.5% CGST as per applicable Sl.no (depending on the material) in Schedule I of Notification 1/2017-Central Tax(Rate) dt. 28.06.2017 as amended and 2.5% SGST as per applicable Sl.no (depending on the material) in Schedule I of Notification No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017. Model 2,3 and 4 salwar/chudidar sets supplied by the Applicant are classifiable as made up articles under Tariff heading 621142/621143/621149 depending on the material. The Applicable rate of tax for such articles of sale value not exceeding ₹ 1000 per piece, would be 2.5% CGST as per Sl.no 223 in Schedule I of Notification 1/2017-Central Tax(Rate) dt. 28.06.2017 as amended and 2.5% SGST as per Sl.no 223 in Schedule 1 of Notification No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017. The Applicable rate of tax for such articles of sale value exceeding ₹ 1000 per piece, would be 6% CGST as per Sl.no 170 in Schedule 11 of Notification 1/2017-Central Tax(Rate) dt. 28.06.2017 as amended and 6% SGST as per Sl.no 170 in Schedule II of Notification No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017.
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2019 (3) TMI 922
Classification of service - Services related to rearing of all life forms of Animals by way of testing include testing of Animal Feeds, Feed ingredients and Feed supplements used to make feeds - Benefit of exemption - Applicability of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - Held that:- The Applicant is involved in the service of testing the feed/ feed ingredients for different parameters for the farming community of the country. They undertake testing of the raw materials, finished animal feeds and feed supplements for its nutrient profile, contaminants, adulterants, mycotoxins and other contents. The activities undertaken by the Applicant are testing the chemical/ physiological composition of the samples of animal feed. Applying the statutory provisions to the facts of the case, it is evident that Service classification Chapter Heading 9986 covers only that genre of support services of animal husbandry like Sheep shearing, care and management of herds, pet training, grooming, etc which are support services related to the operation of animal husbandry and does not cover the services provided by the applicants, which is a mere testing service - the services of the Applicant are not covered under the purview of SAC 9986. The services are more appropriately classified under 998346 Technical testing and Analysis services. The testing of animal feed services rendered by the Applicant is not eligible for the exemption under Notification 12/2017 Central Tax (Rate) dated 28/06/2017 as amended for CGST and vide G.O. (Ms) No. 73 dated 29.06.2017 for SGST.
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2019 (3) TMI 921
Classification of goods - Rate of tax - VAYA TYFFN (lunch boxes) and VAYA Drynk (bottle) - N/N. 01/2017- Central Tax (Rate) dated 28/06/2017 as amended from time to time - Held that:- In the case at hand, the products Vaya Tyffn and Vaya Drynk are made using double walled vaccum designed to keep the food/drink at the desired temperature for reasonable period of time. These are utensils for household items made of stainless steel, they are more specifically covered vacuum vessels capable of retaining the food/drink at a particular temperature. Rule 3(a) of General Rules for the interpretation of import tariff states that the heading with the more specific description shall be preferred. Further, Explanatory notes for heading 7323 of HSN provides that this group comprises a wide range of iron or steel articles, not more specifically covered by other headings of the Nomenclature which in this case is under heading 9617. Vaya Tyffn and Vaya Drynk are double walled stainless steel articles which perform temperature retention and are more specifically classified under Heading 96170019. The goods are chargeable to 14% CGST and 14% SGST as per Sl.No. 225 Schedule IV of Notification No. 01/2017 -C.T.(Rate) dated 28.06.2017 and Notification No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017 respectively upto 14.11.2017. From 15.11.2017, they are chargeable to 9% CGST and 9% SGST as per S.No. 449B of Schedule -III of Notification No. 01/2017 -C.T.(Rate) dated 28.06.2017 as amended and Notification No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017 as amended respectively.
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2019 (3) TMI 920
Classification of supply - supply of goods or services - works contract or not - contract for Erection, Procurement and Commissioning of Solar Power Plant - HSN Classification - rate of tax - Held that:- The contract for providing the design, procurement, supply, development, testing and commissioning of the Plant which includes the supply of both goods and services is a composite supply as per the definition in the Act. There are two taxable supplies- one of goods and the other of services and they both are naturally bundled and it is natural and also a practice to expect that the contractor who will supply the goods will also supply the services alongwith it. In the business of contracts for the Solar Power Generating System, it is a practice to provide a Plant as a whole along with the supply of services. Solar Power Generating System , whether movable property of immovable property? - Held that:- After going through the entire contract, it is concluded that the contract leads to an erection of a Solar power generating system which is immoveable property. Therefore, merely because a schedule entry is provided for the same does not mean that the product would be classified in the same. If the transaction is treated as a composite supply , whether the Principal Supply in such case can be said to be solar power generating system which is taxable at 5% GST? - Held that:- With reference to the question of GST rate of 5% on Principal supply of Solar Power Generating System , we have already treated the transaction as a Composite supply and a Works contract falling u/s. 2(119) of the CGST Act, 2017. Para 6 of SCHEDULE II [ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES] treats Works contracts u/s 2(119) as supply of services . In view thereof, there arises no occasion to go into the issue of Principal supply .
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2019 (3) TMI 918
Taxability - activities of cleaning of the various Agriculture produce like Saunf (Fennel), Dhaniya (Coriander), Jeera (Cumin seeds), etc. or the like goods which are brought to them by the farmers or by the traders - whether the activity of cleaning of the above produce is exempted under the Entry S. No. 24 (i)(i)(c) and 24(i)(iii) of Notification No. 11/2017-Central tax (Rate) dated 28/06/2017 and Entry S. No. 54(c) and 55 of Notification No 12/2017-Central Tax (Rate) dated 28/6/17? - challenge to AAR decision. Held that:- There are three ingredients of the Entry No. 24(i)(i)(c)and 54( c) ibid: (i) Stated processes should be carried out an agricultural farm; (ii) Stated processes should be of such nature which does not alter the essential characteristics of the agricultural produce; (iii) Stated processes should be of such nature which make the produce marketable for the primary market - A process must satisfy all the three conditions before being declared as the process exempted from GST vide the above said entries Nos. 24(i)(i)(c) and 54(c) ibid under the above notifications Nos. 11/2017-Central Tax (Rate) and 12/2017-Central Tax (Rate). Coming to the first condition, we find that the impugned process is not being carried out at an Agricultural Farm. It is being carried out mechanically in the Factory away from the Agricultural Farm - Coming to the second condition, we find that the process of cleaning does not alter the essential characteristics of the agricultural produce - Coming to the third condition, we find that the process of cleaning undertaken at the end of the appellant make the produces like Saunf (Fennel),Dhaniya (Coriander), Jeera (Cumin seeds) marketable for the secondary market. After this cleaning these produces comes to the stage where these can be directly consumed by the general public. While Saunf (Fennel), Dhaniya (Coriander), Jeera (Cumin seeds) which farmer brings into the primary market is not suitable for direct consumption by the general public - the impugned process succeeds only on one count while it failed miserably on other two counts. By no stretch of imagination activity of mechanized cleaning falls under intermediate production process as job work in relation to cultivation of plants. Intermediate production process as job work in relation to cultivation of plants are operations like harvesting, threshing, plant protection, testing, and supply of farm labour etc., carried out at agricultural farm. The activity of the Appellant i.e. M/s. Rara Udhyog, Jaipur is not covered under Notification No. 11/2017-Central tax (Rate) dated 28/06/2017 and Notification No. 12/2017-Central Tax (Rate) dated 28/6/17 - Ruling of the AAR is upheld.
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2019 (3) TMI 917
Levy of GST - valuation - order of AAR challenged - collection of delayed payment charges - cheque dishonor fee - tolerating the situation of dishonor of cheques - inclusion as payment of consideration for supply of electricity - Condonation of delay in filing appeal - Section 100(2) of the CGST Act - case of appellant is that the Taxation matter of the appellants are looked after by Mr. Kailash Mali. Since, Mr. Kailash Mali was busy in the Quarterly Audit, the Appeal against the impugned Advance Ruling could not be filed within the aforementioned time limit - Held that:- The delay is considered reasonable and is condoned. Levy of GST - delayed payment charges collected from the consumers for delay in payment of consideration for supply of electricity - Section 15(2) of the CGST Act, 2017 - Held that:- The value of supply is the consideration charged by the appellants from the consumers of electricity on account of consumption of electricity by them. Coming to the taxability of the supply of electricity, we find that electrical energy has been classified under tariff item No. 27160000 under Customs Tariff Act, 1975 and value of its supply has been exempted vide entry No.104 of the notification No. 02/2017- Central Tax (Rate) dated 28.06.2017 - As per Section 15(2) ibid, delayed payment charges should form part of the value of supply of electricity. When value of supply of electricity itself stands exempted by virtue of the above exemption notification dated 28.06.2017 incremental value (i.e. consideration for delalyed payment of the electricity bills as discussed above) would also remain exempted. Levy of GST - cheque dishonor fee collected by the appellants - Held that:- If any person tolerates any act or a situation and recovers a certain amount for such tolerance then it is supply of service. In the instant case, the appellants is tolerating the situation of dishonor of cheques, tendered by the consumers of electricity for payment of electricity bill, by charging certain amount from the consumers, hence, it is a supply of service in terms of the above clause 5(e). Needless to mention that Banks are also paying GST on the charges (by whatever name) received from customers when their cheques gets dishonoured - cheque dishonor charges, being a supply of service and not exempted anywhere, appropriate GST is chargeable on the value of its supply.
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2019 (3) TMI 916
Search and seizure operation carried out - UPGST Act - reasons to believe - whether the search and seizure was carried out by observing the 'substantive due process' as well as the 'procedural due process'? - Held that:- As regards the substantive due process, which has to be followed before any search, can be carried out, is contained under sections 67(1) and 67(2) of the U.P. GST Act and prior to exercise of the said powers, it is essential that the officer authorizing the search should have 'reasons to believe.' The principles that are culled out from the catena of decisions referred above is that the 'reasons to believe' should exist and should be based on reasonable material and should not be fanciful or arbitrary. It is also established that this Court in exercise of its powers under Article 226 cannot go into the sufficiency of the reasons and should not sit as an appellate court over the reasons recorded. It is also well established that the reasons may or may not be communicated to the assessee but the same should exist on record. The petitioner has thus failed to even establish that the procedure followed during the search was illegal or tainted with mala fides. Thus, the writ petition fails and is liable to be dismissed. Validity of the confiscation order passed under Section 130 of the UPGST Act - Held that:- In the present case, the petitioner had informed the authorities concerned to defer the adjudication on confiscation because the issue of validity of the search was engaging the attention of the High Court, despite the fact that there was no stay order restraining the respondents from passing the confiscation order but in all fairness as the hearing was going on at the High Court, the respondent authorities should have awaited the outcome of the challenge made to the search by the petitioner - the matter remanded before the said authority to adjudicate on the question of confiscation afresh.
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Income Tax
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2019 (3) TMI 915
Addition u/s 43B - liability to pay service tax into the Treasury will arise only upon the assessee receiving the funds and not otherwise - Held that:- SLP dismissed.
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2019 (3) TMI 914
Diversion of Income - Capital Subsidy for infusion of additional capital by the appellant in the joint venture company as per the terms of Letter of Intent - business link or services rendered by the Assessee to the UK based Company RSA - Nature of receipt - revenue or capital receipt - HELD THAT:- The Agreement between the two parties in question clearly stipulated that both intended to set up a new joint venture company to enter into the insurance sector and since, for making the investment in the share capital, the Indian Company SFL the Assessee before us fell short of money, the UK Company RSA gave the capital subsidy to the Assessee Company to contribute its share in the share capital of the joint venture company in terms of the Letter of Intent. 74% of the total subscription share capital was to be invested by the Indian Companies including the Assessee company and only 26% of share capital was to be invested by the RSA (UK Company). There is no material on record to show that the said capital subsidy received by the Assessee Company during the year in question was diverted by the Assessee company for any other purpose except for being invested in the share capital of the joint venture company. This money has not been utilised as subscribing the share capital of the UK Company, RSA itself though the Assessee Company SFL. There is no evidence on record brought by Revenue to establish that the insurance business of the joint venture company had already started and the said remittance of ₹ 2,11,75,000/- was made by the UK company RSA against any such services rendered by the Assessee Company SFL to the said UK based Company RSA. Therefore, we are unable to accept the contention of the Revenue that the said subsidy or remittance was received for any business link or services rendered by the Assessee to the UK based Company RSA. It is undoubtedly, a capital receipt in the hands of the Assessee Company and cannot be brought to tax as Revenue Receipt, particularly in the face of the finding of the Assessing Authority himself that the subsidy or remittance so received from RSA had been invested by the Assessee Company in the share capital of the joint venture Company M/s. Royal Sundaram Alliance Insurance Company Limited. - Decided in favour of assessee.
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2019 (3) TMI 913
Reopening of assessment u/s 147 - Bogus purchases - ITAT deleted the addition - HELD THAT:- The proceedings under sections 147/148 have been initiated against the assessee on the basis of information received from ADIT-3 and statement of Shri Har Narayan Gupta, the Proprietor of M/s Annapurna Trading Company, was recorded to the effect that he has only received commission from the respondent – assessee without there being any actual sale. In turn, the purchases shown by the assessee were bogus and only a bogus purchase entry was made to reduce actual tax liabilities. In pursuance of the summons and on cross-examination of Shri Har Narayan Gupta, he has clearly and categorically denied that he indulged in any kind of mal-practice. He also denied to make any statement that he was only getting commission for issuing bills with actual sale to respondent – assessee. In view of the categorical findings of fact recorded by the Commissioner of Income Tax in favour of the respondent – assessee in appeal and confirmed by the Tribunal vide impugned order, no question of law arises in the present appeal. Moreover, the authorities below have recorded that M/s Annapurna Trading Company has produced its books of account in the reassessment proceedings and the same were verified by the Assessing Authority. The quantity and details, furnished by the respondent – assessee, were neither disturbed nor rejected. Moreover, the assessee has shown purchases from 13 parties, including M/s Annapurna Trading Company, and none of the parties, from whom purchases have been shown by the respondent – assessee, was found bogus purchases by the Assessing Authority. The payments have been made through cheques and all the entries were duly made in the books of account and the same were verified. In view of the findings of fact recorded in favour assessee, that the purchases were being made from M/s Annapurna Trading Company, no substantial question of law arises in the present appeal.
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2019 (3) TMI 912
Exemption u/s 10(23 C)(vi) denied - Charitable activity or not - Trust which is running a school was granted registration under Section 12 AA who took over petitioner a recognized Matriculation Higher Secondary School - petitioner did not establish his claim that the institution is being run solely for the purpose of education - since the institution had been generating surplus of over 15 to 20%, it cannot be an institution which is existing for “not for profit purpose” - HELD THAT:- The petitioner's application dated 28.09.2013 clearly mentions that the school is being run solely for educational purposes. The school has been issued with recognition orders by the concerned authorities. It is further mentioned that all the funds generated by the institution have been utilized for the school development purpose only. When the applicant itself is an educational institution, namely, the school, this Court fails to understand as to why the respondent has been insisting that there should be a written memorandum containing the objects of the school. The object of the applicant can only be to run the school and nothing else. This has been made explicit in the application form itself. Of course, the educational agency for the applicant is a trust. But then, the school has been enjoying the status of an independent assessee. Since it is only the school that seeks exemption in terms of Section 10(23)(C)(vi)of the Income Tax Act, 1961, there is no need or necessity for the school to take recourse to invoke the provisions of the trust deed of the educational agency. The Malco Education Trust may have larger objects connected with education. The petitioner's school being an independent assessee has made it clear that it is being run for educational purposes alone. The petitioner can only make a positive assertion. If the authority is possessed of some material which may indicate that the petitioner is having some other activities also, then the application can be rejected on that ground. But, no such material has been projected in the impugned order. The approach of the respondent suffers from misdirection in law.the order impugned in this writ petition is set aside and the matter is remitted to the file of the respondent to pass orders afresh in accordance with law. The respondent shall issue a notice to the petitioner fixing the date for enquiry.
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2019 (3) TMI 911
Penalty u/s 271A - assessee failure to maintain the books u/s 44AB - gross receipts had been arrived at ₹ 1,72,87,696/- and since it exceeded ₹ 1.00 crore - assessment order u/s 143(3) - according to the assessee his gross receipts were less than ₹ 1.00 crore and therefore, he need not have maintained the books of account - HELD THAT:- The gross receipts have exceeded ₹ 1.00 crore only because of treating the unexplained cash credits also as turnover of the assessee. The AO has made the addition to the turnover because the assessee could not explain the cash credits but there is no positive evidence that all these deposits are the business receipts of the assessee. Therefore, by virtue of increase in the turnover due to the assessment order, the assessee cannot be expected to have maintained books of account u/s 44AB of the Act. Therefore, satisfied that the penalty u/s 271A is not leviable in this case. - Decided in favour of assessee.
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2019 (3) TMI 910
Rectification of mistake u/s 154 - mistake apparent from the record - in original order individual tax rates were wrongly charged - AO after examination of trustee taxability charged maximum marginal rate u/s 167B - Further examination is a patent mistake - not part of record but brought in 154 proceedings - HELD THAT:- Therefore the provisions of section 167B are not applicable automatically, but can be applied only after examination of facts as to whether any of the Member of the AOP has income which exceeds the maximum amount which is not chargeable to tax in the relevant years. It is not a mistake apparent from the record which can be rectified u/s 154 of the Act. The AO has to examine the facts and also has to verify the income of each of the Trustees. Assessee had stated that the return of income of Mr. Mahesh Kumar Khetan was not part of the assessment records of the assessee, but the same is referred to by the AO in the order u/s 154. Therefore, the AO had clearly verified the record of Mr. Mahesh Kumar Khetan to come to the conclusion that his income exceeded the maximum limit of the income which is not chargeable to tax. AO had exceeded his jurisdiction in exercising his powers u/s 154 of the Act. It was clearly a debatable issue and as held by the Hon'ble Supreme Court in the case of T.S. Balaram vs. Volkart Bros [1971 (8) TMI 3 - SUPREME COURT] a mistake apparent from the record must be patent mistake on which there can be no two opinions. Therefore, according to me, the initiation and exercise of powers u/s 154 of the Act by the AO is not sustainable. Even on merits, we find that the Trustees are not the beneficiaries in any way and there is a sole beneficiary who has no other income but the income generated by the Trust. The assessee Trust is not carrying on any business but is only managing the income from other sources for the benefit of the beneficiary. Therefore, even on merits, we are not inclined to accept the order u/s 154 of the Act. - Decided in favour of assessee.
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2019 (3) TMI 909
Stay petition - as per DR the applicant should be directed to deposit at least 50% of the outstanding demand before the stay is granted - HELD THAT:- We are of the view that the assessee company has a prima facie case and this is a fit case for granting unconditional stay as well as early hearing as 35% of total demand is already paid by the assessee company. Therefore, we grant stay for a period of six months (180 days) or till the disposal of appeal whichever is earlier. We would also like to make it clear that on the fixed date of hearing of the appeal, the assessee will not seek any adjournment for any reason. If any adjournment is sought by the assessee, the Stay granted will automatically stand vacated.
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2019 (3) TMI 908
Penalty u/s 271(1)(c) - addition on account of capital gain - Assessment order in the case of one of the co-owners - HELD THAT:- Assessment order in the case of one of the co-owners and submitted that the Assessing Officer in the said order has accepted the returned income without making any addition. On a pointed query by the Bench as to what has happened to the other co-owners, neither the assessee nor the DR could throw any light. It is also discernible from the paper book that the case is pending before the Hon'ble Delhi High Court. Considering the totality of the facts of the case and considering the fact that the Assessing Officer in the case of one of the co-owners has not made any addition on account of capital gain and since it is not known as to what has happened in the case of other co-owners, therefore, I deem it proper to restore the issue to the file of the AO with a direction to adjudicate the issue afresh, after giving due opportunity of being heard to the assessee. The Assessing Officer shall decide the issue as per fact and law. Thus hold accordingly. Grounds raised by the assessee are accordingly allowed for statistical purposes.
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2019 (3) TMI 907
Grant of registration u/s 12AA and recognition u/s 80G - Charitable activity or not - main objection by the CIT(E) to grant of recognition u/s 80G was that the assessee trust has not carried out any noticeable activity till formation of the Trust; and therefore, it was not a fit case for grant of recognition under section 80G - HELD THAT:- What is significant / noticeable activity is very subjective and cannot be the basis for rejection of the assessee’s application. It is for the assessee to determine which of its activities in furtherance of its objects are to be taken up initially. Grant of approval / recognition under section 80G can act as a catalyst to encourage prospective donors to look at the intended activities / objects and possibly provide financial support through donations / contributions. In the case on hand, the CIT(E) has subsequently granted the assessee-trust registration under section 12AA of the Act vide order dated 29.08.2018; ostensibly, after examination of the assessee’s objects, etc., which the CIT has categorized as “Advancement of any other object of general public utility” - restore the matter to the file of the CIT(E) to examine the matter afresh in the light of his subsequent order granting the assessee registration under section 12AA - Assessee’s appeal allowed for statistical purposes.
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2019 (3) TMI 906
Payment of excessive price on purchase of sugarcane - HELD THAT:- Issue is no more res integra in view of the recent judgment of C.I.T. BOMBAY VERSUS TASGAON TALUKA S.S.K. LTD. [2019 (3) TMI 321 - SUPREME COURT] - set aside the impugned orders on this score and remit the matter to the file of the respective A.Os. for deciding it afresh as per law in consonance with the articulation of law by the Hon’ble Supreme Court in the aforenoted judgment. AO would allow deduction for the price paid under clause 3 of the Sugar Cane (Control) Order, 1966 and then determine the component of distribution of profit embedded in the price paid under clause 5A, by considering the statement of accounts, balance sheet and other relevant material supplied to the State Government for the purpose of deciding/fixing the final price/additional purchase price/SAP under this clause. The amount relatable to the profit component or sharing of profit/distribution of profit paid by the assessee, which would be appropriation of income, will not be allowed as deduction, while the remaining amount, being a charge against the income, will be considered as deductible expenditure. At this stage, it is made clear that the distribution of profits can only be qua the payments made to the members. In so far as the non-members are concerned, the case will be considered afresh by the AO by applying the provisions of section 40A(2). Giving sugar to members at concessional rate - AO made addition of the difference between the market price and the concessional price at which sugar (final product) was given to farmers and cane growers - HELD THAT:- It would be just and fair if the impugned orders on this score are set aside and the matter is restored to the file of AOs, instead of to the CITs(A), for fresh consideration as to whether the difference between the average price of sugar sold in the market and that sold to members at concessional rate is appropriation of profit or not, in the light of the directions given by the Hon’ble Supreme Court in the case of Krishna Sahakari Sakhar Karkhana Limited (2012 (11) TMI 669 - SUPREME COURT). Restoration to the AO is necessitated because, following the judgment in the case of Tasgaon Taluka S.S.K. Ltd [2019 (3) TMI 321 - SUPREME COURT], we have remitted the issue of payment of excessive price to the file of AO, and as such, the instant issue cannot be sent to ld. CIT(A) as it would amount to simultaneously sending one part of the same assessment order to the AO and other to the CIT(A), which is not appropriate. Disallowance on account of contribution to Area Development Fund - HELD THAT:- It is noticed that in the appeals under consideration, the ld. CITs(A) have not considered the impact of the judgment of the Hon’ble Supreme Court in Siddheshwar Sahakari Sakhar Karkhana Limited [2004 (9) TMI 6 - SUPREME COURT] and decided the issue without taking note of the factors directed to be considered in the aforenoted case. In view of the above decision of Hon’ble Supreme Court, we set-aside such impugned orders and remit the matter to the file of the respective AOs for deciding the issue afresh. Disallowance for delayed deposit of ESI / EPF employees’ share - deduction as deposited albeit belatedly under the respective Acts, but before the due date of filing of return u/s 139(1) of the Act - HELD THAT:- It is seen as an admitted position that the assessees in such cases deposited the employees’ contribution towards EPF and ESIC before the due date u/s 139(1) of the Act. Respectfully following the aforenoted judgment of AIMIL LIMITED, NIRMALA SWAMI, SPEARHEAD DIGITAL STUDIO, M/S. NET 4 INDIA LTD., MODIPON LTD., & M/S. EKTA AGRO INDUSTRIES LTD., [2009 (12) TMI 38 - DELHI HIGH COURT], we order for the deletion of the addition sustained in the first appeals on account of late deposit of employees’ contribution to the Provident fund. Disallowance of contribution to Vasantdada Sugar Institute (VSI) - weighted deduction at 125% u/s.35(1)(ii) to be allowed - Decided in favour of the assessee. Contribution made to Chief Minister Relief Fund - assessee claiming the entire amount as deduction in its Profit and loss account, the AO opined that the said contribution was eligible for deduction u/s. 80G(iiihf) at the rate of 50% along with other qualifying sums - CIT(A) sustained the entire addition overlooking the fact that deduction u/s.80G(iiihf) was not allowed by the AO on such contribution in the computation of total income - HELD THAT:- We cannot uphold the disallowance of the entire amount claimed as deduction by the assessee in its Profit and loss account. Approving the additions made, we remit the matter to the file of the AO for granting the deduction u/s.80G(iiihf) as per law after allowing a reasonable opportunity of hearing to the assessee. Non-granting of deduction towards payment of Khodki charges - HELD THAT:- It is seen that Khodki charges were incurred as per the directions of the Director of Sugar to compensate for the farmers’ loss for unevenly cutting of cane sugar at the time of harvesting. This issue came up for consideration before the Special Bench of the Tribunal in DCIT Vs. Manjara Shetkari SSK Ltd. [2004 (8) TMI 721 - ITAT MUMBAI] which granted deduction for said expenses. On further appeal by the Revenue to the Hon’ble Bombay High Court [2007 (8) TMI 260 - BOMBAY HIGH COURT], their Lordships in the aforenoted case approved the view taken by the Tribunal allowing deduction for payment of such Khodki charges. Khodki charges have been held as deductible by the Hon’ble jurisdictional High Court and the recent judgment of Hon’ble Supreme Court in Tasgaon Taluka Sahakari Sakhar Karkhana Ltd. [2019 (3) TMI 321 - SUPREME COURT] does not cover Khodki charges, we hold that this issue needs to be decided in favour of the assessee. Deduction u/s 80P - interest and dividend received from Co-operative Society on Savings Bank accounts - HELD THAT:- any amount of interest or dividend derived by a Co-operative Society from its investments with any other Co-operative Society, is deductible under clause (d) of section 80P(2) of the Act. CIT(A) has given a categorical finding that assessee is a Cooperative Society and the Co-operative Bank from which the above-mentioned income was earned, is also a Co-operative Society duly registered under Maharashtra Cooperative Societies Act. This contention has not been controverted by the ld. DR with any cogent material or evidence. Thus, it is seen that the case of the assessee is fully covered u/s.80P(2)(d). Reliance of the AO on the provisions of sub-section (4) of section 80P is misplaced. As the assessee under consideration is not a Co-operative Bank, the mandate of subsection (4) does not extend to it. We, therefore, approve the view taken by the ld. CIT(A) in granting deduction u/s.80P(2)(d) of the Act in respect of interest and dividend income earned by the assessee on such facts.
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2019 (3) TMI 905
Credit of surrender at the time of search in respect of addition u/s 69 regarding various property - Search on Harsingar Gutkha/Patel group - surrender was made by Shri K. N. Singh Patel for undisclosed income/investment - reference to the Valuation Officer - assessee claim credit for surrnederd was made by Shri K. N. Singh Patel - CIT(A) excluded investment in AY 2002-03 were not covered by the search period - main dispute between the parties is that the declaration of surrender made by Shri K. N. Singh, head of the family should be completely set off against the investments made by the assessee in various years - HELD THAT :- it is apparent that at the time of surrender, Shri K. N. Singh had owned up the investments made in the name of various family members including the assessee. There is no dispute regarding identification of property, as undisputedly the properties declared by Shri K. N. Singh in the name of the assessee remained the same. we are of the opinion that the Revenue should have taken a holistic view of the position and total investment in a property during the period under search should have been compared with the total surrender towards that particular property. The assessee in her reply to Assessing Officer, reproduced by us in earlier part of this order, had also confirmed that surrender was made by Shri K. N. Singh Patel on account of construction in various properties and there is no mention of yearwise construction. In the above assessments of Shri K. N. Singh, the Assessing Officer has not made any addition and has accepted the returns filed by him u/s 153A of the Act which means that he has accepted the declaration of surrender made by Shri K. N. Singh in the respective years of surrender. Therefore, keeping in view all the facts and circumstances, we set aside the order of learned CIT(A) on this account and remit the matter back to the office of the Assessing Officer to recalculate the addition, if any, after taking into account the total amount of surrender in various years with respect to the total investments in various properties, irrespective of the year of investment. Assessing Officer should compare the total investment during search period as valued by registered valuer towards various properties. For the purpose of comparison, the construction done before and after the search period has to be ignored. If the difference between such valuation of property in the search period exceeds the surrender amount for that property, the difference has to be assessed as income of the assessee. In view of the above, ground No. 4 in all the appeals relating to assessment year 2003-04 to 2008-09 is allowed for statistical purposes. Addition on account of acquisition of various properties - assessee claim that this addition was to be adjusted against the surrender of Shri K. N. Singh - HELD THAT :- We find that the addition made by the Assessing Officer on account of acquisition of various properties as mentioned by him in his order at page No. 20 and the undisclosed investment, sustained by learned CIT(A), cannot be set off by the surrender of Shri K. N. Singh as the surrender was made for construction only. The learned CIT(A) has already allowed appropriate relief therefore, we do not intend to interfere in his findings. - Ground of assessee is dismissed. Addition of house hold expenses - assessee claim that this amount was to be adjusted against the surrender of Shri K. N. Singh - HELD THAT :- We further find that Assessing Officer had made a total addition on account of various house hold goods available in the house at the time of search for which no evidence was filed and the total of such assets was was distributed among four members of the family and the share of assessee, was added. We find that learned CIT(A) has rightly upheld the addition by rejecting the contention of the assessee that this amount was to be adjusted against the surrender of Shri K. N. Singh. - Ground of assessee is dismissed.
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2019 (3) TMI 904
Nature of land sold - agricultural land or capital asset u/s 2(14) - calculation of distance of more than 8 KMs. from the local limit of any municipality cantonment board - HELD THAT:- As noticed that assessing officer has mentioned in his order that assessee has sold an immovable property (non-agricultural land). However, we find that the ld. CIT(A) has held that assessee has sold an agricultural which is not a capital asset. In the light of the above facts, we are of the view that it will be appropriate to restore this issue to the file of ld. CIT(A) to adjudicate the veracity of the fact reported by the A.O. in the assessment order that the sold land was non-agricultural land. In the result, appeal of the revenue of the assessee is allowed for statistical purposes.
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2019 (3) TMI 903
Eligibility to deduction u/s 35D to the respondent Bank as an industrial undertaking - High Court justification in dismissing the appellant's appeal - non forming substantial question of law - HELD THAT:- The need to remand the case to the High Court is called for due to the following reasons. First, the High Court did not frame any substantial question of law as is required to be framed under Section 260A of the Act though heard the appeal bipartite. High Court did not dismiss the appeal in limine on the ground that the appeal does not involve any substantial question of law; Second, the High Court dismissed the appeal without deciding any issue arising in the case saying that it is not necessary. The main issue involved in this appeal, as rightly taken note of by the High Court in para 6, was with regard to the applicability of Section 35D of the Act to the respondent assessee( Bank). It was, however, not decided. In our view, the High Court should have framed the substantial question of law on the applicability of Section 35D of the Act in addition to other questions and then should have answered them in accordance with law rather than to leave the question(s) undecided. As the issue with regard to applicability of Section 35D of the Act to the respondent Bank is already pending consideration before the High Court at the instance of the respondent in one appeal. If that be so, both the appeals, in our view, should be decided together - Thus we are of the view that the impugned order of HC is not legally sustainable - The appeal is accordingly remanded to the High Court for its decision on merits in accordance with law
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2019 (3) TMI 902
Penalty u/s. 271(1)(c) - exemption under sections 11 and 12 denied - CIT(A) deleted the penalty on the ground that assessee has succeeded before the Gujarat High Court in quantum additions. Same was the view expressed by the Tribunal and confirmed by HC - HELD THAT:- SLP dismissed.
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2019 (3) TMI 901
Addition u/s 41(1) - cessation of liability of Sundry Creditors of timber business which was closed more than 10 years back- non production of written confirmation from such trade creditors - concurrent finding of facts by all authority below - 'common sense principles' application - HELD THAT:- The crucial words in the said provisions are the 'remission or cessation' of such trading liability which has been claimed as an allowance or deduction taken by the Assessee in a previous year and if such liability is remitted by the creditor or had ceased to exist, then in the year of remission or cessation, the said trading liability can be brought to tax as profit chargeable to tax under the said provision. Obviously, the word "cessation" in the said provision means cessation de facto and de jure. The cessation of liability should cease to exist in the eye of law. While the remission of liability can be by way of conscious act on the part of the creditor, the cessation of such liability can be inferred on the basis of facts and circumstances surrounding such trading liability. After Explanation was added on Section 41(1), it can be even by the unilateral act on the part of Assessee viz., by writing back or writing off such liability amounting to cessation of liability in his hands attracting Section 41(1) of the Act and attracting tax thereon. Once the Assessee was called upon to prove the credit entries with regard to the Sundry Creditors of its erstwhile business, the burden shifted upon him to establish the current existence of those creditors and their debts due from Assessee and that there was a live link between the creditors and the outstanding debts and therefore, in the absence of Assessee discharging that burden shifted upon him, the case of cessation of liability made out by the Revenue against him so as to bring back those dead debts of the Assessee to tax under Section 41(1) of the Act, was justified. Assessment Year 2003-04 in question has passed by for last 15-16 years by now. When we took up the cases for hearing, we asked the learned counsel for the Assessee that even in past 15-16 years, if any creditor has raised any claim against the Assessee with regard to these credit entries, he may produce the evidence of the same. But we drew a blank from the learned counsel for the Assessee, despite the grant of an opportunity in this regard. Thus, it is also more fortified now that the liability to pay for these Sundry Creditors had ceased long back and the authorities under the Act, up to the Tribunal, were justified in applying Section 41(1) and bring to tax the liability to pay back their old debts, as having ceased in law and in fact. A reasonable time line of period has to be drawn while considering the words “cessation of trading liability” as employed in Section 41(1). The lapse of ten years of time, coupled with the fact that there was a change of business altogether by the Assessee, in our opinion, absolutely justified the Assessing Authority to draw an adverse inference against the Assessee about the cessation of liability, especially when the Assessee failed to produce the written confirmation from such trade creditors of its erstwhile timber business, despite grant of opportunity to the Assessee. The debts had not only become time barred long ago, but, in fact also, no creditor made any claim for recovery from the Assessee during any of these years even up to now. We find considerable support in the judgments relied upon by the Revenue, especially the 'common sense principles' propounded by Lord Atkinsons, as applied by the Supreme Court in the case of T.V.Sundaram Iyengar [1996 (9) TMI 1 - SUPREME COURT] and also Gujarat High Court in the case of Gujtron Electronics, whereas we are unable to draw any contra support on the basis of ratio of the judgments relied upon by the learned counsel for the Assessee, albeit without any quarrel on the principles laid down therein, especially when it remains a mixed finding of fact and law as to when a trading liability ceases de facto and de jure and therefore, finally it should depend upon the facts and circumstances of each case as to whether such trading liability could be said to have ceased in law or not so as to apply Section 41(1) of the Act. In the present case, we are fully satisfied that the authorities under the Act, all the three authorities, were perfectly justified in drawing such an inference against the Assessee and holding that the trading credits of erstwhile timber business of the Assessee were liable to be taxed as profits of the business under Section 41(1) in the Assessment Year 2003-04 in question. Accordingly, the appeal of the Assessee is dismissed
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2019 (3) TMI 900
Exemption u/s 10(1) - Agricultural activity - Character of income - As per revenue Assessee company cannot be categorized as agricultural operation - tribunal allowed the claim - HELD THAT:- As decided in assessee's own case [2019 (2) TMI 1442 - BOMBAY HIGH COURT] order of the Tribunal dismissed the Revenue's appeal before it on the above issue following an order of this coordinate bench for Assessment Year 2000-01 in respect of the same respondent assessee. It also notes the binding order in CIT Vs. M/s. Monsanto India Ltd.[2011 (8) TMI 1298 - BOMBAY HIGH COURT] raising the same issue, which were dismissed by this Court - As the impugned order has followed the decision of this Court, no fault can be found with the same -Tribunal was correct in treating its commercial income of the sale of hybrid seeds, as agricultural income exempt under Section 10(1) - Decided against revenue Receipts under a Non-Compete Agreement - capital gain or business receipt - Tribunal held that the receipt was capital and it gave rise to long term capital gain - HELD THAT:- Tribunal was right on both counts. The Non-Compete Agreement was part and parcel of the sale of the business and cannot be seen in isolation. Further, the Assessee was in the business of producing and selling wheat herbicides since the year 1997 and therefore, while selling the business, the Assessee also executed a NonCompete Agreement, which was part of the sale of assets held by the Assessee in excess of 36 months. - Decided against revenue
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2019 (3) TMI 899
Scope of CIT in Revision u/s 263 - Restricted to issues raised in SCN or can enlarge the scope- Whether the Tribunal was justified in holding that the CIT had passed an order which was not covered by the grounds mentioned in the notice under Section 263 - CIT issued SCN on four issues but while passing direction to AO under section 263 enlarge the scope of inquiry to entire Sundry Creditors and also estimate net profit at the rate of ₹ 5% of gross turn over of the Assessee which was not the part of SCN Tribunal has recorded a finding of fact that revision u/s 263 of the Act can only be passed on the ground on which assessee has been given reasonable opportunity of being heard in the notice u/s 263 of the Act and it is not allowable and open to the CIT to set out one reason for revising the assessment order but actually revising the assessment order on some other ground in addition to grounds which found place in the notice u/s 263 of the Act, by passing final order u/s 263 of the Act. We may further point out that the AO did not make any addition on any one out of four issues, which were raised and pointed out in the notice u/s 263 Accepting the above finding of recorded by the Tribunal, High Court HELD THAT no substance in the present appeal which gives arise to substantial question of law and, hence, the appeal is dismissed - The question of law is answered in favour of the respondent-assessee and against the department.
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2019 (3) TMI 898
Deduction u/s 80-IB(10)- completion certificate was issued by Kolkata Municipal Corporation on 12th May, 2007 - Assessee claimed deduction in AY 2007-2008 - Department contention that deduction allowable in FY 2007-2008 - C.B.D.T. circular - instruction no.4 – 2009 dated 30th June, 2009 - The deduction can be claimed on a year to year basis where the assessee is showing profit from partial completion of the project in every year - assessee wanted the benefit only once. So, it could be given to him in any one of the four years in which the construction was under way till the year of obtaining the completion certificate - HELD THAT:- So, if it has been given in one of those years, no loss or prejudice has been caused to the revenue. We are least minded to entertain appeals which have theoretical significance and no practical significance -decided in favour of the assessee.
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2019 (3) TMI 897
Assessment in remand - Tribunal remanded the case to AO to confine to determination of undisclosed income only on “net asset” basis based on the materials and evidences found during the course of search, if it is not reflected in the regular books of accounts.with certain direction - During the pendency of appeal before High Court AO passed the order - HELD THAT:- In view of the remand proceedings being concluded by the direction of the Tribunal, the present Tax Case filed by the Revenue has become infructuous. Accordingly, the Tax Case is dismissed as infructuous.
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2019 (3) TMI 896
Unexplained cash credit - addition u/s 68 - entry operator - taking total turnover of the entries as an unexplained cash credit - - search operation u/s 132 - assessee was carrying on the activity of providing bogus entries through various entities which were admitted to be controlled and managed by the assessee - HELD THAT:- CIT(A) did not commit any error in holding that Assessing Officer was not right in taxing the total turnover of the entries as an unexplained cash credit in the hands of the assessee, who is an entry provider and since the beneficiaries are identified, the entire amount should be brought to tax in the respective hands of the beneficiaries. Hence, the order of the CIT(A) is a well reasoned order and, therefore, we affirm the findings of the CIT(A) on the deletion of addition - decided against revenue Estimation of commission income @0.80% - We note that the entries provided by the assessee are mix-match of three types of entries as disclosed by the assessee in his statement recorded on 14-04-2012(post search). The rate of commission is not uniform in respect of these three types of entries. Therefore, to upheld the addition to the extent of 1.50% is not justified on the facts of the case more particularly when AO has not brought any material on record to justify the addition to this extent. Looking in to the facts of the case and the decisions relied upon, Ld. CIT(A) is justified in taking commission rate 0.80%. Therefore, we decline to interfere in a such well reasoned finding of CIT(A), hence, we uphold the findings of the Ld. CIT(A) on the issue in dispute and accordingly these grounds relating to the determination of rate of commission by the assessee as well as by the department are dismissed. Unexplained cash credit - A.Y. 2012-13 - HELD THAT:- CIT(A) has listed out the amount from various bank accounts in para 13 which are found to be the turnover of accommodation entries relating to the entities who have furnished the return of income as well as audited accounts which are relied upon and Ld. CIT(A) has observed that the same cannot be treated as unexplained deposits in the hands of the assessee. After perusing the findings of the Ld. CIT(A), we do not find any infirmity in the findings of Ld. CIT(A), therefore we decline to interfere in the deletion of amount and hence, uphold the order of the Ld. CIT(A) on the issue in dispute.
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2019 (3) TMI 895
Validity of assessment u/s 153B(1)(b) - search to appellant - absence of panchnama - production of search Record before ITAT - HELD THAT:- material on record clearly establish that assessee was subjected to search action u/s 132 in pursuance of valid warrant of authorisation u/s 132 and during the course of search panchanama was also drawn in respect of the premises searched of the assessee firm. The assessing officer, therefore, rightly proceeded to pass the assessment order under section 153B(1) of the Income Tax Act, having jurisdiction over the case of the assessee. Therefore, this ground of appeal of assessee has no merit. Service of Notice u/s 143(2) - within the period of limitation - HELD THAT:- After considering the rival submissions, we are of the view that the issue is covered against the assessee by Judgment of Honorable Delhi High Court in the case of Ashok Chadda vs. ITO [2011 (7) TMI 252 - DELHI HIGH COURT] in which it was held that in proceedings under section 153A of the Income Tax Act, there is requirement to issue notice under section 143(2) of the Income Tax Act . Learned Counsel for the Assessee did not dispute this legal proposition. It may also be added here that the assessee in response to notice under section 153A dated 28th December 2012, filed the return of income on 21st March 2013 and A.O. issued notice under section 143(2) and 142(1) on dated 22nd May, 2013. In response thereto, the assessee and their Counsel appeared before assessing officer. Therefore, notice under section 143(2) have been issued and served upon assessee within the period of limitation, though, it was not required as per the above Judgment. - Ground of assessee dismissed Validity of assessment in absence of proper sanction as required u/s 153D - Assessee voluminous reply filed on 29th January 2014 - AO written a letter to the Addl. CIT, Chandigarh on 30th January 2014 with draft assessment order for his consideration and approval - The AO is stationed at Faridabad and the Addl. CIT is stationed at Chandigarh - The Addl. CIT, Chandigarh granted approval u 153D on 31st January 2014 Addl. CIT, Chandigarh did not mention in the approval, if he has gone through the assessment record - HELD THAT:- It is clear that assessee filed last reply before assessing officer at Faridabad on 29th January 2014 and according to Learned Counsel for the Assessee, it contained more than 500 pages. Therefore, it is difficult for the AO at Faridabad to go through these voluminous papers and prepare a draft order on 30th January 2014, so that the draft order could be transmitted to the Addl. CIT at Chandigarh on same day. In reply to RTI application, the assessing officer has reported that no record of mode of dispatch of assessment record to the Addl. CIT is available with the AO. Similarly, no record is available as to how the draft order and assessment record have been received by Addl. CIT at Chandigarh. The Addl. CIT, Chandigarh did not mention in his approval dated 31st January 2014 (supra), if he has gone through the assessment record or that assessment record was produced before him. Since no details are available on record about the mode, through which, assessment record was transmitted by the AO at Faridabad to Addl. CIT in Chandigarh and vice-versa by Addl. CIT, Chandigarh to Assessing Officer at Faridabad on the very next day would lead to suspicion, in explanation of A.O. if any, valid draft order was transmitted to the Addl. CIT within the time or if the Addl. CIT has communicated the approval under section 153D to the Assessing Officer at Faridabad on 31st January 2014. These facts would clearly show that the action of the Addl. CIT, Chandigarh granting approval in this case was, thus, a mere mechanical exercise, accepting the draft order as it is, without any independent application of mind on his part. Nothing has been clarified during the course of hearing to the effect that if Addl. CIT has gone through the assessment record, before accepting the draft assessment order. Thus, there was no application of mind on the part of the Addl. CIT before granting approval. we are of the view that no valid approval/sanction have been granted by the Addl. CIT, Chandigarh before passing the assessment order in the matter. The requirement of Section 153D of I.T. Act, 1961, are not satisfied in this case. We accordingly hold that entire assessment order is vitiated and is null and void. - Decided in favour of assessee. Capital gain computation on sale of shares - Reduction of consideration in agreement in the nature of Addendum to the Main Agreement - full value of consideration cannot be construed as the market value, but, as the price bargained for by the parties to the Sale. - HELD THAT:- It is not in dispute that the assessee was owner of the impugned shares of M/s. R.S. Infrastructure Pvt. Ltd. The assessee agreed to sell the shares to M/s. Lowe Realty Pvt. Ltd., for a consideration of ₹ 526 crores through the initial Agreement, but, later on its conditions were amended through Addendum to the Agreement and total consideration was reduced to ₹ 520 crores. The observations of the authorities below had been that such consideration could not be changed. Section 62 of the Indian Contract Act, 1872 provides effect of novation recession and alteration of contract If the parties to contract - - agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed. The above Section of Contract Act approves the action of the assessee and the purchaser in altering the terms of the contract. The assessee has executed fresh agreement in the nature of Addendum to the Main Agreement, through which, the consideration was reduced from ₹ 526 crores to ₹ 520 crores. The contention of assessee is supported by Bank statement of the assessee and the purchaser. No evidence has been brought on record of understated price of shares or more consideration received by the assessee. No evidence, in fact, comes on record, if assessee received ₹ 6 crores from the purchaser. Change in the Terms of the Agreement is permissible in Law. Therefore, in the absence of any evidence or material and record, it is difficult to believe that assessee received ₹ 6 crores from the purchaser of the shares. Thus, there was no justification for the authorities below to make the addition - Decided in favour of assessee. Short term capital loss - bonafide genuine transaction to purchase CCDs and only because of one of the condition was not satisfied for transfer of CCDs, therefore, assessee had to sell the shares at a lower price. - HELD THAT:- facts clearly show that assessee entered into the bonafide genuine transaction to purchase CCDs and only because of one of the condition was not satisfied for transfer of CCDs, therefore, assessee had to sell the shares at a lower price. Therefore, assessee suffered short term capital loss of ₹ 155.75 crores in this regard. The documentary evidences on record have not been doubted by the authorities below. The parties are genuine and assessed to tax and all transactions are carried-out through the Banking channel. The assessee could not have produce the original CCDs before A.O. because the same were given to the purchaser M/s. Zealous at the time of sale of CCDs by the assessee. Merely because transaction was carried-out within the Group concerns, by itself, is no ground to reject the explanation of assessee. Considering the totality of the facts and circumstances, we are of the view that assessee has entered into genuine transaction which is supported by documentary evidences, which have not been doubted by the authorities below. Therefore, the rule of preponderance of probability would not apply to the facts and circumstances of the case. Therefore, there was no justification for the authorities below to reject the claim of assessee of short term capital loss. - Decided in favour of assessee.
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2019 (3) TMI 894
Levy of penalty u/s. 271(1)(c) - Addition of LTCG - assessee had adopted indexed cost of acquisition of land as on 01-04-1981 without any basis and had declared Long Term Capital Loss -deliberate Act on the part of assessee to suppress the Long Term Capital Gains and has thereby caused losses to the Revenue - Assessing Officer while recording satisfaction has invoked both the charges of section 271(1)(c) - at the time of levy of penalty, the Assessing Officer stick to only one charge i.e. concealment of income - HELD THAT:- The Hon”ble Supreme Court of India in the case of T. Ashok Pai Vs. Commissioner of Income Tax [2007 (5) TMI 199 - SUPREME COURT] has held, “Concealment of income” and “furnishing of inaccurate particulars” carry different connotations. Concealment refers to deliberate act on the part of the assessee. Expression “concealment of income” and “furnishing inaccurate particulars of income” cannot be used interchangeably In the instant case, we are of considered opinion that there was ambiguity and vagueness in the mind of Assessing Officer while recording satisfaction with respect to charge u/s. 271(1)(c) for levy of penalty. Though at the time of levy of penalty, the Assessing Officer stick to only one charge i.e. concealment of income. The Assessing Officer has to be specific and categoric in mentioning the charge u/s. 271(1)(c) at the time of recording satisfaction as well as at the time of levy of penalty. Where penalty provisions have been invoked in indistinct manner, penalty proceedings would fail the test of legal requirements. Accordingly, the impugned order is set aside and the appeal of assessee is allowed.
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2019 (3) TMI 893
Business income - adopting the sale price @ circle rate for the purpose of computing the assessee’s income - holding properties as stock-in-trade - HELD THAT:- Ld. CIT(A) has rightly held that there is a document evidencing the sale and there is nothing on record to prove that the assessee has received anything more than stated in the said document evidencing the sale, then the sale consideration shall be full value of consideration stated in the document sale and not any other value. Ld. CIT(A) further rightly held that the AO has erred in adopting the sale price @ circle rate for the purpose of computing the assessee’s income. Accordingly, the additions was deleted by the Ld. CIT(A) and AO was directed to allow the consequential relief. Income from house property - notional rental income u/s. 22 - vacancy allowance - Rental Value of house properties lying vacant or used by the assessee for his business - HELD THAT:- the case of Sh. Sachin R. Tendulkar vs. DCIT [2018 (8) TMI 847 - ITAT MUMBAI] is also applicable in the present case, wherein it was held that in case property has remained vacant for whole year the income assessable would be NIL u/s. 23(1)(c) of the Act. - reject the ground raised by the Revenue.
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2019 (3) TMI 892
Taxing the right person - land transaction done by the partnership firm - assessment in the hands of partners or partnership firm - sale consideration received by partnership firm is reflected in their books of account and also offered for taxation - tax in the he hands of the individual partners as ultimate beneficiary - HELD THAT:- As gone through the books of account of the assessee as well as partnership firm. It is demonstrated that cash payment was made by the M/s. Pooja Export and credited to the firm M/s. B.U. Bhandari Real Estate Corporation. Transaction of the amount was assessed in the hands of the M/s. B.U. Bhandari Real Estate Corporation. In such scenario, terming the assessee as ultimate beneficiary is not appropriate as evident through the facts on record. That the Hon'ble Supreme Court in the case of ITO Vs. Ch. Atchaiah (1995 (12) TMI 1 - SUPREME COURT) has clearly held that assessment has to be done in the right hands. Therefore, in the present case, when sale of land transaction has been done by the partnership firm, addition cannot be made in the hands of the individual assessee even though he is a partner of the firm. - Decided in favour of assessee.
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2019 (3) TMI 891
Depreciation on two wheeler vehicles and Car registered in the name of Directors - assessee was not the owner of the assets - payment for purchase of assets made by company - beneficial owner of asset - used of assets for the business - HELD THAT:- Regarding the ownership of the assets, we note that the beneficial ownership vest with the assessee. It is because the payment was made for the purchase of the assets by the assessee though the assets were registered in the name of the directors of the company. Since this fact has not been doubted by any of the authorities below, therefore, we can safely presume that the assessee is the beneficial owner of the assets. Case of MYSORE MINERALS LTD. VERSUS COMMISSIONER OF INCOME-TAX [1999 (9) TMI 1 - SUPREME COURT] to be followed. Whether the assets were used for the business? - no disallowance for interest on a car loan, petrol expenses, repair and maintenance expenses etc.- - HELD THAT:- It is one of the pre-condition to claim the depreciation on the assets that it should be used for the business - the assessee has claimed other expenses in connection with the vehicle as discussed above. These expenses are like interest on a car loan, petrol expenses, repair and maintenance expenses etc. The necessary details of such expenses are available in the financial statements. It is undisputed fact that these expenses have not been disallowed. Thus, it can be transpired that the Revenue has admitted these expenses incurred by the assessee for the business. Thus in our considered view, we find that the authorities below have made the addition on account of depreciation without the application of mind. - Decided in favour of assessee Disallowance on account of labour charges - assessee failed to furnish the details for the movement of jewelry to the labourers for carrying out the necessary job work - non deduction of tds - disallowance under the assessment framed under section 143(3) - HELD THAT:- All the details of the laborers including the addresses and PAN were available with the authorities below. In case there is any doubt about the labour expenses claimed by the assessee, then the authorities below should have taken the confirmation from the respective parties. The authorities below were empowered to verify whether these labors have disclosed the receipt from the assessee in their respective income tax return or not. But we find that the authorities below have not exercised their power provided under the statute. On perusal of the ledgers of the laborers we note that the payment was made by the assessee periodically after the deduction of TDS. Thus, the assessee cannot be penalized if the laborers have raised the bills at the end of the accounting year. The assessee has shown huge turnover from the sale of jewelry amounting to ₹ 98.89 crores and against such sale the assessee has claimed Labour expenses only for ₹ 19,20,390/- only which is constituting less than 1% of the turnover. As such the genuineness of the Labour expenses cannot be doubted considering the huge turnover of the assessee as discussed above. - Decided in favour of assessee Addition u/s 14A r.w.r. 8D - AO during the assessment proceedings found that the assessee has made the investment in shares and securities - HELD THAT:- As there was no exempt income earned by the assessee in the year under consideration. Therefore, in our considered view there cannot be any disallowance under section 14A read with rule 8D of the Act in view of the judgement of Hon’ble Gujarat High Court in the case of CIT Vs Corrtech energy Pvt. Ltd. [2014 (3) TMI 856 - GUJARAT HIGH COURT]. Thus we hold that the disallowance under section 14A read with rule 8D of the income tax rule is not warranted- Decided in favour of assessee Disallowance of interest on account of diversion of interest bearing fund - Addition proportionately of advance - HELD THAT:- We note that the own fund of the assessee exceeds the advances given without any interest. Therefore, we are of the view that no disallowance of interest expenses on account of diversion of the fund is warranted. In this regard, we find support and guidance from the judgement of Hon’ble Bombay High Court in the case of Reliance Utilities and Power Ltd.[2009 (1) TMI 4 - BOMBAY HIGH COURT] - Decided in favour of assessee ad-hock disallowance of labor expenses @25% - HELD THAT:- when assessee has submitted all the supporting documents related to labour charges such as PAN, address, nature of work done and justification of the rate charged. Revenue was expected to point out the specific defect in the details filed by the assessee before resorting to making the ad hoc disallowance. Accordingly, we direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.
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Customs
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2019 (3) TMI 890
Principles of natural justice - demand based on audit objections without issuing SCN - case of appellant is that the order of assessment was confirmed without giving an opportunity to the importer for being heard - Whether principles of natural justice have been violated vis- -vis less charge demand and adjudication order issued to the appellants? - Held that:- During the relevant period copies of the letters were given to the CHA while they were sent by post to the appellants. The letters or orders did not come undelivered as per the averment of the department. It is also not the appellant s contention that they have changed their address during the relevant period. Therefore, there appears to be no cogent reason to suspect that the letters/orders were not delivered to/ received by the appellants. The appellants being regular importers/ exporters at that time, the CHA could have also handed over them the letters - both the sides have contributed to the condition where principles of Natural Justice have been violated in spirit, if not in Letter. Normally, the issue may have to go back to the Original adjudicating authority for a fresh consideration. Demand of interest - Whether the provisions of interest which came into effect in 1996 can be made applicable to the imports made in 1992? - Held that:- The relevant date should be the date of occurrence of taxable event. It is not the intention of Law to penalize importers where the taxable event has occurred before the new legislation came in to effect. Moreover, the appellants were not put to Notice on the requirement of paying interest vide the adjudicating order. Therefore, the appellants are not required to pay any interest on the duty confirmed - Thus, the appellant is not required to pay any interest. It was not correct for the department to collect Interest. Freezing of appellant's accounts - Whether the Revenue was within their right to freeze the accounts of the appellant? - Held that:- Going by the above provisions of Section 142, it is seen that the Commissioner of Customs is empowered to recover sums due to government by distraining any movable or immovable property belonging to or under the control of the defaulter. Therefore deducting the amount due from the ums payable to the defaulter or detaining / selling the goods belonging to the defaulter and lying in the custody of customs or detaining the movable or immovable property are within the ambit of powers conferred under Section 142 - there is no infirmity in the said orders issued by the Commissioner in freezing the bank accounts of the Appellants. However, freezing of accounts for recovery of interest which is not payable is incorrect. Whether there is a case for contempt proceedings against the Commissioner? - Held that:- Contempt proceedings at this stage would not solve any purpose rather than to further increase the litigation which in no way was the intention of the above cited orders of the Tribunals. As the accounts have been defreezed and a speaking order has been passed by the Learned Commissioner, no further justice could be achieved by pursuing the contempt proceedings. Therefore, at this juncture when the final order is ready to be issued I am not inclined to pursue the contempt proceedings. Appeal disposed off.
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2019 (3) TMI 889
Levy of export cess on Mica Products - Section 28 (1) of the Customs Act, 1962 - Held that:- Admittedly, in the Shipping Bills filed by the Respondents and self assessed under Section 17 of the Customs Act, the export cess has not been levied or paid. There is no dispute on this fact. The Revenue has issued the Show Cause Notices in these cases for demand of cess within a period of five years from the dates of export by invoking the proviso to Section 28 by alleging suppression etc. on the part of the exporters. A perusal of the Show Cause Notices reveal that the only reason cited for alleging suppression and willful mis-statement is the exporters, on self assessed shipping bills, did not pay the export cess. The act of not paying the cess which was otherwise payable, has been cited by Revenue to allege suppression of the part of the exporters - This alone cannot constitute proper justification for invoking extended period under Section 28. Perusal of the Order passed by the Commissioner (Appeals) reveals that he has taken a similar view - Appeal dismissed - decided against Revenue.
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2019 (3) TMI 888
Rectification of mistake - apparent mistake on the face of record or not - Held that:- All the submissions raised by the learned counsel of the appellant have been noted. There is no averment in the Application filed by the appellant that this ground was urged at the time of final hearing of the Appeal but was not considered - there is no mistake apparent from the record which needs to be rectified - application for ROM rejected.
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Corporate Laws
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2019 (3) TMI 886
Transfer of the winding-up proceedings to any Tribunal - Transfer of pending proceedings of Winding up on the ground of inability to pay debts - Company gone into liquidation pursuant to an order passed by the company Court on a creditor’s winding-up petition - HELD THAT:- On a reading of Section 434(1)(c) of the Act of 2013 with clause 5(1) of the Notification of December 7, 2016 that it is only where a petition for winding-up instituted under Section 433 (e) of the Act of 1956 has not been served on the company, will such winding-up petition stand transferred to the relevant Bench of the Tribunal. In the present case, the creditor’s winding-up petition resulted in an order of winding-up being passed on June 14, 2016. Thus, as at December 7, 2016, there was no question of transfer of the winding-up proceedings to any Tribunal. The appeal that has been carried from an order passed in the winding-up proceedings is not contemplated under the Act of 2013 or any notification issued thereunder to stand transferred to any tribunal. In any event, it can scarcely be expected that an order passed by a High Court would be carried by way of an appeal to any tribunal. In this context, it may be apposite to record qua the judgment in India Steam Laundry [2018 (9) TMI 337 - CALCUTTA HIGH COURT] that the ratio decidendi in a judgment is exactly what the judgment decides in the context of the issues before it and not what the judgment may imply to say. Without going into the legality of the answers rendered in India Steam Laundry the decision and the dictum therefore, be confined to a case of oppression and mismanagement instituted in this Court prior to the 1988 Amendment coming into effect in 1991. The dictum has no bearing on other company proceedings, far less any impact on proceedings that have been saved and are required to be continued in the High Courts pursuant to the first proviso to Section 434(1)(c) of the Act and as prescribed by the Central Government by the notification of December 7, 2016. The only alteration to such position now is that any party to the pending proceedings in this Court has a right to apply for the transfer of the proceedings to the relevant tribunal. The objection taken by IIBI Limited and IFCI Limited as to the maintainability of the present appeal is, thus, overruled. These matters pertaining to New Central Jute Mills Company Limited (in liquidation) will now appear one week after the puja vacation.
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2019 (3) TMI 882
Oppression and mismanagement - maintainability of petition - exceptional circumstances for grant of waiver to maintain an application under Section 241-242 - individual eligibility to maintain application under Section 241-242 having more than 10% of the share of the company - HELD THAT:- Except two members all the member are individually eligible to maintain application under Section 241-242 having more than 10% of the share of the company. It is not necessary that they will have to join with one or other member to maintain their petition. In ‘Cyrus Investment Pvt. Ltd. & Anr. Versus Tata Sons Ltd. & Ors.’ [2017 (9) TMI 1500 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] this Appellate Tribunal noticed the shareholding pattern and taking into consideration the fact that majority of the shareholder having less than 10% of the shareholding, except 2 got more than 10% and that the Appellant ‘Cyrus Investment Pvt. Ltd.’ has invested about ₹ 1,00,000 Crore in ‘Tata Sons Ltd.’ out of the total investment of ₹ 6,00,000 Crore, held that the Appellant of the said case namely ‘Cyrus Investment Pvt. Ltd.’ has made out an exceptional case to maintain a petition for waiver under Proviso to Sub-section (1) of Section 244 of the Companies Act, 2013. The present case of the 1st Respondent ‘Ronny George’ is not only different but a reversal case where majority of the shareholder have more than 10% of shareholding except two who are less than 10% shareholding. Therefore, it cannot be held that the 1st Respondent has made out a case of exceptional circumstances for grant of waiver to maintain an application under Section 241-242 on such ground. This apart, no exceptional circumstance has been shown by the Tribunal to grant waiver. The factors recorded by NCLT in Para 17 of the impugned order are no grounds to treat them as exceptional circumstances keeping in view our Judgment in the matter of ‘Cyrus Investment Pvt. Ltd. & Anr. Versus Tata Sons Ltd. & Ors.’ (Supra). The impugned order of Tribunal being based on wrong presumptions of fact and law and as the1st Respondent has failed to make out a case for waiver, the said order is set aside. We hold that the petition under Section 241 and 242 preferred by 1st Respondent (Petitioner) before the Tribunal in respect to 2nd Respondent Company – ‘Professional International Couriers Private Limited’ is not maintainable and to be dismissed
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Securities / SEBI
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2019 (3) TMI 887
Declaration or branding of shell company - non issue of notice and to have heard petitioner - maintainability of the writ petition -- authorisation of petitioner No.2 to initiate legal action on behalf of petitioner No.1 - delegation of authority -petitioner No.1 being under the corporate insolvency resolution process and resolution professional having been appointed by the Tribunal, petitioner No.2 has no locus or authority to represent petitioner No.1 and to file the writ petition - HELD THAT:- In the case of petitioner No.1, the circumstances and the context in which it has been declared as a shell company is a virtual condemnation but it is a condemnation without a hearing. That apart, there is also the question of the State or its agencies using an expression which is not defined in any law. Objective of the SEBI Act is to promote orderly and healthy growth of securities market on the one hand and on the other hand to protect the interest of investors. It has power to issue directions if it is satisfied upon enquiry that such direction is necessary in the interest of investors etc. Thus, the power of SEBI to enquire into any infraction of law by corporate entities or to conduct enquiry or to issue direction in exercise of its powers under the SEBI Act is not in dispute. Such a power SEBI undoubtedly has but that is not the question here. The question is whether a person, a juristic person in this case, can be condemned unheard. It goes to the root and is fundamental that no person can be condemned unheard. Therefore, before branding petitioner No.1 as a shell company, it was obligatory on the part of respondent No.1 to have issued notice and to have heard petitioner No.1. That having not been done, declaration or branding of petitioner No.1 as a shell company cannot be legally sustained. Maintainability of the writ petition at the instance of petitioner No.2 is concerned, Court is of the view that it is the company which is staring at being branded as a shell company with all its negative connotations; rather it has already been branded as a shell company. The interim resolution professional or resolution professional under the Code has a definite role to play as per the said Code. Its involvement is limited to that extent. Under the Code where any corporate debtor commits a default, a financial creditor, an operational creditor or the corporate debtor itself may initiate corporate insolvency resolution process in respect of such corporate debtor. The corporate insolvency resolution process shall commence from the date of admission of the application filed in this regard. The adjudicating authority shall appoint an interim resolution professional and thereafter the resolution professional whose mandate is to conduct the entire corporate insolvency resolution process and manage the operation of the corporate debtor during the corporate insolvency resolution process period. But it is the directors of the company or persons who were at the helm of affairs of the company at the relevant time who would be directly affected by declaration of the company as a shell company as it is they who would have to face the consequences of such declaration. Therefore, to say that such persons do not have the locus standi to assail a finding of being branded as a shell company would be wholly untenable. As a matter of fact, Securities Appellate Tribunal entertained the appeal of petitioner No.1 so also SEBI entertained the representation of the petitioners. If they can file appeal before the Securities Appellate Tribunal and file representation before SEBI, it would be wholly illogical to take the stand that they would have no locus standi to challenge branding of petitioner No.1 as a shell company. It is in the above context that authorisation of petitioner No.2 to initiate legal action on behalf of petitioner No.1 has to be seen. The delegation of authority to petitioner No.2 has been placed on record as Annexure-A to the counter filed by the petitioners to the application filed by respondent No.2 SEBI for vacating the interim order dated 12-07-2018 which was registered as IA (C) No. 2932 of 2018. This delegation of authority was signed by the resolution professional for petitioner No.1 on 23-04-2018 Therefore, upon thorough consideration of the matter, writ petition is not only maintainable but deserves to be allowed.
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2019 (3) TMI 885
Misleading appearance of trading in securities market - guilty of self-trades under the PFUTP Regulations, 2003 - Price movement of the scrip of SIL and for possible violations of securities laws - price rise of scrips by almost 47% - misleading the market - investigation being conducted by SEBI - penalty imposed for violation of Regulations 3 and 4 of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 - appellant was trading through approved algorithmic software - HELD THAT:- As per the actual calculation the total market self-trades comes to 1.95%. This fact has been fairly conceded by the learned senior counsel for the respondent. Whether 1.95% is substantial or not has to be reconsidered by the AO in the light of the circular of 2017 in order to find out whether the self-trades were accidental or unintentional and, therefore, not covered by the PFUTP Regulations, 2003 or the self-trades were manipulative or intentional to defraud the market on the basis of additional evidence which could be physical or circumstantial to show the intention or manipulation. We are also of the opinion that the adoption of the yardstick of around 3% of the total market self-trades as substantial creating misleading appearance of trading, after taking into consideration the judgment of SAT in Smt. Krupa Soni’s [2015 (7) TMI 257 - SECURITIES APPELLATE TRIBUNAL MUMBAI] case is totally misplaced as it does not indicate that a total market self-trades of less than 3% would be considered as negligible. Thus, in our view, the AO is required to reconsider and arrive at a finding as to what percentage of the total market selftrades would be considered as negligible or minuscule to come under the category of accidental or unintentional self-trades. Admittedly, the appellant was trading through algorithmic software which was dully approved by BSE and NSE. Admittedly, the software is designed to anticipate microscopic changes in the market and to respond to those changes in the matter of seconds. Orders of sale and purchase are done automatically through this software and not through any human intervention. Whether such self-trades generated automatically could lead to violation of PFUTP Regulations is a point which is required to be considered by the AO especially in the light of the policy declared by SEBI in its circular of 2017, namely, the intention/the manipulative intention. All these aspects are required to be considered which we find the same to be lacking in the instant case. Since, admittedly, the volume of the transaction in self-trades have been incorrectly calculated, the impugned order cannot be sustained and the matter is required to be remitted again to the AO to re-decide the matter. At this stage, it needs to be said that the contention of the appellant that appropriate opportunity of hearing was not given and the principles of natural justice were violated is not correct. The impugned order cannot be sustained and is quashed. The appeal is allowed. The matter is remitted to the AO of SEBI to decide the matter afresh in the light of the observations made above after hearing the parties within four months from the date of receipt of the certified copy of the order.
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2019 (3) TMI 884
Condonation of delay - delay of 73 days - Delisting of securities - principle of a specific remedy - filing an appeal against the decision of a stock exchange - period of limitation - Appeal to Securities Appellate Tribunal - mandation of filing the appeal within the stipulated period - delay of 73 days in filing the appeal - sufficient cause - HELD THAT:- An appeal against the decision of a stock exchange shall be filed within forty five days and that the period beyond forty five days can be condoned if sufficient cause is shown to the Tribunal. Having given our thoughtful consideration in the matter and upon perusing the provisions of Section 21A and Section 23L, we are of the opinion that the provision of Section 23L are wide enough to embrace an appeal filed against a decision of delisting. Section 23L cannot be given a narrow interpretation so as to exclude the exercise which are covered by Section 21A. The argument of the respondent that, if the matter is covered by Section 21A then Section 23L would be inapplicable by necessary implication especially when there is a specific provision cannot be accepted. There is no doubt that when there is a specific provision then it must be governed by that provision and not by the general provision (in terms of the latin maxim “generalia specialibus non derogant”) i.e. to say whenever a specific remedy is made available in law, the other remedy, more general in nature, necessarily gets excluded. In our view, this principle of a specific remedy would exclude the general remedy would not be applicable in the instant case. This sound principle of jurisprudence, namely, that a special provision on a matter excludes the matter of a general provision on that matter cannot be applied in a situation when there are two provisions dealing with remedies in filing an appeal. When there is a plurality of remedies, the principle of specific provision excluding the general provision by necessary implication will not be applicable. In the instant case, there is no conflict between the two provisions namely Section 21A and Section 23L. Even if the two remedies happen to be inconsistent, they continue for the person concerned to choose from, until he elects one of them. In this regard, the doctrine of election will come into play and the aggrieved person has the remedy either to file an appeal under Section 21A or under Section 23L. The contention that there has to be a harmonious construction of the two Rules would not applicable in the instant case as there is no conflict in the two provisions. The principle of harmonious construction would be applicable when there is a conflict between two provisions. The Rule of construction is well settled namely, that when there are, in an enactment, two provisions which cannot be reconciled with each other, they should be so interpreted, that if possible, effect should be given to both. This is known as harmonious construction In the instant case, a composite order under Regulation 22 and 23 of the Regulation of 2009 has been passed by the stock exchange. Thus, an appeal determining the fair value can be challenged in an appeal filed under Section 23L of the SCRA. In the light of the aforesaid, when two provisions deal with the remedies of filing an appeal the doctrine of election will come into play and it is open to an appellant to file an appeal either under Section 21A or under Section 23L. We consequently hold that an appeal can be filed against delisting of the securities under Section 23L. The appeal filed by the appellant is thus maintainable. There is a delay of 73 days in filing the appeal - the reason for the delay is that the appellant company has its registered office at Ahmedabad, in Gujarat and it took them some time to find a specialized lawyer dealing in securities market. Thereafter, it took some time to collect, compile as well as collate various documents as required by the advocate. Having heard the learned counsel for the parties, on this aspect we are of the opinion that sufficient cause has been explained by the appellant which is adequate as well as satisfactory and, therefore, we are of the opinion, that the delay of 73 days in filing the appeal should be condoned -the expression “sufficient cause” should receive a liberal construction so as to advance substantial justice when no negligence or inaction or want of bonafides is imputable to a party. Consequently, the delay in filing the appeal is condoned . See Ram Nath Sao alias Ram Nath Sahu & Ors. Vs. Gobardhan Sao & Ors [2002 (2) TMI 1280 - SUPREME COURT]
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Insolvency & Bankruptcy
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2019 (3) TMI 883
Corporate insolvency process - Outstanding dues - per-existing dues - Respondent issued one legal notice under Section 433 (e) and 434 of the Companies Act, 1956, by letter asking the ‘Corporate Debtor’ to pay the dues - ‘Corporate Debtor’ by its legal reply dated 9th November, 2016, raised dispute relating to late supply of raw material and the poor quality of products and made counter claim - HELD THAT:- It is not denied that the dispute relating to quality of raw material and loss was raised by the ‘Corporate Debtor’ on 9th November, 2016 i.e. much prior to the issuance of the demand notice dated 18th March, 2017 issued under Section 8(1). In the aforesaid background, as we find that there is pre-existence dispute prior to the issuance of the demand notice under Section 8(1), we hold that the application under Section 9 of the ‘I&B Code’ preferred by the Respondent was not maintainable. The impugned order dated 22nd August, 2017 is accordingly set aside. Adjudicating Authority appointing any ‘Interim Resolution Professional’, declaring moratorium, freezing of account, and all other order (s) passed by the Adjudicating Authority pursuant to impugned order and action, if any, taken by the ‘Interim Resolution Professional’, including the advertisement published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside.
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2019 (3) TMI 881
Corporate insolvency proceedings - NCLT admitted the insolvency petition stating that there was no record to show that there was existence of a pre-existing dispute - NCLAT set aside the judgment of the NCLT solely on the ground that the said notice was issued by a Law Firm and not by the Operational Creditor itself - HELD THAT:- We have, by our judgment in Macquarie Bank Limited Ltd. vs. Shilpi Cable Technologies Limited [2017 (12) TMI 850 - SUPREME COURT OF INDIA] held that this view of the law is incorrect. This being the case, we set aside the judgment of the NCLAT and remand the matter for hearing on the merits.
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2019 (3) TMI 880
Corporate insolvency resolution process - pre-existing dispute - HELD THAT:- Taking into consideration that the parties have settled the matter prior to constitution of the ‘Committee of Creditors’ and ‘pre-existing dispute’ as emanating from the FIR enclosed at page 138, we set aside the impugned order dated 17th December, 2018. In effect, order (s) passed by Adjudicating Authority appointing ‘Resolution Professional’, declaring moratorium, freezing of account and all other order (s) passed by Adjudicating Authority pursuant to impugned order and action taken by the ‘Resolution Professional’, including the advertisement published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside. The application preferred by the 1st Respondent under Section 9 of the I&B Code is dismissed. The Adjudicating Authority will now close the proceeding. The 2nd Respondent Company is released from all the rigour of law and is allowed to function independently through its Board of Directors from immediate effect.
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2019 (3) TMI 879
Corporate Insolvency Resolution Process - pre-existing dispute - application under Section 9 filed - HELD THAT:- Corporate Debtor has taken a specific plea that in view of lack of expertise, the Operational Creditor (Appellant herein) was not in a position to execute the contract awarded to it and miserably failed to fulfill its obligations. In fact, the Operational Creditor abandoned the project midway without any notice; all the personnel of the Operational Creditor were also removed from the project site in August, 2017. In this background, the Corporate Debtor was forced to engage another contractor by issuing second work order dated 15th August, 2017 to one M/s KSV Infrabuild for a sum of ₹ 2,99,73,003/- The Corporate Debtor had also sought for damages from the Operational Creditor but the notice which was retuned on 3rd May, 2018 with remarks ‘door locked’. From the aforesaid facts we find that there is a pre-existing dispute about performance of the Operational Creditor. For the said reason, the Adjudicating Authority rightly refused to entertain the application under Section 9.
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2019 (3) TMI 878
Corporate Insolvency Resolution Process - petition has been filed in the required format and duly complies with the requirements of Section 9(3)(b) and 9(3)(c) of the Code - Corporate Debtor did not respond to the demand notice issued under Section 8 of the Code - Corporate Debtor submits that the goods having booked by the Operational Creditor with the concerned transporter, they were responsible for the shortfall - HELD THAT:- Till the filing of the present petition, no dispute has been raised directly with the Operational Creditor. There is nothing on record to accuse the Operational Creditor of the shortfall in the quantity received. At this stage, raising such a dispute as a defence to ward off the resolution process is unsustainable. There is nothing on record to directly indict the Operational Creditor of being accused or being held guilty for the short supplies. Even otherwise, in the event of short supplies under the 3 invoices, the liability would be far in access of the threshold required for initiating the CIR process against the Corporate Debtor for non-payment of the dues. The claim that recoveries on the alleged ground of shortfall in supplies is vague and unenforceable. The dispute sought to be raised does not justify rejection of the petition. In view of the same, this petition merits consideration and is Admitted.
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Service Tax
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2019 (3) TMI 877
SEZ Unit - refund of service tax - credit was distributed by the ISD - Rule 7 of the Cenvat Credit Rules - clause (a) and (e) of para 3 (III) of Notification 12/2013-ST - time limitation - Held that:- Clause (e) of para 3(III) of Notification No.12/2013 provides for discretion to the adjudicating authority to permit filing of a refund claim even beyond one year from the end of the month in which actual payment of service tax was made by the SEZ unit to the registered service provider. This discretion has been exercised by the adjudicating authority while granting refund in respect of cases covered under Table-II of Form A-4 to the refund application. The exercise of discretion is evident as the adjudicating authority has in his order taken cognizance of disclosure in the covering letter filed along with the refund claim, wherein in, it has been stated that in respect of cases where refund was being claimed after distribution of credit by ISD there were some instances where on the date of filing of the refund claim the payment date to the service provider by the ISD office for common services was beyond one year from the date of such payment. The adjudicating authority had processed the refund claim without verifying the compliance with the condition regarding time limitation prescribed in clause (e) of Para 3(III), even then there is no warrant to remand the matter back to the adjudicating authority as has been contended by the Revenue, inasmuch as, even if the adjudicating authority had not exercised the jurisdiction vested with it, we can do so and we exercise the said discretion and condone the delay in filing the claim for refund, as prescribed in clause (e) of para 3 (III) of Notification No.12/2013 In case of ISD invoices for all the purposes be it cenvat or refund, the ISD invoice is deemed to be tax paying document, hence the date of that ISD invoice has to be taken even for computing the one year stipulated in the notification. Therefore as long as the SEZ unit files the claim for refund within one year from the ISD unit distributing credit to it, it is reasonable to condone the delay, if any, in filing the claim for refund from the time period of one year from the end of the month, in which tax payment is made to the service provider as envisaged in clause (e) of para 3(III). Clause (a) of para 3(III) of Notification No.12/2013 - Held that:- It is not in dispute that the services covered by Table-II of Form A-4 were common to the authorised operations in the SEZ and the operations in the DTA. Such common credit has been distributed on the basis of the turnover of the SEZ unit and that of the DTA unit as envisaged in clause (a) of para 3(III) - the adjudicating authority has acted completely in accordance with law while processing the claim for refund in the manner prescribed in the refund Notification. Appeal dismissed - decided against Revenue.
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2019 (3) TMI 876
Refund of service tax - commission paid to Foreign Agent which was otherwise not payable as per Notification No. 14/2014-ST - time limitation - refund rejected on the ground that it was filed beyond the period of 1 year from the relevant date i.e. payment of service tax - Held that:- The issue that whether any amount paid as service Tax/duty without authority of law would be governed by Section 11B for the purpose of time limit in case of refund of the same. This issue has been elaborately dealt in the case of M/s Petronet LMG Ltd Vs. CC [2018 (8) TMI 111 - CESTAT AHMEDABAD], where it was held that all the refund claims under the Customs Act has to be dealt with under the provisions of Section 27. Every refund claim is governed by Section 11B, hence, the period stipulated of one year in filing refund claim from the relevant date is also applicable. Appeal dismissed - decided against appellant.
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2019 (3) TMI 875
Valuation - reimbursement of expenditure - Classification of services - Support Services of Business and Commerce or not - establishment of a subsidiary - period May 2006 to March 2011 - Held that:- While the reimbursements given by service recipient to service provider which are in the nature of expenses made by the service provider in the capacity of pure agent which are not includable in the assessable value in terms of decision of Hon'ble Supreme Court in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. [2018 (3) TMI 357 - SUPREME COURT OF INDIA]. However, what constitute reimbursements has been decided by larger bench of Tribunal in the case of Bhagwathy Traders v/s C.C.E. [2011 (8) TMI 430 - CESTAT, BANGALORE]. The managing director as well as the employees are all employed by the service provider and are not employees of the service recipient. Thus, in no way does the liability to pay salaries of these people is of the subsidiary. The liability to pay salaries and emoluments to these persons is of the appellant. And, thus, the appellant cannot claim that the amounts received from the subsidiary are in the nature of reimbursements - The building belongs to the appellant and, therefore, the payment of rent, rates and taxes, labour charges, repair and maintenance, generator expenses and insurance premium are all liabilities of the appellant and not of the subsidiary. Thus, these payments are not in the nature of reimbursements. Amounts received of electricity and telephone - Held that:- No tax can be demanded on the amounts of money paid by the subsidiary on count of electricity and telephone consumed on estimate basis. Similarly, for the activities done by the President, Executive Director and other Directors and employees on account of the subsidiary and payments made by the subsidiary to the appellant as a reimbursement of the travelling and other expenses would be in the nature of agencies function and excludable from the value of services. The matter is remanded to Original Authority for requantification.
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2019 (3) TMI 874
Classification of services - Supply of Tangible Goods services or rent-a-cab services - activity of providing buses to M/s Maharashtra State Road Transport Corporation (MSRTC) and to M/s Pune Mahanagar Parivahan Mandal Ltd. (PMPML) - exempt services or not - Circular No.89/7/2006-Service Tax dated 18/12/2006 - right of possession and effective control transferred or not - Held that:- On a reading of the terms of the agreement, it is seen that the fleet owner has the right of possession and effective control only for name sake. The right of possession, if any, envisaged in terms of the contract is only for the proper up keep and maintenance of the vehicle and not for using the same for any benefits to him. This is more in the nature of responsibility rather than right. In our standing, the right of possession and effective control should entail in the gainful use or deployment of buses by the fleet owner during the time, in which they are not plying for the purpose of MSRTC during the period of contract. As long as the fleet owner cannot use them for gainful deployment, by no stretch of imagination it can be said that effective control is with the fleet owner. Therefore, going through the terms of the agreement it is to be construed that effective control is transferred. Thus, it cannot be said that right of possession and effective control is retained with the fleet owner. Therefore, such supply of buses by the appellants to MSRTC & PMPML is in the nature of supply of tangible goods. Time limitation - Held that:- The appellants were arguing on different classifications of the service they have rendered. However, they have not come forward to pay service tax under any one of them. Therefore, the extended period is invocable. Penalty - Held that:- Looking in to the fact that the transaction was with public sector undertakings and there were different views on the issue, one need to take a lenient view as regards penalties by invoking the provisions of Section 80 - penalties set aside. Matter remanded back to the original authority to re-examine the classification of the service provided by the appellants - appeal allowed by way of remand.
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2019 (3) TMI 873
CENVAT Credit - input services - insurance premium of group mediclaim policies of their employees - period from 01.04.2007 to 31.03.2009 - Held that:- There is no dispute about the fact that the issue in question is prior to 1.4.2011 i.e. before the amendment in Rule 2(l) ibid. The definition of input service, post amendment contains exclusion clause and the said exclusion specifically excludes the life insurance/health insurance. The need for exclusion would arise only when such services are otherwise covered by the definition earlier i.e. before amendment. While interpreting Rule 2(l) ibid pre and post amendment, the Tribunal in the matter of M/s. Wipro Ltd. Vs. CCE, Bangalore-III [2018 (4) TMI 149 - CESTAT BANGALORE] has observed that the legislature in its wisdom has excluded certain service from the availment of CENVAT credit w.e.f. 1.4.2011, when such service are otherwise covered by the main definition clause of the ‘input service’. Meaning thereby that the need to exclude certain services from the definition of ‘input service’ through amendment arises only when it was included earlier i.e. pre-amendment. Since the insurance has been specifically excluded post-amendment, this itself shows that it was included earlier. Credit allowed - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 872
Recall of the order - time limitation - appeal rejected as it was filed beyond the period prescribed in law - Held that:- The appellant was heard at the time the order was passed by the Bench on 20 July, 2018. Reasons have been stated in the order as to why the Bench did not agree with the submission of the learned Counsel for the appellant - There is, therefore, no good reason to entertain this application which has been filed not for rectification of mistake but for recall of the order itself - application rejected.
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2019 (3) TMI 871
CENVAT credit - whether the transport services availed by the appellant for export of their goods from their factory to the gateway port having rightly been denied under Notification No. 31/2012-ST for the reasons that the prescribed declaration EXP-1, EXP-2 have been filed belatedly? Held that:- From the perusal of the form EXP-I, it is found that it is not required to be given with each consignment, as the form does not contain the details of the particular consignment. Thus, once form EXP-1 is filed it is valid till there is variation in the case of the exporter, of the details contained therein. Accordingly, for admitted delay of about 22 days in filing form EXP-2 the benefit of exemption from service tax for admitted export of goods, cannot be denied. Appeal allowed - decided in favor of appellant.
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2019 (3) TMI 870
Renting of Immovable Property service - Appellant had received the rent for their premises - period October, 2011 to September, 2012 - Held that:- It is evident that the services will not include any building used for residential purpose. From the details submitted by the appellant before the jurisdictional Superintendent, it is seen that the bulk of rent received is claimed towards rent from the properties in residential use. The certificates indicate that the usage of quarters was for residential purpose only. It cannot be said that such premises were partially used for residential purpose and partially for commercial use. Admittedly, these certificates were not produced either before the original adjudicating authority or before Commissioner (Appeals), but the appellant, vide his letter dated 13.10.2012, addressed to the jurisdictional Superintendent had given the bifurcation about the property being used either for commercial or residential purpose - It is clear that none of the properties were used partially for residential and partially for commercial use. There is nothing on record to show that the Department has carried out any verification into the submissions made by the appellant. Nothing has been brought on record to falsify the claim of the appellant. The rent received for use of premises for residential purpose cannot be levied to service tax under the category of ‘renting of immovable property’. However, in respect of rent received for use of premises for commercial use is liable for payment of service tax. However, it is claimed that the total rent received will be far below the threshold exemption - Thus, for renting out of commercial property, no liability of service tax will arise subject to verification by the jurisdictional authorities of the total amount of consideration received in this regard. Appeal allowed - decided in favor of appellant.
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2019 (3) TMI 869
Classification of services - mining services or GTA Services - transportation of coal through tipper / dumpers to the railway sidings or dispatch points situated within the mines for M/s. South Eastern Coal Fields Ltd. - period from April 2012 to March 2013 - Held that:- In the case of H N Coal vs. CCE & ST Raipur [2018 (8) TMI 173 - CESTAT NEW DELHI] in which one of the issues considered by the Tribunal was the transportation of coal within the mining area. The Tribunal has taken the view that this activity will be chargeable to service tax only under the category of ‘Goods Transportation Agency’ service - Even for the period commencing from 01 July 2012 when the negative list regime was introduced, the Tribunal held that the services will continue to be liable for service tax under the category of Goods Transportation Agency service’ - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 867
Real Estate Agent’s Service - demand of service tax - period 01 April 2006 to 31 March 2011 - Held that:- In Ansal Properties Infrastructure Ltd. [2017 (11) TMI 546 - CESTAT NEW DELHI], the Tribunal held that the transfer charges received by the appellant for permitting the transfer of land from one person to another cannot be taxed as ‘Real Estate Agent Service’. The Appellate Authority has completely failed to appreciate the contentions advanced by the appellant and committed an error in holding that the payment received by the appellant towards the administrative charges was as ‘Real Estate Agent Service’. In fact, the Appellate Authority relied upon an interim order passed in the appeal filed by M/s MGF Developments Limited, which appeal was ultimately dismissed. The order passed by the Appellate Authority cannot be upheld - appeal allowed.
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2019 (3) TMI 866
Compliance with the requirement of pre-deposit - Held that:- It is appropriate to recall the order dated 13 October, 2017 by which the appeal was disposed of by granting liberty to the appellant to come back to the Tribunal after the final verdict from the High Court of Chhattisgarh - it is also directed that the amount of 10 % which the appellant has already deposited on 16 October, 2018 be considered as sufficient towards the requirement of pre- deposit as the appellant does have a prima facia case. Appeal be listed for final hearing on 12 March, 2019. at the top of the broad.
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2019 (3) TMI 865
Rectification of mistake - error apparent on the face of record or not - Held that:- Since the appellant has conceded its liability to pay the interest, otherwise also it is so recorded in the order at para 6 (a) thereof, the prayer of the Department is acceptable as far as the payment of interest is concerned. It is apparent that appeal was partly allowed directing the Commissioner (Adjudication) to re-quantify the demand. Further from para 6 (a) of the order, it is apparent that there is no contumacious conduct of the appellant for deliberate violation of the provisions of Service Tax Laws as has otherwise also been held by Commissioner (Appeals). When both these observations are read together in the light of the ground of appeals that it is clear that ground for invoking extended period of limitation has not available with the department accordingly hold that despite having an observation in favour of the appellant the final and express verdict has been skipped in the order - the same amounts to an error apparent on record. The Appeal is partly allowed as show cause notice is held barred by time and the adjudicating authority is directed to re-quantify the demand i.e. the demand confining to the normal period itself and also the interest payable, proportionate to the demand of the normal period.
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2019 (3) TMI 864
Classification of services - Hiring of Heavy Earth Moving Equipment - Whether the activity performed by the appellant would fall under the category of Site formation services ? - Held that:- On a reading of section 65 (105) (zzza) and the definition of site formation contained under section 65 (97a) and the budget letter dated 27 July, 2005, there is no manner of doubt that the service referred to is prior to the actual activity of mining. Drilling, boring and core extraction services for construction of geophysical, geological or similar purpose is carried out to determine the feasibility for digging any mine prior to mining and it is this service on which service tax is sought to be levied under section 65 (105) (zzza) - It is not the case of the department that the activity that was carried out by the appellant was prior to mining - In such circumstances, it is not possible to accept the contention of the Department that the services would fall under the category of Site Formation . Classification of services - Transportation of Limestone - Cargo Handling Service or Good Transportation Agency Service? - Held that:- The composite service may include various intermediary and ancillary services such as loading/ unloading, packing / unpacking etc. provided in the course of transportation of goods by road. These services are not provided as independent activity but as means of successful implementation of the principal service, namely the transportation of goods by road. It has, therefore, been clarified that a composite service even if it consists of more than one service, should be treated as a single service based on the main or principal service. It has, therefore, been held that any ancillary / intermediate service provided in relation to transportation of goods, and the charges, if any, for such services are included in the invoice issued by the Goods and Transport Agency and not by any other person. Such service would form part of Goods and Transport Agency Service and , therefore, the abatement of 75% would be available on it - It is apparent that the essential feature of the service is transportation. Loading and unloading are ancillary / intermediate service provided in relation to transportation of goods, and such service would be Goods and Transport Agency Service. It cannot be Cargo Handling service as was found by the Commissioner. Valuation - inclusion of cost of diesel in assessable value - Held that:- The cost of diesel cannot be included in the gross amount since it has been supplied free of cost by the service recipient. Appeal allowed - decided in favor of appellant.
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2019 (3) TMI 863
Construction of residential complex service - the appellant have constructed individual row houses, where in each block there is one residential unit - demand of service tax - Held that:- It is admitted fact that the appellant have constructed individual row houses/units and not a building/buildings having more than 12 residential units which is the condition precedent for categorization of service under the category of ‘construction of residential complex service’. The ruling of a coordinate Bench of this Tribunal in the CST, New Delhi V/s Gandharva Infrastructure & Projects Ltd. [2017 (9) TMI 270 - CESTAT NEW DELHI] is per incurrium as it have erred in ignoring and not following the binding ruling of Hon’ble Supreme Court in the case of Commissioner v. Macro Marvel Projects Ltd. [2008 (9) TMI 80 - CESTAT, CHENNAI] wherein under similar facts and circumstances where row houses were constructed under a housing scheme having one unit in each house, it have been held that such activity is not liable to Service Tax under ‘Construction of Residential Complex Service’. Appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (3) TMI 862
Re-credit of CENVAT Credit - Held that:- The Adjudicating Authority must consider the entire matter on its own merits and in accordance with law uninfluenced by any observation in the impugned judgment. All contentions available to the parties are left open - SLP disposed off.
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2019 (3) TMI 861
Condonation of delay of 932 days in filing appeal - Section 35G(2)(a) of CEA - Held that:- It is very clear that the person aggrieved can approach the High Court within 180 days from the date the order is received and in the event the parties failed to approach the High Court within the time allowed then the High Court has been given power to condone the delay if it is satisfied that there was sufficient cause for not filing the appeal within the prescribed period of limitation. The party in default i.e. not approaching the High Court within the period of limitation as provided under Section 35G(2)(a), is required to show sufficient cause for approaching the High Court beyond such period of limitation - there is no question of any bona-fide to justify that after payment of Service Tax alongwith interest the penalty was also waived. Such, a presumption is not acceptable in absence of any cogent material on record. The facts of the present case is clearly show a gross negligence and deliberate in action in not approaching the Court within the prescribed time for filing an appeal before this Court - The appellant has failed to show sufficient cause for condoning such a huge delay of 932 days. Delay condonation application is rejected - appeal dismissed.
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2019 (3) TMI 860
Contravention of the 2nd proviso to Rule 3(5) of CCR or not? - demand of duty or reversal of credit? - Held that:- The substantial questions of arising for consideration in these cases were considered in the case of Commissioner of Central Excise and Service Tax vs. M/s.Ashok Leyland Ltd. [2019 (1) TMI 430 - MADRAS HIGH COURT] wherein though there may be slightly a factual difference in the said case, the legal issue is one and the same - It was held in the case of there is no dispute that the electricity generated by the windmills are exclusively used in the manufacturing unit for final products, there is no nexus between the process of electricity generated and manufacture of final products and there is no necessity for the windmills to be situated in the place of manufacture. These appeals are dismissed and the substantial questions of law are answered against the Revenue.
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2019 (3) TMI 859
Rebate claim - Rule 18 of the Central Excise Rules, 2002 - DEEC Scheme - Held that:- It is admitted by the parties that, the petitioner exported Py Gas by three several ARE 1 forms bearing No. 481/0304 dated September 3, 2003, 574/0304 dated November 7, 2003 and 618/2003 dated November 28, 2003. The petitioner submitted rebate claims on October 20, 2003, January 14, 2004 and January 15, 2004. It is the contention of the petitioner that, the ARE 1 forms are not the only documents for grant of rebate claim in view of the notification bearing No. 19/2004 CE (NT) dated September 4, 2004. Rule 18 of the Rules of 2002 contemplates that, the Central Government may grant rebate of duty paid on such excisable goods or duty paid on material used in the manufacture or processing of such goods and that, the rebate would be subject to such conditions or limitations if any and fulfilment of such procedure as may be prescribed in the notification. The notification dated September 6, 2004 was issued in exercise of powers conferred by Rule 18 of the Rules of 2002. The notification dated September 6, 2004 lays down the procedure by which, an application for grant of rebate is to be considered - A claimant making a claim is required to substantiate such claim by cogent evidence. The claim is required to be adjudicated on merits. A claimant can succeed to substantiate its claim on the basis of all or any of the documents mentioned in Paragraph 8 of the Supplementary Instructions, 2005 or on the basis of secondary evidence. What is required is that the claim is substantiated by cogent evidence. Paragraph 8 of the Supplementary Instructions, 2005 is required to be read in such context. If a claimant is in a position to substantiate its claim for rebate in the basis of any of the documents mentioned in Paragraph 8 of the Supplementary Instructions, 2005 or by leading secondary evidence with regard to its claim, then such claim is required to be allowed notwithstanding the failure of the claimant to produce all the documents mentioned therein. The revisional authority is incorrect when, it disallows the claim. It is not the case of the respondents that, the ARE-1 forms are questionable documents. The validity and the veracity of the ARE-1 forms have not been doubted by the respondents in the adjudication proceedings till date. The ARE-1 forms are issued by the authorities themselves. Therefore, in absence of the respondents doubting the veracity of the ARE-1 forms, the adjudicating authority ought to have allowed the claim for rebate as made by the petitioner. The order of the revisional authority is quashed - Petition disposed off.
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2019 (3) TMI 858
Clandestine manufacture and removal - demand of the duty is only on the allegations as confirmed by the lower authorities on the quantum of goods certified by the quality control certificate and information provided by State Government authorities - Held that:- The verification of the data indicated that clearances which were made by the appellant to State Government for laying the water pipes in the rural areas were three counts i) receipt of orders ii) quality of supply of the goods iii) post quality control removal. The Revenue Authorities have mentioned the clearances made by the appellant and the quality control reports of the State Government as regards particular evidence specific quality of the goods when correlated with the appellant’s record, are not able to show from the records maintained by him as to how and when the pipes were cleared to State Government Authorities and was on payment of appropriate Central Excise duty. It is also to be noted that when confronted with the evidence available with the State Government quality control analysis of the consignment of the pipes, the managing director of the appellant’s company has admitted in his statement that there is practice of clandestine removal of goods - the First Appellate Authority has considered all these aspects and confirmed the demands on this ground which is seemed correct - appeal dismissed.
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2019 (3) TMI 857
CENVAT Credit - write off of inputs partially or fully - Whether upon an assessee writing off certain inputs either partially or fully in its books of account for the income-tax purpose, he is also required to reverse Cenvat credit taken on such inputs? - Held that:- The Cenvat credit was available as provided under Rule 57A. Sub-rule (1) thereof provides that the provisions of this Chapter [which is Chapter V(AA) pertaining to credit of duty paid on excisable goods used as inputs] shall apply to such finished excisable goods as may be notified by the Central Government for the purpose of allowing credit on any duty of excise or additional duty as may be specified in such notification paid on the goods used in the manufacture of the said final products. Rule 57F provided for the manner of utilisation of inputs and the credit allowed in respect of duty paid thereon. It can be seen that the liability of the assessee to pay duty equal to the amount of credit availed in respect of a particular input would arise at the time of the removal of the inputs for home consumption. This rule did not envisage reversal of Cenvat credit even before removal of goods. There was no provision under which the cenvat credit already taken under the Rules of 1944 could be directed to be reversed simply because the input goods were not utilised for a certain period of time. We also note that there is significant difference in the accounting approach for the income-tax purpose and the approach for stock maintenance for the purpose of manufacturing activities relevant for the question of excise. Therefore, merely because the value of goods diminished in the books of account of the assessee would not by itself permit the Department to insist on reversal of the credit particularly when such goods were still available in the factory in usable condition. The reversal of the credit would amount to collection of duty which would be wholly unauthorised. The Board s circular could not have created a liability which did not exist under the rules - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 856
Method of Valuation - supply of goods to related as well as unrelated person - applicability of Rule 9 of the Central Excise Valuation Rules - penalty - Held that:- As per the Show Cause Notice itself, the appellants were supplying their goods to various customers and not just to related persons. As per the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, Rule 9 would be applicable when the assessee sells the goods only to a related person - CBEC in the Circular dated 01.07.2002 has clarified that Rule 9 cannot be applied in such cases when goods are sold party to related persons and partly to independent buyers and that it covers only those cases where all the sales are to related persons only - it would be in the fitness of things that the matter is once again re-looked into by the adjudicating authority Penalty - Held that:- Irrespective of the final outcome of such de novo adjudication, it is noted that the entire issue has emanated out of an interpretational dispute on the applicability or otherwise of Rule 9 of the Central Excise Valuation Rules. This being so,the imposition of penalties under Section 11AC of the Act is not warranted. Appeal allowed in part and part matter on remand.
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2019 (3) TMI 855
Valuation - Job Work - the value of raw material as adopted for determination of assessable value is not correct - What would be principles of valuation of the goods under consideration? - Circular No 619/10/2002-CX dated 19th February 2002 - Held that:- There is no dispute that in the present case the finished goods namely 90/10 New Cupro Nickel Tubes, have been manufactured and supplied by the Appellant 1 to M/s NTPC and M/s GIPCL from the raw material supplied to them by the said customers. Since these goods have been processed and manufactured out of the raw material supplied by the customers appellants have claimed that valuation of the goods should be done treating the activities undertaken by them as job work - in the present case the valuation of the finished goods has to be determined in manner as clarified by the Board in terms of the above circular. What should be the value of raw material in the case? - Held that:- In case of job work, done on the behalf of raw material supplier, the assessable value has to be determined taking into account all the expenses including the manufacturing/ processing profits incurred upto the point of clearance from the premises of job worker. Further the value of the goods cleared by a job worker/ processor will be intrinsic value of the same/ similar or like goods cleared from the premises of the job worker. Whether extended period of limitation as proviso to Section 11A(1) of Central Excise Act, 1944 can be invoked in the facts and circumstances of this case? - Held that:- In the present case there is misdeclaration of value by the appellant - In case of M/s NTPC, Commissioner has not recorded any finding for invoking or not invoking the extended period of limitation - the matter remanded back to Commissioner for recording a specific finding in this respect after considering all the evidences as available on record. Whether penalty under Section 11AC justifiable in the facts of the present case? - Held that:- It is now settled principle in law that penalty under Section 11AC is justified in case where the provision of extended period of limitation as per proviso to section 11A(1) is held to be invokable - the penalty under Section 11AC is imposable in the present case. Since for determination of value and limitation issues in respect of supplies made to M/s NTPC is being remanded to the Commissioner, we are of the view that Commissioner should determine this aspect after rendering a finding on the other two issues. Thus matter in this respect is remanded back to the Commissioner for redetermination of quantum of penalty under Section 11AC. Whether penalty under Rule 26 of Central Excise Rules, 1944 justifiable on the officers of the Company in the present case? - Held that:- Since the issue in respect of determination of the assessable value and period of limitation in respect of supplies made to M/s NTPC is being remanded back to the adjudicating authority, and in case of supplies made to M/s GIPCL for redetermination of assessable value, the penalties on these officers are set aside and matter remanded for redetermination of penalties on the said three officers namely Shri T U Shenava Managing Director, Shri T V Shetty, Marketing Manager and Shri Vasant Nadar, Authorized Signatory Factory incharge of M/s ITMPL. Demand of interest u/s 11AB of CEA - Held that:- Since interest is associated with the short payment of duty on the due date, there is no hesitation in sustaining the demand of interest under Section 11AB. Appeal allowed by way of remand.
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2019 (3) TMI 854
CENVAT credit - ISD - entire credit distributed to one unit / Hazira Plant - services utilized for the drilling activities undertaken at Mumbai offshore fields - Rule 7 of Cenvat Credit Rules - distribution of credit - The Show cause notices consider the crude oil and natural gas as final products and state that crude oil and natural gas are exempted excisable goods therefore, Cenvat credit of services used at Mumbai Off shore is not admissible. - Held that:- The perusal of the relevant Rule 7 of Cenvat Credit Rules, 2004 shows that word ’sale’ does not appear anywhere in the Rule. In fact the whole Rule is premised on the use of services in or in relation to manufacture of finished products where the invoices are received at a place different from the manufacturing facility for the reason that such services are availed commonly by different units/ manufacturers. The ratio of the decision of Hon'ble High Court of Bombay in the case of OIL AND NATURAL GAS CORPN. LTD. VERSUS CCE, SERVICE TAX AND CUSTOMS [2013 (4) TMI 103 - BOMBAY HIGH COURT] is squarely applicable to the present case, where it was held that Tribunal was in error in coming to the conclusion that the Appellant was dis-entitled to the benefit of Cenvat credit in respect of the input services used in or in relation to the manufacture of dutiable final products on the ground, as the Tribunal held, that crude oil which is subject to a further process of manufacture at the Uran plant for the production of dutiable final products is exempted from central excise duty. Credit allowed - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 853
CENVAT Credit - whether main appellant herein has correctly availed CENVAT credit or otherwise and whether the allegations of the Revenue that main appellant has availed CENVAT credit without receipt of the material is correct or otherwise? - Held that:- There is no allegation as well as any evidence to indicate that the goods have been diverted by the appellant to another party or collection of any amount as payable towards such diversion. Nor there is any allegation in the show-cause notice as to there being buyers of diverted imported goods. It is to be noted that though the factory premises of the main appellant was visited by the officers, no physical verification of the finished goods/in process material or raw material was undertaken, which could have been a pointer if there is any discrepancy in stock, though it may not lead to inference that appellant did not receive the goods in the factory or has cleared their own manufactured goods under the guise of job work The statement received from the Commercial Tax Department as to number of vehicles entering into A.P. needs to be taken with pinch of salt and it cannot be held to be a conclusive evidence of non-transportation of goods. Revenue authorities have also not brought any evidence to show that the vehicles mentioned in the LRs are not vehicles for transportation of goods and are that the said vehicles were during the period of time deployed somewhere else. In view of this, the impugned order recording that appellant is ineligible to avail CENVAT credit of ₹ 39,69,377/- is unsustainable. Revenue has not proved beyond doubt their case of non-transportation of materials from these three parties to main appellant for doing job work on the goods. The only argument adopted by the learned A.R., is that these three persons have discharged the duty liability on being pointed out to them that they have availed CENVAT credit without receipt of the inputs. It is stated that these three parties have in order to end litigation and also the amounts involved were very miniscule settled the matter by paying the disputed amount. Accordingly, the demands confirmed against the main appellant on this ground also are unsustainable. Appeal allowed - decided in favor of appellant.
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2019 (3) TMI 852
Valuation - inclusion of subsidy amounts in the assessable value of the goods manufactured by the appellants - Section 4 of the Central Excise Act - Revenue has taken the view that payment of VAT using 37B Challans cannot be considered as actual payment of VAT - Held that:- In the present case, for the initial period the assessees are required to remit the VAT recovered by them at the time of sale of the goods manufactured. A part of such VAT is given back to them in the form of subsidy in Challan 37 B. Such Challans are as good as cash but can be used only for payment of VAT in the subsequent period. In terms of the scheme of the Government of Rajasthan payment of VAT using such Challan are considered legal payments of tax - Revenue is not correct in taking the view that VAT liability discharged by utilizing such subsidy challans cannot be taken as VAT actually paid. There is no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 851
Method of Valuation - related party transaction or not - appellants have been clearing said wires to their sister concern / group companies, which are further using the same in the manufacture of free stressed concrete sleepers - time limitation - Held that:- There is no evidence on record about whole of the HTS wires being manufactured by the appellant to be cleared to anyone else other than their sister concern. In absence thereof, it stands clear that Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules is applicable. In pursuance thereto, the appellant is liable to pay the Central Excise duty at the rate of 110 % of the cost of production of its final product. The appellant is entitled for the requisite adjustments of the higher payments made by him. However, since the documents highlighting the same were not before the original adjudicating authority, we deem it to be a fit case to be remanded back for the re-quantification. Original Adjudicating Authority is required to look into the documents i.e. requisite CAs-4, as produced by the appellant today before this Tribunal for the purpose of re-quantifying the observed short payment on part of the appellants, if still it exists or not, however, applying Rule 8 of the said Valuation Rules. Time Limitation - Held that:- The normal period for issuing the show cause notice is that of one year, so entire period has rather been taken by the Department itself. In view of said observation, the argument of Department i.e. the delay is on part of the appellant to provide information, is not sustainable - In the present case, as it is already observed from the documents, though submitted today, that the appellant rather had been paying duties at higher values during the disputed period the allegation as that of intent to evade duty cannot be attributed. The demand for both the show cause notices, if any, is held to have been confined to the normal period of demand. For the limited purpose, the matters are remanded back to the original adjudicating authority. Appeal allowed by way of remand.
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2019 (3) TMI 850
Rectification of mistake - typographical error or not - Held that- All the mistakes as mentioned in para (a), (b) and (c) are merely typographical in nature. Resultantly, the necessary changes be made in the impugned final order - ROM application allowed.
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2019 (3) TMI 849
Recovery of erroneous refund - recovery in cash invoking proviso to section 11(A)(4) of the Act along with interest and penalty - whether the show cause notice could have been issued by the Department under Section 11A of the Act for recovery of the duty refunded to the Appellant once the orders passed by the Adjudicating Authority granting refund of duty had attained finality? Held that:- In the present case, the 12 orders passed by the Adjudicating Authority for refund of the excise duty under Section 11B of the Act had attained finality in as much as appeals were not filed under Section 35 of the Act by the Department - if the orders granting refund under Section 11B of the Act had attained finality, a show cause notice under Section 11A of the Act could not have been issued has to be examined. If this issue is decided in favour of the Appellant, then it may not be necessary to examine the alternative submissions advanced by the learned counsel for the Appellant regarding the show cause notice being barred by limitation or on the merits of the orders granting refund. It is seen from the records that the Appellant had initially filed 13 claims under Section 11B of the Act for refund of ₹ 1,90,53,661/- for the period commencing April, 2001 to June, 2004. Subsequently, 11 refund claims were filed for periods from October 2008 to September 2011. Section 11B provides that the refund application has to be accompanied by documentary evidence and if the Authority is satisfied that the whole or any part of the duty paid by the Applicants is refundable, it may make an order accordingly and the amount so determined shall be credited to the Appellant. It is, therefore, after scrutiny of the relevant documents that the Adjudicating Authority passes an order - In the instant case, the Adjudicating Authority had passed detailed orders after examining the documents on record and the various pleas, including the plea of unjust enrichment raised by the Department. Sub-section (4) of Section 35E provides that the Adjudicating authority may make an application to the Appellate Tribunal or the Commissioner (Appeals) pursuant to an order passed under sub-section (1) or sub-section (2) of Section 35E within a period of one month from the date of communication of the order and such application shall be heard by the Appellate Tribunal or the Commissioner (Appeals), as the case may be, as if such application was an appeal against the decision or order of the Adjudicating Authority and the provisions of the Act regarding appeals would apply - In the present case, neither was there any direction to the Adjudicating Authority by the Principal Commissioner of Central Excise or Commissioner of Central Excise to file an appeal nor any appeal was filed. In such circumstances, the order passed by the Adjudicating Authority under Section 11B for refund of duty, attained finality. Thus, Section 11A of the Act cannot be resorted to by the Department for recovery of duty which it believes was erroneously refunded if the order passed by the Adjudicating Authority for refund of duty under Section 11B of the Act on an application filed for refund of duty attained finality for the simple reason that it cannot fall in the category of ‘duty erroneously refunded’ - Thus, the show cause notice dated 30 January, 2015 seeking recovery of the duty refunded to the Appellant was without jurisdiction. The order passed on such a show cause notice, therefore, deserves to be set aside. Appeal allowed - decided in favor of appellant.
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2019 (3) TMI 848
Valuation - place of removal and place of delivery - Short payment of Central Excise Duty - respondent was selling the final product to BSNL on contract basis under purchase orders for delivering the goods at destination, but the Respondent discharged duty liability only on the value of goods at factory gate without including the expenses incurred from factory gate upto the destination - period involved is from April, 2014 to October, 2015. Held that:- The Commissioner (Appeals) observed that though the contract was on ‘free on receipt’ basis, but the amount of freight or the rate of freight was separately mentioned in the contracts and the invoices were issued when the goods left the factory premises. The Commissioner (Appeals) also observed that the amount of freight, sales tax etc. were charged separately and ‘time of removal’ was also mentioned to be when the goods left the factory premises. The Commissioner (Appeals) also noticed that the sale of goods were effected on ex-factory basis on payment of sales tax by the assessee itself and invoices were prepared at the factory directly in the name of customers at the time the goods left the factory and the freight amount was separately shown in the invoice. The factual position that emerges in the present case is similar to that of the contract before the Supreme Court in Ispat Industries Ltd.[2015 (10) TMI 613 - SUPREME COURT], it has to be held that the place of removal of goods was the factory gate, though the place of delivery may be buyer’s premises. This Tribunal in Shardha Ceramics Pvt. Ltd. vs CCE, Jodhpur, [2018 (8) TMI 732 – CESTAT New Delhi], after placing reliance upon the decision of the Supreme Court in Ispat Industries Ltd., also observed that the cost of transportation from the place of removal upto the place of delivery of excisable goods is excluded from the computation of excise duty provided it is charged to the buyers and separately shown in the invoices. Appeal dismissed - decided against Revenue.
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2019 (3) TMI 847
Classification of goods - Mehandi Cone/Paste and Mehandi Powder - N/N. 12/2012-CE dated 17.03.12 - Board vide letter dated 10.07.2014 - Held that:- The said entry under notification is very clear with reference to henna paste. The only condition is that the said paste should not have been mixed with any other ingredients. The scope of the said entry was clarified by the Board vide letter dated 10.07.2014. The objection of the Revenue, that no other ingredients should have been added to claim the exemption, is correct. However, the facts of the present case did not reveal that any other ingredients at all has been added in making the henna paste. Admittedly, the clove oil is a liquid used to make henna paste from powder and make it marketable as such paste in cones - There is no evidence on record which could show presence of any active ingredients to heena powder to make the heena paste other than the said oil or liquid. Therefore, the present appeal of the appellant is required to be allowed in view of clarification issued by Board vide letter dated 10.07.2014. The facts of the present case did not reveal that any other ingredients at all has been added in making the henna paste. Admittedly, the clove oil is a liquid used to make henna paste from powder and make it marketable as such paste in cones. We note that the said process is for making the paste, marketable/useable much later by the customers. There is no evidence on record which could show presence of any active ingredients to heena powder to make the heena paste other than the said oil or liquid. Therefore, the present appeal of the appellant is required to be allowed in view of clarification issued by Board vide letter dated 10.07.2014. The adjudicating authority as well as the first appellate authority was not correct in placing reliance on the CRCL Report dated 29.05.2014 which was neither forming part of the SCN nor pertained to the lot which were manufactured and cleared by the appellant during the period covered in the SCN i.e. June 2013 to March 2014 - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2019 (3) TMI 846
Revision of assessment - Section 27 of TNVAT Act - all facts not properly considered - principles of natural justice - Held that:- In the instant case, the petitioner being a purchasing dealer, has reported all the sales and purchases effected during the assessment year 2012-13 to the respondent and there is no suppression of sales and purchases done by him - All these factors were not considered in the impugned assessment order, even though, the same was raised as objection by the petitioner in his detailed reply dated 28.06.2016 sent to the respondent. Therefore, in the considered view of this Court, the respondent has violated the principles of natural justice by not considering the objection raised by the petitioner on merits and in accordance with law. The matter is remanded back to the respondent for fresh consideration in accordance with law - petition allowed by way of remand.
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2019 (3) TMI 845
Assessment of notice - assessment under Section 16 of the HVAT Act - Whether VAT N-2 notice which is mandatory is required to be served on the assessee for assessment under Section 16 of the HVAT Act? - Whether the proceedings against the assessee would be rendered illegal in the absence of serving VAT N-2 notice on the assessee for the assessment under Section 16 of the HVAT Act? Held that:- The case had been decided as inspection case under Section 29 of the Act after giving proper opportunity of hearing to the assessee and by issuing notice. Moreover, the limitation period for serving VAT N-2 notice under Section 16 of the Act had not yet expired and, therefore, even if the matter was remanded to the Assessing Authority for serving VAT N-2 notice on the assessee and then to pass fresh order, it would be a formality and futile exercise - The assessee cannot be absolved of its liability to pay penalty merely because it had retained the purchase invoices and bill books. Appeal dismissed.
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2019 (3) TMI 844
Validity of assessment order - no proper opportunity of hearing provided - principles of natural justice - Held that:- Even though the petitioner has written the letter dated October 10,2007 to the respondent seeking one month time for furnishing the reconcile statement of accounts,the petitioner neither made any further representation nor produced the records to the respondent,instead the petitioner waited to hear from the respondent,till the respondent passed the impugned orders. Therefore,it is evident that the petitioner has also to be blamed as they did not furnish the reconcile statement to the respondent on their own. While setting aside the orders impugned in these writ petitions on the ground of violation of principles of nature of justice,this court is inclined to award cost of ₹ 5,000 payable by the petitioner in each writ petition,totally a sum of ₹ 15,000 payable to the Tamil Nadu State Legal Aid Service Authority,High Court Buildings,Chennai,within the period of three weeks from the date of receipt of a copy of this order,failing which the authorities are directed to proceed further - petition disposed off.
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Indian Laws
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2019 (3) TMI 843
Dishonor of Cheque - section 138 of NI Act - shortage of money - rebuttal of presumption - Held that:- The Appellate Court has held that respondent has been able to rebut the presumption that arises under Section 118 of the N.I. Act. Petitioner has thereafter failed to prove beyond reasonable doubt that he had given the loan to the respondent and the cheque was issued for repayment of the said loan - Finding of the Appellate Court that the petitioner has not shown the source of funds or that he had the capacity to make arrangement of a huge sum of ₹ 4,90,000/- and extend the same as a friendly loan for someone who was barely known to him, is neither perverse nor unreasonable. Perusal of the record shows that the respondent has been able to rebut the statutory presumption. The petitioner has not been able to establish that he had the capacity to extend a friendly loan of ₹ 4,90,000/- without any condition and that such a loan was extended and was to be repaid and the subject cheque was issued for repayment of the loan - petition dismissed.
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2019 (3) TMI 842
Maintainability of appeal - Held that:- The appellants is not present in the Court today. It is stated that he is out of station. This is no ground to seek adjournment. We therefore reject the request for adjournment - Appeal dismissed for non-prosecution.
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