TMI Tax Updates - e-Newsletter
May 15, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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GST:
Late fee for late filing of FORM GSTR-3B waived for the class of registered persons whose declaration in FORM GST TRAN-1 was submitted but not filed on the common portal on or before the 27th day of December, 2017.
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GST:
Classification of goods - Fludeoxyglucose or 'FDG' - Even if the compounds of radioactive isotopes may have uses in medicine, they fall in Heading 2844 only. We very determinedly feel that we need not enter into any discussion or any case law as to what would be a medicament and the properties thereof. - AAR
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GST:
Classification of Service - Rate of GST - turnkey Engineering, Procurement and Construction (EPC) Contract for construction of a solar power plant - cannot be held as supply of immovable property or in the nature of composite supply - to be taxed as Works contract under GST - AAR
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Income Tax:
TDS u/s 194C OR 194J - scope of work of the contracts - As the payments made to the vendors for the work done by them by deploying semi-skilled personnel, did not involve any technical or professional knowledge on their part, the same could not be brought within the sweep of Sec. 194J and had rightly been subjected to deduction of tax at source by the assessee under Sec. 194C - AT
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Income Tax:
Addition being share capital and premium by invoking the provisions of 68 - no proof of identity and creditworthiness of all the new shareholders as well genuineness of transaction of raising share capital - Additions confirmed - AT
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Income Tax:
Reassessment u/s 147 - in these facts that the assessee could not have placed on record the required documents within any notice at all before section 133(6)/131 process - Mere on non production of the notice(s) in question; in our considered view, is not sufficient to conclude that the AO had not issued sec. 143(2) and sec. 142(1) - AT
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Customs:
Implementation of Export Transhipment (ETP) Module for movement of export cargo from J.N.Port to gateway port in ICES-reg.
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Customs:
Implementation of the Track and Trace system for export of Pharmaceuticals and drug consignments
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Customs:
‘Standard Operating Procedure’ to be followed for Export and Import at Bharat Mumbai Container Terminal (BMCT), JNCH
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Customs:
Valuation - assorted frames (plastic optical frames) and sunglasses - The declared value in this case, cannot be rejected and value cannot be re-determined in absence of any plausible evidence regarding mis-declaration of the value of the goods - AT
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IBC:
Corporate insolvency process - the corporate debtor being confirmed the balance amount outstanding as per the above referred documents the claim is not at all barred by limitation as alleged. - Tri
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IBC:
Committee of Creditors liability to bear the expenses incurred by the Insolvency Resolution Professional - the applicant, who has filed the application under Section 7 or 9 of the I & B Code, is required to bear the expenses which is to be reimbursed by the committee of creditors to the extent the Committee of Creditors ratifies the same. - AT
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Service Tax:
Valuation - value of goods / materials supplied free of cost by service recipient and used for providing taxable service of construction and industrial complex is not to be included in “gross amounts” because no price is charged for that by the assessee / service provider - AT
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Service Tax:
Classification of services - services were provided under the works contract to Delhi Metro Rail Corporation (DMRC) as a main contractor or as a sub-contractor of M/s IDEB - whether classified under Commercial and Industrial Construction Service or not? - demand set aside - AT
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Service Tax:
Renting of Immovable property service - Inasmuch as separate agreement has been entered into by the appellant with their customers so on renting out of immovable property and renting out of equipment, it cannot be said that these are part of the immovable property - AT
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Service Tax:
Banking and other Financial Services - reverse charge mechanism - The foreign banks while remitting the money to the Indian Bank, deduct their charges for collection of bills which in turn are charged by the Indian Banks from the appellants. When it is so, then the appellant are not entitled to pay the service tax. - AT
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Service Tax:
Commercial or Industrial Construction Service - services provided to Educational Society, which is non-commercial organization - the Service Tax demand cannot be confirmed under that category of service - AT
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Central Excise:
Valuation - goods cleared to sister concern - Rule 8 of Central Excise Valuation Rules specifically prescribes that the valuation for purpose of charging of excise duty is required to be made on the basis of 110% of the value of the goods ascertained as per the CAS-4. - AT
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2018 (5) TMI 855
Classification of goods - Fludeoxyglucose or 'FDG' - classifiable under Chapter 3006 3000 of the Central Excise Tariff Act, 1985 or otherwise - Whether chemicals used as pharmaceuticals that are inorganic or/ and of organic nature shall merit classification only under Chapter 28 & 29 and not under Chapter 30 which has been specifically carved out for chemical pharmaceuticals by makers of law? - rules of interpretation.
Held that: - Fluorodeoxyglucose is a fluoro derivative of 2-deoxyglucose, usually referred to as 18F-FDG or FDG. FDG is most commonly used in positron emission tomography (PET) medical imaging equipment. After injecting FDG into the patient, the PET scanner can construct an image that reflects the distribution of the FDG in vivo. Then, the nuclear medicine physician or radiologist evaluates these images to make a diagnosis of various medical health conditions - In addition, FDG-PET also has been used for the diagnosis of Alzheimer's disease. In the field of nuclear medicine, compound 18F-FDG, besides its important use in cardiology and neurology, it also exhibits cancer tissues that can be detected by conventional methods, or correct the misdiagnosis of these diseases.
18F is a radioisotope AND fluorodeoxyglucose (18F-FDG) is a compound. And since all point to the impugned product being a compound of the radioisotope 18F, the Tariff Heading which covers the situation is Heading 2844 which is for "radioactive chemical ELEMENTS AND RADIOACTIVE ISOTOPES (INCLUDING THE FISSILE OR FERTILE CHEMICAL ELEMENTS AND ISOTOPES) AND THEIR COMPOUNDS; MIXTURES AND RESIDUES CONTAINING THESE PRODUCTS". Heading 2844 covers compounds of radioactive isotopes - 18F is a radioisotope AND fluorodeoxyglucose (18F-FDG) is a compound. And since all point to the impugned product being a compound of the radioisotope 18F, the Tariff Heading which covers the situation is Heading 2844 which is for "radioactive chemical ELEMENTS AND RADIOACTIVE ISOTOPES (INCLUDING THE FISSILE OR FERTILE CHEMICAL ELEMENTS AND ISOTOPES) AND THEIR COMPOUNDS; MIXTURES AND RESIDUES CONTAINING THESE PRODUCTS". Heading 2844 covers compounds of radioactive isotopes - there is no iota of doubt that the impugned product, a compound of the radioisotope 18F, is covered by the Heading 2844.
Even if the compounds of radioactive isotopes may have uses in medicine, they fall in Heading 2844 only. We very determinedly feel that we need not enter into any discussion or any case law as to what would be a medicament and the properties thereof.
The Tariff item 28444000 reads "Radioactive elements and isotopes and compounds other than those of sub-heading 2844 10, 2844 20 or 2844 30; alloys, dispersions (including cermets), ceramic products and mixtures containing these elements, isotopes or compounds; radioactive residues". Hence, the impugned product would fall in the aforesaid Tariff item
Ruling: - The product 'Fludeoxyglucose1 or 'FDG' is not classifiable under Chapter 3006 3000 of the Central Excise Tariff Act, 1985 or the Customs Tariff Act, 1975 (51 of 1975).
A product is to be classified as per the Tariff, Rules of interpretation and other provisions in respect of classification as applicable. The question is of a very general nature and is not for classification of any specific product. In view thereof, this question cannot be entertained under the provisions of section 98 of the GST Act.
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2018 (5) TMI 854
Classification of Service - Rate of GST - Composite supply or works contract - Nature of supply - Supply of immovable property or supply is of goods and services under a single contract to be construed as composite supply or not - supply of turnkey Engineering, Procurement and Construction ('EPC') Contract for construction of a solar power plant - levy of GST
Held that: - It is a big project and has a permanent location. Such a plant would, therefore, have an inherent element of permanency. - Further, here the output of the project i.e the power would be available to an identifiable segment of consumers. Thus, this output supply would involve an element of permanency for which it would not be possible and prudent to shift base from time to time or locate the Plant elsewhere at frequent intervals. - The project would be using goods which would be imported. Are such high end equipments frequently dislocated? Would there not be damage to the materials if moved places frequently and if so, would it perform as effectively as it would have when without damage? The questions itself would give the answers. - The definition of the word "Commissioning" as found in the agreement brings out the enormity of the scale of operations and how the transaction would fall in the scope of an immovable property.
An overview of all above makes us observe that the impugned transaction for supply of the Solar Power Plant which includes engineering, design, procurement, supply, development, testing and Commissioning is a "works contract" in terms of clause (119) of section 2 of the GST Act.
Ruling:- The plants in question were not immovable property so as to be immune from the levy of GST duty - Since the transaction is treated as a "works contract" and not as a "composite supply" , there would be no relevance of "principal supply". And therefore, there arises no occasion to answer the question as to what would be the "principal supply" in the impugned transaction - In the absence of any documents before us, we would not be able to deal with the issue of benefit of concessional rate of 5% of solar power generation system and parts thereof.
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Income Tax
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2018 (5) TMI 853
Reopening of assessment - deduction u/s 10A - Held that:- AO can reassess but not review. See CIT v. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA ]
The higher total income of ₹ 2,49,52,270/- found by the AO was assessed on the basis of reduced profit resulting from sales return. Sales return was the cause, as per the assessee, the effect of which was reduction in the profit figure qualifying for deduction under the provisions of section 10A of the Act. The exercise that resulted in the intimation, done on the basis of material and evidence then available, cannot be said to have been done in a manner which allowed some income of the assessee to have escaped assessment to tax. As such there is nothing wrong with the directions given by the said appellate authority. No substantial question of law is involved.
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2018 (5) TMI 852
Additions towards share of the assessee in the undisclosed profit of the partnership firm - taxability of undisclosed income detected in the course of search in the case of partnership firm where the assessee is a partner - income can be taxed only in the hands of the partnership firm - Held that:- We find ourselves in complete agreement, in principle, with the said proposition raised on behalf of the assessee-partner that the undisclosed income once already considered for taxation in the hands of the partnership firm cannot be taxed once again in the hands of the partner. However, in the same vein, we find that question as to whether the undisclosed income in controversy, forms part of the additional income declared before the Settlement Commission or not, is essentially a question of fact. This aspect has not been raised before the lower authorities, and thus remained unanswered. Hence, as a measure of fair-play, the issue requires to be remanded back and restored to the file of CIT(A) to re-appreciate the limited aspect as to whether income in dispute has already been included in the additional income offered by the partnership firm before the Settlement Commission, directly or indirectly.
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2018 (5) TMI 851
Addition on account of transfer pricing adjustment - international transaction of ‘Provision of marketing support services’ - comparability analysis - Held that:- Assessee's services encompass Liaison activities, Market information activities and Sales support to the existing customers in India. Under the Liaison activities, it has been stated that the market in India for alcoholic beverages, being the product which is sold by the Head office in India, is a regulated market and falls in the State List of the Constitution, implying that each State of the country has its own individual policies and regulations. The assessee as a branch office is in rationalization of policies in respect of selling and distribution of alcoholic beverages. Under the head Market information activities, it has been mentioned that the assessee is engaged in providing information of Indian markets and assists its head office in creating market for them. Under the last category, the assessee is extending support to the existing customers in India.
Thus companies functionally dissimilar with that of assessee need to be deselected from final list.
Matter remanded back to the file of AO/TPO for a fresh determination of the ALP of the international transaction of ‘Provision of Marketing support services’ in consonance with our above directions. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such fresh proceedings.
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2018 (5) TMI 850
TDS u/s 194C OR 194J - scope of work of the contracts entered into by the assessee with the parties/contractors - tds liability - TCS had entered into an agreement with the assessee company for creation of Geographical Information system in the State of Maharashtra and Gujarat - Held that:- As the payments made to the vendors for the work done by them by deploying semi-skilled personnel, did not involve any technical or professional knowledge on their part, the same could not be brought within the sweep of Sec. 194J and had rightly been subjected to deduction of tax at source by the assessee under Sec. 194C.
We thus being of the view that the assessee had correctly deducted tax at source on the payment made to the vendors, therefore, no disallowance under Sec.40(a)(ia) as regards the same was liable to be made in the hands of the assessee. We thus finding no infirmity in the order of the CIT(A), uphold the same in context of the issue under consideration.- Decided against revenue
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2018 (5) TMI 849
Addition being share capital and premium by invoking the provisions of 68 - no proof of identity and creditworthiness of all the new shareholders as well genuineness of transaction of raising share capital - Held that:- The perusal of the financial statements does not reveal that these companies are into any organised business of certain magnitude while perusal of the financial statements typically reveals and points towards peculiarity of being typical a shell companies which instead of doing any genuine business are undertaking huge voluminous movement of money from one entity to another entity.
The assessee is not able to prove creditworthiness of these three investing companies and genuineness of these transactions of issuing share capital of ₹ 300 lacs( inclusive of share premium )by the assessee company could also not be proved and the additions were rightly made by the AO within deeming fiction of Provisions of Section 68 of the Act.
Merely saying that return of allotment in form no 2 was filed with the Ministry of Corporate Affairs or Resolutions were passed by the assessee or these companies have Corporate Identification Numbers is not sufficient as these are merely ministerial/administrative functions which needs to be done in any case by all the companies allotting shares but the moot question is as to the creditworthiness of these three new share holders to invest such a huge amount of ₹ 300 lacs in assessee company as well whether these share transactions raising ₹ 300 lacs from these three new shareholders at huge valuation/share premium were genuine and justified which we have wide detailed reasoning above held otherwise.
Additions confirmed - Decided against assessee.
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2018 (5) TMI 848
Addition on transfer pricing adjustment in the international transaction of ‘Management group cost’ - MAM - CUP method - Held that:- It is fairly settled through a catena of decisions that the CUP is the most appropriate method to determine the ALP of an international transaction because it seeks to compare the price charged or paid for property transferred or services rendered, provided proper comparables are available. It is under this method alone that the price charged or paid is directly compared with the price charged or paid in an uncontrolled comparable transaction.
Thus set aside the impugned order and remit the matter to the file of AO/TPO for a fresh determination of the ALP of the international transaction, primarily, under the CUP method. In case, the TPO finds that the CUP method cannot be applied either due to non-availability of the relevant data or for some other genuine reasons, he is free to apply any other appropriate method for a fresh determination of the ALP of the international transaction of ‘Management Group cost’.
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2018 (5) TMI 847
Reassessment u/s 147 - Assessee contended that, AO had not issued notices sec. 143(2) and sec. 142(1) - another appeal against Revision u/s 263 - Held that:- The very auditor had been continuing to represent the assessee’s right from reassessment to section 263 proceedings as well as the consequential assessment framed on 26.07.2014. We take note of the assessee’s reply filed before the CIT as well defending the above assessment to have been completed after calling necessary books, bills, vouchers as well as supporting documents for examination as produced at its behest followed by notice / summons issued u/s. 133(6) and 131 of the Act; respectively.
We are of the view in these facts that the assessee could not have placed on record the required documents within any notice at all before section 133(6)/131 process. The assessee’s instant substantive ground therefore appears to be as well worded one wherein it has sought to reiterate the CIT’s observation only that the AO had not issued the said statutory notice(s) before completing the assessment in question.
We conclude in view of these facts that the CIT’s said observation is against the assessment records. Mere on non production of the notice(s) in question; in our considered view, is not sufficient to conclude that the Assessing Officer had not issued sec. 143(2) and sec. 142(1) notices which is view of the above overwhelming supportive evidence in the nature of assessment proceedings before us. We quote sec. 136 of the Act to conclude that the legislature has indeed treated proceedings before us Income Tax authorities to be judicial proceedings as well.
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Customs
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2018 (5) TMI 846
Valuation - rejection of declared value - assorted frames (plastic optical frames) and sunglasses - Held that: - the market enquiry report submitted by the Department clearly shows that the subject goods were substandard, outdated and were of inferior quality - the approximate sale price submitted by the traders/ shopkeepers with regard to the disputed goods was also disputed by the appellant. The Department has also not brought on any evidence to prove that over and above the invoice value, the appellant had paid any other or further amount towards the purchase of the imported goods.
The declared value in this case, cannot be rejected and value cannot be re-determined in absence of any plausible evidence regarding mis-declaration of the value of the goods - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 845
Penalty - smuggling - illegal imports - mis-declaration of goods - Held that: - From the facts of the case, as uncovered by the DRI investigation, it is evident that Shri PK Ralli had colluded with Shri BK Goyal in arranging the import and smuggling of goods in the name of fictitious firm M/s Mehak Overseas - penalty upheld - appeal dismissed - decided against appellant.
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2018 (5) TMI 844
Penalty u/s 114 of CA - Smuggling of prohibited goods - Red Sanders - Held that: - excepting the job profile i.e. booking of airlines at negotiated price and receiving of E-mails from the concerned persons, the appellant did not state anything with regard to his knowledge of exportation of prohibited Red Sanders - it is not the case of Revenue that the appellant was either involved in smuggling of the prohibited goods, or encouraged and supported the wrong doer in doing the wrongful act, in attempting to export the goods - penalty u/s 114 cannot be sustained - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 843
Maintainability of appeal - interference with order which has already been sustained by the Tribunal - Held that: - we cannot interfere in the order which has already been sustained by the Tribunal, especially when the High Court upholds the Tribunal order. Present appeal is nothing but an example of misuse of the judicial process - appeal dismissed.
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2018 (5) TMI 842
Maintainability of appeal - time limitation - Condonation of delay in filing appeal - Held that: - the Hon’ble Supreme Court in the case of Singh Enterprises vs. Commissioner of C.Ex. Jamshedpur [2007 (12) TMI 11 - SUPREME COURT OF INDIA] observed that the Commissioner (Appeals) has power to condone the delay within the period of 60 + 30 = 90 days. The Commissioner (Appeals) has no power to condone the delay beyond the period of 90 days - In the instant case, the delay is more than 90 days (08 months).
The Commissioner (Appeals) has rightly dismissed the appeal on the ground of limitation - appeal dismissed - decided against appellant.
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2018 (5) TMI 841
Revocation of CHA License - forfeiture of security deposit - case of appellant-CHA is that proceedings initiated by the SCN dated 23/08/2017 was time barred for violation of Regulation 20 of CBLR, 2013 - Held that: - Regulation 20 has prescribed the time limit of 90 days for issue of SCN to the Custom Broker for taking as any disciplinary action against the Custom Broker.
In the present case the alleged offence has been taken cognizance of by the disciplinary authority on the basis of the Order-in-Original dated 28/04/2017 in which the alleged customs offence was adjudicated and decided. Hence this is to be regarded as the Offence Report and the period of 90 days from the date of such order would expire towards the end of month of July, 2017. Since the SCN has been issued beyond the period of 90 days, i.e. on 23/08/2017, the proceedings initiated are hit by time bar specifically provided in Regulation 20.
It is settled law that the time limit prescribed in the CBLR 2013 for are sacrosanct and cannot be violated.
Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 840
Drawback claim as per Section 129A of the Customs Act, 1962 - Jurisdiction of Tribunals to decide such claims - Held that: - the jurisdiction of the Tribunal is specifically barred under Section 129A to entertain such claims - Tribunal does not have jurisdiction and on such issues, only the Revisionary Authority has the power to decide the drawback claims - appeal dismissed being not maintainable.
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Insolvency & Bankruptcy
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2018 (5) TMI 858
Initiation of corporate insolvency resolution process by financial creditor - Held that:- Form and manner of the application has to be the one as prescribed. It is evident from the record that the application has been filed on the proforma prescribed under Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of IBC. We are satisfied that a default has occurred and the application under sub section 2 of Section 7 is complete; and no disciplinary proceedings are pending against the proposed Interim Resolution Professional. Thus, the application warrant admission.
This petition is admitted and Mr. Huzefa Fakhri Sitabkhan, 1012, Dalamal Towers, Free Press Journal Road, 211, Nariman Point, Mumbai -400021 is appointed as an Interim Resolution Professional.
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2018 (5) TMI 857
Corporate insolvency process - Corporate Debtor has committed default in making payment - whether default occurred as alleged by the Financial Creditor? - Claim barred by limitation - authority to file the petition - Held that:- The objections raised are vague and inconsistent with that of the documents admittedly executed by the corporate debtor. The petitioner produced Annexure-”B” proving the authority given to the Asstt. General Manager Mr. Bishwatosh Misra for signing a petition like this nature. The above said authorisation was issued by the Chairman, SBI as per notification dated 2nd May 1987. As per clause A in the notification all officers in the grade of SMGS IV and above are empowered to do business of the Bank in respect of all matters coming in discharge of functions of the posts held for the time being. Annexure -B proves special authority to file a petition before NCLT also. So the petitioner has got the authority to file a petition like the petition in hand. The contention of the corporate debtor that petitioner has no authority is therefore found devoid of any merit.
Annexure- “C” is the calculation of the amount due from the corporate debtor. It shows that total outstanding due on the corporate debtor on 31/12/2017 is ₹ 469,29,69,983.63 /-. As per Annexure C the date of default in regards cash credit and term loan is on 31-03-2016. It is also clear that corporate debtor has committed default as alleged by the petitioner. The total outstanding as on 31-12-2017 is ₹ 469,29,69,983.63, which include interest, penal interest which the corporate debtor failed to pay. The contention that the calculation of the amount in default is wrong also found without any supporting data.
The acknowledgment of liability evidently found executed by the corporate debtor i.e. Annexure LL dated 2nd April 2016, Annexure MM, dated 19th August 2017, Annexure NN date 2nd May, 2017 and Annexure OO dated 7th April, 2017 are evidently executed by the corporate debtor. Therefore, the corporate debtor being confirmed the balance amount outstanding as per the above referred documents the claim is not at all barred by limitation as alleged.
The petition filed by the financial creditor under Sec.7 of the Insolvency & Bankruptcy Code, 2016 is hereby admitted for initiating the Corporate Resolution Process and declare a moratorium and public announcement in accordance with Sec.13 and 15 of the IBC, 2016.
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2018 (5) TMI 856
Committee of Creditors liability to bear the expenses incurred by the Insolvency Resolution Professional - Held that:- As per Regulation 33, the applicant means the person who files the application under Section 7 or 9 of the Insolvency and Bankruptcy Code, 2016 who generally proposes the name of the ‘interim resolution professional’. Such applicant negotiates the fee to be charged and paid to the interim resolution professional. As per the provision aforesaid, the Adjudicating Authority is required to fix the expenses where the applicant has not fixed expenses under sub-regulation (1) of Regulation 33. In such case, the applicant, who has filed the application under Section 7 or 9 of the I & B Code, is required to bear the expenses which is to be reimbursed by the committee of creditors to the extent the Committee of Creditors ratifies the same.
In the present case, the application was filed by the respondent(s) under Section 7 of the I & B Code, 2016 and under Section 9 of the I & B Code, 2016. The name of resolution professional were suggested by the applicant of such application. Therefore, as per sub-regulation (1) of Regulation 33, the applicant is liable to incur the expenses of resolution professional. Thereafter, the applicant will get the amount reimbursed by the Committee of Creditors to the extent the amount as is ratified by the Committee. The expenses will include all expenses as explained above in clause (4) of Regulation 33.
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Service Tax
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2018 (5) TMI 838
Levy of service tax - appellant provided railway siding facility and also for providing Cargo Handling Services by way of lifting and transporting the Coal Ash/ Bed ash from its effluent treatment plan within its factory premises - Held that: - as per the definition, the appellant has neither provided any transportation nor any labourers for execution of the said work. Therefore, it cannot be said that the appellant is providing any cargo handling services in respect of the transportation of coal ash/bed ash - appeal allowed.
Renting of immovable property service - Held that: - Explanation 2 was inserted w.e.f. 16.05.2008 by Section 90 of the Finance Act, 2008. Hence, renting of space prior to 16.05.2008 without transfer of possession or control is outside the purview of service tax - Although in the instant appeal, the period of dispute is prior to 16.05.2008 but the appellant has failed to submit any documentary evidence in support of their claim that they have rented out the railway siding to other parties, without transfer of possession or control - the appellant is liable to pay the service tax under the category of “renting of immovable property service” alongwith interest and penalty.
Appeal allowed in part.
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2018 (5) TMI 837
Valuation - includibility of value of free supply made by service recipient, in the assessable value for determining service tax liability - Held that: - Hon'ble Apex Court in their landmark judgment in the case of Commissioner of Service Tax Etc. Versus M/s. Bhayana Builders (P) Ltd. Etc. [2018 (2) TMI 1325 - SUPREME COURT OF INDIA], has unequivocally held that value of goods / materials supplied free of cost by service recipient and used for providing taxable service of construction and industrial complex is not to be included in “gross amounts” because no price is charged for that by the assessee / service provider - decided in favor of assessee.
Demand of service tax on the TDS amounts and not included by the assessees - Held that: - there is no doubt that these amounts are required to be included in the assessable value - there are merits in the submission of the Ld. Advocate that they would be eligible for 67% abatement on the amount of TDS and accordingly the service tax liability is required to be re-quantified - matter on remand.
Penalties - Held that: - it cannot be denied that the issue was very much mired in confusion and litigation for quite some time. In the circumstances, there was reasonable cause on the part of the assessee in his failure to discharge tax liability on the portion of the TDS amounts - penalty set aside.
Appeal allowed in part - part matter on remand.
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2018 (5) TMI 836
Business Auxiliary Service - the service outsourced by ICICI Bank - Held that: - we find from the pleadings and oral submissions of the appellant that they had nowhere admitted their liability before 10.9.2004 and had in fact contested it in their grounds of appeal before the Commissioner (A) - the first appellate authority has not given any analysis and findings on the merits of the issue, which was raised in the show-cause notice and which was adjudicated by the adjudicating authority - the matter is remanded back to the Commissioner (A) to give reasoned analysis and findings on the contentions of the appellant - appeal allowed by way of remand.
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2018 (5) TMI 835
CENVAT credit - inputs/capital goods - appellant is an advertising agency involved various activities which included outdoor advertising, promotion of various services and goods of clients by way of display in various public places - Held that: - identical issue decided in appellant own case M/s JC Decaux Advertising India Private Ltd. Versus CCE (Adjudication), New Delhi [2018 (3) TMI 109 - CESTAT NEW DELHI], where it was held that All the items which are now disputed for credit are essentially used to create such structures for display of advertisement. In fact many of these items are themselves used for display without any further elaborate fabrication. In such situation, there could be no reason for denial of credit holding that these items cannot be considered as inputs for such output service - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 834
Construction of residential complex for Rajasthan Housing Board - Liability of service tax - Held that: - the identical issue has come up before the Tribunal in the case of M/s Kumawat Contractor vs. CCE, Jaipur [2017 (6) TMI 1190 - CESTAT NEW DELHI], where it was held that Without inferring the fact regarding applicability of the tax entry in the present case, it is necessary to examine as to whether the residential complex, having individual houses, is in fact, having common areas as mentioned in the statutory definition - following the decision, the matter remanded to the adjudicating authority with the similar direction - appeal allowed by way of remand.
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2018 (5) TMI 833
Classification of services - services were provided under the works contract to Delhi Metro Rail Corporation (DMRC) as a main contractor or as a sub-contractor of M/s IDEB - whether classified under Commercial and Industrial Construction Service or not? - Held that: - the Tribunal in the case of AFCONS Infrastructure Limited vs CCE, Mumbai-II [2013 (8) TMI 530 - CESTAT MUMBAI] has held that the construction for DMRC are not liable to service tax under CICS as DMRC was covered in the exclusionary clause of Section 65(25b) of the Finance Act, 1994.
The services rendered to DMRC would be covered in the exclusionary clause of WCS under Section 65(105)(zzzza) - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 832
Renting of Immovable property service - the appellant has entered into a separate agreement for providing generators, air conditioners services in the said premises - demand of service tax on this separate agreement - Held that: - service tax stand demanded for the period 2007-2008, prior to introduction of service tax on supply of tangible goods.
Inasmuch as separate agreement has been entered into by the appellant with their customers so on renting out of immovable property and renting out of equipment, it cannot be said that these are part of the immovable property and hence, there is no justification for raising demand of service tax on equipment under the category of renting out of immovable property.
Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 831
Demand of service tax - Dusting (cleaning) services - Road Berms - Held that: - dusting (cleaning) is not falling under the category of management, maintenance and repair service as per the ratio laid down in the case of Commissioner of Central Excise, Jaipur vs. ANS Constructions Ltd. [2009 (6) TMI 465 - CESTAT, NEW DELHI] - demand set aside.
Services regarding road beam are exempted as per Section 97 of the Finance Act, 1994 which was inserted on 28.5.2012 with retrospective effect. So, these services are not covered for the purpose of service tax - demand set aside.
Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 830
Manpower Recruitment or supply Agency service - extended period of limitation - Held that: - the issue of extended period was already discussed by the lower authorities and we agree with it. Regarding the quantum, it is evident that the assessee-Appellant is claiming that the services of “Manpower Recruitment or supply Agency” by any person after 01.05.2006 were brought under the clutches of Section 65(68) of the Finance Act, 2006 and prior to it only commercial concern were taxable.
An identical issue has come up for consideration before the Tribunal in the case of Charanjeet Singh Khanuja vs CST, Indore, [2015 (6) TMI 585 - CESTAT NEW DELHI], where it was held that notwithstanding the fact that w.e.f. 1-5-2006 the term, ‘commercial concern’ in Section 65(105)(zzb) was replaced by ‘any person’, we are of the view that even during the period prior to 1-5-2006, the Business Auxiliary Service, even if provided by an individual to a client, was taxable.
Appeal dismissed - decided against assessee-Appellant.
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2018 (5) TMI 829
Business Auxiliary Service - job charges said to have been received, but for which Service Tax was not paid - Held that: - The dispute pertains to the period 2005-06 and we note that during the said period the Service Tax was payable on the amount receipt basis. Hence, the actual receipt of commission and the service tax payable thereon will need to be verified by the original authority.
In respect of the amount of “commission/trade discount”, it is submission of the assessee-Appellants that such amount does not pertain to the activity of job work carried out by them, but pertains to the activity of selling of the product from M/s SAIL. This aspect has not been discussed.
Appeal allowed by way of remand.
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2018 (5) TMI 828
Classification of services - the construction of wall and watch tower around the sports complex were created for security purpose of others as well as players - whether classifiable under the category of “Commercial or Industrial Construction Services”? - Held that: - the identical issue has come up before the Tribunal in the case of B.G. Shirke Construction Technology Pvt. Ltd. V/s CCE, Pune-III [2013 (11) TMI 870 - CESTAT MUMBAI] where it was observed that stadium is facility for recreation of public and not covered under the impugned category. Merely, because some amount was charged, stadium cannot be considered into “Commercial or Industrial Construction” - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 827
Condonation of delay in filing appeal - Service of order - relevant date - whether the date of despatch of the impugned order dated 05.04.2011 from the office of the Commissioner (Appeals) should be considered as the relevant date for communication, or on 24.07.2017 as claimed by the appellant regarding receipt of such order?
Held that: - Since the impugned order was sent by the Postal Department under Postal receipt No.1228, as per the mandates of Section 37 C, it has to be construed that the order has been served on the applicant within the reasonable time from the date of its dispatch - the date of sending of the impugned order through registered post i.e. on 05.04.2011 should be considered as the date of communication of the order.
Since the appeal was filed after more than six & half years, thereafter, without explaining any reasonable cause for such delay, we are of the view that appeal cannot be entertained on the ground of limitation - delay cannot be condoned - COD application dismissed.
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2018 (5) TMI 826
Demand of service tax - management maintenance & repair service - manpower recruitment and supply agency service - cleaning activity - Held that: - the authorities below have not properly addressed the issue as to under which category of taxable service, the activities provided by the appellant should fall - the Service Tax liability has not been properly quantified with regard to the specific heads of service.
The proceedings initiated by the Department cannot be sustained at this juncture, for proper consideration of the facts - the matter should go back to the original authority for passing of fresh adjudication order, by addressing the issues - appeal allowed by way of remand.
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2018 (5) TMI 825
Banking and other Financial Services - reverse charge mechanism - For providing services, either the intermediary Bank or foreign Bank deduct certain amount and remit the balance amount to the appellant’s Bank account - Held that: - the issue arising out of present dispute is no more res-integra, in view of the decision of this Tribunal in the case of M/s. Dileep Industries Pvt. Ltd. vs. CCE, Jaipur [2017 (10) TMI 1231 - CESTAT NEW DELHI], where it was held that while exporting their goods, they lodged their bills for collection to the Indian Bankers who in turn send the same to the foreign banks. The foreign banks while remitting the money to the Indian Bank, deduct their charges for collection of bills which in turn are charged by the Indian Banks from the appellants. When it is so, then the appellant are not entitled to pay the service tax.
Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 824
Extended period of limitation - demand of service tax - P.F./E.S.I. reimbursement and labour charges received from the service receiver - Held that: - the period of dispute, in this case, is from April, 2007 to March, 2012 and the show cause notice was issued on 27/09/2012 - the ingredients mentioned in the proviso to Section 73(1) of the Act are absent in this case. Thus, part of the confirmed adjudged demand is barred by limitation of time.
The service tax demand has also been confirmed within the normal period of limitation, which should be paid by the appellant.
Appeal allowed in part.
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2018 (5) TMI 823
Non-payment of service tax - bill for services raised for higher amount but settled at lower amount - - Held that: - the appellant had specifically stated that during the disputed period, it had received ₹ 50,20,540/- (as against bill of ₹ 85.93 lacs) and discharged the Service Tax liability thereon - the authorities below have not discussed the submissions made by the appellant in the reply to the show cause notice.
For ascertaining the correct tax liability, since the submissions of the appellant were required to be considered, we are of the view the matter should go back to the Original Authority for consideration of the submissions - appeal allowed by way of remand.
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2018 (5) TMI 822
Commercial or Industrial Construction Service - the appellant had entered into the agreements with M/s Pooja Educational Society, Phagi and M/s Bansal Classes Pvt. Ltd, Kota for construction of the buildings for them - Held that: - It is an admitted fact on record that the appellant had provided the construction service to M/s Pooja Educational Society, which is non-commercial organization, and is not involved in the activity of any business or commerce. Since the definition under Section 65 (105) (zzq) mandates that the activity of commercial or industrial construction should only be taxed, in absence of such construction undertaken by the appellant, the Service Tax demand cannot be confirmed under that category of service - the adjudged demand confirmed on construction of building for Pooja Educational Society cannot be sustained on the appellant.
Services provided to M/s Bansal Classes Pvt. Ltd. - mobilization advance was received and the same was adjusted towards the supply of material - Held that: - Since the documents are required to be verified for ascertaining the fact whether, the said amount was towards supply of material or for providing service, we are of view that the matter should go back to the original authority for necessary verification of the desired documents - matter on remand.
Appeal allowed in part and part matter on remand.
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2018 (5) TMI 821
Refund of service tax paid - export of goods - N/N. 41/2007-ST dated 6/10/2007 as amended - Held that: - the basis on which the issue revolves around certain facts which was not considered before the authorities below while arguing their case, therefore, the matter may be remanded to the adjudicating authority to allow the respondent to place the facts of their case - appeal allowed by way of remand.
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Central Excise
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2018 (5) TMI 819
Valuation - goods cleared to sister concern - related party transaction or not? - applicability of Rule 8 and Rule 9 of Central Excise valuation Rules, 2000 - Held that: - the goods have been cleared from their factory at Pitampur to their sister concerned at Parol and Kohlapur. Under such circumstances Rule(8) of the Central Excise Valuation Rule would apply for the purpose of charging Central Excise duty made on the basis of 110 % of the cost of production of a as per the CAS 4 certificate.
Reliance placed in the case of M/s Indore Composite Pvt. Limited Versus CCE, Indore [2017 (10) TMI 191 - CESTAT NEW DELHI], where it was held that Both units are owned by the same company and there is no sale involved in the transfer of goods from one unit to another. Under such circumstances, Rule 8 of Central Excise Valuation Rules specifically prescribes that the valuation for purpose of charging of excise duty is required to be made on the basis of 110% of the value of the goods ascertained as per the CAS-4.
Appeal dismissed - decided against appellant.
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2018 (5) TMI 818
CENVAT credit - inputs - Clandestine removal - invoices were provided without supplying the goods - case of the department is solely based on the statements of Shri Amit Gupta and other transporters, for which no cross examination was provided - Held that: - In the instant case, it appears that the appellant has availed the cenvat credit on the basis of such duty paying documents and cleared the goods manufactured on payment of duty, which was accepted by the department without any objection.
As per the chart mentioned in the impugned order, the departmental officers expressed doubt about the genuineness of sales of the appellant company which is about 50% of the total turn over. Therefore, when the sales are genuine, then such genuine sales is possible only with genuine purchase of standard raw material - The allegation that appellant was procuring the same from the open market on cash basis, is not sustainable for the reason that the appellant has to maintain higher standard of quality to make major supplies either for export or to the companies which are operating in atomic energy, power, defence, oil refining etc. In the instant case, no physical verification of stock was done. No shortage of physical stock was identified.
Regarding the allegation that payment was made through banking channel and was received back in cash is not sustainable for the reason that no cash was seized from the appellants premises.
Department has made out a case of irregular availment of cenvat credit mainly based on the statement of Shri Amit Gupta and transporters, but no cross examination of the witnesses was provided to the appellants. One of the witnesses has retracted his earlier statement. Surprisingly, in the instant case, no inquiry was made from the customers of the appellant company.
Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 817
Exemption - manufacture of power bank out of imported components - to be classified as mobile battery charger/ potable mobile battery charger or not - whether the benefit of exemption N/N. 12/2012-Cus. Dated 17/3/12 is available to the respondent assessee or not? - Held that: - The benefit of exemption is intended only for the charger for use in the manufacture of mobile handset under Sl.No. 430A of the N/N. 12/2012 Customs dated 17/3/12 subject to the actual user condition - appeal by way of Remand to the Appellate Authority to examine the classification issued by the TRU to the appellant regarding their application in the impugned matter - appeal allowed by way of remand.
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2018 (5) TMI 816
Valuation - inclusion of subsidy amounts in the value of the goods - subsidy concern is sanctioned and disbursed in Form 37B - Held that: - there is no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 820
Clandestine removal - validity of evidences - Whether ld. CESTAT, New Delhi has erred in brushing aside the vital evidences in the form of voluntary statements of the Director of the assessee respondent Company which was corroborated by the reports of the test samples and in turn setting aside the order of the Adjudicating Authority? - penalty on assessee u/r 26 of CER, 2002.
Held that: - in the statement of Director and laboratory report, there is nothing on record to establish that the manufacturing process has taken place either by way of electricity bills, labour charges, transport charges or any corroborative piece of evidence is available.
The department has not gone beyond the approximation and the statement of Shri Agarwal. Any prudent person would not so conclude on extra production by approximation and by a mere statement of the Director of the company. Unless there are further corroborations in the form of documentary evidences, which could be like despatch details for the production, receipt details of the said material, transactions of the sale money, transportation details of such goods, details of additional consumption of electricity for such suppressed production a prudent individual would not agree with the present conclusions of the Revenue. There is nothing on record from the Revenue side to come to a reasonable conclusion to say that there has been preponderance of probability of such suppressed production on the part of the appellant - The evidences in the form of approximation and averaging production as 77.6% and one statement of Shri Agarwal, Director of the appellant company cannot be called a prudent conclusion of the production estimate.
Impugned order set aside - appeal dismissed - decided against Revenue.
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2018 (5) TMI 815
Clandestine removal - shortage of finished goods - entire case of the Revenue is based upon the shortages detected at the time of their visit - Held that: - It is well settled law that such shortages cannot lead to the allegations and findings of clandestine removal - reliance placed in the case of Shahi Exports Pvt. Ltd. Versus Commissioner of C. Ex. & S.T., Ghaziabad [2015 (8) TMI 1382 - CESTAT NEW DELHI].
Inasmuch as there is no other corroborative evidence on record, there are no reasons to uphold the impugned orders - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 814
Clandestine removal - entire case of the Revenue is based upon the records recovered from M/s Monu Steels and based upon the statement of the representative of M/s Monu Steels - Held that: - The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established - the findings of clandestine removal cannot be upheld based upon the third party documents, unless there is clinching evidence of clandestine manufacture and removal of the goods.
Penalty u/r 26 of CER on M/s Kailash Traders - it is alleged that that he has supplied the unaccounted raw material to the appellant - Held that: - there is virtually no evidence to show that such entries relate to the actual transportation and supply of the raw material to the present appellant - penalty not justified.
Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 813
CENVAT credit - capital goods - denial on the ground that they have simultaneously availed depreciation in respect of the same, in terms of provisions of section 32 of the Income Tax Act - Held that: the appellants have filed a Chartered Accountant’s certificate certifying that credit taken on capital goods were not capitalized in the books of accounts. Commissioner (Appeals) has observed that apart from the said CA’s certificate the appellant have not submitted the evidence to prove their submission and hence, in the absence of any evidence, the adjudicating authority has rightly disallowed the credit.
The dispute would get solved if the Income Tax return for the relevant period be produced which would clearly establish whether depreciation has been claimed or not - appeal allowed by way of remand.
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2018 (5) TMI 812
CENVAT credit availed on AED (GSI) and AED (T&TA) - N/N. 30/2004-CE dated 09.07.2004 - Held that: - Ld. Commissioner (Appeals) upheld the order of the Adjudicating Authority observing that the Cenvat credit availed on AED (GSI) and AED (T&TA), lying in balance, as on the date of exercising option to avail the exemption under N/N. 30/2004-CE dated 09.07.2004, would lapse.
A plain reading of the Sub-Rule (2) of Rule 9 it is clear that it is applicable only to cases, when the assessee has availed value based exemption - Hon ble Karnataka High Court in the case of CCE, Bangalore-II vs. Gokaldas Intimate Wear [2011 (4) TMI 1123 - KARNATAKA HIGH COURT] observed that Sub-Rule (3) of Rule 11 of the Cenvat Credit Rules brought into force by N/N. 10/2007-CE w.e.f. 01.03.2007, and would be applicable prospectively.
The impugned order is modified to the extent of upholding confirmation of the demands of Cenvat Credit of 83,665/- and ₹ 35,340/- and the demands of ₹ 15,81,781/- and ₹ 24,42,530/- are set-aside - appeal allowed in part.
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CST, VAT & Sales Tax
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2018 (5) TMI 811
Stay on recovery - grievance of the petitioner is that even though his appeals and applications for condonation of delay are pending before the 2nd respondent, steps have been taken for recovery of the assessed tax from him through various demand notices - Held that: - Taking note of similar orders passed by this Court in analoguous situations, the petitioner can be given some respite from the rigor of recovery, at least until such time as his applications for condonation of delay are disposed of - until orders are passed on pending appeals, all steps for recovery pursuant to various demand notices for recovery of amounts against the petitioner, shall be kept in abeyance.
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Indian Laws
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2018 (5) TMI 839
Suit for recovery of borrowed amount alongwith interest - execution of promissory notes - burden of proof - Whether the suit promissory note is true, valid and supported by consideration? - benefits of Act 45 of 1987 and Act 1 of 1990.
Held that: - The instant case is a converse case, where, though the plaintiff did not enter the witness box, but the facts were spoken by PW.1 on behalf of the plaintiff and the case of the plaintiff to the extent of execution of the document was admitted by the defendant, though he denied the consideration and attestation. The suit promissory note is not a compulsorily attestable document and there is no dispute with regard to execution of Ex.A1 promissory note - as rightly pointed out by the learned counsel for the respondent/plaintiff, Section 118(a) of the Negotiable Instruments Act comes into operation.
The burden of proof is of importance only where by reason of not discharging the burden which was put upon it, a party must eventually fail, where, however, parties have joined issue and have led evidence and the conflicting evidence can be weighed to determine which way the issue can be decided, the abstract question of burden of proof becomes academic.
Where, in a suit on a promissory note, the case of the defendant as to the circumstances under which the promissory note was executed is not accepted, it is open to the defendant to prove that the case set up by the plaintiff on the basis of the recitals in the promissory note, or the case set up in suit notice or in the plaint is not true and rebut the presumption under Section 118 by showing a preponderance of probabilities in his favour and against the plaintiff. He need not lead evidence on all conceivable modes of consideration for establishing that the promissory note is not supported by any consideration whatsoever.
In view of admission of execution of the Ex.A1 promissory note, the burden is on the defendant to prove his case. Besides himself, the defendant examined DWs.2 to 4 to show that the said Mohana Rao was in the habit of lending money, but did not speak of non-passing of consideration - That borrowing of higher amount was also not proved by the defendant in the instant case by producing any documentary evidence. In view of the same, the judgment and decree passed by the trial Court cannot be set aside and accordingly it is affirmed.
Appeal suit is dismissed.
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