TMI Tax Updates - e-Newsletter
March 12, 2019

Case Laws in this Newsletter:

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

TMI SMS

• Input tax credit - giving gold coins voluntary on certain conditions achieved by the customers - It is nothing but Gift - ITC not available

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Highlights / Catch Notes

• GST:

  Detention of goods in transit - perishable goods - It appears that the showcause notice under section 130 of the CGST Act has been issued without complying with the requirements of section 129 of the CGST Act - interim relief granted.
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• GST:

  Input tax credit - gift or not - gold coins are not given to their customers under any contractual obligation and are voluntarily given on certain conditions achieved by their customers - ITC on “gifts” will not be available when no GST is being paid on their disposal.
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• GST:

  Scope of the term 'Original Works' - setting up of a comprehensive CCTV based city surveillance system - the activity is nothing but a composite supply of Works Contract, not being original works and they will be liable to GST @18%
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• GST:

  Levy of tax - SGST/CGST Act - setting up of a comprehensive CCTV based city surveillance system for state government - the activity is supply of services - And therefore the amount received for the supply of services post GST are taxable under the provision of GST Act.
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• GST:

  Requirement for Registration as Input Service Distributor (ISD) for distribution of ITC on common input supplies - they must compulsorily obtain separate registration as an ISD.
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• GST:

  Valuation of supply to offices/branches having different registration numbers - whether assessable value can be determined, by arriving at nominal value? - The provisions of Rule 30 of the CGST Rules, 2017 should be followed by the applicant to arrive at the assessable value.
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• GST:

  Supply of services or not - allocation of the cost incurred to such other units - the applicant is required to pay GST on such supply made to their offices/branches having different registration numbers.
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• GST:

  Classification of goods - engine - the subject engines manufactured and supplied for use in railway, locomotives are classifiable under HSN Heading 8408 and not under Heading 8607 of the Customs Tariff.
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• GST:

  Levy of GST - Liquor licence - Contracting Bottling Units (CBU) provides manufacturing services to the Applicant, and is remunerated in the form of bottling charges - as per GST laws there is no supply of goods or services or both by the applicant.
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• Income Tax:

  Power of CIT(A) u/s 251 to give direction to reopen the assessment - Can CIT(A) set aside the assessment framed u/s 153C - Such directions are uncalled for and deserve to be expunged from the findings of the first appellate authority.
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• Income Tax:

  Additions u/s 68 - loans received from eight different companies and interest paid thereon - if these loans were not genuine, then in that eventuality the same would not have been repaid - No additions.
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• Income Tax:

  Charitable activity - CIT(A) held that asssessee is entitlement for depreciation on the opening balance of written down value of the assets - No appeal filed by Department - Tribunal in assessee appeal cannot suo-motu take this isse and decide against assessee.
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• Income Tax:

  Stay petition before appellate authority - CBDT circular regarding stay of demand does not seem to bind the appellate authority, though it binds at the lower echelons.
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• Income Tax:

  Rectification of mistake u/s 254(2) - mistake of making an incorrect statement by AR - Order of tribunal was passed relying statement - argument advanced by said counsel are to be construed to have been made on behalf of assessee and shall bind the assessee - not a mistake warranting rectification u/s 254(2)
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• Income Tax:

  Levy of penalty u/s.271(1)(c) - disallowance of certain expenses made on an adhoc basis by the AO which got confirmed up to the Tribunal for want of evidences - No penalty is leviable.
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• Income Tax:

  Where notice to be sent - even if the Assessing Officer or the CIT(A) or the Tribunal issues notices to the authorized representative/chartered accountant/advocate, the notices will have to be issued to the assessee to their registered office.
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• Income Tax:

  Scrutiny assessment - issuance of notice u/s 143(2) - Non compliance of assessee v/s Non compliance of AO - Can assessee take advantage of his own non compliance - Revenue should be given full opportunity by the CIT(A) to canvass all the grounds.
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• Income Tax:

  Writ for Refund of tax - war hero of our country should not be unnecessarily Harassed or Troubled, for Technical adherence to some archaic administrative procedures having no thoughtful purpose sought to be achieved, while denying Legitimate Relief. - Refund to tax paid on exempted income in respect of his disability pension to be granted within 30 days.
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• Income Tax:

  Maintainability of appeal before CIT(A) - First appeal was filed manually - dismissed in limine - again filed appeal electronically with Condonation of delay - delay condoned - second appeal is maintainable & The assessee has taken right step in moving fresh appeal before CIT(A) through electronic mode.
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• Income Tax:

  Unascertained liability - allowability of future development expenses - expenditure related to the revenue already recognised by the assessee in the year under consideration by following the project completion method and the same was allowable as deduction in the year under consideration as per the concept of matching principle if such expenses were duly identified by the assessee in respect of each and every projects.
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• Income Tax:

  Penalty u/s 271AAA - There will not be any penalty to the extent of undisclosed income admitted during search - immunity available under sub-clause (2) of section 271AAA
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• Income Tax:

  Jurisdiction of court - maintainability of appeal - group cases were centralized to Central Circle, Ghaziabad - Punjab & Haryana High court has no territorial jurisdiction to adjudicate upon the lis over an order passed by the Assessing Officer, i.e. Deputy CIT, Ghaziabad.
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• DGFT:

  Onetime condonation under the EPCG Scheme — Extension till 30.09.2019
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• Corporate Law:

  Stock brokers - misuse of clients’ funds / securities - In the absence of any allegation of the violation being repetitive in nature and, in the absence of any finding that the violations had a high impact or that the violations were grave in nature, having serious consequences, we find that the imposition of suspension of trading membership of 5 days was excessive and unwarranted.
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• SEBI:

  Filing of Advertisements under SEBI (Mutual Funds) Regulations, 1996
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• Service Tax:

  Business auxiliary service - tripartite agreement - activities in relation to the conduct of examinations by Sikkim Manipal University, Manipal Academy for Higher Education and the National Association of Software and Service Companies (NASSCOM) - Demand set aside for incorrect classification and period of limitation.
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• Central Excise:

  Clandestine removal - in the given time of 9-10 hours, the officers were present in the factory premises, it was not feasible to verify the stock of laminated sheets of different sizes physically - the Revenue has not succeeded in establishing that there was any shortage of finished goods in the factory of the appellant.
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• Central Excise:

  CENVAT Credit - input services - inclusion part of the definition allows service in the nature of repair and maintenance as well as modernization of factory / premises.
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• Central Excise:

  Refund of CENVAT Credit - clearances to 100% EOU - deemed exports - assessee is entitled to the claim for refund of accumulated CENVAT credit of duties/taxes on inputs/input services used in the manufacture of goods supplied as ‘deemed exports’
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Articles

• E-WAY BILL – SOME ISSUES

Notifications

• GST - States

• G.O.MS.No. 182 - dated 19-2-2019 - Andhra Pradesh SGST
  Rescinds the Notification G.O.Ms.No.585, dated 12th December, 2017

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• G.O.MS.No. 181 - dated 19-2-2019 - Andhra Pradesh SGST
  Amendment in Notification No. G.O.Ms No.566, Revenue (CT-II) Dept., Dt.24.11.2017

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• G.O.MS.No. 180 - dated 19-2-2019 - Andhra Pradesh SGST
  Amendment in Notification No. G.O.Ms.No.250, Revenue (Commercial Taxes-I), 28th June, 2017

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• G.O.MS.No. 179 - dated 19-2-2019 - Andhra Pradesh SGST
  Andhra Pradesh Goods and Services Tax (Amendment) Rules, 2019

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• G.O.MS.No. 178 - dated 19-2-2019 - Andhra Pradesh SGST
  Appoints the 1st day of February, 2019, as the date on which the provisions of the Andhra Pradesh Goods and Services Tax (Amendment) Act, 2018 ( Act No. 23 of 2018), except clause (b) of section 8, section 17, section 18, clause (a) of section 20, shall come into force

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• G.O.MS.No. 177 - dated 19-2-2019 - Andhra Pradesh SGST
  Corrigendum – Notification No. G.O.Ms No.23, Revenue (CT-II) Dept. Dt.18.01.2018

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• Order No. 03/2019 - dated 8-3-2019 - Bihar SGST
  Bihar Goods and Services Tax (Third Removal of Difficulties) Order, 2019.

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• S.O. 49 - dated 7-3-2019 - Bihar SGST
  Prescribe the due dates for furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover upto ₹ 1.5 crores for the months of April, May and June, 2019 under the BGST Act, 2017

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• S.O. 48 - dated 7-3-2019 - Bihar SGST
  Exemption from registration for any person engaged in exclusive supply of goods and whose aggregate turnover in the financial year does not exceed ₹ 40 lakhs under the BGST Act, 2017

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• 2/2019- State Tax (Rate) - dated 7-3-2019 - Bihar SGST
  Composition scheme for supplier of services with a tax rate of 6% having annual turn over in preceding year upto ₹ 50 lakhs under the BGST Act, 2017

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• 33/GST-2 - dated 8-3-2019 - Haryana SGST
  Haryana Goods and Services Tax (Third Removal of Difficulties) Order, 2019

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• 32/GST-2 - dated 8-3-2019 - Haryana SGST
  Notification to give composition scheme for supplier of services with a tax rate of 6% having annual turn over in preceding year upto ₹ 50 lakhs under the HGST Act, 2017

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• 31/GST-2 - dated 8-3-2019 - Haryana SGST
  Notification to supersede notification No. 34/ST-2, dated 30.06.2017 in order to extend the limit of threshold of aggregate turnover for availing Composition Scheme u/s 10 of the HGST Act, 2017 to ₹ 1.5 crores under the HGST Act, 2017

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• 30/GST-2 - dated 8-3-2019 - Haryana SGST
  Notification to prescribe the due dates for furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover upto ₹ 1.5 crores for the months of April, May and June, 2019 under the HGST Act, 2017

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• 29/GST-2 - dated 8-3-2019 - Haryana SGST
  Notification to give exemption from registration for any person engaged in exclusive supply of goods and whose aggregate turnover in the financial year does not exceed ₹ 40 lakhs under the HGST Act, 2017

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• 28/GST-2 - dated 8-3-2019 - Haryana SGST
  Notification to prescribe the due dates for furnishing of FORM GSTR-3B for the months of April, May and June, 2019 under the HGST Act, 2017

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• 27/GST-2 - dated 8-3-2019 - Haryana SGST
  Notification to prescribe the due dates for furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover of more than ₹ 1.5 crores for the months of April, May and June, 2019 under the HGST Act, 2017

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• 03/ 2019 No. KGST.CR.01/17-i8 - dated 11-2-2019 - Karnataka SGST
  Seeks to extend the due date for furnishing of FORM GSTR – 7 for the month of January, 2019 till 28.02.2019

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• 2/ 2019 No. KGST.CR.01/17-18 - dated 5-2-2019 - Karnataka SGST
  Amendment in Notification No. (1-W/2018) KGST.CR.01/ 17-18, dated the 29th November, 2018

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Circulars / Instructions / Orders

• SEBI - SEBI/HO/IMD/DF2/CIR/P/2019/34 - dated 8-3-2019
  Filing of Advertisements under SEBI (Mutual Funds) Regulations, 1996
• Insolvency and Bankruptcy - 30/3/2019-lnsolvency Section - dated 6-3-2019
  Re-Constitution of Insolvency Law Committee as Standinq Committee for review of implementation of Insolvency & Bankruptcy Code, 2016
• DGFT - 78 /2015-20 - dated 11-3-2019
  Onetime condonation under the EPCG Scheme — Extension till 30.09.2019

News

• Proposed GST Return - Sahaj

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• Proposed GST Return - Sugam

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• Proposed GST Return - Normal

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• 14thCII-EXIM Bank Conclave on India-Africa Project Partnerships to be held in New Delhi on March 17 – 19

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Case Laws:

• GST

• 2019 (3) TMI 542

  Extension of time limit for filing of GST TRAN-1 - transitional credit - transition to GST regime - Held that:- The respondents are directed to open the portal before 31st of March 2019. In the event they do not do so, they will entertain the GST TRAN-1 of the petitioner manually and pass orders on it after due verification of the credits as claimed by the petitioner - List this matter on 10.04.2019.

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• 2019 (3) TMI 541

  Validity of SCN - requirements of section 129 of the CGST Act not complied with - detention of goods in transit - perishable goods - Held that:- It appears that the showcause notice under section 130 of the CGST Act has been issued without complying with the requirements of section 129 of the CGST Act - It is also an admitted position that the goods in question are perishable in nature.

  The petitioner has made out a strong prima facie case for the grant of interim relief. By way of interim relief, the respondents are hereby directed to forthwith release the goods in question and the Truck etained / seized under purported exercise of powers under sections 129 and 130 of the CGST Act - Stand over to 27.03.2019, so as to enable the respondents to file affidavitinreply, if any, in the matter.

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• 2019 (3) TMI 540

  Input tax credit - procurement of Gold coins which are to be distributed to the customers at the end of scheme period for achieving the stipulated lifting or payment criteria - various other schemes involved periodically - gift or not - Held that:- The provisions of ITC are governed by Sections 16 and 17 of the CGST Act, 2017. In order to avail ITC, two basic provisions need to be complied with, i.e. Section 16 and Section 17. As per Section 16, a taxpayer is entitled to take credit of input tax charged on any supply of goods or services to him which are used in the course or furtherance of his business, i.e this section disallows ITC against input goods/services used for non-business purposes. Section 17 (5) of the CGST Act deals with Blocked credits and begins with a non obstante clause, which means even if Section 16 (1) allows ITC, Section 17(5) shall block in respect of certain cases.

  The word ‘gift’ has not been defined in the CGST Act and the Gift-Tax Act (18 of 1858) had defined the word gift to mean transfer by one person to another of any existing movable or immovable property voluntarily and without consideration in money or money’s worth. It is seen from the definition that the transfer i.e the gift given in such a case has to be voluntary - A contractual arrangement implies especially in view of the magnitude and area of the applicant’s business that, it should also be agreed by the customer in writing to such scheme floated by the applicant. We find that they have not submitted any such contract/agreement and in support of their contention, as Exhibit ‘A’ they have only submitted a brochure/writeup/invitation with the heading Kharif Gold Scheme 2018. Hence we find that the gold coins are not given to their customers under any contractual obligation and are voluntarily given on certain conditions achieved by their customers.

  In the instant case it is seen that the applicant has assigned a value to the gold coins to be given gifts and the value is ₹ 3,200/- per gm. They have not explained as to how they have arrived at the value because value of gold changes everyday. Secondly the Scheme announced by them states that “customers who lifted the products as per the scheme and made payments as per the scheme are invited for the meeting.

  ITC on “gifts” will not be available when no GST is being paid on their disposal. Just because the applicant submits that they have satisfied Section 16 (1) of the CGST Act 2017 does not mean that they are entitled to credit since Section 17(5) starts with “Notwithstanding anything contained in sub-section (1) of Section 16” The implication is that in the subject case even if it seems, as per the applicant, that Section 16 (1) is applicable in their case and allows them credit, Section 17(5) shall block such credits.

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• 2019 (3) TMI 539

  Levy of tax - SGST/CGST Act - setting up of a comprehensive CCTV based city surveillance system - amount received for supply of services during the post GST period to the Government of Maharashtra (Home Department) as per the contract - Held that:- In the present contract, we find that the liability of the contractor-applicant does not end with the supply of goods but it extends till the successful testing, commissioning and also to maintenance of the system. The present contract in our view is a works contract as it involves provision of services and goods, but it is for us to decide whether it is works contract as defined under the GST Act cited supra. The term 'immovable property' has not been defined under the GST Act. However, there are plethora of judgments of the Hon. Supreme Court and the Hon. High Courts which have helped understand the term 'immovable property'.

  The set up of a comprehensive CCTV based city surveillance system for the city of Pune and Pimpri-Chinchwad does result into installation/commissioning of immovable property wherein transfer of property in goods is involved in the execution of the contract and thus the 'Surveillance Project' is a works contract as defined in Sub-section 119 of Section 2 of the GST Act and is supply of services as per 6(a) of Schedule II of the GST Act. And therefore the amount received for the supply of services post GST are taxable under the provision of GST Act.

  Rate of tax applicable under GST Act? - Held that:- The Surveillance project remains works contract as in the subject case falls under (ii) attracting GST @18%. However in the subject it is seen that applicant is providing composite supply of works contract in respect of surveillance project to Government of Maharashtra but the reduced rate of tax is available only if the work is of the type of original work. The expression 'Original work' has not been defined under any of the Notifications applicable to the present case.

  Thus' Original Works' would mean ; all new constructions; all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; erection, installation etc. that results in increase in life and value of property . In the present case the work done by the applicant does not appear to be original works.

  In the present case, the contract is not related to any original work and is in the nature of composite supply of Works Contract - the activity of the applicant in the present case is nothing but a composite supply of Works Contract, not being original works and they will be covered under Sr. No. 3, item no. (ii) of Notification No. 11/2017 dated 28.06.2017 as amended by Notification No. 1/2018 dated 25.01.2018 and attract 18% GST (9% each of CGST and SGST).

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• 2019 (3) TMI 538

  Classification of goods - engine manufactured and supplied solely and principally for use in railways/locomotives - whether classifiable under HSN Heading 8408 or under HSN Heading 8607 of the Customs Tariff as a part used solely or principally for Railways or Tramway Locomotives or Rolling Stock? - Held that:- Circular No. 30/4/2018-GST dated January 25, 2018 has clarified that only the goods classified under Chapter 86, supplied to the railways attract 5% GST rate with no refund of unutilised input tax credit and other goods [falling in any other chapter], would attract the general applicable GST rates to such goods, under the aforesaid notifications, even if supplied to the railways. Therefore it is very important to classify subject engines, whether the same falls under Chapters 8408 or 8607 - Note 2 of Chapter 86 states that Heading 8607 applies to (a) axles, wheels, wheels sets (running gear), metal tyres, hoops and hubs and other parts of wheels, (b) frames, under frames, bogies and bissel-bogies, (c) axle boxes, brake gear, (d) buffers for rolling-stocks; hooks and other coupling gear and corridor connections, and (e) coachwork. Therefore it is crystal clear that Heading 8607 does not cover engines of any type - the goods classified under Heading 8607 are subjected for assessment on the basis of quantity cleared on weight basis whereas the goods classified under Heading 8408 are subjected for assessment on the basis of quantity cleared on number basis. This shows that the nature of goods classified under these two heads is inherently different from each other - thus, the subject engines manufactured and supplied for use in railway, locomotives are classifiable under HSN Heading 8408 and not under Heading 8607 of the Customs Tariff.

  Supply of services or not - Input tax credit - common input supplies on behalf of other unit/units registered as distinct person - allocation of the cost incurred for same to such other units qualifies as supply - levy of GST or not - Held that:- As per Section 25 of the CGST Act, 2017, “a person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act.” Hence the applicant and their various offices will be distinct persons - As per the provisions of Section 7 of the CGST Act, 2017 read with Sr. no. 2 in Schedule -I of the CGST Act, 2017, supply of goods or services or both between related persons or between distinct persons, when made in the course or furtherance of business is to be considered as supply. Hence, the applicant is required to pay GST on such supply made to their offices/branches having different registration numbers.

  If GST is leviable, whether assessable value can be determined, by arriving at nominal value? - Held that:- The provisions of Rule 30 of the CGST Rules, 2017 should be followed by the applicant to arrive at the assessable value.

  Requirement for Registration as Input Service Distributor (ISD) for distribution of ITC on common input supplies - they are already registered for supply of goods / services - Held that:- ISD is a facility available to persons/businesses having a large share of common expenditure and where billing/payment is done from a centralized location. The concept of ISD has been introduced to simplify the credit taking process for various assesses/businesses, etc, and the facility helps the concerned to have a smooth flow of input tax credit under GST - We have no doubt that the applicant wants to distribute common cenvat credit received by the HO for which payments/billings are done by them. If they want to distribute such credit than they will be an Input service Distributor. Once an ISD, then it follows that they must compulsorily obtain separate registration as an ISD. Hence we do not agree with the applicant's contention that the provisions of Section 24 (viii) of the CGST Act merely refers to the necessity of an independent registration if a person intends to avail the facility of ISD and does not create any stipulation as to necessity of availing the ISD facility itself.

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• 2019 (3) TMI 537

  Levy of GST - Supply of goods/services made by brand owner or not - Liquor licence - Contracting Bottling Units (CBU) scope of supply - Applicant permits the CBU to affix the labels etc. on the finished products and packaging. - CBU provides manufacturing services to the Applicant, and is remunerated in the form of bottling charges - whether the aforementioned surplus/ profit earned by the Applicant as the Brand Owner is liable to GST - maintainability of advance ruling aplication - Held that:- As per Section 95 (a) of the CGST Act. 2017 “advance ruling” means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant - the supply of services or goods or both, if any is not undertaken by the applicant and therefore the said questions cannot be answered by this Authority - also the question whether the Applicant (i.e. Brand Owner) is paying consideration to the Contract Bottling Unit by way of bottling charges does not fall under any of the clauses of sub-section (2) of section 97 of the CGST Act, 2017 and is not maintainable.

  The only question that is being taken up in this ruling is, which falls under Section 97 (2) of the CGST Act, 2017 is Whether in the facts and circumstances of the' present case, the Applicant (i.e. brand owner) is making a taxable supply to the Contract Bottling Unit? - Held that:- The Applicant, holding various registered brands in relation to Indian Made Foreign Liquor (“IMFL') has approached and contracted with various Contracting Bottling Units (“CBUS”) who hold the requisite licences under the State Excise laws to undertake the manufacture of the IMFL for the Applicant, in return for the payment of bottling charges (and certain agreed upon reimbursements, such as taxes and expenses). The CBUs after manufacturing the IMFL, deliver the said goods to buyers as per the applicant's directions and the sale price for the said goods is received by the Applicant. All the raw materials, packing materials, finished goods, scrap, etc. used by the CBUs are paid for, by the Applicant - From a perusal of the sample agreements submitted by the applicant, we find that the said agreements are on a principal-to-principal basis, the price at which raw materials are to be procured is fixed by the applicant, the risk, property and interest in the manufactured product passes from the CBU to the applicant upon delivery of the product to the carrier noaminated by the applicant, the selling price is as per the directions of the applicant, the sale price of the goods is received by the applicant, the applicant pays consideration to the CBU in the nature of bottling charges which are fixed on a per month case basis, and not the sale price of the manufactured products, the manufacturing activity by the CBU is carried out under the supervision of the Applicant, etc. The amount left with the Applicant after making all of the aforesaid payments is their profit.

  In the instant case the applicant is not receiving any consideration for allowing the CBU to use their brand/logo etc on the IMFL. In fact the entire process can be seen as the applicant is contracting with the CBUs to get the IMFL manufactured in under their brand name. There is no service rendered by the applicant in this case - It is very clear from the terms of the agreement that there is neither any supply of goods nor services flowing from the applicant. The applicant actually gets the products manufactured by the CBUs. Hence as per GST laws there is no supply of goods or services or both by the applicant as per Definition of 'supply' under section 7 of the GST Act, 2017.

  Thus, the question “Whether the applicant (brand owner) is making taxable supply to the Contract Bottling Unit” is answered in the negative.

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• Income Tax

• 2019 (3) TMI 531

  Addition u/s 68 - addition of unaccounted income - non explanation to source from agricultural income - HELD THAT:- Assessee has explained source of the cash deposit in the bank account. Copies of the bills of sale of agricultural produce are filed in the paper book, which supports the explanation of assessee that assessee received cash out of sale of agriculture produce.

  CIT(A) partly accepted the agricultural income which supports the explanation of assessee that assessee had source from agricultural income. CIT(A) also partly accepted the explanation of assessee for sale of property, but, assessee explained that the share of property of assessee’s brother is also available to him being the amount getting in joint family. All these documents in the paper book have not been disputed by the authorities below.

  Assessee further submitted that apart from it, assessee has salary income, which have not been taken into consideration. These facts clearly show that assessee has source to make deposit in the bank account. - Decided in favour of assessee.

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• 2019 (3) TMI 529

  Application for adjustment or refund of the amount paid under Income Declaration Scheme – 2016 rejected - Held that:- No reason to interfere in the matter. The special leave petition is, accordingly, dismissed.

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• 2019 (3) TMI 528

  Disallowance of expenses - selling expenses - promotional expenses - expenses towards packaging material purchases - genuineness of the transactions - failure to deduct TDS u/s 194C/ 194H on selling expenses and promotional expenses - Disallowance u/s 40(a)(ia) - CIT(A) deleted the additions - ITAT confirmed the order of CIT(A) - HELD THAT:- Mr. Mahabir Singh, learned senior counsel has relied upon a judgment of this Court in Director, Prasar Bharati Vs. Commissioner of Income Tax, Thiruvananthapuram [2018 (4) TMI 201 - SUPREME COURT OF INDIA].

  Issue notice on the application for condonation of delay and on the Special Leave Petition.

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• 2019 (3) TMI 497

  Benefit of Section 54F denied - assessee did not substantiate that sale proceeds have been invested in residential property within the stipulated time - contention of the assessee that the land in question is not capital asset as the land is more than 8 km. away from Municipal limit of Sonipat rejected - whether Land sold by assessee was not agricultural land, but, it was a capital asset as per Section 2(14)? - application for admission of the additional evidence was not filed before Tribunal - HELD THAT:- The assessee appeared at the later stage of the assessment proceedings and filed the written submissions, which have been considered by the assessing officer. The assessee produced the valuation report and some other documents at appellate stage, on which, Learned CIT(A), called for the remand report. A.O. as well as the CIT(A) have given sufficient opportunity of being heard to the assessee. Therefore, there is no merit in the contention of Learned Counsel for the Assessee that no proper opportunity have been granted to the assessee at any stage.

  Assessee submitted that the CIT(A) should have admitted the additional evidence. At this stage also, Assessee filed copy of the Certificate of Architects dated 4th February, 2019 and some bills of building material, which are not attested and no application have been filed for admission of the additional evidence. No reasons have been explained as to why the same were not produced before the authorities below.

  Departmental Representative, therefore, rightly contended that the same papers cannot be admitted at this stage, since, no request have been made by assessee for admission of the additional evidences by filing a proper application and no reasons have been explained why these documents were not filed before the authorities below. The Certificate of the Architects dated 4th February, 2019 and bills of building material cannot be taken into consideration.

  The request of the Assessee to entertain these documents is, therefore, rejected. During the course of arguments Learned Counsel for the Assessee did not point out any error in the Orders of the authorities below that the land sold by the assessee was not capital asset. The assessee also failed to prove that sale proceeds were invested in residential house within the time prescribed under the Law. Therefore, assessee failed to substantiate any of the grounds raised in the present appeal. - Decided against assessee.

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• 2019 (3) TMI 496

  Penalty u/s 271(1)(c) - quantum addition deleted - HELD THAT:- It is an admitted fact that the addition on the basis of which the penalty u/s 271(1)(c) of the Act was levied by the Assessing officer has been deleted by the ITAT.

  On a similar issue in the case of K. C. Builders & Others Vs ACIT [2004 (1) TMI 7 - SUPREME COURT] held that Where the additions made in the assessment order on the basis of which penalty for concealment is levied, are deleted, there remains no basis at all for levying penalty for concealment and, therefore, in such a case no penalty can survive - Decided in favour of assessee.

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• 2019 (3) TMI 536

  Exemption u/s. 80G - CIT(E)'s non-speaking orders - CIT(E) granting registration as “Religious Trust” instead of “Charitable Trust - HELD THAT:- CIT(E) has not passed a speaking order and did not give well reasoned finding in his orders dated 22.12.2017 passed u/s. 80G(5)(vi) read with Rule 11AA and also in the order dated 26.9.2017 passed u/s. 12AA read with section 12A which is not sustainable in the eyes of law.

  In the interest of justice, we set aside the orders of the CIT(E) and remitted back the issues involved in both the appeals to the file of the CIT(E) to decide the issues in dispute in both the appeals afresh, in accordance with law, after giving adequate opportunity of being heard to the assessee and pass a speaking order. The assessee is directed through this counsel to appear before the Ld. CIT(E) on 25.03.2019 at 10 AM to substantiate his case in both the appeals and did not take any unnecessary adjournment. Since the order has been pronounced in the Open Court, there is no need to send the notice for the hearing before the CIT(E). - Appeals filed by the Assessee stand allowed for statistical purpose.

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• 2019 (3) TMI 530

  Disallowance u/s 14A r.w. Rule 8D - claim exceeding exempt income of the relevant year - HELD THAT:- It is an undisputed fact that assessee has incurred expenditure on account of interest etc., for making investment in shares of various companies to the extent of ₹ 2.37 crores and has not earned any any exempt income. We find that in the case of PCIT Vs. State Bank of Patiala [2018 (4) TMI 23 - PUNJAB & HARYANA HIGH COURT] has held that the amount of disallowance u/s 14A has to be restricted to the amount of exempt income only and not at a higher figure. We find that against the aforesaid order of Punjab and Haryana High Court, Revenue filed S.L.P. before the Hon’ble Apex Court and the S.L.P. was dismissed by the Hon’ble Apex Court.

  In the case of PCIT Vs Caraf Builders & Construction (P) Ltd. [2018 (12) TMI 410 - DELHI HIGH COURT] after considering the decisions of Maxopp Investment Ltd. Vs. CIT [2018 (3) TMI 805 - SUPREME COURT OF INDIA], Cheminvest Vs. CIT [2015 (9) TMI 238 - DELHI HIGH COURT] and other decisions has held that disallowance u/s 14A cannot exceed exempt income of the relevant year. In the present case, since assessee has not earned any exempt income from dividends, no disallowance is called for in the present case. - Decided in favour of assessee.

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• 2019 (3) TMI 495

  Maintainability of appeal before CIT(A) - First appeal was filed manually - Dismissed in limine - again filed appeal electronically with Condonation of delay - CIT(A) dismissed appeal stating that assessee should have file an appeal before the ITAT. - HELD THAT:- The findings of the CIT(A) cannot be sustained in Law. CIT(A) vide his first order dated 21st April, 2017 dismissed the appeal of assessee being not maintainable and in limine because it was not filed electronically. Thus, the appeal of assessee was dismissed on technical reasons, without deciding the appeal of assessee on merits.

  There is no bar on assessee in filing appeal electronically subsequently against the order of the assessment passed by the AO on Dated 18th February, 2016. The assessee has taken right step in moving fresh appeal before CIT(A) through electronic mode. The findings of the CIT(A) are thus, liable to be set aside. The facts and circumstances above clearly explain that the delay in filing the appeal was bonafide and as such, the CIT(A) should have condone the delay in filing the appeal electronically as per the Rules.

  Condone the delay in filing the appeal electronically before Ld. CIT(A) and set aside the orders of the Ld. CIT(A). The appeal of assessee is restored to the file of Ld. CIT(A) with a direction to decide the appeal of assessee on merits, by giving reasonable sufficient opportunity of being heard to the assessee.

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• 2019 (3) TMI 494

  Penalty u/s 271AAA - undisclosed income admitted during the course of search - assessee failed to disclose the manner and substantiate the manner, how this income was earned - HELD THAT:- A conjoint reading of all the material would indicate that to the extent of ₹ 3.13 crores income was declared during the course of search by Shri Sunil P. Sewani on behalf of the assessee. This has been returned by the assessee. However, with regard to the remaining part i.e. ₹ 54.50 lakhs on account of jewellery and ₹ 12.50 lakhs on account of other discprenacy admitted in the return, there is no corresponding declaration at the time of search. Thus, qua this amount, immunity available under sub-clause (2) of section 271AAA is not available. The ld.CIT(A) has erred in deleting penalty qua this undisclosed income. Therefore, we partly allow the appeal of the Revenue and restore penalty qua addition of ₹ 54.50 lakhs and ₹ 12.50 lakhs.

  There will not be any penalty to the extent of undisclosed income admitted at ₹ 3.13 crores and penalty at the rate of 10% for the balance undisclosed income of ₹ 67.00 lakhs out of ₹ 3.80 crores would be calculated and levied i.e. (Rs.3.80 crores minus ₹ 3.13 crores). We partly allow the ground of appeal of the Revenue.

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• 2019 (3) TMI 493

  Unascertained liability - allowability of future development expenses - assessee following the mercantile system of accounting - matching principle applicability - assessment completed u/s 143(3) - HELD THAT:- The matching principle is one of the most fundamental principles in accounting. It is an integral part of the accrual accounting system and requires that a company must record expenses in the period in which the related revenues are earned. The matching principle states that expenses should be recognised and recorded when those expenses can be matched with the revenues those expenses helped to generate.

  The provision was made by the assessee for the expenses in relation to the projects completed of which the revenue was recognised and since such expenses were duly identified by the assessee in respect of each and every projects and details of the same were also furnished before the AO, the provision made by the assessee represented ascertained liability. Moreover, the expenditure so provided was to be incurred in respect of the projects substantially completed, the entire revenue of which was duly recognised by the assessee in the year under consideration. The said expenditure thus was related to the revenue already recognised by the assessee in the year under consideration by following the project completion method and the same was allowable as deduction in the year under consideration as per the concept of matching principle.

  Similar method of accounting was followed by the assessee consistently even in the earlier years and as submitted by the learned counsel for the assessee, similar provision made for the expenses to be incurred in respect of project substantially completed in respect of which revenue was recognised was allowed by the AO even in the assessment completed u/s 143(3). In our opinion, the Ld. CIT(A) appreciated the claim made by the assessee in the right perspective and rightly allowed the same after taking into consideration, the method of accounting followed by the assessee, in the light of relevant accounting standard as well as case laws relied upon by the assessee in support. - Decided against revenue

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• 2019 (3) TMI 527

  Disallowance u/s. 40A(2)(b) - excess remuneration to directors - disallowance u/s. 14A - valuation of closing stock - Addition on account of notional interest on delayed refund of security deposits - Held that:- We are not inclined to entertain these petitions under Article 136 of the Constitution of India. The Special Leave Petitions are, accordingly, dismissed.

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• 2019 (3) TMI 526

  TDS u/s 194L/194LA - cost of construction incurred by the assessee is the consideration paid for acquiring such rights, interest and titles from such squatters/hutments - whether consideration given by assessee to such squatters/ hutments was not in the nature of 'compulsory acquisition of land/ structure'? - Held that:- SLP dismissed.

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• 2019 (3) TMI 492

  Unexplained cash credit u/s 68 - Share applicants were not creditworthy - falure to produce share applicants - shares subscribed at such a higher premium - HELD THAT:- AO has specifically directed production of these share applicants. But the assessee failed to produce them. There is no justification at the end of the assessee to demonstrate that these shares could be subscribed at such a higher premium that too by a marginal person who has very nominal income. They are not family members, who have some interest in the company. The ld.CIT(A) has appreciated this aspect. It is also noted that in their accounts identical amount of deposits were made before issuance of cheques for share applications - decided against assessee.

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• 2019 (3) TMI 503

  Stay petition - appellate authority discretion to stay the proceedings conditionally - petitioner contended that the Ext.P24 cannot be termed 'an order' is a mere statement or directive from the authority that the petitioner should deposit 20% of the demand to have the recovery proceedings stayed - As contended by petitioner, the appellate authority may have exercised its discretion but the manner of that exercise has not been spelt out in the Ext.P24 - HELD THAT:- No doubt, an interim order, especially in the nature of a stay order, does not require detailed reasoning for adjudication. At the same time, the order must spell out the authority's prima facie opinion of the matter. And that is lacking here: The circular, the Standing Counsel has relied on, as produced now before the Court, does not seem to bind the appellate authority, though it binds at the lower echelons.

  Under these circumstances, set aside the Ext.P24 and remand the matter to the appellate authority for fresh consideration of the stay petition. At any rate, it is left open for the appellate authority either to pass orders after hearing the petitioner or dispose of the appeal itself as per its convenience.

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• 2019 (3) TMI 491

  Additions u/s 68 - loans received from eight different companies and interest paid thereon - satisfaction of all the ingredients of cash credit i.e. identity, creditworthiness and genuineness of transactions - Assessee produced confirmation of parties, copies of ack. return of income filed by the lenders , copies of the bank statement of lenders, audited accounts of the lenders - CIT(A) deleted the addition - HELD THAT:- CIT(A) apart from appreciating that all the documents had been placed on record by the assessee had also categorically mentioned that the audited accounts and return of income of all the parties, show that the loans given by them to the assessee were reflected in their audited accounts and these parties had not borrowed any funds and thus had utilised their own funds for giving loans to the assessee on which they had earned interest.

  A.O himself stated that the turnover of these parties was in hundreds of crores and at the same time, AO stated these parties were not credit worthy. In this respect, the A.O had not placed on record any corroborative evidence to show that cash had been paid by the assessee to these parties for availing the loans and had not been able to establish the cash trail at all. On the contrary, the assessee had filed the entire documents, required to establish the identity of the creditors and their creditworthiness, as well as the genuineness of the transaction.

  CIT(A) had rightly concluded that the loans taken by the assessee were subsequently repaid through banking channels. Thus, if these loans were not genuine, then in that eventuality the same would not have been repaid. Therefore, considering the entirtiy of the facts, the Ld. CIT(A) had rightly held that the assessee had satisfied all the ingredients of cash credit i.e. identity, creditworthiness and genuineness of transactions and accordingly deleted the additions. - Decided in favour of assessee.

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• 2019 (3) TMI 533

  Penalty u/s.271C - assessee has not deducted tax at source on payment made to M/s Indiabulls Distribution Services Ltd - income recognition - assessee was treated as "assessee-in-default" u/s 201(1) - assessee liability for tax audit u/s 44AB - HELD THAT:- As gone through the profit and loss account of the assessee for the years under consideration we find that no income has been recognized by the assessee from projects. The perusal of the profit and loss account and balance sheet of the assessee goes to prove that the assessee is not liable for tax audit u/s.44AB for the year under consideration. We find that the second proviso to Section 194H stipulates that if the assessee is liable for tax audit in A.Y.2015-16 then, he is bound to deduct tax at source and comply with the provisions of Chapter XVIIB of the Act in respect of transactions carried out by him in A.Y.2016-17.

  We find that there is no evidence brought on record by both the parties or from the orders of the lower authorities that whether assessee was liable for tax audit in the A.Y.2015-16. For this limited purpose, we deem it fit and appropriate to remand this issue to the file of the AO to verify the same and decide the issue in accordance with second proviso to Section 194H of the Act, after affording reasonable opportunity of being heard to the assessee.

  The other propositions made by the AR are not required to be adjudicated as it is a simple case of factual verification for the A.Y. 2016-17. The assessee is also at a liberty to raise fresh propositions and adduce fresh evidences in support of her contentions before the AO in the fresh round of proceedings.

  Accordingly, the grounds raised by the assessee for the Asst Year 2016-17 are allowed for statistical purposes.

  Since we had given a finding supra that the assessee was not liable for tax audit u/s 44AB of the Act during the F.Y. 2015-16 relevant to Asst Year 2016-17, we hold that as per section 194H of the Act, the assessee is not liable for deducting tax at source in respect of payment of marketing fees / commission to M/s India Bulls Distribution Services in Asst Year 2017-18.

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• 2019 (3) TMI 505

  Levy of penalty u/s.271(1)(c) - disallowance of certain expenses made on an adhoc basis by the AO - HELD THAT:- The assessee placed on record the comparative chart of various expenses for the years ending 31/03/2008 to 31/03/2012 wherein we find that the expenditure incurred during the year had not varied substantially with that in the earlier years or in the subsequent years. Either way, the penalty has been levied only on the disallowance of expenses made on adhoc basis. As find from the list of expenses debited in the P & L account that the same are purely regular business expenditure. Hence, no penalty could be levied for concealment or furnishing of inaccurate particulars of income thereon for mere disallowance of claim of expenses made by the assessee. Reliance is placed in this regard on the decision in the case of Reliance Petro Products Pvt. Ltd., reported [2010 (3) TMI 80 - SUPREME COURT].

  In view of our aforesaid findings and respectfully following the aforesaid judicial precedents, we direct the Ld. AO to cancel the penalty levied u/s.271(1)(c ) - Decided in favour of assessee.

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• 2019 (3) TMI 504

  Unexplained cash deposits in bank account - major sources of money claimed are from amount received on sale of jewellery; amount received from lease of agricultural land; and saving in the form of PIN money - assessee claimed that out of the above cash deposits, he made demand draft for depositing with HUDA for allotment of plot of land in the name of the mother of the assessee. It is claimed that due to non-allotment of the plot, the said amount was refunded to the mother of the assessee and deposited in her bank account - AY 2010-11 - HELD THAT:- Counsel has claimed that summons were issued to the jeweller and alleged lessee of the agricultural land at the fag end of the assessment proceeding and therefore those persons could not attend before the Assessing Officer. But we are unable to understand as why the assessee did not raise this issue before the CIT(A) and sought to file additional evidence for producing those persons. But no efforts were made by the assessee either for producing those persons before the Ld. CIT(A) or seeking issue of the fresh summons for producing those persons. Even no such request has been made before us also. The assessee was required to establish that ₹ 2 lakh was received from the so-called lessee of the land and in absence of which, proof of ownership of the landholding itself are not relevant to explain the source of the money. In such circumstances, the burden of proof of the assessee remained undischarged regarding the source and nature of the cash deposits of ₹ 11,80,000/-in the bank accounts of the assessee.

  The claim of cash in hands of more than ₹ 6 lakh with the mother of the assessee is against the normal conduct of the human probability , when she has withdrawn a small amount of money from the bank during that period. - Decided against assessee

  Undisclosed income of the assessee company - undisclosed deposits in bank - assessment year 2011-12 - assessee claimed that cash flow statement was filed before the AO whereas CIT(A) observed that same was not filed before the AO and it was in the nature of the additional evidence and being no application filed by the assessee for admitting the additional evidences, he rejected the cash flow statement submitted by the assessee - HELD THAT:- The claim of the assessee that deposits stands explained in view of the withdrawals, should not be brushed aside without verifying only on the ground that same was not submitted before the AO and in the nature of additional evidence. The verification of the above claim of the assessee is crucial for holding whether the said cash deposits was explained or unexplained. CIT(A) should have given opportunity to the assessee for filing the application for additional evidence or should have verified the record of the AO but rejecting the same without examining would amount to denial of justice to the assessee. In view of the above circumstances, we feel it appropriate to restore this issue of addition to the file of AO with the directions to verify the claim of the assessee of withdrawal of the money from bank accounts to justify the cash deposits

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• 2019 (3) TMI 502

  Writ for Refund of tax - petitioner is Officer in the Indian Army - paid the income tax on his entire income from 2008 to 2016 including the disability pension - excess tax paid by the petitioner on his exempted income for the financial year 2008-09 to 2015-16 - CBDT vide memorandum dated 2.7.2001 has notified that the disability pension received by the Officers of the Indian Armed Forces is completely exempted from Income Tax - HELD THAT :- In the considered opinion of this Court, as the income of the petitioner was exempted, the department does not have any other choice except to refund the amount and the disabled Army Officer cannot be made to run from pillar to post on account of various technicalities as stated in the writ petition.

  Our Army Soldiers, Naval Officials and Fighter Pilots are Day and Nights protecting Our Territorial Borders from Enemy Infiltration and Attacks and even while putting their life to the greatest risk, are keeping all Citizens safe and Secure and making Our life free from all such Dangers, where they don't think of “Technicalities” while Fighting with Enemies at the Front, as to whether pulling the Trigger of their Gun would invite a “Court of inquiry” and from this practical perspective this Court wants to express its concern for not putting too much of technicalities in such matters by those who are invested with Administrative Powers to deal and decide the affairs of the Personnel of Indian Armed Forces.

  The Court records and reiterates its absolute commitment to adherence of Rule of Law in its strictest terms, without carving out any exception to it, however it intends to convey its concern for the welfare of the “War Heros” who marvels at the Borders and within the Country, should not be unnecessarily Harassed or Troubled, for Technical adherence to some archaic administrative procedures having no thoughtful purpose sought to be achieved, while denying Legitimate Relief to the Members of the Armed Forces. Resultantly the respondent is directed to refund the entire amount of income tax they have recovered, which was an exempted amount and which the petitioner has paid in respect of his disability pension.

  The exercise of refunding the amount be concluded within a period of 30 days from the date of receipt of certifiedcopy of this order. Authorities shall be free to pass appropriate order in the matter of refund and the petitioner shall be entitled for interest @ 12% per annum from the date the amount was deposited with the income tax department till the amount is paid. After 30 days

  Non compliance of order of court shall be issuing suo motu notices for initiating contempt proceedings against the respondent Commissioner of Income Tax as well as against the Principal Commissioner of Income Tax II who has filed the affidavit in the present writ petition. Also after 30 rate of interest shall be 18% per annum from the date of entitlement till the amount is actually paid to the petitioner.

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• 2019 (3) TMI 490

  Rectification of mistake u/s 254(2) - mistake of making an incorrect statement before this Tribunal at the time of hearing of the main appeal which was apparently made by him without the benefit of workings of Arm’s Length Price pursuant to exclusion of comparables which are Government Companies - Order of tribunal was passed relying statement - order of the Tribunal erroneous warranting rectification - HELD THAT:- We find that it is admitted fact that the mistake was committed only by the Ld. AR at the time of hearing of the main appeal by making certain statements. Hence there cannot be any mistake that could be attributed in the order of this Tribunal within the meaning of Section 254(2) of the Act warranting rectification.

  In the instant case, it is the AR who had admitted by making certain statements at the time of hearing of the main appeal which was accepted and followed by Tribunal while disposing off the main appeal. We are afraid that if the argument of the Ld. AR is appreciated that it would be against the proposition of binding nature of ‘Law of Contracts’, in as much as the counsel has been appointed by the assessee by giving proper Vakalatnama in the name of the counsel and the statement and argument advanced by said counsel are to be construed to have been made on behalf of assessee and shall bind the assessee. We are not inclined to open up a Pandora box by agreeing to the proposition advanced by the Ld. AR before us in the miscellaneous application proceeding. With these observations, we do not deem it fit to recall the order passed by this Tribunal. - Decided against assessee.

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• 2019 (3) TMI 535

  Reopening of assessment u/s 147 - addition made towards provision for doubtful debts as well as confirmation of disallowance of unabsorbed depreciation - HELD THAT:- There is a live and clear nexus between the said information and the reasons to believe escapement of income, formed on that basis, the assumption of jurisdiction to reassess cannot be called into question as was sought to be canvassed before us. Thus, we hold that the entire reassessment in this case is valid and therefore, the reopening of assessment is upheld

  Allowability of provision for doubtful debts, the assessee has claimed provisions for doubtful debts and the same is disallowed and added back by the assessee itself in computing the book profit under section 115JB of the Act. At the same time, the same is required to be added in computing total income under the normal provisions of the Act. Having the assessee not done so, the Assessing Officer has disallowed the provisions for doubtful debts and advances which was rightly confirmed by the CIT(A). We find no reason to interfere with the order passed by the ld. CIT(A) on this issue. Thus, the ground raised by the assessee stands dismissed.

  Disallowance of unabsorbed depreciation, the assessee has claimed of depreciation of ₹.1,14,96,325/- as unabsorbed depreciation loss of the assessment year 1999-2000 to 2001-02. However, the Assessing Officer observed that the claim of unabsorbed depreciation loss of the assessment year 1999-2000 to 2001- 02 was not acceptable in view of the decision of the Mumbai Special Bench in the case of DCIT v. Times Guaranty [2010 (6) TMI 516 - ITAT, MUMBAI] the same was disallowed. Since the claim of unabsorbed depreciation loss of the assessment year 1999-2000 to 2001-02 is not eligible for relief granted by amendment to section 32(2) in the assessment year 2002-03, the ld. CIT(A) confirmed the disallowance made by the Assessing Officer. The assessee has not placed reliance of any higher Court’s decision against the decision of Mumbai Special Bench order in the case of DCIT v. Times Guaranty (supra), which was followed by the authorities below. - Decided against assessee.

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• 2019 (3) TMI 501

  Jurisdiction of court - maintainability of appeal - which assessing officer have jurisdiction over assessee - Order passed before search by AO in Delhi - After search case cetralised at Ghaziabad - order under Section 153A/143(3) was passed by AO Ghaziabad - The appeal filed by the assessee was allowed by CIT(A), Kanpur - appeal filed by the revenue was dismissed by the Tribunal at New Delhi - Appeal against ordr of ITAT filed in Punjab & Haryana High Court - The doctrine of precedents and rule of binding efficacy of law laid down by the High Court within its territorial jurisdiction and which exercises territorial jurisdiction over the suits of the Assessing Officer

  HELD THAT:- Since the initial process of assessment was started at New Delhi and the final assessment was framed by the Assessing Officer at Ghaziabad, this court lacks territorial jurisdiction to adjudicate the matter.

  This court has no territorial jurisdiction to adjudicate upon the lis over an order passed by the Assessing Officer, i.e. Deputy Commissioner of Income Tax, Ghaziabad. Accordingly, the complete paper books of all the appeals are returned to the appellant-revenue for filing before the competent court of jurisdiction in accordance with law. The appeals stand disposed of accordingly.

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• 2019 (3) TMI 500

  Admission the additional ground - Non issuance of notice u/s 143(2) - jurisdictional issue - Tribunal admitted additional ground following National Thermal Power Co. Ltd. Vs. CIT [1996 (12) TMI 7 - SUPREME COURT] - HELD THAT:- It is no doubt true that the non issuance of notice can result in a jurisdictional issue. Therefore, we do not fault the Tribunal for having entertained the additional ground canvassed by the assessee. However, after hearing the arguments of the learned Senior Standing Counsel, we find that the Revenue did not have sufficient opportunity to meet this point.

  Can assessee take advantage of his own non compliance - address for service is of chartered accountant of the assessee and that there is an attempt to evade service. - AY 1995 -96 - AO served a notice u/s 142(1)dated 08.1.1996 on 24.01.2016 to CA- CA filed a letter dated 27.1.1996, requested for time and thereafter no compliance - Assessment time baring on 31.03.1998 - AO taken no further action - Return filed on 24.03.1998 - Department contention that it was impossible to make compliance in short time after filing of return - and HELD THAT:- Tribunal, after admitting the additional ground, has not adverted to any of the contentions advanced by the Revenue and it is pleaded before us that the Revenue had not been given sufficient time to meet the point. In any event, the Tribunal, having admitted the additional ground, should have considered the contentions advanced by the Revenue by giving reasonable time and recorded its satisfaction as to why the matter should be remanded to the CIT(A). The matter has again gone back to the CIT(A) and we are of the considered view that the Revenue should be given full opportunity by the CIT(A) to canvass all the grounds raised before us.

  Service of notice u/s 143(2) - Held that:- even if the Assessing Officer or the CIT(A) or the Tribunal issues notices to the authorized representative/chartered accountant/advocate, the notices will have to be issued to the assessee to their registered office of company.

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• 2019 (3) TMI 499

  Depreciation on dies and moulds @ 100% - replacement of the dies and moulds - HELD THAT:- Isuue covered against the Revenue, in the light of the decision in the assessee's own case in CIT vs. TVS Motors Limited [2014 (2) TMI 522 - MADRAS HIGH COURT] with regard to the moulds and dies attached to the machinery like press designs specification, moulds and dies are not independent of the plant and machinery, but are parts of the machinery. Once the dies are worn out, the machines cannot turn out the product to the business specifications and this has to be obtained only on a replacement of the dies and moulds, a fact which is not refuted by the revenue – the right of the assessee to the relief is not restricted to the plea raised by him. On the facts before us, when the dies and moulds were attached to the machine to manufacture the designed product, we have no hesitation to accept the plea of the assessee that the claim would fall for consideration only under Section 31 of the Act. - Decided against revenue

  Depreciation on plant - HELD THAT:- No challenge with regard to the claim for depreciation in respect of the Reverse Osmosis Plant and TET Plant - Assessing Officer restricted the claim of depreciation to 10%. However, he did not assign any reason for doing so.

  on seeing the note furnished about the Reverse Osmosis System and the TET Plant, it was observed that there is no doubt that the civil structures are part of the entire plant, without which, the plant cannot function. The concrete tanks, pump beds, filter unit beds are special requirements to hold water or motor and pump in a sturdy position at required height and without this, the Reverse Osmosis cannot function properly and therefore, the CIT(A) directed the Assessing Officer to treat the civil structures as part of the 'plant and machinery' and allow depreciation at the same rates, at which, the relevant plants were allowed. - Decided against the Revenue.

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• 2019 (3) TMI 498

  Charitable activity - exemption u/s 11 - CIT(A) held that asssessee is entitlement for depreciation on the opening balance of written down value of the assets - No appeal filed by Department - Can Tribunal in assessee appeal suo-motu take this isse and decide against assessee - HELD THAT:- Assessee entitlement for depreciation on the opening balance of written down value of the assets in the assessment year under consideration. We need not go into the merits of the matter as this issue was decided in favour of the assessee by the CIT (Appeals)-I. Admittedly, the revenue did not file any appeal against the said finding however, the Tribunal suo motu took up the issue and adjudicated the same and rendered a finding against the assessee. The procedure adopted by the Tribunal is impermissible. The assessee can be worse of in their appeal petition. Revenue having not filed any appeal were not aggrieved over the finding rendered in favour of the assessee by the CIT(A). Therefore, the finding rendered by the Tribunal on the said issue needs to be set aside. - Decided in favour of the assessee

  Income from the auditorium hall - exemption under Section 11 - whether the income arising from the auditorium is from a business activity when the assessee would state that the dominant activity of the assessee is education ? - new proviso introduced by the Finance Act, 2015 (w.e.f April1, 2016) changing the cut-off bench mark as 20% of the total receipts instead of the fixed limit of ₹ 25 lakhs - CBDT's Circular No.21 of 2016 dated 27th May, 2016 held that the new proviso would apply for A.Y. 2009-10 - miscellaneous application filed but reject stating that it will amount to re-writing the order, akin to the power of review - HELD THAT:- Since the Circular dated 27.05.2016 was very much in vogue when the main appeal was heard by the Tribunal on 22.06.2016. The circular having been issued after the order passed by the CIT(A) on 12.06.2014, we deem it appropriate that the matter should be remanded to the CIT(A) so as to afford an opportunity to the assessee to canvas the grounds which have been raised by the assessee in their miscellaneous application referred above..For the above reasons, the appeal filed by the assessee is allowed and the order passed by the Tribunal is set aside and the matter is remanded to the CIT(A) for considering the grounds which have been raised by the assessee in the miscellaneous application

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• 2019 (3) TMI 525

  Assessment u/s 153C - addition u/s 69C - Whether ITAT, Mumbai was right in holding that the action taken u/s. 153C was bad in law, also for the 7th year/current year of the search i.e. A.Y. 2009-10 even when it does not fall under the ambit of provisions of section 153C of the IT Act, 1961? - Held that:- SLP dismissed.

  Question of law, on the additional grounds raised, is left open.

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• 2019 (3) TMI 534

  Short Term Capital Gain V/S long term capital gain - correct date of acquisition of asset - acquiring an identifiable right in a specific property - CIT(A) treating date of full payment as date of acquisition and gain as nature of Short Term Capital Gain - HELD THAT:- The assessee had acquired the right in the property pursuant to allotment letter dated 10/03/2008. The assessee has made the full payment of ₹ 83.30 Lacs by 25/06/2008. The said fact is duly supported by the bank statements as placed on record from where the payments were made by the assessee. The above stated fact demonstrates that the assessee had acquired a identifiable right in a specific property and also made the full payment thereof by 25/06/2008. The registration of purchase documents, in such a case, was to convey the ownership rights to the assessee which already existed in assessee’s favor by way of allotment letter dated 10/03/2008. As undisputed fact that the same property has been sold by the assessee during impugned AY. This being the case, we have no hesitation in concurring with the stand of CIT(A), in this regard.

  Maintainability of appeal - Monetary limit - AO added entire sale consideration in the hands of the assessee without deducting there-from the cost of acquisition, which is clearly erroneous - HELD THAT:- The computations as placed on record by AR reveal that if the cost of acquisition is allowed to the assessee, the tax effect of the impugned additions shall be below ₹ 20 Lacs and the same is squarely covered by the recent low tax effect circular No. 03/2018 dated 11/07/2018 issued by the CBDT and keeping in view of the same, the appeal of the revenue is otherwise not maintainable.

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• 2019 (3) TMI 532

  Power of CIT(A) u/s 251 to give direction to reopen the assessment - Can CIT(A) set aside the assessment framed u/s 153C - scope of section 150(1) - allegation of accommodation entries provided by the appellant - HELD THAT:- Before the amendment by Finance [No. 2] Act, 2014 the provisions of section 251 empowers the appellate authority in an appeal against the order of assessment to confirm, enhance or annul the assessment. Before 1.6.2001, there was one more power and the same reads as under - “Or he may set aside the assessment and refer the case back to the AO for making fresh assessment in accordance with the directions.”

  The CBDT in its Circular has also clarified that the power of the appellate commissioner does not include the power to set aside the assessment.

  In our considered opinion, action of the first appellate authority has no sanction of law as powers of the CIT(A) have been set out in section 251 of the Act. The CIT(A) has more power to send the matter back to the file of the AO for making fresh decision on the issue. Once the assessment order was quashed the CIT(A) has transgressed the power given to him u/s 251(1) of the Act by giving direction to the AO to take action u/s 147/148 of the Act. Such directions are uncalled for and deserve to be expunged from the findings of the first appellate authority. We accordingly direct the AO to read the order of the first appellate authority without direction to take action u/s 147/148 of the Act.

  Decided in favour of assessee.

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• Customs

• 2019 (3) TMI 524

  Classification of imported goods - Kapok - While appellants claimed the classification under chapter 52, show cause notice was issued classifying the same under chapter 53, However on appeal Commissioner (Appeal) held that the said goods would classified under Chapter 14 - whether classified under Chapter Heading 1404 or otherwise? - Held that:- As per the rules of interpretation of tariff, classification of the goods has to be decided on the basis of terms of Chapter Headings and Sub-headings & relevant Section Note and Chapter Notes. Further it has been held in various judicial pronouncements that the product should be classified as per the market and trade under-standing of the goods.

  In the present case the goods have been imported by the appellants for being supplied to Ministry of Defence and not for sale in local market. These goods have been supplied as “Cotton” to the Ministry Of Defence. Even the overseas supplier has also clarified that the goods supplied by them were “Kapok Fiber (Java Kapok) was prime grade and super fine quality but not carded or combed.”

  Commissioner has upheld the classification of the imported goods under heading 1404, by totally ignoring the chapter note 1 to Chapter 14. From the said Chapter Note, it is quite evident that “vegetable materials or fibres of vegetable materials of a kind used primarily in the manufacture of textiles”, get classified in Section XI. Commissioner (Appeal) has in his order not rendered any finding to this effect that the goods under importation were other than of a kind used primarily in the manufacture of textiles.

  It is quite evident that adjudicating authority has classified the goods considering them of a kind used primarily in the manufacture of textiles. Commissioner (Appeal) has not rendered any finding in this regards, but on the contrary held that goods are classifiable under heading 1404, after holding that “Kapok Fibres prepared for use as textile material are classifiable in heading 5305” - Thus Commissioner (Appeal) was required to render a finding in this regards whether the imported goods namely “Kapok” was of a kind used primarily in the manufacture of textiles - the order of Commissioner (Appeal) without rendering such a finding cannot be sustained.

  The matter needs to be remitted back to Commissioner (Appeal) for determining the correct classification of goods as claimed by the Appellants or as adjudged by the adjudicating authority - appeal allowed by way of remand.

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• 2019 (3) TMI 523

  100% EOU - penalty - jurisdiction of officer who issued SCN - time limitation - whether the Commissioner, Customs had competent jurisdiction to issue a show cause notice proposing confiscation, to a 100% EOU under the supervision of Central Excise Officers? - Held that:- In the case of EOU there is duality of jurisdiction. The proper Officer of Excise has jurisdiction till the goods are warehoused and are released for clearance, but beyond this stage, the proper officer is the one under Customs Act. Otherwise also, in case of exports, the Customs procedure finds conclusion at the Customs because thereafter the goods actually leave the Indian Territory. Notification 27 dated 07.07.1997 as impressed upon by the Department is perused vide entry No.7 of the said Notification Commissioner of Customs, Delhi has been declared as the proper officer to carry out Customs Procedure. Thus, the moment the manufactured goods enter the precincts of Customs Commissionerate they have to be dealt with by them and Notification No. 27 has to come into play - Stage clearance of warehoused goods onwards is a function under Customs Act, the proper Officer is definitely the Officer of Customs. The situation stands clarified vide Circular No.126 dated 12.12.1995 stands modified vide Circular No.27 of 10.05.1996. It has been clarified that there is no overlapping of jurisdiction but a clear cut demarcation of function to be performed by Central Excise Commissionerate and Customs formation.

  Since in the present case, the goods were intercepted at Mumbai Customs area. They had already reached into the jurisdiction of Customs Commissionerate. The Commissioner, Customs was the competent/ “proper Officer” to issue the impugned show cause notice - The issue of jurisdiction is therefore decided against the appellant.

  Time limitation - Held that:- Whether the show cause notice dated 19.03.1999 is within the period of 6 months in terms of Section 124 of the Customs Act? - Held that:- The detention is a case prior of acquiring convection that seizure is required and hence is different from seizure. As per Section 124 of Customs Act, period of 6 months has to reckon from the date of seizure - the show cause notice is well within the limitation period.

  Penalties - it is impressed upon by the appellant that the statement of Mr. Rakesh Kumar Bhagat dated 05.10.1998 as is relied upon by the adjudicating authority to confirm the demand and impose the penalty was retracted vide letter dated 23.11.1998, since it amounts to withdrawal of admission, if any, the same cannot be read against the appellant - Held that:- Though there has been a letter dated 23.11.1998 retracting the said admission but to our opinion same is not sufficient, in view of above discussed circumstances and also for the reason that the retraction came not from the horses mouth but by the appellants’ Counsel that too vide a letter - there is no infirmity in the order while relying upon the confessional statement of the proprietor of the appellant for confirming the impugned demand.

  Finally coming to the grievance of the appellant about the test report as prepared by Doordarshan about the impugned samples, I am of the opinion that to test the veracity of the examiner thereof, the appellant was granted the opportunity of cross-examination. Perusal thereof shows that the test report mentioned the initials AKM i.e. of Mr. Anil Kumar Mangli, who was Station Engineer, Doordarshan Kendra, Delhi and was competent to conduct the impugned test - The reply of Doordarshan Kendra dated 28.04.2006 as impressed upon by the appellant is opined to have no significance in view of the above deposition as made by the witness, who prepared the test report. The entire above evidence also falsifies any need for Department to investigate the scrap vendors from the local market from whom the appellant admittedly purchased the old video cassettes.

  Appeal dismissed - decided against appellant.

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• 2019 (3) TMI 522

  Revocation of CHA License - forfeiture of security deposit - irregularities in ‘baggage declaration’ - another grievance of theirs is that the action has been initiated while M/s Mysore Business Associates, which was in existence earlier, had ceased its operations at Chennai.

  Whether the impugned order is legal in the context of the pleading that the licence that was alleged to have been utilized for the misdemeanor in clearance of unaccompanied baggage at Chennai Customs stood cancelled much before the order of revocation in the impugned order?

  Held that:- We find no reason to disagree with Learned Authorized Representative that the licensing authority would have been influenced by an adverse finding against a proprietary concern whose proprietor subsequently sought issue of fresh licence as a partnership firm. Nevertheless, the fundamental principles of natural justice prescribes that the entity proposed to be imposed with detriment should be placed on notice of jurisdiction, and the alleged deviation from prescribed Rules of Conduct along with sufficient evidence of such misdemeanor. It is seen from the show-cause notice leading to the present proceedings that the charges are specific to the four consignments of unaccompanied baggage and, though based on the connection between M/s Mysore Business Associates and M/s Mysoor 4M, is conspicuously silent on (a) the discretion to withhold a licence on the ground of proved misconduct and; (b) the provision within the Regulation that permits a successor licence to be proceeded against for alleged misdemeanor under the erstwhile licence.

  Even if it be prejudicial to the proper functioning of a custom house to permit a licence to operate under a different garb even after committing of an offence, the relation between the action initiated and the present proceedings should have been made amply clear along with the intent to take it to its logical conclusion. We find marked lack of such forthrightness on detailed articulation of intent in the show-cause notice. It would, therefore, appear that revocation of the licence of M/s Mysoor 4M is based solely on the commonality of the individual, Shri MS Diwakar, to the two licences. This does not appear to be adequately evidenced in the show-cause notice; nor do we find an elaboration on this in the impugned order.

  It is seen from the records that the appellant had been assailing the allegation of blank documents having been given, as well as of their complicity in the forgeries, though, doubtlessly, with no evidence to substantiate these. Nevertheless, in the context of such firm rebuttal of the allegations, the original authority should have taken steps to ascertain the possible role of the appellant by appropriate forensic reference. Appellant too has also failed to undertake this task but that does not overcome the obligation of the licensing authority to establish, beyond doubt, that the appellant was involved in the fraudulent transaction.

  It is not necessary to examine the correctness of the finding pertaining to the six charges that had been held as proved by the enquiry authority. That is a matter that would have to be determined on its own if the licensing authority had proceeded against a licence which was valid when the misdemeanor occurred - appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2019 (3) TMI 521

  Stock brokers - misuse of clients’ funds / securities - Disciplinary action including monetary penalty/ suspension/ expulsion in accordance with National Stock Exchange of India Limited Rules, Regulations and Bye Laws - failure to abide the Code of Conduct for trading members under Regulation 4.5.1 and Regulation 4.5.2 of the National Stock Exchange (Capital Market) Trading Regulations, 1994 as well as under the National Stock Exchange of India Limited Rules - doctrine of proportionality - imposition and quantum of penalty - Held that:- Admittedly, the appellant had committed violation which is clear from his submissions in reply to the show cause notice. Thus, the appellant had failed to abide by the Code of Conduct for trading members under the aforesaid Rules and Regulations. The appellant had failed to act in a diligent manner and had failed to protect the interest of his clients. It was found that the appellant had failed to ensure availability of clients’ assets and misappropriated clients’ funds to meet the proprietary obligation and, therefore, the appellant failed to perform its fiduciary duty. Using clients’ funds is a misuse of clients’ funds and securities and thus, the appellant was liable for imposition of penalty.

  In the instant case, it was urged by the learned counsel that if the penalty is to be calculated under this provision, a maximum penalty of ₹ 5 lakhs could have been imposed whereas, in the instant case the NSE has imposed a penalty of ₹ 15 lakhs which was excessive - Normally, the penalty indicated in the Circular should be followed in letter and spirit and if a departure is to be made, it would be necessary for the NSE to give reasons for such departure and give a finding as to whether there was repetitive nature of the violation or the gravity of the violation was such that a higher penalty was required to be imposed. If the violation was having a high impact the seriousness and gravity of such violation was required to be indicated - In the absence of any allegation of the violation being repetitive in nature and, in the absence of any finding that the violations had a high impact or that the violations were grave in nature, having serious consequences, we find that the imposition of suspension of trading membership of 5 days was excessive and unwarranted. We are further of the opinion, that considering the admission of the appellant that they had misused the client funds and securities the imposition of penalty of ₹ 15 lakhs over and above the amount indicated in Annexure 1 was justified in the given circumstances.

  Doctrine of proportionality - Held that:- In the instant case, the doctrine of proportionality is fully applicable. In the test of proportionality, the Courts will quash the exercise of discretionary powers if it finds that there is no reasonable relation between the objective which is sought to be achieved and the means used to that end or where the penalty imposed is wholly out of proportion to the relevant misconduct. Thus action which is arbitrary or discriminatory cannot be sustained. In the instant case, the penalty of suspension, in the facts of the given case is out of proportion and thus cannot be sustained.

  Appeal allowed in part - that part of the order is quashed by which the trading membership of the appellant was suspended in all segments for a period of 5 days.

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• Service Tax

• 2019 (3) TMI 520

  Business auxiliary service - tripartite agreement - activities in relation to the conduct of examinations by Sikkim Manipal University, Manipal Academy for Higher Education and the National Association of Software and Service Companies (NASSCOM) - period from December 2007 to March 2012 - exemption under N/N. 14/2004-ST dated 20th September 2004 - scope of SCN - Held that:- We are fortunately burdened by the rigour of certainty that appears to have convinced the adjudicating authority of lack of coverage under section 65(19)(v) of Finance Act, 1994. National Association of Software and Service Companies (NASSCOM) renders the service of certifying of potential job-seekers with the laudable objective of distancing the employer from the candidate. In the circumstances, the existence of tripartite transaction, that is so essentially a fundamental requirement for ascertaining the provision of ‘business auxiliary service’, is manifest enough to discard coverage under a different taxable service.

  Scope of SCN - Held that:- The show cause notices have not invoked the applicability of any other taxable service. Without the resort to alternative classification for rejection of the proposed classification, we are able to reject the proposed classification for want of fitment within its description.

  Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2019 (3) TMI 518

  CENVAT Credit - input services - GTA Services - it was concluded that M/s Jagruti Resins or Shree Sai International has issued invoices without accompanying the goods, therefore, the cenvat credit was denied - case of the revenue is that the vehicle numbers mentioned in the invoices either not capable of transportation of goods or not transported the goods - Held that:- The invoices were issued by the dealers for transportation of the goods. Therefore, on this analysis, it cannot be alleged that vehicle No. HR/55/0076 has not transported the goods and is not having the capacity to transport the goods - Credit allowed.

  CENVAT Credit - credit sought to be denied on the ground that vehicle sold and NOC given by the RTA in 2007 and all the invoices issued after 2007 not transported the goods - Held that:- The statement of Shri Rajender Rana owner of the vehicle who stated that he has no transported the goods of M/s Jagruti Resins to M/s Vikas Spool and M/s Sparsh Polychem, Bahadurgarh, but, he has not stated that he has not transported the goods either to Shree Sai International or M/s Dhiman Engineering Corporation. Therefore, the said statement is not conclusive proof to hold that Shri Rajender Rana has not transported the goods to M/s Dhiman Engineering Corporation - In the absence of any conclusive proof, the benefit of doubt goes in favour of the appellant and moreover the statement recorded in the year 2010 for the transportation of goods during the period 2008 cannot relied upon when the transporter does not maintain records of transportation of their goods - Credit allowed.

  CENVAT Credit - Held that:- The said vehicle was also involved in the case of M/s Sharad Electronics [2015 (3) TMI 1159 - CESTAT NEW DELHI] and in the said case this Tribunal with regard to the vehicle No. HR/55H/7767 observed as without having corroborative evidence that vehicle was not used in transportation of the goods, the allegation is not sustainable. Consequently, the charge of non usage of these vehicle is not sustainable - credit cannot be denied.

  CENVAT Credit - Penalty - Held that:- The two invoices on which no vehicle number has been mentioned and the onus lies on the appellant to prove that goods has been received and through which vehicle, they have received the goods which they failed to do so. In that circumstances, the cenvat credit of ₹ 6,488/- is denied and the same is recoverable with interest for the intervening period. In the facts and circumstances of the case, penalty imposed on the appellant is dropped.

  Appeal allowed in part.

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• 2019 (3) TMI 517

  Clandestine removal - shortage found in the stock of finished goods - admissibility of statements - opportunity of cross-examination denied - principles of natural justice - Held that:- The Hon’ble Supreme Court in very clear terms has held in Andaman Timber Industries, [2015 (10) TMI 442 - SUPREME COURT], that denial of cross-examiantion of the witness whose statements were made the basis of the adjudication order is a serious flaw which makes the order a nullity, as it amounts to violation of the principles of natural justice - the provisions of Section 9D of the Central Excise Act have not been followed in the present matter. In view of this, the statements are not admissible in evidence.

  The learned Commissioner ought to have considered the retractions made by Authorized Signatory and the supervisor of the Company, even if these were made belatedly - It is also settled law that if the statements are retracted, the same should be corroborated by other material particulars - In the present matter, the Revenue has not brought on record any independent evidence to support the retracted statements. Consequently no reliance can be placed on such statements to support the charge of clandestine manufacture and removal of finished goods by the Appellant Company.

  It is trite law that third party document alone cannot be relied upon as admissible piece of evidence. It has repeatedly been held by the Courts and this Tribunal that clandestine manufacture and clearances cannot be inferred from a few documents and statements unless the allegations are corroborated and established on evidences relatable to or linked with actual manufacturing operation - In the present matter no such evidence is brought on record.

  Shortage found in the stock of finished goods - Held that:- There is nothing on record to show that actually the stock of laminated sheets were physically checked by the officers. The Revenue has not controverted the contention of the Appellant that in the given time of 9-10 hours, the officers were present in the factory premises, it was not feasible to verify the stock of laminated sheets of different sizes physically - the Revenue has not succeeded in establishing that there was any shortage of finished goods in the factory of the appellant.

  Demand set aside - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 516

  Valuation - mis-declaration of value - job-work - inclusion of amount paid by appellant no.2 as royalty to their parent concern in the value for discharging the central excise duty - period 2004-05 to 2007-08 - time limitation - Held that:- Undisputedly appellant is a job worker for appellant no. 2; manufactures Vicks Action 500 and Vicks Inhalers; discharges the duty liability on the said products based upon the formula of valuation as settled by the Apex Court in the case of Ujagar Prints [1989 (1) TMI 124 - SUPREME COURT OF INDIA] i.e. cost of materials plus job work charges (which includes job workers profit); filed regularly the cost sheets, declarations etc., with the authorities as being job worker of the appellant no.2.

  In the absence of any knowledge of any payment made by appellant no. 2 to Procter & Gamble, USA, it cannot be held that appellant had misdeclared the value of the goods manufactured on job work basis. Further, in the entire proceedings, the Revenue has not disputed that appellant had been filing cost sheets along with the declaration made by appellant no.2 when they manufactured and cleared Vicks Action 500 and Vicks Inhalers from their factory premises. If that be so, alleging that there was a misdeclaration of the value in the case in hand seems to be unfounded and incorrect - also reading the Apex Court Judgment in the case of Ujagar Prints the discharge of the duty liability by the appellant based upon the cost of material plus job works charges during the period in question is the correct law followed and was followed.

  Time limitation - Held that:- Undisputedly, the declaration of the price which has been made by appellant is based upon the cost sheets given by appellant no. 2 to him and discharged the duty liability accordingly. It is also undisputed that the appellant has been filing the monthly returns with the authorities. If that be so a show cause notice dated 03-08-2009 invoking the extended period for demanding the duty for the period 2004- 05 to 2007-08 is blatantly hit by limitation.

  Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 515

  Validity of SCN - Suppression of facts - extended period of limitation - Held that:- The SCN is not ipso facto adjudication; just a proposal which culminates in the adjudication order and during the adjudication proceedings, the adjudicating authority looks into all aspects of law, facts and explanations offered by the assessee, the final order and the demand follows thereafter and hence the arguments of the Ld. Consultant that for proposing entire demand, in the SCN itself is bad, cannot be accepted and hence, the same is rejected.

  One hand, appellant claims that there was no suppression, longer period of limitation should not have been invoked; on the other hand it doesn’t explain difference in closing stock as at the end of the year and the opening stock as of next year. On being pointed out, it admits the duty liability but gives a working as to correct duty liability. Had there not been the show cause notice, the appellant would not have come forward so gratefully, as there would not have arisen any occasion for an assessee to do so, voluntarily.

  Appeal dismissed - decided against appellant.

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• 2019 (3) TMI 514

  Utilization of CENVAT credit - carriage inward - financial year 2007-08 to 2009-10 - Whether a manufacturer having credit balance in his account can utilize that credit for payment of Service Tax on goods transport by road? - Rule 3 (4) of CCR - time limitation - scope of SCN - Held that:- CENVAT Credit can be utilized for payment of Service Tax on any output service - Thus, the reasoning of the adjudicating authority that since GTA do not qualify to be an output service as such is not eligible for Cenvat Credit. Hence payment of Service Tax thereof cannot be made from the accumulated Cenvat Credit is opined as incorrect. Though there are several other proviso attached to this sub-rule (4) but none of those provisos are applicable to the given situation.

  There is an explanation that CENVAT credit cannot be utilized for payment of service tax in respect of services where the person liable to pay tax is the service recipient. But this explanation got incorporated in this Rule vide Notification No.28 dated 20th June, 2012 with effect from 1st July, 2012. The period here is 2007-08 to 2009-10. Hence, the explanation cannot be made retrospectively applicable to the impugned period for which the above condition holds a good law that cenvat credit may be utilized for payment of Service Tax on any output service (including GTA service).

  Extended period of limitation - Held that:- Discharging the liability by utilizing the cenvat credit is otherwise a situation of Revenue neutrality, due to which, no mala fide can be attributed to the appellant that there was an intention to cause a loss to Government Exchequer - Department was not entitled to invoke the extended period of limitation.

  Scope of SCN - Held that:- The order under challenge has gone beyond the scope of show cause notice by confirming the demand till December, 2010, despite that, it was proposed till 31st December, 2009. In the light of entire above discussion, the order under challenge is held not sustainable.

  Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 513

  CENVAT Credit - input services - civil construction service done on works contract basis - period from 1.1.2016 to 31.3.2017 - Held that:- It is seen that the works undertaken are in the nature of flooring works, fencing, gate post and charges for repairing work etc. It is very much clear from the documents that the works undertaken are in the nature of repair and maintenance work. The exclusion clause in the definition of input service excludes only works contract service which is in the nature of construction of civil structure, part thereof or laying of foundation or support structure for capital goods - The works undertaken by the appellant does not fall under this category.

  Further, the inclusion part of the definition allows service in the nature of repair and maintenance as well as modernization of factory / premises.

  Credit allowed - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 512

  Clearance of goods to the construction industry - sale to institutional/industrial consumers - concessional rate of duty under SI. No. 1C of N/N. 04/2006-CE dated 01/03/2006 and N/N. 12/2012-CE dated 17/03/2012 - Held that:- The builder and construction companies qualify as institutional/industrial consumers, hence the benefit of the said Notifications would be available to the assessee - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 511

  Time limitation - Valuation - stock transfer - wrong assessable value adopted by the appellant - revenue neutrality - difference of opinion - Held that:- As there are difference of opinion, the matter is referred to Hon'ble President, to refer the matter to third member to determine: i. Whether in the facts and circumstances of the case, the appeal filed by the appellant should be allowed on the ground of limitation as held by the Member (Judicial), or should be rejected as there is sufficient evidence to invoke extended period of limitation for demanding the Central Excise duty as held by the Member (Technical)? and ii. Whether the revenue neutrality can be invoked in the present case for determining the issue of limitation in the present case?

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• 2019 (3) TMI 519

  CENVAT Credit - input services - GTA Services - period after 01.4.2008 - Held that:- The Adjudicating Authority held that in view of clarification given by the Board, vide letter dated 02.2.2006, the contention of the assessee was accepted. However, the next three sentences overturned the case of the assessee. The Adjudicating Authority held that the service tax credit distributed by the Regional Distribution Centres and the Corporate Office as discussed supra have no nexus with the manufacturing activity of the assessee and that the credit availed by the assessee was not in order.

  The issue, which should have been decided by the Adjudicating Authority, is as to whether the point of sale is the RDC as contended by the assessee. In fact, the Tribunal partly allowed the assessee's appeals on input service credit availed in all the RDCs in respect of renting of premises, courier, telephone, security services, etc., under Rule 2(l) of the CCR irrespective of the amendment i.e. before and after 01.4.2008 and also set aside the penalty. However, in respect of GTA services, the Adjudicating Authority and the Tribunal disallowed the input credit availed by the assessee beyond the RDCs/Corporate Office from 01.4.2008 and held that they are not eligible for the purpose of Rule 2(l) of the CCR as it stood after 01.4.2008.

  To arrive at the correct conclusion, the Adjudicating Authority should have taken note of the decision of the Hon'ble Supreme Court in the case of CCE, Belgaum Vs. Vasavadatta Cements Ltd. [2018 (3) TMI 993 - SUPREME COURT]. The issue, which fell for consideration before the Hon'ble Supreme Court was as to what interpretation has to be given to input services, which is defined in Rule 2(l) of the CCR. The appeals before the Hon'ble Supreme Court all related to a period prior to 01.4.2008 and the said Rule stood amended with effect from 01.4.2008.

  The issue requires to be examined in depth on the factual matrix and the Adjudicating Authority shall take note of the decision of the Hon'ble Supreme Court in the case of Vasavadatta Cements Ltd. - Appeal allowed by way of remand.

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• 2019 (3) TMI 510

  Refund of CENVAT Credit - clearances to 100% EOU - deemed exports - rejection on the ground of disbarment owing to export under claim for rebate which was, therefore, in dissonance with the second proviso to rule 5 of CENVAT Credit Rules, 2004 -rule 18 of Central Excise Rules, 2002 - Held that:- The sole reason for rejection of the refund claim is rendered unsustainable. The upholding of the rejection of this very claim of refund on a different ground by the first appellate authority is contrary to the principles of natural justice.

  The first appellate authority has approved of the order of rejection of the claim for refund for the subsequent period on the ground of availment of the privilege of export under claim for rebate during the same period while claiming the refund on deemed exports effected to eligible entities - We find a logical inconsistency in this finding; export under claim for rebate, as per rule 18 of Central Excise Rules, 2002, is restricted to, and applicable only for, physical exports. There is no scope for invoking the privilege of rule 18 of Central Excise Rules, 2002 for clearances effected to ‘100% Export Oriented Units’ licensed in accordance with the Foreign Trade Policy notified under the Foreign Trade (Development & Regulation) Act, 1992.

  The impugned order is flawed and the appellant-assessee is entitled to the claim for refund of accumulated CENVAT credit of duties/taxes on inputs/input services used in the manufacture of goods supplied as ‘deemed exports’ - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2019 (3) TMI 509

  Principles of natural justice - opportunity of personal haring not provided - case of petitioner is that the respondents have not afforded adequate opportunity and have also not conducted proper enquiry - TNVAT Act - Held that:- As seen from the provisions of Section 22 r/w Section 27 of the TNVAT Act, 2006, adequate opportunity will have to be granted to the petitioner before any adverse order is passed against them. This Court in an earlier judgment has interpreted the word 'reasonable opportunity' found in Section 27 to mean and include the right of personal hearing. In the instant case, no such opportunity was given by the respondents before passing the impugned order. Therefore, this Court is of the considered view that the respondents have violated the principles of natural justice by not affording adequate opportunity to the petitioner.

  The matter is remanded back to the respondents to redo the assessment afresh after giving adequate opportunity to the petitioner including the right of personal hearing and pass final orders in accordance with law - petition allowed by way of remand.

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• 2019 (3) TMI 508

  Direction to furnish the records in support of the alleged purchases effected - innocuous prayer - It is the case of the petitioner that he does not know the alleged seller of the goods and further, it is his case that the alleged sale transaction is said to have taken place during the time when his mother was alive and was the Proprietrix of the business.

  Held that:- The prayer sought for by the petitioner is only to cross examine the seller and transporter of the goods, which were allegedly purchased in the years 2009-2010, 2010-2011 & 2011-2012 respectively, during the time when the petitioner's mother was alive and was the Proprietrix of the business. The respondent, being the State, are also interested in finding out the truth. That being the case, this Court is of the considered view that no prejudice will be caused to them if the prayer sought for in this writ petition is granted to the petitioner.

  This Court directs the respondent to furnish the records in support of the alleged purchases effected in the years 2009-2010, 2010-2011 & 2011-2012 respectively to the petitioner and issue summons to the third parties, who had sold the goods to the petitioner for producing the records and permit the petitioner to conduct the cross examination of the third parties and conduct a detailed inquiry before proceeding - petition disposed off.

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• 2019 (3) TMI 507

  Principles of natural justice - imposition of penalty - no personal hearing provided - TNVAT Act - case of petitioner is that the receipt of the tax has been duly acknowledged in the impugned assessment order, the second respondent without any basis and without giving sufficient opportunity to dispute the payment and also without giving a chance of personal hearing has arbitrarily directed the petitioner to pay the penalty.

  Held that:- As seen from the circular dated 03.02.2014 issued by the Principal Secretary/Commissioner of Commercial Taxes, Chepauk, Chennai-5, which is also not disputed by the learned Additional Government Pleader, it is clear that the petitioner ought to have been given personal hearing, whether he had opted for the same or not.

  In the instant case, it is the case of the second respondent that pre-assessment notice was issued to the petitioner, which was received by him. But, he did not respond to the pre-assessment notice and therefore, sufficient opportunity has been afforded to the petitioner. As seen from the impugned demand, it is claimed by the second respondent that the petitioner did not pay huge amount of tax for the purchase of goods - this Court is of the considered view that the respondents have violated the principles of natural justice by not affording sufficient opportunity including the right of personal hearing to the petitioner before passing the impugned order.

  The matter is remanded back to the second respondent for fresh consideration - appeal allowed by way of remand.

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• 2019 (3) TMI 506

  Principles of natural justice - Validity of assessment order - It is the case of the petitioner that no notice was received by the petitioner before passing the impugned proceedings and no personal hearing was given to the petitioner to enable him to raise objections to the demand - Held that:- The petitioner ought to have been given personal hearing, whether he had opted for the same or not.

  This Court is of the considered view that the respondents have violated the principles of natural justice by not affording sufficient opportunity including the right of personal hearing to the petitioner before passing the impugned demand - the matter is remanded back to the second respondent for fresh consideration and the second respondent after affording sufficient opportunity to the petitioner including the right of personal hearing - appeal allowed by way of remand.

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