TMI Tax Updates - e-Newsletter
May 3, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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GST:
Revision of Form GST TRAN-1 - transitional credit - the respondent authorities ought to have considered the request/representation of the petitioner to permit or allow it to revise the declaration in FORM GST TRAN-1
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GST:
Vires of Section 129 of CGST Act(Detention, seizure and release of goods and conveyances in transit), Section 129 of U.P. GST Act is under challenge and notice issued to government
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GST:
Grant of anticipatory Bail - availing Input Tax Credit of GST without actual supply of goods, which is punishable u/s 132 of the CGST Act, 2017 - applicant is the Director - It is well settled that economic offences fall in a separate class and are to be viewed seriously - As per the IO there is a reasonable apprehension of the applicant tampering/influencing with the evidence/ witnesses - no ground for grant of anticipatory bail
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Income Tax:
Disallowing the interest u/s 36(1)(iii) - borrowings to set up a new unit for manufacturing door-frames at Haryana - capitalised in the Books of Accounts - no question of allowing the same as deductable expenditure for the Assessment year in question, as the said unit was yet to commence production
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Income Tax:
Allocating unallocable expenses to each segment in proportion to segmental turnover to total turnover - all common expenses cannot be apportioned in the universal ratio of sales or gross revenue from different segments, each having its own separate features and characteristics - One can logically make allocation depending upon the nature of expenses and appropriate allocation key.
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Income Tax:
Disallowance u/s 40(a)(ia) - TDS u/s 194C - transport Operators furnish their PAN to the person responsible for making payments - non furnishing of details obtained in 194C(6) of transporters in e-TDS return as per 194C(7) - disallowance u/s 40(a)(ia) does not arise
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Income Tax:
Penalty u/s 271(1)(c) - assessee has admitted part disallowance of expenses - admission of expenses could not be construed that the assessee has admitted allegations that he has furnished inaccurate particulars - AO need to demonstrate that the explanation of the expenditure given by the assessee was false - No penalty
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Income Tax:
Allowable expenditure u/s 37(1) - providing gifts and freebies to Doctors and Medical Practitioners - Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations - applicability of explanation to Section 37(1) - not allowable after 14.12.2009
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Income Tax:
TDS u/s 194I or 194C - use of lounge premises paid by the assessee - The assessee did not have exclusive use to the lounge for its customers - The customers of other Airlines of specified categories, would be allowed to use all such facilities - do not see element of rent - No TDS u/s 80I
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Income Tax:
Levy of interest u/s 220(2) - no complete setting aside of the Assessment Order - CBDT Circular No.334 dated 03/04/1982 - No fresh determination of the tax liability was to take place upon such remand by the Tribunal - question of suspension of the levy of interest u/s 220(2) could not arise
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Income Tax:
Weighted deduction u/s 35(2AB) - approval for the project on which expenditure was incurred on Scientific Research was approved for the period prior and even subsequent are available but for relevant AY i.e. AY 2003-2004 was not available - assessee cannot be punished for the bureaucratic delay - deduction allowed
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Income Tax:
TPA - MAM selection - CUP or TNMM - if the intra AE transactions were fundamentally different in character in economic circumstances and contractual terms then these cannot be compared with the independent transactions entered into by the assessee - the availability, coverage and reliability of data necessary for application of the method - CUP rejected
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Income Tax:
TP adjustment - TPO while working out the operating cost has made an addition of reimbursement received on account of advertisement and warranty - it is apparent that the adjustment made by the learned TPO by increasing the operating expenses by this amount is erroneous and incorrect - it amounts to double addition
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Income Tax:
Addition u/s 69B for unexplained investment - consideration in sale deed vs consideration in agreement to sale - During the course of search, no evidence was found other than payment mentioned in sale seed - assessee has been able to prove that agreement to sell have not been acted upon between the parties - no addition based on agreement to sale
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Income Tax:
Deduction u/s 80IB(10) - benefit to land owner who is partner in profit with developer - Nothing in Section 80IB(10) to deny the benefit of Deduction - Merely because the land owner does not undertake the construction work himself
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Income Tax:
Duty of Tribunal - The findings of facts by the final fact finding body are not only of great relevance and significance for the higher Constitutional Courts, such as High Court u/s 260A in the present appeal, but, even otherwise also, the mandate of the Act is that the Tribunal should arrive at its own findings of facts based on relevant and cogent material.
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Income Tax:
Disallowance u/s 40(a)(i) - TDS u/s 195 OR 194A - interest paid to its Banker for import of certain goods from a supplier in USA - Section 194A shall not apply in case, such income is credited or paid to any banking company - For invoking Section 40(a)(i) the burden squarely lies on the AO to establish in the first instance that the relevant TDS provisions were applicable - no TDS liability u/s 195
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Customs:
Mis-declaration of imported goods - procedural lapse in collecting samples - This is definitely a tragedy for which the department will have to bear the cross, especially when there is no dispute that the appellant-importer had given all these details at the time of import.
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Service Tax:
Voluntary Compliance Entitlement Scheme (VCES) - whether any inquiry / investigation was pending - the enquiry being made in respect of the respondents were in nature of roving enquiry, not hit by Section 106(2) of the Finance Act, 2013
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Service Tax:
Valuation - benefit of abatement - even if the value of free supply of material was not included in the gross value of the service namely, Commercial or Industrial Construction Service, the appellant is still entitled for the abatement under Notification No. 15/2004-ST and 1/2006-ST.
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Service Tax:
Refund claim - whether provision of output services are necessary for entitlement of CENVAT credit under CENVAT Credit Rules 2004 - Where no service was rendered from the premises, credit cannot be allowed.
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Central Excise:
Whether the proceeding relating to breaches committed under the erstwhile Modvat Credit Rules could be continued/initiated after its withdrawal and substitution by new Rules? - Held Yes
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Central Excise:
Valuation - some customers had paid excess amount than the actual purchase value; that such excess payment was not adjusted in subsequent years - inclusion of such excess value in the assessable value of goods - The allegation of short-payment of duty is unjustified.
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Central Excise:
Levy of penalty and extended period of limitation - Evidently, none of the ingredients for invocation of extended period of limitation are present in this case. By implication, none of the ingredients which will allow for imposition of penalty u/s 11 AC are present.
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Central Excise:
Excisability/marketability - kolas which are used for Breakwater's while constructing Krishnapatnam Port - Revenue has not produced any evidence to even indicate that this kolas are be used at some other port - Demand cannot sustain
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Central Excise:
Valuation - The appellant had clearly contravened the provisions of Sec.4 read with Rule 7 of Central Excise Valuation Rules, 2000 without any justification and evaded payment of Central Excise duty. The intention cannot be clearer than this.
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VAT:
Stock transfer or sale? - transfer of goods against Form-F - The appellant clearly attempted to avoid tax under the TNGST Act and under the CST Act due to Tamil Nadu.
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VAT:
Rate of tax - Pre-painted Galvanized Steel Metal Sheets - The pre-painting of iron and steel may be for different reasons mainly, to protect the iron and steel from rusting, that itself would not be construed as a different commodity altogether different from Galvanized Steel Metal Sheets.
Notifications
Companies Law-
F. No. 05/01/2019-IEPF - G.S.R. 343 (E) - dated
1-5-2019
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Co. Law
Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Amendment Rules, 2019
Customs-
14/2019 - dated
1-5-2019
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Cus
Seeks to further amend notification No. 50/2017-customs dated 30th June 2017 to postpone the implementation of increased customs duty on specified imports originating in USA from 2nd May, 2019 to 16th May, 2019.
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35/2019 - dated
2-5-2019
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Cus (NT)
Exchange Rates Notification No.35/2019-Custom(NT) dated 02.05.2019
GST - States-
24/2019-GST (CT/GST-14/2017/206) - dated
22-4-2019
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Assam SGST
Seeks to extend the due date for furnishing of returns in FORM GSTR-3B for the Month of March, 2019 for three days (i.e. from 20.04.2019 to 23.04.2019).
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ORDER No. 10/2019-GST - dated
30-3-2019
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Assam SGST
Delegation of power to Appellate Authorities under Assam GST, Act 2017.
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FTX.56/2017/391 - dated
4-3-2019
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Assam SGST
Corregendum to Notification No. FTX.56/2017/Pt-I/202 dtd. 28/02/2018.
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FTX.56/2017/Pt-III/194 - dated
22-2-2019
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Assam SGST
Seeks to amend notification No. FTX.56/2017/Pt-III/19 dtd. 01/12/2017 to amend the meaning of Advance Authorisation.
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ERTS (T) 4/2019/45 - dated
8-3-2019
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Meghalaya SGST
Meghalaya Goods and Services Tax (Third Removal of Difficulties) Order, 2019
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ERTS (T) 4/2019/44 - dated
7-3-2019
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Meghalaya SGST
Supersession Notification No.ERTS(T) 65/2017/22, dated the 29th June, 2017
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ERTS (T) 4/2019/43 - dated
7-3-2019
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Meghalaya SGST
Prescribe the due dates for furnishing of FORM GSTR-3B for the months of April, May and June, 2019
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ERTS (T) 4/2019/42 - dated
7-3-2019
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Meghalaya SGST
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
Circulars / Instructions / Orders
Case Laws:
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GST
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2019 (5) TMI 173
Vires of Section 129 of CGST Act, Section 129 of U.P. GST Act, Office Order No. 278/GST/2017-18/File No. 118 dated 01.07.2017 as well as Circular No. 41/15/2018-GST dated 13.04.2018 - HELD THAT:- Issue notice to the Attorney General as well as the Advocate General, U.P.
List this case in the second week of May, 2019.
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2019 (5) TMI 172
Filing of Form GST TRAN – 2 - extension of time limit - HELD THAT:- It is not in dispute that the FORM GST TRAN – 2 portal was not available when the petitioner filed FORM GST TRAN – 1. In such circumstances, non-mentioning of certain quantity of goods held in stock in column 7B of FORM GST TRAN – 1 appears due to bonafide mistake or inadvertence. Hence, in terms of the Circular instructions dated 03.04.2018, the Nodal Officer is required to redress the grievance of the petitioner to enable the petitioner to file FORM GST TRAN – 2 within the time prescribed. The object and purpose of the transitional provisions has to be achieved to its logical end and the same cannot be rejected/denied on technicalities.
The respondent No.5 – Nodal Officer is directed to redress the grievance of the petitioner in accordance with law to enable the petitioner to file FORM GST TRAN – 2. The compliance of the same shall be in an expedite manner - petition disposed off.
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2019 (5) TMI 171
Filing of Form GST TRAN-2 - extension of time for filing of form - petitioner contends that the attempt made to file Form GST TRAN-2 was unsuccessful due to technical glitches as on 07.03.2018. Since then, several complaints have been made with the respondent-authorities to redress the grievance of the petitioner but the same not being responded to, constrained to file this writ petition - HELD THAT:- This Court deems it appropriate to direct the respondent No.7 to consider the representation of the petitioner dated 26.03.2019 and address the grievance of the petitioner in accordance with law in an expedite manner to enable the petitioner to file the Form GST TRAN-2 on or before 30.04.2019 and is ordered accordingly.
Petition disposed off.
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2019 (5) TMI 170
Revision of Form GST TRAN-1 - transitional credit - transition to GST regime - HELD THAT:- Rule 117 of the Rules provides for submitting a declaration electronically in FORM GST TRAN-1 within 90 days from the appointed day on the common portal specified therein, separately, the amount of input tax credit to which the registered person is entitled to take input tax credit under Section 140. The Commissioner is empowered to extend the period of 90 days by a further period not exceeding 90 days for submitting the declaration electronically in FORM GST TRAN-1 in terms of Rule 117[1A].
This Court in M/S. ATRIA CONVERGENCE TECHNOLOGIES LTD. VERSUS UNION OF INDIA THROUGH THE JOINT SECRETARY, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, AND OTHER [2019 (4) TMI 301 - KARNATAKA HIGH COURT] has held that the petitioner therein is entitled to revise or rectify the errors in Form GST TRAN-1 in terms of Rule 120A wherein the Commissioner is empowered to extend the time period specified in Rule 117 as the petitioner is intending to revise the FORM GST TRAN-1 for the first time, the same squarely comes under Rule 120A.
Hence, the respondent authorities ought to have considered the request/representation of the petitioner to permit or allow it to revise the declaration in FORM GST TRAN-1 - the matter is restored to the file of the respondent No.6 to re-consider the grievance of the petitioner in the light of the observations made herein above - Petition disposed off.
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2019 (5) TMI 90
Grant of anticipatory Bail - availing Input Tax Credit of GST without actual supply of goods, which is punishable u/s 132 of the CGST Act, 2017 - applicant Rajiv Malhotra is the Director - no likelihood of his evading the process of law - no reqeuset to police custody of the applicant entitles him to grant of bail? - habitual offender - HELD THAT:- The IO has shown, in the case file, statement of witnesses and other record regarding the non-supply of goods to MCPL and some of the firms/ entities being dummy/ non-extent, Issuance of invoices or bills without supply of goods can have wide ramifications. It is well settled that economic offences fall in a separate class and are to be viewed seriously, Admittedly, the applicant was earlier also involved in a similar case and despite the same he has allegedly again committed the offence. As per the IO there is a reasonable apprehension of the applicant tampering/influencing with the evidence/ witnesses. The investigation is at initial stage. In view of the facts and circumstances of the case, it is considered that no ground forgrant of anticipatory bail is made out. Therefore, the application for anticipatory bail is dismissed.
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Income Tax
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2019 (5) TMI 107
Penalty u/s 271(1)(c) - computation of penalty payable - such taxes which sought to be evaded - unexplained cash credit - HELD THAT:- The assessee has offered short term capital gain on the amount of ₹ 10,19,405/-. AO treated it as unexplained cash credit.
But this amount has suffered taxes, in the return of income itself by admission of the assessee. Thus, we direct the AO to calculate the penalty under sub-clause (iii) of section 271(1)(c) if any tax was sought to be evaded by the assessee by taking this addition under two different heads. The difference of tax components, if this amount of ₹ 10,19,405/- is being assessed under the head unexplained cash credit vis-à-vis short term capital gin, comes out, then penalty equivalent to that tax component would be charged from the assessee.
In any away, it will not be ₹ 3,15,000/-. This exercise be carried out after hearing the assessee - Appeal of the assessee is partly allowed.
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2019 (5) TMI 106
Exemption u/s 54F - investment of capital gain in purchase of a flat - Non deposited the sale consideration in a capital account before the due date of filing of return u/s 139 - Stand of the assessee is that she has made investment in purchase of a new flat and utilised the total capital gain - HELD THAT:- In the case of Ashok Kapasiawala [2015 (10) TMI 2045 - ITAT AHMEDABAD] also the assessee did not deposit the sale consideration in the bank account before the due date of filing of return. But otherwise purchase of house is within two years stipulated in section 54F(1) of the Act. It is not the case of the assessee that she has purchased beyond the period as contemplated in section 54F(1). The only failure is, she has not deposited the sale consideration in capital account. This condition has not been considered as mandatory by K. RAMACHANDRA RAO [2015 (4) TMI 620 - KARNATAKA HIGH COURT] . Thus allow the appeal of the assessee and direct the AO to grant exemption under section 54F to the assessee. - Decided against revenue
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2019 (5) TMI 105
Penalty u/s 271(1)(c) - Disallowance of expenses - AO has observed that the assessee has admitted qua a fact that he has furnished inaccurate particulars - HELD THAT:- What the assessee has admitted is that, in case the expenses are partly disallowed, then he did not dispute. It could not be construed that the assessee has admitted allegations that he has furnished inaccurate particulars. The AO has nowhere brought any material or reasoning for harbouring this plea. The only question is that, out of total expenditure claimed by the assessee, partly not accepted by the AO. His explanation qua the expenditure was not found to be false. The assessee could not substantiate his claim of expenditure with help of evidence. In these circumstances penalty upon the assessee cannot be imposed with help of Explanation 1 to section 271(1)(c)
If the AO was able to demonstrate that the explanation of the expenditure given by the assessee was false, then his case can be appreciated. Penalty is not imposable upon the assessee - Decided in favour of assessee.
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2019 (5) TMI 104
Addition u/s 69B for unexplained investment - immovable property at Mehrauli - search u/s 132 - agreement to sell mentioned consideration of ₹ 5.95 crores where as in sale deed consideration mentioned is ₹ 60 lakhs - as per assessee agreement to sell have not been acted upon between the parties - During the course of search, no evidence was found to show assessee made payment of money to the extent of ₹ 5.95 crores - addition made alleging cash payment - CIT-A deleted part addition - HELD THAT:- Assessee has been able to prove that agreement to sell have not been acted upon between the parties. As per the agreement to sell, the balance amount shall have to be paid within 45 days, but, there is no evidence on record to prove that assessee has actually paid the balance amount to the sellers.
No evidence of any payment later on was also found or brought on record. Since it was conditional agreement and as such it was to be proved by the Revenue, whether the terms of the agreement have been complied with, which the A.O. in this case has failed to do so. The valuation of the property as per circle rate have not been disputed by the authorities below. No enquiry have also been made to the witness to the agreement to sell. Thus, on 18th November, 2008 the deal through agreement to sell deemed to have been cancelled as the time was the essence to the agreement. The Inspector is not a technical person to give report of valuation of the property. Therefore, no reliance could be placed upon his report.
No infirmity in the order of the Ld. CIT(A) in deleting the addition of ₹ 4,85,74,816/-. It may also be noted here that the Ld. CIT(A) maintained addition of ₹ 50 lakhs on account of cash of ₹ 25 lakhs mentioned in each agreement to sell. Since the explanation of assessee was not called for at the time of search proceedings or thereafter and that the sellers have denied to have executed any agreement to sell or have received any sale consideration as per the agreement to sell, there was no justification for the Ld. CIT(A) to have maintained the addition of ₹ 50 lakhs. It may also be noted here that the assessee explained before Ld. CIT(A) that whatever amount was paid initially to the seller was duly explained through the cash book maintained by the assessee and accepted in the impugned assessment.
Therefore, these facts would show that the matter requires reconsideration at the level of the Ld. CIT(A) with regard to addition of ₹ 50 lakhs. In view of the above discussion, we do not find any justification to interfere with the orders of the Ld. CIT(A) in deleting the addition. Appeal of the Assessee is allowed for statistical purposes
Addition of investment made in plots at Aya Nagar - consideration in sale deed vs consideration in agreement to sale - D.R. merely relied upon Order of the A.O. without pointing-out any infirmity in the Order of the Ld. CIT(A) in deleting the addition. The assessee explained before the authorities below that investment made in purchase of plots, assessee filed copies of the purchase deed with bank statements, details of the mode of payment supported by documents of bank statements and entire consideration have been paid by Account Payee Cheques out of the Bank account.
All the documentary evidences were placed on record. CIT(A) considering the details on record noted that assessee has been carrying on proprietorship business and maintained books of account which are duly audited and such business have been disclosed to the Revenue Department in income tax returns. CIT(A) found that payments for purchase of plots have been made out of the said disclosed source of the assessee which have not been controverted by the A.O. The finding of fact recorded by the Ld. CIT(A) have not been rebutted through any evidence or material on record. - Decided in favour of assessee.
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2019 (5) TMI 103
Addition account of reduced value of stock - old stock of so many years - HELD THAT:- It is not in dispute that assessee-company has been following the method of valuation of closing stock at cost or market value, whichever is less. The assessee did not make any purchases in the year and considering the nature of item used in the business, it is clear that the items day to-day reduce in their value. Thus, the assessee was justified in selling the goods at a lower value year after year.
When similar method of accounting have been employed by assessee in earlier year and similar addition have been deleted by the Tribunal in assessment year 2005-2006 [2010 (8) TMI 1125 - ITAT DELHI] , there was nothing wrong in the findings of the CIT(A) to have deleted similar addition. In the absence of any material on record in favour of the Revenue, no interference is called for in the matter. Revenue in the ground of appeal also stated that in assessment year 2005-2006, Revenue has not filed any appeal before the jurisdictional High Court because of the CBDT Circular. Stands proved that finding of fact in the impugned year have reached finality. In the absence of any contrary material on record, no interference is called for. The Departmental Appeal, therefore, stands dismissed.
Addition being remission of liability - capital in nature - wavier of loan - HELD THAT:- Hon’ble Supreme Court in the case of Mahindra and Mahindra Ltd. [2018 (5) TMI 358 - SUPREME COURT] also held that “Section 41(1) of the Income Tax Act does not apply since waiver of loan does not amount to cessation of trading liability. It is a matter on record that the respondent has not claimed any deduction under section 36(1)(iii) of the Income Tax Act qua the payment of interest in any previous year”.
In the present case, the authorities below have not given any finding of fact whether the whole amount of loan had been utilised either for the purpose of acquiring a capital asset or for the purpose of business activity or trading activity. There is also no finding of fact whether assessee had claimed any deduction in respect of interest on loan in earlier years - restore the matter to re-decide the issue strictly in accordance with Law - Appeal of assessee is allowed for statistical purposes
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2019 (5) TMI 102
Disallowance u/s 14A applying rule 8D - HELD THAT:- As in the case of M/s. Turquoise Investment & Finance Pvt. Ltd [2013 (6) TMI 870 - ITAT INDORE] on examination of facts we find that in the instant appeal the net interest expenses (interest paid less interest income) has already been disallowed by the assessee suomoto while computing the total income.
No disallowance u/s 14A was called for, for the interest expenditure and the CIT(A) has rightly deleted the disallowance u/s 14A computed for the interest expenditure.
As regards the administrative expenses, only an has been claimed as expenses during the year as the remaining amount of expenditure debited to Profit & Loss Account has already been added back to the income by the assessee while computing the total income.
Therefore against the expenses claimed by the assessee sustaining the disallowance towards the expenses claimed by the assessee which may have been incurred directly or indirectly for maintaining the investments fetching tax free income. We accordingly partly allow the revenue’s appeal and sustain the disallowance u/s 14A - Appeal of the revenue is partly allowed.
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2019 (5) TMI 101
Deduction claim u/s 80IC - Interest on FDR from fund of different unit - no finance charges debited in unit - allocation of HO expenses on estimation basis - HELD THAT:- A.O. is directed to verify whether the assessee has reduced ₹ 62,91,275/- from deduction u/s 80IC and then give deduction on this amount. Regarding the finance charges of Rudrapur unit of ₹ 60,30,690/-, we note that the A.O. allocated ₹ 60,30,690/- as finance charges of Rudrapur unit without taking into account facts submitted by the assessee. The ld Counsel submitted before us explanation which has not been considered by the AO. We direct the AO to verify the facts as mentioned above and re-compute the deduction under section 80IC in accordance with law.
Allocation of H.O. office expenses relating to Rudrapur Unit, on estimate basis we note that assessee`s books of accounts are audited by a chartered accountant. The books of accounts are not rejected by the AO. We note that the AO could have ventured into estimation only after rejecting the books of accounts of the assessee u/s 145(3) and thereafter by best judgment assessment u/s 144 .
Here in this case, the AO has not passed any order u/s 144 of the Act. AO thus without rejecting the books of account of the assessee has gone for estimation on suspicion and conjectures and made estimated disallowance of ₹ 3,00,000/-, which is not tenable and therefore, we delete the addition of ₹ 3,00,000/-
Allowability of commission - HELD THAT:- The assessee has raised ground relating commission paid of ₹ 5 lakhs, which has been disallowed.However, the said sum was disallowed in A.Y. 2009-10 also. Therefore, the A.O. is directed to verify the TDS payment and allow the claim of the assessee in accordance with law.
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2019 (5) TMI 100
Penalty u/s 271(1)(c ) - notice defective for not mentioning the specific charge - HELD THAT:- Notice issued by the AO u/s 274 r.w.s. 271(l)(c) to be bad in law as it did not specify which limb of Section 271(l)(c), the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income.
Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT) - on the same issue there is two conflicting judgments of Hon’ble Supreme Court. In this scenario, we take the support of the established principle for a proposition that when there are two views on the issue, on in the favouring of the assessee should be adopted for that we rely on the judgment of the Hon’ble Supreme Court in the case of Vegetable Products Ltd. [1973 (1) TMI 1 - SUPREME COURT] . Decided in favour of assessee.
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2019 (5) TMI 99
Penalty u/s 271(1)(c ) - notice defective for not mentioning the specific charge - HELD THAT:- Notice issued by the AO u/s 274 r.w.s. 271(l)(c) to be bad in law as it did not specify which limb of Section 271(l)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT) - on the same issue there is two conflicting judgments of Hon’ble Supreme Court. In this scenario, we take the support of the established principle for a proposition that when there are two views on the issue, on in the favouring of the assessee should be adopted for that we rely on the judgment of the Hon’ble Supreme Court in the case of Vegetable Products Ltd. [1973 (1) TMI 1 - SUPREME COURT] . Decided in favour of assessee. - Decided in favour of assessee.
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2019 (5) TMI 98
Addition invoking provisions of Sec.40(a)(ia) - TDS u/s 194C - payments to transporters - non furnishing of details obtained in 194C(6) of transporters in e-TDS return as per 194C(7) - HELD THAT:- Two reasons assigned by the AO for not accepting the plea of the Assessee to invoke the provisions of Sec.40(a)(ia) of the Act in this case was held to be unsustainable.
First reason given by the AO was that the provisions of Sec.194C(6) are applicable only to transport contractors and not to any other payee and that reason has been held to be not correct in the aforesaid decision in which it was held Sec. 194C(6) made it plainly clear that from the A.Y. 2010-11 onwards, by virtue thereof when Transport Operators furnish their PAN to the person responsible for making payments to them, the Transport Operators would be outside the purview of TDS u/s 194C and that immunity from TDS u/s. 194C(1) in relation to payments to transporters, applies transporter and non-transporter contractees alike.
Second reason that the Assessee failed to comply with the provisions of Sec.194C(7) of the Act and that reason has also been held to be not correct in the aforesaid decision and the view taken is that if the assessee complies with the provisions of section 194C(6), disallowance under section 40(a)(ia) does not arise just because there is violation of provisions of section 194C(7) of the Act.
CIT(A) was justified in deleting the addition made by the AO. We find no grounds to interfere with the order of CIT(A) and consequently dismiss this appeal by the Revenue.
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2019 (5) TMI 97
TP adjustment - international transaction of “Provision of Software Development Services” by the assessee to its Associated Enterprise (AE) - comparable selection - HELD THAT:- Kals Information Technology Systems Ltd. (Seg.) was engaged in selling of software products which was different from activity undertaken by assessee in that case, namely, rendering of software service to its holding company, the same was held to be rightly excluded from the list of comparables. In view of the foregoing discussion, we order to exclude this company from the final list of comparables.
Thirdware Solutions Ltd. - absence of the availability of any concrete information in respect of Software Services, we fail to comprehend as to how this company, also having software products in its portfolio, can be construed as comparable. The same is accordingly directed to be excluded.
Acropetal Technologies Ltd. (Seg.) - this company cannot be considered as comparable as it is not only engaged in the business of Software products but is also providing on-site services, which make it distinguishable from the assessee company. We, therefore, order to exclude this company from the list of comparables.
Companies providing on-site services cannot be considered as comparable.
Direction of the DRP to include certain companies which were initially not included by the assessee in its list of comparables because the relevant financial data was not available - As in CIT Vs. Reuters India Pvt. Ltd. [2016 (5) TMI 796 - BOMBAY HIGH COURT] has held that there can be no estoppel in pointing out the correct facts before the appellate authorities particularly when all facts are on record. No reason to interfere with the direction given by the DRP on this count in so far as the objection of the Revenue is concerned. The ld. DRP has simply directed to examine the comparability of these companies and did not, at the threshold, throw the assessee out simply on the reasoning that the relevant information was filed in respect of these companies only during the course of proceedings before the TPO. In view of the foregoing discussion, we are satisfied that the direction given by the DRP cannot be interfered.
Infosys Technologies Ltd. cannot be treated as comparable with the assessee company as it is engaged in noteworthy R&D activities apart from having significant intangible assets and exceptionally high turnover.
Allocating unallocable expenses to each segment in proportion to segmental turnover to total turnover - HELD THAT:- Unallocated expenses obviously comprise several items of distinct nature and hence there cannot be a uniform key of apportionment - apportioning common Rent expenditure on the basis of sales or gross revenue from such varied divisions, will give skewed results of segment profitability. Similarly, contribution of various segments to other items of expenses varies depending upon the nature of transaction, extent of capital employed and labour required etc. etc. So all common expenses cannot be apportioned in the universal ratio of sales or gross revenue from different segments, each having its own separate features and characteristics. One can logically make allocation depending upon the nature of expenses and appropriate allocation key. As the assessee is not aggrieved by the otherwise inclusion of such companies on the ground of allocation of unallocated expenses, we set aside the impugned order and direct the AO/TPO to allocate common unallocated expenses on the basis of relevant keys as the case may be after allowing an opportunity of hearing to the assessee.
TDS u/s 195 - Disallowance u/s.40(a)(i) - payments made to Deere & Company, USA towards Information System charges; Telecommunication charges; and also IT Software Licenses; Internet Access charges; and IT Support Services - assessee submitted that the assessee made payments pursuant to certain agreements, some of which were filed by him as additional evidence - HELD THAT:- We set-aside the impugned order on the question of disallowance u/s.40(a)(i)/(ia) and remit the matter to the file of AO for deciding it afresh as per law in the light of additional evidence filed by the assessee. Needless to say, the assessee will be allowed reasonable opportunity of hearing.
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2019 (5) TMI 96
Undisclosed interest income - difference between the interest income shown by assessee and reflected in Form No. 26AS - HELD THAT:- Computation of interest as shown in Form 26AS by the bankers may be based on the difference in the accrual date taken by the banker as against the interest calculated by the assessee on FDR as on 31st March of each year. Therefore, it appears that there is a double taxation to the extent of ₹ 41,611/- which was offered to tax by the assessee in the return of income more than the computation of interest in the statement of affairs.
Difference due to the computation by taking the different accrual dates will be subsume to the extent of extra interest income offered to tax by the assessee for the assessment years 2015-16 and 16-17. Accordingly, the addition made by the AO of ₹ 14,285/- is covered by the additional interest income offered by the assessee to tax for the assessment years 2015-16 and 16-17. Hence the same is deleted.
Assessment u/s 153A - Addition of deemed dividend u/s 2(22)(e) - advance against salary payment - HELD THAT:- In the absence of any incriminating material the addition made by the AO u/s 2(22)(e) is not sustainable in law. The same is liable to be deleted.
Addition u/s 2(24)(iv) - assessee has purchased the villa from the company at lower price than the market price - Receipts of benefit/perquisite from the company - search and seizure operations - unrecorded consideration of 94.86% of the recorded consideration - CIT (A) deleted the addition by considering FMV and stamp duty value which is lower than price paid bu assessee - HELD THAT:- AO without considering the fact of the rate declared in the case of the assessee has applied the ratio of recorded and unrecorded value in case of sale of other plots wherein the recorded consideration was very less, if it is taken in terms of per sq. ft. It is clear that for the plot D-12, the rate per sq. ft. as recorded is ₹ 650/- and as per seized document it is ₹ 1550/- whereas in the case of assessee the recorded consideration itself is ₹ 1922/- per sq. ft. Hence the ratio applied by the AO without considering the relevant facts is not justified
Sale of the villa to the assessee is at a price more than the price determined by the sub registrar. This represents fair market value as recognized u/s 50C and 43CA. Further the assessee has also filed comparative case of villa sold to other parties at a price lower than to the assessee which proves that no extra benefit is given to the assessee - no illegality in the order of ld. CIT (A) in deleting the addition made by the AO under section 2(24)(iv) of the IT Act.
Deemed dividend addition u/s 2(22)(e) - assessee received ₹ 53,20,000/- from M/s. Bhatia Corporation Pvt. Ltd. and the said money was utilized by the assessee for investment in the shares of the same company - HELD THAT:- The law is clear that once the loan/advance has been given to the substantial shareholders, the same has to be treated as deemed dividend unless the same falls in exceptional circumstances as enumerated in the various case laws and CBDT circular. It may be mentioned that transaction made by the appellant does not fall in any way in to trade advance/commercial transactions described in CBDT in Circular No. 19/2017 dated 12 June 2017 and therefore, the said circular cannot help the appellant to take out the transaction from the ambit of the word ‘advance’ in section 2(22)(e) - addition made by the AO by treating the advance taken by the assessee from the company as deemed dividend is confirmed.
Paper transaction of exchanging the cheques - no actual movement of the fund - loan or advance as per provisions of section 2(22)(e) - HELD THAT:- We find from the record that there is no actual movement of the fund from either party and, therefore, there is no payment of any amount either by the company to the assessee or by the assessee to the company but it was only a paper transaction of exchanging the cheques of equal amount by the parties. Therefore, to that extent, we do not find any error or illegality in the order of the CIT (A) when the actual movement of fund has not happened which can be termed as the loan or advance as per provisions of section 2(22)(e).
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2019 (5) TMI 95
Entitled to deduction u/s 80I and 80IA - allocating any expenditure to the gas unit to steam unit - HELD THAT:- As relying on own case M/S NTPC LTD. [2018 (5) TMI 796 - ITAT DELHI] arguments addressed by the ld. DR for the Revenue are misconceived and as such the assessee is entitled to deduction u/s 80I and 80IA without allocating any expenditure to the gas unit to steam unit. CIT(A) has duly thrashed this issue in the light of the findings returned by Hon’ble Delhi High Court in assessee's own case for AY 2000- 01 [2013 (1) TMI 219 - DELHI HIGH COURT] wherein Hon’ble High Court has held that both the gas turbine or steam turbine generated electricity independently and inspection report dated 02.09.2004 does not indicate any new facts. So, we are of the considered view that the ld. CIT (A) has rightly decided the issue in favour of the assessee.
Deduction of expenditure u/s 37 - expenses incurred on the assets not owned by it but belongs to various State Governments like irrigation, PWD, Electricity Board and in a few cases Central Government like Indian Railways - HELD THAT:- No illegality or infirmity in the findings returned by the ld. CIT (A) which are based upon the decision of L.H. Sugar Factory & Oil Mills (P) Ltd. vs. CIT [1980 (8) TMI 1 - SUPREME COURT] and Airport Authority of India vs. CIT [2011 (12) TMI 114 - DELHI HIGH COURT] and Bikaner Gypsusms Ltd. vs. CIT [1990 (10) TMI 2 - SUPREME COURT] as held that when the roads were constructed around the factory with an amount incurred by the assessee existing on the land owned by Government of UP, the assessee did not acquire any asset of an enduring nature. Assessee is having existing right to carry out the business, any expenditure made by it for smooth running of the business would not lead to acquisition of capital assets. Thus the expenditure incurred by the assessee on construction of road, water supply, rail connectivity and other infrastructure activities on the assets not owned by it but owned by various Government Departments are revenue expenditure. - Decided in favour of assessee.
Disallowance of pre-commissioning expenses - HELD THAT:- As the addition is made by the AO following the assessment order of A Y 2004-05, therefore respectfully following the decision of Ld. CIT-A this ground of appeal is decided in favour of the appellant and the AO is directed to allow the netting off precommissioning sales against pre-commissioning expenses as claimed by the assessee and delete the addition made as income from other sources. The appeal is allowed in this ground - Decided against the Revenue.
Disallowance u/s 14A - Exemption u/s 10 - Assessee earned an income form tax free interest bonds @ 8.5% and dividend income - HELD THAT:- Perusal of the order passed by the coordinate Bench of the Tribunal in AY 2004-05 [2018 (5) TMI 796 - ITAT DELHI] apparently goes to prove that identical issue as to disallowance of the expenditure made by the assessee to earn the exempt income from investment in tax free bonds has been decided in favour of the assessee wherein AO has disallowed 2.5% of the administrative expenses for earning income from tax free bonds and the disallowance was ordered to be deleted.
As to making disallowance of ₹ 123.09 crores by the AO and reduced the same to ₹ 82.67 crores by the ld. CIT (A) in the light of the facts inter alia that AO has not recorded any dissatisfaction as to the working out made by the AO; that the AO has failed to establish any nexus between the tax free income and expenditure incurred; that the assessee was having huge sufficient own funds of ₹ 41776 crores as against the investment of ₹ 16469 crores and the fact that the entire investment was made long back under one time settlement, disallowance made by the AO as well as CIT (A) is not sustainable. There is not an iota of material on file to prove the fact that the assessee has incurred any expenditure by way of administrative expenses for earning the exempt income, which makes the estimated disallowance made by the AO as well as ld. CIT (A) not sustainable.
Staff is appointed to manage the surplus funds as well as investment made by the assessee and at the same time, they have also brought on record by way of financials that no expenditure has been incurred in relation to earning such income. Accounts of the assessee are audited by auditor as well as Controller & Auditor General (CAG) and when the AO has failed to prove on record material to show that such and such expenditure has been incurred by the assessee to earn exempt income, in the face of the fact that all the investments are old investments that too in tax free bonds and loan to the Government out of its own huge surplus funds, no disallowance can be made - Decided in favour of assessee.
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2019 (5) TMI 94
Addition made on account of interest accrued on outstanding debt - HELD THAT:- CIT(A) had also deleted the addition by placing reliance on the Co-ordinate bench decision of this Tribunal in assessee’s own case for the earlier years and hence, we find no infirmity in the order of the CIT(A). Accordingly, ground Nos. 1 & 2 raised by the revenue for both the years are dismissed.
Addition made on account of disallowance u/s.14A r.w.r. 8D - HELD THAT:- We find that this issue has already been dealt by this Tribunal in assessee’s own case [2016 (12) TMI 1771 - ITAT MUMBAI] wherein, it was held that amount already disallowed by the assessee is fair and reasonable and the AO without recording any satisfaction as to why the disallowance made by the assessee is incorrect cannot automatically proceed to make disallowance by applying the computation mechanism under rule 8D(2) of the rules. Respectfully following the same, we find no infirmity in the order of CIT(A).
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2019 (5) TMI 117
TDS u/s 194H - commission paid to the banks on processing of Credit Card Transactions - TDS liability - HELD THAT:- As relying on M/S. HOTEL LEELA VENTURE LTD., [2018 (12) TMI 1637 - BOMBAY HIGH COURT] The so called bank guarantee commission is not in the nature of commission paid to an agent but it is in the nature of bank charges for providing one of the banking service. The requirement of Section 194H of the Act, therefore, would not arise. - Decided in favour of assessee.
Tds u/s 194I or 194C - use of lounge premises paid by the assessee - payments for contract of work under section 194C OR nature of rent as per section 194I - HELD THAT:- Assessee would enter into an agreement with the agency which has rented out the lounge space at the Airport from the Airport Authority. Under such agreement, the assessee would pay committed charges be it on lumpsum basis or on the basis of customer flow to such agency. This in turn would enable the passengers of the Airlines to utilize the lounge facilities while in transit.
We accept the suggestion of Mr.A.R. Malhotra appearing for the revenue that service of providing beverages and refreshments was not the dominant part of service. It may only be incidental to providing quiet, comfortable and clean place for customers to spend some spare time.
We do not descreen element of rent being paid by the assessee to the agency. The assessee did not rent out the premises. The assessee did not have exclusive use to the lounge for its customers. The customers of the Airlines along with customers of other Airlines of specified categories, would be allowed to use all such facilities. Section 194I governs the situation where a person is responsible for paying any rent. In such a situation deduction of tax at source while making such payment is obligated. We do not find that the revenue is correct in invoking section 194I of the Act. - Decided against revenue.
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2019 (5) TMI 93
Penalty u/s 271(1)(c) - grants and contribution made by the assessee to various institution and deduction claimed thereon u/s 36(1)(xii) was disallowed by AO, however, same was allowed by the CIT(A) and ITAT - whether assessee has failed to give any bonafide explanation in respect of the claim - claim of benefit of weighted deduction u/s 35 being an incentive - HELD THAT:- We find that the hundred percent claim of the grant to notified institution was allowed u/s 36(1)(xii) but the balance 25% claimed u/s 35(1) has not been allowed to the assessee.
It is settled position of the law that mere making of a claim, which is not sustainable in the law by itself will not amount to furnishing inaccurate particulars of income. See RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT]
The only question is regarding the weighted claim of 25% u/s 35(1) on the same grants made to notified institution, which has been allowed under section 36(1)(xii). Thus, we cannot say that the claim under section 35(1) is based on any inaccurate particulars of income.
CIT(A) has upheld the penalty only on the ground that assessee has failed to give any bonafide explanation in respect of the claim. We do not agree with the said finding of the CIT(A). The assessee has duly explained before the AO the reasons as why the deduction u/s 35(1) has been claimed, which have been also reiterated by us in the brief facts of the case. Accordingly, we set aside the finding of the CIT(A) on the issue in dispute and direct the AO to delete the penalty in all the three assessment years under consideration. - Decided in favour of assessee.
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2019 (5) TMI 116
Benefit of deduction in respect of export business u/s 80 HHC - writ Appeals revolve around deduction u/s 80 HHC, particularly against the proviso inserted in Section 80HHC by the Taxation Law (Amendment Act, 2005) with retrospective effect on 01.04.1998 - HELD THAT:- In CIT. & ANR VERSUS M/S AVANI EXPORTS & ANR. [2015 (4) TMI 193 - SUPREME COURT] in essence the High Court [2012 (7) TMI 190 - GUJARAT HIGH COURT] has quashed the severable part of third and fourth proviso to Section 80HHC(3) and it becomes clear therefrom that challenge which was laid to the conditions contained in the said provisos by the respondent has succeeded. However, to make the position crystal clear, we substitute the direction of the High Court with the following direction:
Having seen the twin conditions and since 80HHC benefit is not available after 1.4.05, we are satisfied that cases of exporters having a turnover below and those above 10 crores should be treated similarly. This order is in substitution of the judgment in appeal.
In view of the aforesaid decision of the Supreme Court, the present controversy is no longer res intergra and therefore, the present Writ Appeals filed by the Union of India – Income Tax Department, also deserves to be disposed of on same terms.
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2019 (5) TMI 115
Levy of interest u/s 220(2) - no complete setting aside of the Assessment Order in the present case - CBDT Circular No.334 dated 03/04/1982 - HELD THAT:- The levy of interest u/s 220, is consequential and the interest is payable if the Assessee fails to pay the tax payable as determined in the Assessment Order and a Notice of Demand is issued to the Assessee u/s 156. The levy of interest naturally therefore, depends upon the levy of tax itself. If the above Assessment Order is set aside or set at naught and the Assessing Authority is required to pass fresh Assessment Order, then naturally unless the tax liability is re-determined by the Assessing Authority, the question of interest as determined in the earlier Assessment Order, which has been set aside by the Tribunal, cannot arise.
The present case is not a case of total cancellation or setting aside of the Assessment Order fully. It was for a limited purpose that the Tribunal in its order dated 24.08.2004 had asked the Assessing Authority to reconcile the accounts with regard to the amounts of ₹ 1,50,064/- and ₹ 3,58,877/- which two figures did not tally with the total of ₹ 4,54,566/-. Such re-computation at the hands of the Assessing Authority, pursuant to the remand of the learned Tribunal, will not amount to setting aside the Assessment Order altogether. No fresh determination of the tax liability was to take place upon such remand by the learned Tribunal.
Question of suspension of the levy of interest for the interim period, upon the order passed by the Tribunal dated 24.08.2004 upto 22.03.2006, when a fresh Assessment Order was passed by the Assessing Authority, could not arise. Circular No.334 dated 03.04.1982 had no application to the facts of the present case and therefore, the contention of the learned counsel for the Assessee raised before us, is devoid of merit.
Order under Section 220(2) as such, namely, adding of interest of ₹ 10,05,030/- in the Appeal Effect Order dated 22.03.2006 was per se appealable. Such provision is not included in the category of 'Orders Appealable' u/s 246A. If the levy itself is challenged, the levy of interest consequentially could only be challenged and if the tax liability is reduced or enhanced, the quantum of interest could go up or down, but without making a challenge to the tax liability itself, the levy of interest independently cannot be challenged before the CIT (Appeals).
That is why it seems that the Assessee, conscious of this restriction, did not raise this issue as such in the “Grounds of Appeal” initially, but during the course of hearing of Appeal wrongly relying on the aforesaid CBDT Circular No.334 dated 03.04.1982, had raised the ground, against levy of interest under Section 220(2) and the same came to be not only entertained by the CIT (Appeals) but even the relief was granted by him, which in our opinion, was rightly reversed by the learned Tribunal. Decided against the Assessee and in favour of the Revenue
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2019 (5) TMI 114
Disallowing the interest u/s 36(1)(iii) - borrowings to set up a new unit for manufacturing door-frames at Haryana - revenue expenses vs capital expenses - whether the new unit set up by the Appellant at Haryana for manufacture of door frames is not an expansion of existing business? - HELD THAT:- Since the authorities below have consistently found against the Assessee that the interest on borrowings to the extent of 2.72 crores which had been capitalised by the Assessee itself in the Books of Accounts for setting up the Haryana Unit, there was no question of allowing the same as deductable expenditure for the Assessment year in question, as the said unit was yet to commence production.
Even though the Assessee is one company and it has set up a different unit at Haryana and since the interest paid on borrowings pertains to Haryana Unit, which was a new unit set up by the same company,it cannot be construed as a mere expansion of business existing at Chennai particularly, when the Assessee has capitalised the said expansion in its Books of Accounts as consistently found by the authorities below. Therefore, the disallowance of said interest on borrowings under Section 36(1) (iii) of the Act was a natural consequence to follow.
Disallowance u/s 14A - HELD THAT:- No Substantial Question of law arises for consideration, as the said issue has only been remitted back to the AO by Tribunal for ascertaining actual expenses incurred by the Assessee in earning the exempted income for the Assessment Year in question.
Whether the Assessee incurred anything or not is the question of fact and the same has to be ascertained by the Assessing authority the same does not give rise to any Substantial Questions of law.
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2019 (5) TMI 113
Minor's income taxability u/s 56(1) - both the parents are not alive - as per tribunal income of the minor will be completely exempt from tax if both the parents are not alive ? - HELD THAT:- As decided in R.P. SARATHY, THE COMMISSIONER OF INCOME TAX VERSUS THE JOINT COMMISSIONER OF INCOME TAX, MINOR M. PRANUTHI [2019 (4) TMI 420 - MADRAS HIGH COURT] Tribunal has wholly erred in holding that since there is no provision to assess the minor's income in the hands of the minor and, if the parents do not survive, the income cannot be clubbed in the hands of any of his grandparents or anybody, who maintains minor child, and, therefore, the orders of two authorities bringing the income of minor to tax in the hands of the Minor deserve to be quashed
Income in the present case was taxable in the hands of representative-assessee-Guardian and grandfather for the period for which the said minor child remained a Minor, we do not find any justification for holding otherwise - Decided against revenue.
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2019 (5) TMI 112
Weighted deduction of expenditure incorporated u/s 35 (2AB) - expenditure was incurred by the Assessee on Scientific Research - mandatory condition of producing the approval for the Assessment Year in question was not complied with - HELD THAT:- Allowability of weighted deduction to the Assessee u/s 35 (2AB) since the requisite approval for the project on which expenditure was incurred by the Assessee on Scientific Research was approved for the period prior and even subsequent to AY 2003-2004. The said condition of approval stood substantially complied with. Assessee had contended before the authorities below that approval from the Ministry concerned of the Central Government for the year in question was also under active consideration and awaited.
Assessee cannot be punished for the bureaucratic delay in giving such approval for the year in question, which was in the hands of the Department concerned of the Central Government itself. On the very fact that for the period anterior and posterior to the year in question such approval was very well on the record of the Revenue, the weighted deduction for the expenditure incurred on the Scientific Research could not have been disallowed by the authorities below and, therefore, Tribunal, in our view, rightly held such Scientific Research expenditure to be allowable under Section 35 (2AB). - Decided in favour of the Assessee and against the Revenue.
Levy of Interest u/s 234D - HELD THAT- Computation of interest will depend upon the appeal effect order to be passed, the quantum of net payment is to be determined accordingly, after allowing weighted deduction under Section 35 (2AB) . The provisions of Section 234D have been held applicable for Assessment Year 2003-2004 in question in terms of the decision of the Co-ordinate Bench of this Court in the case of Fisher Sanmar Ltd. [2014 (4) TMI 236 - MADRAS HIGH COURT] . - Decided in favour of the Revenue and against the Assessee.
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2019 (5) TMI 111
Deduction in respect of provision for liquidated damages and retention of money - contingent liability - possibility vs probability - HELD THAT:- The controversy has been decided in the case of the Assessee itself by a Co-ordinate Bench of this Court for Assessment Year 1998-1999 on 13.08.2018 in FFE Minerals India (P) Ltd. v. Joint Commissioner of Income Tax, [2018 (9) TMI 357 - MADRAS HIGH COURT] in which, it was held that when a provision was made for liquidated damages to be paid by the Assessee to the companies with which it executed certain turnkey projects and delay occurred in execution of such turnkey projects, the liability for liquidated damages made by the Assessee had not crystallized during the previous year in question and, therefore, the same was not allowable towards business expenditure under Section 37 (1) - M/S. ROTORK CONTROLS INDIA (P) LTD. VERSUS COMMISSIONER OF INCOME TAX, CHENNAI [2009 (5) TMI 16 - SUPREME COURT OF INDIA] followed. - First Question of Law in favour of the Revenue and against the Assessee.
Disallowance u/s 40 (a) (i) - TDS u/s 195 OR 194A - interest paid to its Banker for import of certain goods from a supplier in USA - remittance to the exporter in USA through his Bank in USA - HELD THAT:- We are satisfied that the learned Assessing Authority was absolutely not justified in invoking Section 195, ignoring the fact of payment made by the Assessee to its own Bank in India. There was no material on record either produced by the Assessee or brought on record by the Assessing Authority, on the basis of which a direct payment by the Assessee to the non-resident company in US could be inferred and, therefore, the applicability of Section 195 was out of question. Still, the Assessing Authority, without having any material on record, chose to ignore the provision of Section 194A (3), which clearly provides that the provisions of Section 194A shall not apply in case such income is credited or paid to any banking company.
Payment of interest in question was made by the Asseseee to its own Banker in India for the grace period or period of delay under the contract and such remittance was made to the exporter in USA through his Bank in USA. This is how in normal course export and import transactions take place and without the intervention of Banks, direct payment for import cannot be made and, therefore, the existence of a Bank in India through which such remittance was made by the Assessee during the year in question and payment of interest made by the Assessee to its Bank in India could not have been ignored by the Assessing Authority. Without there being any material on record in this regard, the learned Assessing Authority could not even have arrived at the figure of interest of ₹ 6,22,577/-.
If the provisions of Section 40 (a) (i) have to be invoked, the burden squarely lies on the Assessing Authority to establish in the first instance that the relevant TDS provisions were applicable to the facts of the case, casting a legal obligation upon the Assessee to deduct tax at source. Without such a finding or basis being found, the disallowance u/s 40 (a) (i) could not have been lightly made by the Assessing Authority. In the present case, we find it to be casually invoked by the Assessing Authority as well as the Tribunal - Decided in favour of the Assessee and against the Revenue.
Duty of Tribunal - The final fact finding body, particularly while reversing the order of the First Appellate Authority, was expected to deal with the facts of the case and the legal position in detail, before restoring the addition made in the hands of the Assessee in the present case. The findings of facts by the final fact finding body are not only of great relevance and significance for the higher Constitutional Courts, such as High Court under Section 260A of the Act in the present appeal, but, even otherwise also, the mandate of the Act is that the Tribunal should arrive at its own findings of facts based on relevant and cogent material.
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2019 (5) TMI 110
Allowable expenditure u/s 37(1) - expenditure incurred towards 'sales promotion expenses' and 'other selling expenses' by providing gifts and freebies to Doctors and Medical Practitioners - expenditure contrary to the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 - scope of amendment - applicability of explanation to Section 37(1) - CBDT Circular No.5/2012, dated 1st August 2012 - HELD THAT:- The Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations were amended with effect from 14.12.2009 and therefore, the expenditure incurred after 14.12.2009 to 31.3.2010 for relevant Assessment Year 2010-2011 was disallowed.
We find that no substantial question of law arises for our consideration in the present case as the findings of facts of the Appellate Authority below are based on relevant Regulations and Amendment thereafter and the expenditure on such items prior to the Amendment have already been allowed in favour of the Assessee and they have been disallowed after 14.12.2009. We find no error in the order passed by the Tribunal. Appeal is devoid of merit and the same is liable to be dismissed and accordingly, it is dismissed.
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2019 (5) TMI 109
Revision u/s 263 - allowability of deduction u/s 80IB(10) to land owner who does not undertake the construction work himself - land owner who is equally a partner in the "development" of Industrial Undertaking other than the Infrastructure Development Undertaking - erroneous order and prejudicial to the interests of the Revenue - HELD THAT:- Nothing in Section 80IB(10) to deny the benefit of Deduction to the land owner also, who is equally a partner in the "development" of Industrial Undertaking other than the Infrastructure Development Undertaking. Without the land, obviously, the construction of building cannot be undertaken and therefore, the land owner is an integral part of the development of the Buildings. It is considered to be an Industrial Undertaking other than Infrastructure Development in view of the said provision. Merely because the land owner does not undertake the construction work himself, the land owner cannot be excluded from the ambit and scope of Section 80IB(10).
The Tribunal has, therefore, has by citing its earlier decision in the case of Sri Lakshmi Brick Industries, [2012 (11) TMI 1090 - ITAT CHENNAI] wherein such benefit was allowed to the extent of 1/2 to both the land owner and the developer who constructed the building in question, has rightly given the said benefit to the land owner, the present Assessee before us and has rightly set aside the order passed by the Commissioner of Income Tax u/s 263 - no substantial question of law - Decided against revenue
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2019 (5) TMI 92
Disallowance u/s 14A r/w rule 8D - HELD THAT:- As in assessee’s own case for assessment year 2006–07 we restore the issue to the file of the Assessing Officer to verify assessee’s claim that in the facts of assessee’s case, disallowance u/s 14A can be reasonably be computed @ 5% of the exempt income earned during the year. AO must decide the issue after due opportunity of being heard to the assessee. - Ground is allowed for statistical purposes.
Addition towards publicity expenses by the assessee - HELD THAT:- Identical issue arising in assessee’s appeals for assessment year 2003–04 and 2004–05 was decided in favour of the assessee by the first appellate authority. Therefore, following the aforesaid decisions, he deleted the disallowance made by the Assessing Officer.
TP Adjustment - determination of arm's length price of advertisement and publicity expenses, as raised in additional grounds - HELD THAT:- The advertisement and publicity expenses whether is an international transaction and it at all it is so, what should be the arm's length price of the transaction requires verification of primary facts which, as per AO’s own version, is neither available in Form no.3CEB report nor in the course of proceedings before the Transfer Pricing Officer - the issues raised in additional grounds require verification / investigation into fresh facts which are not available on record - as noticed that identical additional grounds were raised by the Department before the Tribunal in the appeal filed in assessee’s own case for assessment year 2006–07.
Accrual of income - addition on account of commission income - HELD THAT:- Issue to be decided in favour of assessee as relying on assessee's own case [2009 (3) TMI 990 - BOMBAY HIGH COURT]
Depreciation on computer peripherals @ 60% to be allowed as relying on assessee's own case.
Addition u/s 68 - HELD THAT:- FAA has factually verified the claim of the assessee and has found that all the details relating to the Cable Operators who have made deposits with the assessee are available on record and have been duly reflected in the books of account of the assessee. Also recorded a finding of fact that not only the deposits were received by cheque but subsequently they have been adjusted/refunded back to the Cable Operators. DR has not controverted the aforesaid factual finding except submitting that Commissioner (Appeals) should have called for a remand report from the Assessing Officer on the submissions made by the assessee. Commissioner (Appeals) after verifying the facts brought on record has found that the deposits were received from Cable Operators and the aforesaid factual finding remains uncontroverted, there is no reason to interfere with the decision of learned Commissioner (Appeals). - Decided against revenue.
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2019 (5) TMI 108
Eligible for deduction u/s 80HH/80IA - Delay of filing the cross objection 496 days - alternate prayer seeking relief under Section 80 IA - HELD THAT:- We find that the claim of the Appellant for deduction under Section 80 IA had not been properly considered and consequently, we hold that it would only be just and proper that the matter is remitted back to the Tribunal for fresh consideration on that aspect alone.
We are keeping the issue of grant or otherwise of benefit under Section 80 HH open. It will be permissible for any of the parties to approach the High Court again to raise the issue of claim for benefit under Section 80 HH if deemed necessary, on order being passed by the Tribunal on this remand order and on the claim under Section 80 IA. Consequently, keeping the issue relating to Claim of benefit under Section 80 HH open,the matter is remitted back to the Tribunal to decide the claim for benefit under Section 80IA of the Act.
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2019 (5) TMI 91
Transfer pricing adjustment - correction of reimbursement wrongly grossed - TPO while working out the operating cost has made an addition of reimbursement received on account of advertisement and warranty - comparable selection - HELD THAT:- When the original expenses were incurred they were also included by debiting those expenditure to those expenditure accounts. Once those expenditure have been debited whenever they were incurred and at the time of reimbursement they were credited to the same expenditure account, both should have been excluded. Therefore addition to the operating expenses of assessee amounts to double addition to the operating cost by the sum. Therefore it is apparent that the adjustment made by the learned transfer pricing officer by increasing the operating expenses by this amount is erroneous and incorrect. Therefore the learned TPO is directed to remove the addition made to the other operating expenses of the assessee.
Comparable selection - acceptability of 2 comparable companies being Micromax informatics Ltd and Lava international Ltd - availability of brands registered in their name in current assessment year - HELD THAT:- We set aside the issue with respect to the selection of comparable companies with respect to these 2 companies back to the file of the learned transfer pricing officer to determine whether there is any brand registered in the name of this companies for assessment year 2013 – 14 or not and then to find out whether such brands have made any impact on their profitability. Such information may be obtained by the learned transfer pricing officer by exercising powers u/s 133 (6). On receipt of such information, it should be provided to the assessee to submit its contention, and then decide about whether such companies can be selected as a comparable companies are not.
AMP expenditure - international transactions for marketing and development of marketing services based on Bright line test approach on protective basis - bright line test used for making an adjustment of excessive advertisement marketing promotion expenditure - HELD THAT:- With respect to the protective adjustment made by the learned transfer pricing officer by bright line test method it was submitted by the learned authorised representative that it is contrary to the decision of the honourable Delhi High Court in Sony Ericsson [2015 (3) TMI 580 - DELHI HIGH COURT] . We hold that bright line test cannot be used for making an adjustment of excessive advertisement marketing promotion expenditure.
We direct the learned assessing officer/transfer pricing officer to not to make adjustment by addition of reimbursement received to the operating expenses of the assessee and also to examine the 2 comparable companies afresh discussed above.
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Customs
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2019 (5) TMI 166
Mis-declaration of imported goods - Agar Agar Strips - procedural lapse in collecting samples - it was alleged that sample of agar agar does not confirm as Food Ingredient - HELD THAT:- The first CFTRI test report dated 18.09.2010 had opined that the sample did not conform as food ingredient under the provisions of PFA Act, 1954, only for technical reasons like batch number was not mentioned, date of manufacture and expiry was not mentioned. This lapse / discrepancy certainly cannot be attributed to the importer-appellant but only to the officers who forwarded the samples for test. Possibly, if these details had also been made incorporated in the test request, the CFTRI may well have reiterated the report dated 15.07.2010 of the University of Madras that the sample was Agar-Agar only with no pathogenic microorganisms upon culture on different media. The second sample for retest was obviously sent after prolonged delay as a result of which the CFTRI rightly pointed out that the goods were nearing their expiry period.
It is also interesting to note that even when CFTRI in their initial report dt. 18.09.2010 had flagged the non-mention of batch number and non-mentioning the dates of manufacture and expiry of goods, while sending the samples for retest, the department again goofed up, this time by not mentioning the name of the manufacturer. This is definitely a tragedy for which the department will have to bear the cross, especially when there is no dispute that the appellant-importer had given all these details at the time of import.
It can be concluded that the report dt. 15.07.2010 of University of Madras has to be taken as the correct report since only that report has discussed the actual nature and condition of the imported goods. Viewed in this light, impugned goods cannot be then assailed as not conforming to the Food Safety and Standards (Packaging and Labelling) Regulations, 2011.
Valuation - enhancement of value based on NIDB data - HELD THAT:- The order of enhancement of value by the original authority in his order dt. 23.05.2012 based on NIDB data also cannot be sustained in view of the plethora of decisions by higher appellate forums including those by this Tribunal - reliance placed in the case of Vijaya International Impex, Vs CC (Seaport-Import) Chennai [2017 (6) TMI 991 - CESTAT CHENNAI].
The part of the LAA upholding the order by the original authority of confiscation of impugned goods under Section 111 (m) ibid cannot be sustained and is therefore set aside. In consequence, the imposition of redemption fine of ₹ 25,000/-under Section 125 ibid is also set aside - The penalty of ₹ 10,000/- imposed on CMT under Section 112 (a) ibid on the charge of having rendered the goods liable to confiscation under Section 111 (d) and (m) ibid will also have no legs to stand upon and hence that part of the impugned order of LAA upholding such penalty is also set aside.
Appeal allowed.
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2019 (5) TMI 169
Import of restricted item - Old and Used Digital Multifunction Print and Copying Machines - requirement of production of authorisation/import licence issued by the DGFT authorities or any other notification or clarification issued by the DGFT - HELD THAT:- The goods imported by the respondent/writ petitioner are second hand machinery. In terms of the policy guidelines issued by the DGFT, authorisation/import licence ought to have been obtained, as the goods are restricted for import in terms of Para 2.31 of the Foreign Trade Policy 2015-20.
The respondent/writ petitioner was fully aware of the fact and that an import licence and appropriate BIS clearance certificate under the relevant order is a prerequisite and having been well acquainted with the legal position, they have applied for grant of such licence which was either rejected or not entertained or kept pending without orders. In such a factual position, we would be fully justified in holding that the appellant can insist upon orders for provisional release of the imported goods by raising a plea that the provisions of the Foreign Trade Policy and the various notification and orders are not sustainable or inapplicable to the goods imported by them.
Whether Section 110A of the Customs Act could be invoked by the respondent/writ petitioner? - HELD THAT:- Prerequisite for Section 110A to be attracted is seizure of the goods under Section 110 and in terms of sub-Section (1) of Section 110, if the proper officer has reason to believe that any goods are liable to confiscation under the Customs Act, he may seize such goods. Admittedly, till date, the goods have not been seized. The respondents do not dispute the said factual position. This is more so because, the goods have been warehoused in terms of Section 49 of the Act - Proviso to Section 49 states that the Principal Commissioner of Customs or Commissioner of Customs may extend the period of storage for a further period not exceeding thirty days at a time. This warehousing is done on the application made by the respondents/importer requesting time for production of requisite documents and the Assistant Commissioner of Customs being satisfied that the goods cannot be cleared within the reasonable time, pending clearance, has permitted the goods to be stored in a warehouse. Thus, in the absence of seizure, the provision of Section 110A would be inapplicable.
The respondent would not be entitled to make a prayer for provisional clearance, as there is non compliance of the vital requirement regarding BIS certificate as required under Electronics and Information Technology Goods (Requirements for Compulsory Registration) Order 2012 dated 07.09.2012 and subsequent orders dated 25.06.2013 and 07.11.2014 issued by MeitY.
Appeal allowed - decided in favor of Revenue.
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2019 (5) TMI 168
Interpretation of statute - Redemption of goods denied - right of redemption has not been given to the appellants because the owner of the goods was known to them and that the owners did not come forward to redeem the goods - Section 125 of the Customs Act - HELD THAT:- If the owner of the goods is properly identified and submits to the authority of the customs, his agent, upon proper authorization by him can be allowed to avail of and redeem the goods under Section 125 of the said Act. Such an interpretation has to be given to Section 125 of the said Act.
Thus, provided the owner of the goods declares his identity and details before the customs authority, submits to their jurisdiction, executes a proper instrument conferring authority on the appellant as his agent to the satisfaction of the customs authorities, they may allow the appellant to avail of the option provided in Section 125 on behalf of the owner as his constituted attorney or agent. To avail of such option, the owner must make the answer to declare and comply with the above conditions of this order within two months from date. Otherwise, the customs may take steps for dealing with the confiscated goods in accordance with law.
Appeal disposed off.
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2019 (5) TMI 167
Principles of natural justice - denial of cross-examination - HELD THAT:- This Court notices in the present case that the statements of the co-accused, recorded under Section 108 of the Act, ultimately became the basis of the impugned order. The denial of the right of cross examination of such witnesses, was plainly in violation of the principles of natural justice.
The Court is of the opinion that it would not be appropriate to relegate the appellant to the remedy of cross-examination in the course of an appeal, which would in effect amount to denial of an appellate forum, in the event, the findings of the Additional Commissioner are affirmed. As a consequence, the impugned order is set aside, as against the petitioners.
The Additional Commissioner of Customs shall proceed to hear the petitioners and also grant appropriate and sufficient opportunity to cross-examine the witnesses, whose cross-examination was sought but denied in the original proceedings - Petition allowed by way of remand.
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2019 (5) TMI 165
Rectification of Mistake - typographical error - HELD THAT:- It is clear that no new ground is raised, no additional documents are required to be looked not and no question of law is involved nor is it a debatable one. The mistake pointed out is clearly perceivable one and do not require no deliberation nor detailed arguments. Hence, the error being a typographical error apparent on the face of the record, the same is rectifiable.
ROM Application disposed off.
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Service Tax
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2019 (5) TMI 160
Classification of services - port services or not - Freight on barges - Salary of floating crane operator - Management and allied services - HELD THAT:- Only the services authorized by the port, or other ports, were chargeable to service tax in terms of the aforesaid definition of ‘Port Service’ - thus, unless revenue is able to produce specific authorization in favour of appellant from the port for such operations the demand cannot be upheld - The demands under Port Services, therefore, set aside.
Salary paid to Foreman/ Khalasi - Demand of service tax - extended period of limitation - HELD THAT:- In the instant case there exist two different legal entities. In view of clear supply of manpower by appellant they are liable to tax. Moreover, it is seen that there is no ambiguity in law and in these circumstances failure to pay can be clearly attributed to intention to evade. Extended period has been rightly invoked - demand upheld.
Appeal allowed in part.
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2019 (5) TMI 159
Valuation - supply of manpower services - inclusion of amount of salaries and wages paid to the persons in assessable value - Section 67 of the Finance Act, 1994 read with Rule 3 of the Service Tax (Determination of Value) Rules, 2006 - Time Limitation - HELD THAT:- The period involved is from June 2005 to September 2008. The Show Cause Notice has been issued on 12.04.2010 invoking the extended period - Appellant has placed the samples of the invoices raised by them as also the financial statements. The amount received as salaries and wages by the appellant is shown as expenditure and not as income by them. This goes to show that the appellants were under the bona fide belief that these are reimbursable expenses and would not be includible in the taxable value.
The issue whether reimbursable expenses are subject to levy of service tax was under litigation and had travelled up to the Hon’ble Apex Court wherein it was settled by the decision in the case of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [2018 (3) TMI 357 - SUPREME COURT OF INDIA] . The Department does not have a case that the appellants did not reflect the amount received by them in the nature of salaries/wages in their account.
The Department has failed to establish that the appellants have wilfully suppressed facts with an intention to evade payment of service tax - The appeal succeeds on the ground of limitation.
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2019 (5) TMI 158
Valuation - Payment of Service Tax on net amount received by the appellant - violation of Section 67(1) of the Finance Act, 1994 that contemplates payment of Service Tax on gross amount charged for the taxable service - HELD THAT:- Certain amount was paid to M/s ASMACS from such collection towards the service rendered by it and basing on the computer generated copies obtained from M/s ASMACS, appellant was asked to produce cash register, balance sheet etc. The said amount paid to M/s ASMACS also included component of Service Tax which M/s ASMACS paid and that had gone to the credit of appellant but due to erroneous filing of ST-3 return, they failed to put the CENVAT credit in the appropriate column for which demand was raised where as duty was not payable as it was a technical error.
From para 22.5 (v) as well as show-cause notice, It is found that no invoice/bill was raised against such collection from the candidates and therefore the amount shown in the balance sheet was taken by the respondent-department as the gross value. Therefore, there is no evidence on record to substantiate that the entire bill is raised by the appellant except figure mentioned in the balance sheet.
Service Tax was paid by the appellant and M/s ASMACS separately on the gross amount collected and distributed between them and imposing duty liability on the appellant, on the ground that it had paid the same alone on the net amount would amount to double taxation, which no law of the land had ever approved of.
Appeal allowed - decided in favor of appellant.
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2019 (5) TMI 157
Utilization of CENVAT credit for payment of Service Tax under RCM - import of “Information Technology Software Service” - HELD THAT:- This Tribunal in the case of PLANSEE INDIA HIGH PERFORMANCE MATERIALS PVT LTD VERSUS COMMISSIONER OF CENTRAL TAX [2018 (10) TMI 324 - CESTAT BANGALORE] has considered the same issue and held that there is no bar for utilization of CENVAT credit for deemed service provider to pay Service Tax liability from CENVAT credit in terms of Section 66A - CENVAT credit can be utilized for payment of service tax payable under reverse charge mechanism in respect of the services received from abroad.
CENVAT Credit - input services - air ticket booking - employee gratuity - factory insurance - factory building maintenance - HELD THAT:- The Learned Commissioner in the impugned order has observed that the air ticket booking, employee gratuity, factory insurance expenses and factory building maintenance on description itself appears to have nexus with output services - Further, Explanation to Rule 3(4) of CCR, 2004 was inserted with effect from 01.07.2012 whereby restriction was imposed but in the present case, the period involved is April 2010 to July 2012 therefore for one month of July 2012, the appellant is liable to pay Service Tax in cash and is not entitled to utilize CENVAT credit for the month of July 2012.
Thus, the impugned order is set aside by allowing the appeal of the appellant except for the month of July 2012 for which he is liable to pay the Service Tax in cash - appeal allowed in part.
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2019 (5) TMI 164
Voluntary Compliance Entitlement Scheme - no inquiry had been initiated against the respondents herein to warrant rejection of the declaration made under the VCES scheme - Section 106(2A) of the Finance Act, 2013 - HELD THAT:- Before Section 106(2) of the Finance Act, 2013 can be invoked so as to reject the application under the VCES scheme, it is necessary that the declaration is made by a person against whom an inquiry / investigation for service tax not paid / short paid has been initiated. In this case, admittedly no inquiry / investigation has been initiated against the respondents but a Notice has been issued to M/s. Marvel Realtors, which admittedly is a non-existing entity. Therefore, no proceedings have been initiated against the two respondents herein who had filed declaration under the VCES scheme so as to be hit by Section 106(2) of the Finance Act, 2013.
The impugned order of the Tribunal allowing the appeal of the respondents before it, cannot be found fault with as the Authorities had no jurisdiction to reject the declaration filed under the VCES scheme by the two respondents. This is particularly so as no inquiry / investigation had been initiated in respect of them.
Whether in the facts and circumstances of the case and in law, was the Tribunal justified in holding that the information sought from M/s. Marvel Realtors was an inquiry of roving nature and, therefore, the declaration ought to have been accepted? - HELD THAT:- The Tribunal found that the enquiry being made in respect of the respondents were in nature of roving enquiry, not hit by Section 106(2) of the Finance Act, 2013 - the finding of the Tribunal is one of facts and nothing has been shown to us to indicate that the same is perverse.
Appeal dismissed - decided against appellant.
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2019 (5) TMI 156
Valuation - Commercial or Industrial Construction Service - benefit of abatement under N/N. 15/2004-ST or 01/2006-ST - appellant have used the material supplied free of cost by the service recipient and the value thereof was not included in gross value - HELD THAT:- The issue in question is no more in dispute as the same was decided by the Hon'ble Supreme Court 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] according to which, even if the value of free supply of material was not included in the gross value of the service namely, Commercial or Industrial Construction Service, the appellant is still entitled for the abatement under Notification No. 15/2004-ST and 1/2006-ST.
The demand raised by the lower authority denying the abatement is not sustainable - appeal allowed - decided in favor of appellant.
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2019 (5) TMI 155
Penalty u/s 78(1) of the Finance Act 1994 read with Rule 15 of CENVAT Credit Rules 2004 - wrongly availed CENVAT Credit reversed on being pointed out with applicable interest - No intent to evade - period involved was 2011-12 to September 2015 - HELD THAT:- Merely because service tax was paid or ineligible CENVAT credit was reversed prior to the show-cause notice, it does not absolve the assessee from the liability to penalty. The facts in each case have to be examined individually. The department’s contention is that there was suppression of facts in this case.
Clearly, there was a mistake by the respondent in availing CENVAT credit. The department is free, while assessing returns, to call for further information and decide if there are errors/discrepancies. The mere fact that the break-up of the CENVAT credit availed was not given by the assessee cannot be held against them when the law does not require them to give this breakup. On the other hand, the conduct of the assessee as has been correctly recorded by the First Appellate Authority, in this case, does not indicate that they had any intention to evade payment of duty or to commit a fraud or had wilfully suppressed facts to evade payment of service tax.
Penalty cannot be sustained - appeal dismissed - decided against Revenue.
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2019 (5) TMI 154
Refund claim - whether provision of output services are necessary for entitlement of CENVAT credit under CENVAT Credit Rules 2004 (whether such output services are exported or rendered domestically)? - Rule 3 of CENVAT Credit Rules 2004 - HELD THAT:- Rule 3 of CENVAT Credit Rules 2004 is the only basis for anyone taking CENVAT credit. This rule provides for CENVAT credit to a manufacturer or a provider of output services of the tax/duty paid on inputs or capital goods or input services received by the manufacturer or provider of output services. In other words, the provision of output services is an essential requirement for entitlement to CENVAT credit under Rule 3 of CENVAT Credit Rules 2004.
Whether there is sufficient evidence to show that the output services were rendered by the appellant from the seven new premises during the relevant period? - HELD THAT:- On a specific question from the Bench if the invoices listed as “other Non-STPI locations” could be matched with the corresponding invoice numbers and the address of the premises where the services were provided, Learned Counsel replied in negative. Therefore, merely based on the assertions of the Learned Counsel, I find it impossible to come to any conclusion that the statement given by the appellant established that the services from these seven premises - there is not even a casual remark or mention in any of these invoices that the services were rendered from any of the seven disputed premises. In the absence of any evidence whatsoever, I am unable to come to a conclusion with these invoices that output services were rendered from any of the seven disputed premises.
Extended period of limitation - penalty - HELD THAT:- It was incumbent upon the appellant to ensure that they take credit as per the rules and not in violation of them. I do not find that the appellant had any reason to believe that they would have been entitled to CENVAT credit on the input services when they have not even kept a record of having rendered any output services from these seven premises - the SCN demanding the recovery of the CENVAT credit along with interest invoking extended period of limitation and proposing imposition of penalty under Section 78 was correctly issued.
Appeal dismissed - decided against appellant.
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2019 (5) TMI 163
Imposition of penalty u/s 78 of FA - entire service tax along with interest had been paid before the issuance of SCN - HELD THAT:- The factual scenario appears to stare against the appellant in the sense that, there is record to show that the appellant has collected service tax from its client/customer, but failed to remit the same with the Department.
The plea of innocence and bona fides should necessarily fail - there is no error in the order passed by the Tribunal and no question of law, much less substantial questions of law arise for consideration in this appeal - Appeal dismissed.
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2019 (5) TMI 162
Principles of Natural Justice - time limitation - Condonation of delay in filing appeal - HELD THAT:- The Tribunal found that there is inordinate delay of 1,103 days and the reason assigned by the appellant is flimsy and will not connote sufficient cause - We cannot differ with the finding recorded by the Tribunal because the delay is 1,103 days and the explanation offered is that some of the employees/managers have left the establishment and they did not bring to the notice of the appellant/management about the order in appeal, dated 05.03.2015. Therefore, we would have been well justified in confirming the order passed by the Tribunal in dismissing the appeal.
This order shall not be treated as precedent, since this order is passed taking note of the peculiar facts and circumstances of the case, so as to enable the appellant to prosecute their appeal before the Tribunal and we also propose to impose further condition.
Appeal allowed.
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2019 (5) TMI 153
VCES Scheme - Jurisdiction - assessees right of filing an appeal against the order of the designated authority in respect of an order passed by him under the VCES Scheme - HELD THAT:- There is Punjab & Haryana High Court decision in the case of M/S BARNALA BUILDERS & PROPERTY CONSULTANTS, VERSUS THE DEPUTY COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, DERA BASSI DIVISION, DERA BASSI AND OTHERS. [2013 (12) TMI 568 - PUNJAB AND HARYANA HIGH COURT] laying down the the said order are appealable - In the absence of any other decision to the contrary and there being no stay of the said decision of the Hon’ble High court, we are unable to find favour with the Revenue’s contention.
VCES - requirement of 50% of the disclosed income to be deposited at the time of filing of declaration - assessee has voluntarily deposited the said amount prior to 10.05.2013 - HELD THAT:-The issue is covered by not only Hon’ble Gujarat High Court in SADGURU CONSTRUCTION CO. & 1 VERSUS UNION OF INDIA & 2 [2014 (5) TMI 219 - GUJARAT HIGH COURT] but also by the Hon’ble Karnataka High Court in PREMIER ASSOCIATES VERSUS THE ASSISTANT COMMISSIONER OF SERVICE TAX [2018 (2) TMI 408 - KARNATAKA HIGH COURT] and Hon’ble Bombay High Court in DR. YESHWANT DHUME, VERSUS ASSISTANT COMMISSIONER SERVICE TAX, DESIGNATED AUTHORITY VCES CELL, [2018 (12) TMI 1042 - BOMBAY HIGH COURT] laying down that the deposits made before 10.05.2013 are required to be taken into consideration.
Appeal dismissed - decided against Revenue.
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2019 (5) TMI 152
Construction Services - composite contracts - period involved is from Jun.’05 to Mar.’10 - HELD THAT:- The contracts are composite in nature involving both supply of materials as well as rendering of services. The agreement is a Tripartite agreement where the developer had to put in 50% and the land owner had to put in 50% which was the total value for the constructions. The demand has been quantified by authority below after giving abatement from the total value. Thus it is very much clear that the contracts are composite in nature.
The decision in the case of COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT] would apply to the period prior to 01.06.2007 wherein it has been held that the demand of service tax cannot sustain for composite contracts. So also, the decision of Tribunal in the case of REAL VALUE PROMOTERS PVT. LTD., CEEBROS PROPERTY DEVELOPMENT, PRIME DEVELOPERS VERSUS COMMISSIONER OF GST & CENTRAL EXCISE, CHENNAI [2018 (9) TMI 1149 - CESTAT CHENNAI] would apply to the period after 01.06.2007.
The demand cannot sustain - appeal allowed - decided in favor of appellant.
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2019 (5) TMI 161
Business Auxiliary Services - non-payment of service tax - HELD THAT:- The learned Single Bench was right to an extent that such a plea could not be raised by the assessee at this distance off time especially when the assessee accepted the order in appeal dated 28.07.2016, participated in the de novo proceedings which resulted in order in original dated 22.01.2018. Admittedly, the assessee did not challenge the order in original dated 28.02.2016. It is the Revenue which went on appeal before the First Appellate Authority against the said order - the appeal was not on the merits of the matter but on technical ground that there was a computation error.
Even assuming that the First Appellate Authority can rectify the computation error, it cannot be a case where the penalty can also be reduced more particularly when the order in original dated 22.01.2018 was accepted by the assessee and 25% of the penalty was paid within 30 days period thereby giving a protection to the assessee in terms of Clause 2 of second proviso. Therefore, considering the peculiar facts and circumstances of the case, we are of the opinion that the writ petition is untenable.
The enhanced penalty cannot be demanded from the appellant/assessee. Though the appellant had filed the writ petition challenging the order in appeal dated 28.09.2018 in its entirety, we restrict the relief only to that of penalty as quantified in the said order to the tune of ₹ 4,77,542/- and the said penalty stands deleted. In all other aspects, the order in appeal dated 28.09.2018 stands confirmed.
Appeal allowed.
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2019 (5) TMI 151
Classification of service - composite works contract for construction of houses for Tsunami affected victims - Works Contract service or construction of residential complex service? - HELD THAT:- It is very clear that the contracts were in the nature of works contracts that involved both supply of material and labour. Even if the SCN has considered only the services rendered by the appellant, the entire service is only composite works contract. This being so, notwithstanding the protestations of the Ld. AR, the ratio of COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT] will be applicable on all fours to this issue.
The demand of tax under construction of complex service cannot then sustain and will require to be set aside - appeal allowed - decided in favor of appellant.
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2019 (5) TMI 150
Reverse charge mechanism - transportation of goods of the appellants for the period 01.01.2005 to 31.01.2009, on the freight expenditure incurred by them - abatement under the Notification No. 32/2004-ST and No. 1/2006-ST - only inadvertence is the name of the signatory has not been indicated along with the signature - demand of service tax - HELD THAT:- No doubt, as observed by the lower appellate authority, the name of the signatories who have issued certificates have not been indicated therein. However, there is no allegation made by the department about the genuineness of these documents.
Exemption under Notification No. 32/2004-ST cannot be denied on such minor discrepancies.
Appeal allowed in part.
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2019 (5) TMI 149
Classification of service - composite works contract for construction of houses for Tsunami affected victims - Works Contract service or construction of residential complex service? - HELD THAT:- The documents evidencing supply of material were not produced before the adjudicating authority. This being the case, we are unable to conclude whether contract was indeed within the fold of works contract service” involving supply of both materials and labour. In the circumstances, the matter is remanded to the adjudicating authority for the limited purpose of going through the documents that may be produced by the appellants in support of the claim that materials had also been supplied by them.
Penalty - HELD THAT:- As the said issue was mired in litigation, we hold that even if any amount of tax is confirmed in such denovo adjudication, there shall be no penalty under the Finance Act, 1994.
Appeal allowed by way of remand.
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2019 (5) TMI 148
Penalty u/s 77 and 78 of FA - non-payment of service tax - Man-power Recruitment and Supply Agency Service - reason for non-payment given is Financial Hardship - HELD THAT:- An amount of ₹ 95,90,656/- has been recovered from the recipients of service by the department. In fact, this is reflected in the show-cause notice para 9, wherein, it is stated that the said amounts was collected from the service recipients. This proves that the appellant could not discharge the service tax liability as the payments were not received from their customers.
The appellant has given reasonable cause for failure to discharge the service tax during the relevant period. This is a fit case for invocation of section 80.
Impugned order is modified to the extent of setting aside the penalties only without disturbing the confirmation of demand or interest thereon - appeal allowed in part.
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2019 (5) TMI 147
Classification of services - construction of residential complexes - whether classified as works contract service or not - benefit of abatement - HELD THAT:- For the period up to 01.07.2010 this Bench in the case of KOLLA DEVELOPERS & BUILDERS VERSUS CCCE & ST, HYDERABAD-II [2018 (11) TMI 164 - CESTAT HYDERABAD] has held that construction of residential complex by the builder prior to 01.07.2010 is not chargable to service tax as has been clarified by the CBEC Circular No. 151/2/2012-ST dated 10.02.2012 -The same ratio was also adopted in the case of MEHTA & MODI HOMES VERSUS CCT, SECUNDERABAD - GST [2019 (2) TMI 476 - CESTAT HYDERABAD] - there are no reason to deviate from the decisions already taken - the demand of service tax prior to 01.07.2010 is liable to be set aside.
Period post 01.07.2010 - HELD THAT:- The appellant has raised a doubt regarding the classification of the services, claimed that they are entitled to abatement of 75%/70% in terms of Notification No. 26/2012-ST dated 20.06.2012 and that there was a duplication of the amounts received by counting them first as advances under current liabilities and thereafter as sales income, and the re-computation of the tax liability is required based on milestone payments. Needless to say the liability of interest accordingly needs to be re-calculated as well - these issues need to be examined by the adjudicating authority along with the liability of the appellant to penalty for the period post 01.07.2010.
Appeal allowed in part and part matter on remand.
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2019 (5) TMI 146
Refund claim - services availed in relation to authorized operations in SEZ - HELD THAT:- The issue decided in appellant own case ATC TIRES (P) LTD. VERSUS CCE & ST TIRUNELVELI [2019 (2) TMI 1178 - CESTAT CHENNAI] where it was held that any service tax paid/ remitted by a service provider is liable to be refunded to the provider who has remitted service tax in relation to taxable services provided to the unit to carry on authorized operations in a SEZ - refund allowed - appeal allowed - decided in favor of appellant.
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2019 (5) TMI 145
Construction services - construction of residential complexes of more than 12 flats/dwelling units - composite contracts - HELD THAT:- The issue as to whether the demand of service tax can sustain under the categories of ECIS, CICS and RCS has been considered by the Tribunal in the case of REAL VALUE PROMOTERS PVT. LTD., CEEBROS PROPERTY DEVELOPMENT, PRIME DEVELOPERS VERSUS COMMISSIONER OF GST & CENTRAL EXCISE, CHENNAI [2018 (9) TMI 1149 - CESTAT CHENNAI] - The Tribunal in the said decision held that after 01.06.2007, in the case of composite contracts, the demand can sustain only under WCS - the demand of service tax under Residential Complex Service then cannot sustain.
For the period prior to 01.06.2007, the decision in the case of COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT] would apply since it is held therein by the Apex Court that the demand of service tax on contracts which are of composite nature cannot sustain prior to the introduction of Works Contract Service w.e.f. 01.06.2007.
Appeal allowed - decided in favor of appellant.
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2019 (5) TMI 144
Maintainability of appeal - whether an appeal can be entertained by the Tribunal in respect of an order-in-revision issued by the Commissioner under section 84 as it stood prior to 2009 where the order was issued after this date? - HELD THAT:- In the absence of any saving clause in section 86 is concerned, this issue has been settled by the Tribunal Bangalore in the case of M/S TA PAI MANAGEMENT INSTITUTE & OTHERS VERSUS CCE. MANGALORE [2012 (8) TMI 498 - CESTAT, BANGALORE] wherein it has been held that notwithstanding lack of any specific provisions saving the right to appeal against the Order-in-Revision after 19-08-2009, in view of Section 6 of the General Clauses Act 1897, CESTAT can decide such appeals.
Valuation - Clearing and forwarding agency services - inclusion of rent amount - whether in cases where the assessee providing Clearing & Forwarding Agent services enters into two agreements – one for renting the godown/warehouse and another for rendering the Clearing & Forwarding Agent services, the rental amount is includable in the value of taxable services rendered or otherwise? - HELD THAT:- In this case, for the service of Clearing & Forwarding Agency, they are charging an amount on which they are already discharging the service tax. There is no specific provision under which the rent on immovable property leased out to the companies providing C & F services can also be charged to service tax. In the absence of any legal provision, the liability cannot be passed on the appellant.
On an identical case, in the case of SWAMY SONS (AGENCIES) VERSUS CCE, C&ST, HYDERABAD-III [2019 (3) TMI 245 - CESTAT HYDERABAD] , this Bench held that rental income earned by the assessee cannot be included in the value of Clearing & Forwarding Agent services and the judgment of Hon’ble Apex Court in the case of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [2018 (3) TMI 357 - SUPREME COURT OF INDIA].
Appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (5) TMI 140
CENVAT Credit - input services - portion of factory premises that was rented out to another - case of Department is that a portion of the factory premises that is rented out cannot be said to be used for the manufacture or clearance of final products - HELD THAT:- The definition of ‘input service’ seeks to cover every conceivable service used in the business of manufacture of final products - Similarly, leasing out a part of the factory which is not used by the manufacturer and that too, to their joint venture partner, can help the manufacturer in raising funds or other business benefits. Such activities which are used in relation to the business of manufacture would be covered by the inclusive part of the definition.
During the relevant period, the services relating to setting up of factory was an eligible input service. By the amendment which was introduced with effect from 01.04.2011, the services of setting up of factory as also activities relating to business of manufacture were deleted. Thus, for the period prior to 01.04.2011, the credit availed on construction services for setting up of factory was eligible.
The Department does not have a case that the respondents have used the construction services for setting up of a building or civil structure which is not a factory. The allegation is that the factory was set up using the construction services and thereafter, part of the factory was leased out to another without being used in the manufacture of final products. When credit is eligible for setting up of factory and the respondents have correctly utilized the construction services for setting up of the factory, the same cannot be denied alleging that a part or portion of the factory was leased out to another.
Invocation of Rule 3(5) of the CENVAT Credit Rules, 2004 - HELD THAT:- Rule 3(5) ibid speaks about reversal of credit availed on inputs or capital goods when such goods are cleared as such. There is no allegation in the Show Cause Notice that ‘inputs’ or ‘capital goods’ have been cleared as such - demand in the SCN do not sustain.
Appeal dismissed - decided agianst Revenue.
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2019 (5) TMI 143
Bar on utilization of CENVAT Credit - default in making payment of Central Excise Duty - constitutional validity of Rule 8 (3A) of the Central Excise Rules, 2002 - HELD THAT:- The Jurisdictional High Court at Calcutta, in the case of M/S. GOYAL MG GASES PVT. LTD VERSUS UNION OF INDIA & OTHERS [2017 (8) TMI 1515 - CALCUTTA HIGH COURT] has followed the decision of the Gujarat High Court in INDSUR GLOBAL LTD. VERSUS UNION OF INDIA & 2 [2014 (12) TMI 585 - GUJARAT HIGH COURT] and has held the portion of rule 8 (3A) as ultra vires.
There is no bar in making use of Cenvat Credit in making payment of Central Excise Duty even during default period, in view of the fact that the Rule 8 (3A) ibid which steps otherwise, has been struck down as ultra vires.
The portion of the order imposing penalties as well as demand for Central Excise Duty is set aside - appeal disposed off.
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2019 (5) TMI 139
CENVAT Credit - input services - C&F Agent Import - C&F Agent-Warehouse - Management Consultant/CA Service - Commercial Training and Coaching - Business Support Services - Manpower Recruitment and Supply Services - Laundry Services - Management Fees - Security Services, etc. - denial on account of nexus - HELD THAT:- Though the appellant have made an elaborate submission of the use of the services but no supporting documentary evidence was produced - As regard the credit on proportionate basis, though the appellant have made a categorical submission before the adjudicating authority but the same was not considered by the adjudicating authority.
The services even though used at the depot since that the said place is of removal, the credit is prima facie admissible to the appellant but since the documentary evidence needs to be submitted in support of actual use of the service, the entire matter needs to be re-considered - Appeal allowed by way of remand.
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2019 (5) TMI 142
Interpretation of statute - Whether the proceeding relating to breaches committed under the erstwhile Modvat Credit Rules could be continued/initiated after its withdrawal and substitution by new Rules?
HELD THAT:- In view of section 38A of the Act (inserted in 2001 with retrospective effect from 1994) the proceedings relating to breaches committed under the erstwhile Rules would be saved and not abort.
The substantial question has to be answered in the negative i.e in favour of the Revenue - Appeal allowed.
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2019 (5) TMI 141
Whether in the facts and circumstances of the case, the Tribunal is correct in law to dispose the Appeal as file closed, when there is no provision under Section 35-C (1) of Central Excise Act, 1944 to close the appeal for statistical purposes without going into merits?
HELD THAT:- In terms of Section 35-C (1) of the Act, the Appellate Tribunal may, after giving parties to the appeal an opportunity of being heard, pass such orders confirming, modifying or annulling the decision or order appealed against. The Tribunal may also refer the case back to the authority which passed such decision or order with such directions, as the Appellate Tribunal may think fit, for fresh adjudication or decision, after taking additional evidence, if necessary.
The matter is remanded to the Tribunal with a direction to the Tribunal to await the decision, which is now pending before the High Court at Ahmedabad in the case of HOUSING AND URBAN DEVELOPMENT CORPORATION LTD. VERSUS COMMISSIONER [2012 (7) TMI 1072 - GUJARAT HIGH COURT].
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2019 (5) TMI 138
Valuation - some customers had paid excess amount than the actual purchase value; that such excess payment was not adjusted in subsequent years - inclusion of such excess value in the assessable value of goods - Section 4(3)(d) of the Central Excise Act, 1944 - HELD THAT:- The appellants have discharged duty liability on the entire assessable value. However, the customers on the course of delay in dispatch of the goods have held back certain amounts as Liquidated damages. On negotiation, such held back amounts were paid to the appellant - There cannot be any allegation that the appellants have not discharged the total duty liability that was required to be paid at the time of clearance of the goods.
The allegation of short-payment of duty is unjustified. This being so, the impugned order cannot sustain - appeal allowed - decided in favor of appellant.
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2019 (5) TMI 137
CENVAT credit - common inputs and input services used for manufacture of dutiable goods like sugar and exempted goods namely bagasse - non-maintenance of separate records - Rule 6(3) of CENVAT Credit rules, 2004 - HELD THAT:- The Apex Court in the case of UNION OF INDIA VERSUS DSCL SUGAR LTD. [2015 (10) TMI 566 - SUPREME COURT] has held that bagasse emerges as a residue from the manufacturing process, that Bagasse by itself is not a product which is manufactured by the assessee. Bagasse is not excisable there being no manufacturing process, Rule 6 of CENVAT Credit Rules 2004 is not applicable.
Demand cannot sustain - appeal allowed - decided in favor of appellant.
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2019 (5) TMI 136
Validity of subsequent SCN - Classification of goods - printed sheets manufactured by the assessee and used in the packing of printed notebooks and magazines - extended period of limitation - HELD THAT:- The Commissioner (Appeals), after considering the facts as well as the position of law, has held that the goods are rightly classifiable under Chapter Heading 4901. It is to be mentioned that in the assessee’s own case in the previous proceedings, the Commissioner (Appeals) vide Order-in-Appeal No. 24/2012 dated 24.07.2012 held that the impugned goods are classifiable under Chapter Heading 4901. This being so, the subsequent Show Cause Notice alleging suppression of facts with intent to evade payment of duty cannot sustain - appeal dismissed - decided against Revenue.
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2019 (5) TMI 135
CENVAT Credit - capital goods - MS Channels, MS Angles, CR Coils, HR Plates, MS Plates etc. - HELD THAT:- It is established that the impugned goods were used for repair and maintenance of capital goods and not for support structures, in particular.
The decision in the case of COMMISSIONER OF CENTRAL EXCISE, JAIPUR VERSUS M/S RAJASTHAN SPINNING & WEAVING MILLS LTD. [2010 (7) TMI 12 - SUPREME COURT OF INDIA] has considered the same issue wherein it was held that when MS Angles, MS Channels etc., are used for erection of capital goods without which capital goods cannot be used for the manufacturing activity, the credit would be eligible.
Credit allowed - appeal allowed - decided in favor of appellant.
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2019 (5) TMI 134
CENVAT Credit - process amounting to manufacture or not - credit availed on high quality RBD Palm Stearin procured by them - Department was of the view that the process does not amount to manufacture and hence appellants are not eligible for credit - HELD THAT:- It is not in dispute that appellants cleared the final products on payment of excise duty. The show-cause notice has been issued alleging that the process does not amount to manufacture - When the appellant has discharged excise duty on the final product, the credit cannot be disallowed on the inputs alleging that the process does not amount to manufacture.
Credit allowed - appeal allowed - decided in favor of appellant.
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2019 (5) TMI 133
CENVAT Credit - input services - GTA outward transportation - place of removal - goods sold to the customers on FOR basis - HELD THAT:- The Board has clarified in their circular dated 8.6.2018 that when the transaction / sale is on FOR basis, the place of removal would be the buyer’s premises. Therefore, it is necessary to determine the place of removal to consider the eligibility of credit of service tax paid on freight charges upto the buyer’s premises.
It is deemed fit to remand the matter to the adjudicating authority who shall look into the issue of eligibility of credit on GTA service after determining the place of removal - appeal allowed by way of remand.
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2019 (5) TMI 132
Refund of accumulated CENVAT Credit - export of goods under bond for the period from 06.10.2008 to 31.10.2008 - time limitation - HELD THAT:- Even though the grounds of appeal have indeed mentioned that an appeal has been filed against the said CESTAT Final Order, there is nothing forthcoming on record that the said Order has been stayed or otherwise the Department Appeal allowed.
Appeal dismissed - decided against Revenue.
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2019 (5) TMI 131
CENVAT Credit - Capital goods - MS channels and MS angles used to give support to the foundation of Pollution Control Equipment - HELD THAT:- It has been held in a slew of judgments by various High Courts that MS structurals which are used to support plant and machinery or which went in erecting foundations to hold plant and machinery are integral part of capital goods.
In M/S. THIRU AROORAN SUGARS, M/S. DALMIA CEMENTS (BHARAT) LTD. VERSUS CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, THE COMMISSIONER OF CENTRAL EXCISE [2017 (7) TMI 524 - MADRAS HIGH COURT], the Hon’ble High Court has held that whether “user test is applied or the test that they are integral part of capital goods applied”, such items are eligible to get Cenvat benefit as they fall within the scope and ambit of Rule 2 (a) (A) as well as 2 (k) of CCR, 2004.
Credit allowed - appeal allowed - decided in favor of appellant.
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2019 (5) TMI 130
Levy of penalty and extended period of limitation - Clearance of “Specially designed Transformers” to some of the manufacturers of “Wind Operated Electricity Generating (WOEG) Systems - benefit of N/N. 6/2006-CE dated 01.03.2006 - Rule 6 (3) of the Cenvat Credit Rules, 2004 - HELD THAT:- Discernably, the adjudicating authority himself has confirmed the fact of the appellants having made atleast three attempts in writing to obtain clarifications from July 2006 to August 2007. The receipt of these communications have also been acknowledged by the adjudicating authority. When this is the case, the department cannot steamroll demand for the extended period, alleging suppression or mis-statement of facts with intent to evade payment of duty. Evidently, none of the ingredients for invocation of extended period of limitation are present in this case. By implication, none of the ingredients which will allow for imposition of penalty under Section 11 AC are present.
The demand of duty can be sustained only for the normal period of limitation ie., within one year from the date of issue of SCN - there cannot be any imposition of penalty under Section 11 AC ibid - for the limited purpose of arriving at the net duty liability for the portion of demand that survives for the normal period of limitation, the matter is remanded to the adjudicating authority - Appeal allowed in part and part matter on remand.
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2019 (5) TMI 129
CENVAT Credit - input - input services - construction of a new project called Line-II Project (cement plant) - time limitation.
CENVAT Credit - inputs - HELD THAT:- Although it is alleged in the Show Cause Notice that the goods did not fall within the definition of ‘inputs’, the reason for which the Credit has been disallowed is that after assembly and installation of such items, they become immovable property and therefore, are not eligible for Credit. From the Show Cause Notice as well as the impugned Order, it is seen that various items were used for setting up of the cement plant. Many of these items are components or small parts which go into assembly, installation or commissioning of machines and equipment. As per Explanation-2 of the definition of inputs, as it stood during the relevant period, ‘input’ includes the goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. Thus, all those items which are brought into the factory and used for the manufacture of capital goods, which are further used for the manufacturing activity, would be eligible for Credit.
The Department does not have a case that the items are not used as part of the cement plant. Instead, the Credit has been disallowed observing that these items take the nature of immovable property after being fixed to earth - the disallowance of Credit on the impugned items under the category of ‘inputs’ is unjustified and requires to be set aside.
CENVAT Credit - input services - HELD THAT:- The assertion of the Ld. Consultant for the appellant that there is no specific mention in the Show Cause Notice as to what are the categories of services under dispute, is not without merit. In fact, there is nothing in the Show Cause Notice which gives details of the services which are not eligible for Credit - Without availing the services of Erection, Commissioning and Installation, the machineries and equipment cannot be installed and put to commence manufacturing activity. We therefore find that the disallowance of Credit under the category of ‘input service’ to the tune of ₹ 6,64,95,149/- is without any legal reasons and requires to be set aside.
Time limitation - HELD THAT:- It is seen that for the period from November 2009 to March 2011, audit and later, investigation was also conducted. In spite of such investigations, the Show Cause Notice was issued only on 27.11.2014. The appellants have disclosed the entire Credit availed by them in their ER-1 returns as well as their statutory records. It is also seen that they have intimated the Department as early as 04.11.2009 with regard to their intention to avail the Credit - the appellants cannot be saddled with the allegation of suppression of facts with intention to evade payment of duty - there are no ingredients for invoking the extended period of limitation.
Appeal allowed - decided in favor of appellant.
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2019 (5) TMI 128
Distribution of CENVAT Credit - ISD - non-distribution of credit on pro-rata basis u/r 7 of CCR - duty paying documents - improper documents - credit availed also on invoices issued to the Head Office - HELD THAT:- With regard to amount of ₹ 1,73,33,050/-, the ld. counsel for appellant has submitted that the issue is not contested on merits. He submitted that the appellant could not furnish the documents to the adjudicating authority and has reversed the credit even prior to issuance of the show cause notice - Penalty also unwarranted - demand do not sustain.
Denial on the ground that the manufacturing unit has availed credit on the invoices issued on ISD (name and address of the Head Office) - denied also on the ground that certain services were not included in the ISD registration during the disputed period and required endorsement for including such services were not obtained by the appellant - HELD THAT:- In M/S. WABCO INDIA LTD. VERSUS CCE, CHENNAI-II [2018 (5) TMI 777 - CESTAT CHENNAI], the Tribunal has relied upon the decision of the Hon’ble High Court of Gujarat in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS DASHION LTD [2016 (2) TMI 183 - GUJARAT HIGH COURT] which held that even if Head Office did not obtain ISD registration, the credit distributed cannot be denied - credit cannot be denied on this ground.
Period from January 2010 to August 2011 - Denial on the ground that the entire credit has been distributed to the manufacturing unit and that the ISD registered Head Office has not distributed on pro-rata basis as required under Rule 7 - HELD THAT:- The period is prior to 1.4.2012 and the requirement of pro-rata distribution was introduced with the amendment brought forth with effect from 1.4.2012. The Hon’ble High Court of Karnataka in the case of COMMISSIONER OF CENTRAL EXCISE, BANGALORE-I COMMISSIONERATE VERSUS ECOF INDUSTRIES (P.) LTD. [2011 (4) TMI 560 - KARNATAKA HIGH COURT] has held that prior to 1.4.2012, the assessee cannot be compelled to comply with the requirement of pro-rata distribution - the credit availed is legal and proper.
The impugned order is modified to the extent of setting aside the penalty in respect of an amount of ₹ 1,73,33,052/- confirmed in the impugned order and also set aside the demand of ₹ 3,74,77,389/- entirely - appeal allowed in part.
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2019 (5) TMI 127
Excisability/marketability - kolas which are used for Breakwater's while constructing Krishnapatnam Port - HELD THAT:- It is undisputed that the respondent herein was awarded a EPC contract for construction of port at Krishnapatnam Port and the entire EPC contract included construction of Breakwaters in order to make the water still and come in the port area for which they produced the said kolos. It is also undisputed that this kolas were manufactured keeping in mind the specific requirements of Krishnapatnam Port.
Also, Revenue has not produced any evidence to even indicate that this kolas are be used at some other port.
Demand cannot sustain - appeal dismissed - decided against Revenue.
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2019 (5) TMI 126
Valuation - clearance of goods based on a fixed refinery gate price at the time of clearance - Time of removal - HELD THAT:- The assessee is manufacturing goods and clearing them from their factory to the depots. It is also not in dispute that they are subsequently, selling the goods from their depots. Therefore, the time of removal of goods is different from the time of sale of the goods and no sale price is available at the time of removal of the goods. Under such circumstances, in terms of Sec.4 read with Rule 7 of Central Excise Valuation Rules, 2000 the price to be applied at the time of clearance of goods, is the price nearest to the time of removal at which such goods have been sold.
A plain reading of Sec.4 read with Rule 7 would show that clearance at a price nearest to the time of removal would mean the price which will be available to the assessee at the time of removal as being the price at which the goods were sold. It is impossible for the assessee to predict what will be the price after the removal of goods and when such transaction will take place - thus the price to be reckoned is price at which such goods have been sold at the time nearest to the time of removal.
The appellant had clearly contravened the provisions of Sec.4 read with Rule 7 of Central Excise Valuation Rules, 2000 without any justification and evaded payment of Central Excise duty. The intention cannot be clearer than this.
Impugned order upheld - appeal dismissed - decided against appellant.
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CST, VAT & Sales Tax
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2019 (5) TMI 125
Validity of reassessment order - stock transfer or sale? - HELD THAT:- From the submissions of the appellant one thing is clear that the appellant has not disputed the manner in which the goods have moved from Tamil Nadu to Pondicherry and from Pondicherry to Tamil Nadu and other States. The appellant has admitted that same lorry was used.
The Assessing Officer has rightly concluded that the appellant has circuitously transferred the goods to their already identified purchasers in various places in Tamil Nadu and other States via Pondicherry so as to evade payment of tax. The Assessing Officer has further rightly concluded that in the scheme of supplying the goods to customers in Tamil Nadu and other States, the intervention of the Pondicherry Branch is only as a conduit as evidenced by the transport records and the Stock Register maintained at Pondicherry. It is pertinent to note that the Assessing Officer took note of the fact that the appellant did not produce even a single purchase order placed by any customer on its Pondicherry Branch and held that the appellant’s contention that Pondicherry Branch independently received orders and executed them is contrary to facts.
We have no reason to disbelieve the statement made by the Assessing Officer that detailed examination of the stock transfers from Tamil Nadu to Pondicherry with reference to the stock book of Pondicherry revealed that in almost all the cases, the goods stock transferred from Tamil Nadu have been sold and dispatched in the same lot to the ultimate buyers in Tamil Nadu and other States - We also find no substance in the submission of the appellant that the Assessing Officer had disallowed the transactions pertaining to transfer of goods to Pondicherry on the basis of a single transaction.
The appellant clearly attempted to avoid tax under the TNGST Act and under the CST Act due to Tamil Nadu. We are entirely in agreement with the Assessing Officer’s view expressed in his well-reasoned orders. Unfortunately the Appellant Assistant Commissioner overlooked vital aspects and core issues of the matter and reversed the Assessing Officer’s orders.
Appeal dismissed.
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2019 (5) TMI 124
Validity of assessment order - imposition of tax on cotton seeds - TNGST Act - HELD THAT:- The Commissioner of Commercial Taxes, the First Respondent herein, has stated, in the letter dated 30.08.2005 that the request for amendment of entry 7 cannot be complied with and, in the Clarification dated 26.09.2005, that hybrid cotton seeds are taxable at the rate of 4% under entry 6(iii) of the II Schedule to the TNGST Act. The said Communication and Clarification do not contain any reasons. It also appears that proper opportunity was not provided to the Petitioner to state its case or its objections before the said Communication and Clarification were issued.
Although Section 28 A of the TNGST empowers the Commissioner of Commercial Taxes to issue a clarification on the rate of tax in response to a request from a registered dealer, the said communication and Clarification also do not cite any applicable provisions of law. Further, the Assessment Order dated 15.06.2006 was issued without waiting for the objections of the Petitioner and, therefore, the assessment order does not consider the submission that cotton seeds that are used only for seeding purposes are exempted under Entry 7 of Part -B of the III Schedule. Consequently, it is in the interest of justice that the Assessment Order dated 15.06.2006 under the TNGST Act be set aside.
The Assessing Officer is directed to carry out fresh assessment after providing a reasonable opportunity to the Petitioner to submit objections and make its submissions. The said Assessing Officer shall make the assessment on an independent basis by disregarding Clarification No.147 dated 26.09.2005 or any other clarification and the communications dated 30.08.2005 and 13.10.2005 - petition allowed by way of remand.
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2019 (5) TMI 123
Validity of assessment order - imposition of tax on cotton seeds - TNGST Act - HELD THAT:- The Commissioner of Commercial Taxes, the First Respondent herein, has stated, in the letter dated 30.08.2005 that the request for amendment of entry 7 cannot be complied with and, in the Clarification dated 26.09.2005, that hybrid cotton seeds are taxable at the rate of 4% under entry 6(iii) of the II Schedule to the TNGST Act. The said Communication and Clarification do not contain any reasons. It also appears that proper opportunity was not provided to the Petitioner to state its case or its objections before the said Communication and Clarification were issued.
Although Section 28 A of the TNGST empowers the Commissioner of Commercial Taxes to issue a clarification on the rate of tax in response to a request from a registered dealer, the said communication and Clarification also do not cite any applicable provisions of law. Further, the Assessment Order dated 15.06.2006 was issued without waiting for the objections of the Petitioner and, therefore, the assessment order does not consider the submission that cotton seeds that are used only for seeding purposes are exempted under Entry 7 of Part -B of the III Schedule. Consequently, it is in the interest of justice that the Assessment Order dated 15.06.2006 under the TNGST Act be set aside.
The Assessing Officer is directed to carry out fresh assessment after providing a reasonable opportunity to the Petitioner to submit objections and make its submissions. The said Assessing Officer shall make the assessment on an independent basis by disregarding Clarification No.147 dated 26.09.2005 or any other clarification and the communications dated 30.08.2005 and 13.10.2005 - petition allowed by way of remand.
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2019 (5) TMI 122
Auction - recovery of alleged sales tax dues - bonafide purchaser or not - Section 24-A of TNGST Act - HELD THAT:- The terms and conditions of sale coupled with the Second Sale Deed, which is in favour of the Petitioner herein, make it abundantly clear that the purchaser is liable in respect of commercial tax dues. The Second Sale Deed further clarifies that the seller is not providing title warranties to the purchaser and this may be compared and contrasted with the First Sale Deed which contains a title warranty from SIDCO to the Fourth Respondent and does not impose liability for commercial tax dues on the Fourth Respondent.
When the documents on record are examined in the context of section 24-A of the TNGST Act, there is little doubt that the Petitioner herein was aware of the sales tax dues of the Fourth Respondent and was duly notified that he would be liable in respect thereof. Thus, he would not be entitled to any protection as a bona fide purchaser.
In the instant case, by way of specific clauses in the Second Sale Deed, the implied warranties on title under Section 55 of the Transfer of Property Act, 1882 were varied by a contract to the contrary, namely, the specific clauses in the Second Sale Deed. Consequently, the Writ Petition is liable to be dismissed.
Petition is dismissed but the parties are left to bear their respective costs.
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2019 (5) TMI 121
Rate of tax - Pre-painted Galvanized Steel Metal Sheets - Section 4(1)(b)(iii) of the Karnataka Value Added Tax Act, 2003 - HELD THAT:- It is not in dispute that Galvanized Steel Metal Sheets comes within the ambit of clause (vi) of Section 14(iv). Now the question would be whether Pre-painted Galvanized Steel Metal Sheets would come within the ambit of the said entry or not. Pre-painted Galvanized Steel Metal Sheets are construed to be a different commodity other than Galvanized Steel Metal Sheets by the Commissioner of Commercial Taxes based on the commercial and common parlance theory, but the same is not substantiated except holding that Pre-painted Galvanized Steel Metal Sheets are ready to use than just Galvanized Steel Metal Sheets. Merely painting the iron and steel enumerated under different clauses of Section 14(iv) would not disqualify it as a “declared goods”.
The pre-painting of iron and steel may be for different reasons mainly, to protect the iron and steel from rusting, that itself would not be construed as a different commodity altogether different from Galvanized Steel Metal Sheets. Where commercial goods without change of their identity as such goods if merely subjected to some processing or finishing, they do not cease to be goods of original description. Hence, the decision of the Commissioner of Commercial Taxes cannot be approved and the same deserves reconsideration.
Petition allowed by way of remand.
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2019 (5) TMI 120
Demand of sales tax for the deferral period - Eligibility Certificate in force - violation of the Condition No.5.4 of the Eligibility Certificate - HELD THAT:- Since the petitioner admitted the fact that they have been issued with the Certificate of Eligibility for deferral of Sales Tax to a maximum amount of ₹ 93,46,000/- for a period of 9 years and also further claimed that they have not violated the Condition No.5.4 of the Eligibility Certificate because they have effected sale of only a part of the plant and machinery to the tune of ₹ 1,01,050/- which is nothing to do with the violation of Condition No.5.4 of the Eligibility Certificate and consequently, they have not received any one of the notices dated 13.09.2005, 16.10.2006, 6.12.2006 and 13.2.2007 since one of the staffs working in their company had not placed anyone of the notices before the responsible officer, this Court deems it fit to give one more opportunity to the petitioner to put forth their case.
The petitioner is directed to appear before the Assistant Commissioner (CT), Zone-2, Chennai, III Floor, PAPJM Building, Chennai-6 in his office at 3.00 p.m. on 06.06.2019 along with all the documents. On such appearance of the petitioner before the 1st respondent, he shall decide the case of the petitioner afresh on merits - petition allowed by way of remand.
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2019 (5) TMI 119
100% Export Oriented Small Scale Industrial Unit - refund of sales tax - benefit of Government Order dated 28.08.1993 - Karnataka Sales Tax Act, 1957 - HELD THAT:- The petitioner’s Unit is established in the year 1956 as such, it was existing as on the date of issuance of the Government Order. Further the petitioner-Unit has also not made any additional investment so as to attract the benefit of Government Orders under which the incentive is claimed by the petitioner. The object of the Government Order is to encourage the new entrepreneurs who are in the field of EOUs and who have made additional investments. The respondent under the impugned endorsement has clearly held that the Government Order dated 28.08.1993 is to be read along with Government Order dated 12.07.1993 as the Government Order dated 28.08.1993 is issued to implement the concessions announced under Government Order dated 12.07.1993.
The learned Single Judge has rightly rejected the writ petition holding that the benefit of Government Order dated 28.08.1993 would be available only to new Industries and to the Industries which made additional investments. The Government Order dated 28.08.1993 cannot be read in isolation as contended by the learned Senior counsel for the petitioner.
Appeal dismissed.
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2019 (5) TMI 118
Validity of assessment order - KVAT ACT - Principles of natural justice - HELD THAT:- It is not in dispute that the writ jurisdiction cannot be invoked in a routine manner. However, considering the request made by the petitioner for a week’s time to produce the documents being rejected on the ground of time barred case necessarily calls for interference by this court. Assessee cannot be made to suffer with a high pitched assessment unless the reasonable opportunity is provided to substantiate the claim made by the assessee. It is noticed that the petitioner has deposited a sum of ₹ 1,00,00,000/- (Rupees One Crore only) before the authority in terms of the order passed by this court on 09.05.2017 and in such circumstances, this court deems it appropriate to set aside the impugned assessment order as well as demand notice at Annexure-D and to restore the proceedings to the file of the respondent No.1- prescribed authority to redo the assessment after providing reasonable opportunity of hearing to the petitioner - Petition disposed off.
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