TMI Tax Updates - e-Newsletter
June 25, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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GST:
Levy of GST - Difference between ‘storage or warehousing’ service and ‘renting of storage premises’ service - The service provided by M/s. Rishi Shipping is classifiable as ‘Rental or leasing services involving own or leased non-residential property’ (Service Accounting Code – 9972) leviable to Goods and Services Tax @ 18%.
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GST:
Levy of GST - distribution of electricity - The Services provided by M/s TPADL with respect to the non-tariff charges recovered from their customers are not eligible for exemption and M/s TPADL is liable to pay tax on the aforesaid recovery made from their customers.
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Income Tax:
Rental income received from Directors - Even though assessee has offered the income under the head "business and profession‟, however, no depreciation has been claimed as per I.T. provisions - The company is not doing any sort of business from many years. - Taxable as income from house property.
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Income Tax:
Assessment u/s 153A - Addition u/s 68 - the burden had shifted to revenue to show the basis of some reliable and tangible material which could indicate undisclosed receipts out of books of accounts in the hands of assessee. - we cannot improve upon what AO could have done himself - addition made by AO on account of alleged receipts of cash deleted.
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Income Tax:
Validity of reopening of assessment beyond 4 years - there is no mention that income amounting to ₹ 1 lac or more is believed to have escaped assessment - reassessment proceedings held to be null & void ab-initio.
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Income Tax:
Sale of scrap generated while repairing building - to be taxed as separate income or to be adjusted against the written down value of the block of asset - the scrap sale to be adjusted against the written down value of the assets. - not to be taxed separately as income.
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Income Tax:
Recovery proceedings - attachment of property - order u/s 281 of the Income Tax Act - under the amended provision, the question of mens rea or intention to defraud does not arise - it is up to the assessee under the amended provision, to go to the Civil Court and establish that his case falls under the proviso to section 281(1)
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Income Tax:
Deduction u/s 80IB - two flats in a housing project sold to two members of the same family - the amendments were prospective with effect from 1.4.2010 - since the actual sale of the flats in question took place on 14.1.2008 and 16.7.2008, full deduction allowed.
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Customs:
Double benefit of DFIA Scheme availed - N/N. 40/2006-Cus denied - certificate regarding use of goods not produced - In failure to comply with this substantive condition, the appellant is not eligible for exemption Notification.
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Corporate Law:
Overriding of Insolvency and Bankruptcy Code, 2016 - Since NCLT is not a forum superior to the High Court, it's orders cannot be construed as injuncting this Court from proceeding with a winding up proceeding in which it has clear jurisdiction to hear and decide.
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Service Tax:
The question of a reverse levy of tax on the recipient of the service under section 66A of the Finance Act, 1994 would arise only if the service itself is taxable and, in the absence of any reason to subject the said royalty to tax, the demand under section 66A would not survive.
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Service Tax:
Interior decoration services - assessee had approached the Department for registration under Interior Decoration Service, but no action was taken by the Department on their application for registration under the said service - Demand of service tax cannot sustain.
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Service Tax:
Business Auxiliary Services - rebate received from the postal department - It cannot be treated as a commission or an amount received for promoting the postal services.
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Service Tax:
Rejection of benefit of Voluntary Compliance Entitlement Scheme - The rigour of such taxing statute cannot be whittled down by the appellant by seeking to invoke so called voluntary compliance that too after the fact that the service has not been registered or has not been taxed was discovered by the department.
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Central Excise:
Manufacture - process of mixing base paint with the colourants to obtain the pain of a desired shade known as “Tinting” - under any circumstances, the activity carried out by the appellant is indeed manufacture.
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Central Excise:
CENVAT credit - Reversal of 50% of credit as required in the case of Banking and other Financial Services - appellant will not fall within the category of ‘Banking Company’ since they are primarily engaged in the manufacture of iron steel items.
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Central Excise:
Manufacture - conversion of tissue papers, C-fold tissue, M-fold tissue, paper napkin/serviette of different sizes, toilet roll, kitchen roll, JRT roll and HRT roll etc. from jumbo rolls of paper - The process undertaken by the appellant is to be considered as a process of manufacture - demand of duty confirmed.
Articles
Notifications
News
Case Laws:
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GST
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2018 (6) TMI 1196
Levy of GST - Transmission or distribution of electricity by an electricity transmission or distribution utility - Whether TPADL is eligible to avail the exemption from levy of GST under Entry No. 25 of Notification 12/2017 - Central Tax (Rate) dated 28.06.2017 bearing description 'Transmission or distribution of electricity by an electricity transmission or distribution utility' with respect to the non-tariff charges recovered by TPADL from its customers? - Whether TPADL is liable to pay tax on the aforesaid recovery made from its customer? Held that:- M/s TPADL is covered under electricity transmission or distribution utility and Transmission or distribution of electricity by an electricity transmission or distribution utility is EXEMPTED. As regard the other services provided by M/s TPADL, it is clarified by the Department under Circular no. 34/8/2018-GST dated 01.03.2018 issued vide F.No. 354/17/ 2018 - In view of the clarification issued under Circular no. 34/8/2018-GST dated 01.03.2018 issued vide F.No. 354/17/ 2018., it is found that, M/s TPADL is not eligible to avail the exemption from levy of GST under Entry No. 25 of Notification 12/2017 - Central Tax (Rate) dated 28.06.2017 bearing description 'Transmission or distribution of electricity by an electricity transmission or distribution utility' with respect to the non-tariff charges recovered from their customers and is liable to pay tax on the aforesaid made from its customer. Ruling:- The Services provided by M/s TPADL with respect to the non-tariff charges recovered from their customers are not eligible for exemption and M/s TPADL is liable to pay tax on the aforesaid recovery made from their customers.
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2018 (6) TMI 1195
Levy of GST - storage charges for storing the imported agri product in godowns at Gandhidham - Difference between ‘storage or warehousing’ service and ‘renting of storage premises’ service - Held that:- The ‘storage and warehousing service’ provider normally make arrangement for space to keep the goods, loading, unloading and stacking of goods in the storage area, keeps inventory of goods, makes security arrangements and provide insurance cover etc. In a case where a person only rents the storage premises, he does not provide any service such as loading / unloading, stacking, security etc. Mere renting of space cannot be said to be in the nature of service provided for storage or warehousing of goods. From the nature of service provided by the applicant, as described in the application, it is clear that the applicant only rent the storage premises. Once the storage premises is rented by the applicant to its customers, what use the customer makes of such premises doesn’t have any bearing on the nature of service provided by the applicant - the applicant is required to pay Goods and Services Tax at 18% (CGST 9% + GGST 9% or IGST 18%) for aforesaid activity carried out by them classifiable as ‘Rental or leasing services involving own or leased non-residential property’ (Service Accounting Code – 997212). Ruling:- The service provided by M/s. Rishi Shipping is classifiable as ‘Rental or leasing services involving own or leased non-residential property’ (Service Accounting Code – 9972) leviable to Goods and Services Tax @ 18%.
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Income Tax
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2018 (6) TMI 1191
Deduction u/s 80IB - two flats in a housing project sold to two members of the same family, Smt. Latha Ramachandran and Shri K.Ramachandran, being husband and wife - relevant year selection - Held that:- The relevant year would be the year of the actual sale and not the year when the revenue chooses to recognize the sale. In the instant case, the Appellate Commissioner and the learned Tribunal concurred in the factual finding that the actual sale of the flats in question took place on 14.1.2008 and 16.7.2008 respectively, long before the amendment of Section 80IB(10) of the Income Tax Act. The Appellate Commissioner and the learned Tribunal very rightly held that the amendments were prospective with effect from 1.4.2010. Actually sale of flats in question took place in 2008, long before the amendment of Section 80IB of the said Act, which is prospective, there is no question of law, let alone substantial question of law, involved in these appeals. It is well settled that right of appeal is not automatic, but is conferred by statute. The right of appeal to the High Court conferred under Section 260A of the said Act is a limited right of appeal, restricted only to substantial questions of law. The appeals cannot, therefore, be entertained. Whether an assessee would be liable to full deduction or only proportionate deduction or for that matter no deduction under Section 80IB(10) in respect of the two flats exceeding 1500 Sq. Ft. purchased prior to 1.4.2010 is covered by a judgment in Commissioner of Income Tax, Chennai v. Elegant Estates [2016 (1) TMI 502 - MADRAS HIGH COURT] - Decided in favour of the assessee
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2018 (6) TMI 1190
Recovery proceedings - attachment of property - order u/s 281 of the Income Tax Act - investigation by Tax Recovery Officer - void transfer of property - adequate consideration - Held that:- Under the unamended provision, which was considered in Gangadhar Vishwanath Ranade [1981 (1) TMI 1 - BOMBAY HIGH COURT] the revenue should go to the Civil Court and first establish that there was an intention to defraud the revenue. Once this is established, the burden will get shifted to the transferee to show, as per the proviso that the transfer was for valuable consideration and without notice of the pendency of the proceeding. But under the amended provision, the question of mens rea or intention to defraud does not arise. Hence, the entire burden to show that the transfer falls within the two clauses of the proviso to sub-section (1) of Section 281 is now upon the assessee under the amended provision. Hence, it is up to the assessee under the amended provision, to go to the Civil Court and establish that his case falls under the proviso. Thus the petitioner cannot take shelter under the decision of the Supreme Court in Gangadhar Vishwanath Ranade. Having come to know of the fact that the assessee is due to pay arrears of tax and having got the application for a Certificate under Section 230A rejected, the petitioner clearly took a chance by going ahead with the purchase. Therefore, we do not think that the petitioner is entitled to have the order of attachment and the order declaring the sale to be void set aside by this Court. As we have pointed out in the first part of the order, the order declaring the sale to be void was passed in the year 2005. The petitioner did not come to Court immediately. She came to Court only after the issue of an order of attachment. - Writ petition lacks merits.
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2018 (6) TMI 1189
Disallowance of 10% of the total expenditure incurred by the assessee on ad hoc basis - Held that:- when the assessee has received billing as per milestone and from the milestone till the close of the year there are no expenditure identified by the ld AO then there cannot be any work in progress in the business of the assessee. AO could not find out that whether there is such expenditure exists or not. It was also not found by the ld AO that the assessee has incurred substantial expenditure. If the milestone before the close of the year. As the assessee is engaged in the business of consultancy services definitely there can be sum over lap of the expenses between two years. However that does not give any rise to the AO to disallow the expenditure @10% and treat it as work in progress - Decided against revenue Disallowance of repair and maintenance - AO stated that this expenditure is incurred for wiring electricity etc is capital in nature for the reason that assessee is carrying business in rented premises - Held that:- the expenditure incurred by the assessee cannot be said to be an expenditure of an enduring nature. The above sum is paid by the assessee on 01.11.2009 to M/s. Sterling and Wilson Pvt. Ltd for wiring and electrical accessories to make the lease premises usable for the business of the assessee - Decided against revenue Disallowance of consultancy charges - Held that:- The details submitted were copies of the income tax return, TDS certificate, copies of travelling expenses, copies of contract and bank statement to prove the expenditure. In view of these overwhelming details submitted by the assessee before the ld CIT(A), he deleted the disallowance. Even otherwise if before the ld AO the parties did not respond or did not submit the requisite details, he does not have any authority to apply the ad hoc percentage for making disallowance. In view of this we do not find any infirmity in deleting the disallowance - Decided against revenue
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2018 (6) TMI 1188
Claim of short term capital loss - claim of carry forward of short term capital loss denied as no revised return have been filed - Held that:- It is well settled law that even if A.O. could not have considered the claim of assessee but there is no bar on the powers of the appellate authority to consider the claim of assessee as per law. The powers of the CIT(A) are co-terminus powers to that of the A.O. Therefore, being the first appellate authority, Ld. CIT(A) correctly directed the A.O. to consider the claim of carry forward of the short term capital loss. The assessee is, therefore, not legally barred from making such claim. Ld. CIT(A), therefore, correctly directed the A.O. to consider the claim of assessee for carry forward of short term capital loss. Directions of the CIT(A) are modified to that extent that the A.O. shall verify the claim of assessee of carry forward of the short term capital loss as per law and shall pass the order accordingly, by giving reasonable, sufficient opportunity of being heard to the assessee
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2018 (6) TMI 1187
Penalty u/s u/s 271(1)(c)- addition on account of explained cash deposits - Held that:- Since the entire addition on account of unexplained cash deposits has already been deleted by the Ld. CIT(A), therefore, the penalty in dispute was rightly deleted by the ld. CIT(A), which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) in deleting the penalty and reject the grounds raised by the Revenue.
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2018 (6) TMI 1186
Income accrued in India - FTS - reimbursement received by the assessee for rendering advisory services/technical services for managing the affairs of CIPL - DTAA - Held that:- There does not exist any service agreement between appellant and CIPL. The appellant is also not in business of providing any services. The payments in dispute are made in relation to employment of Mr. Jitesh Avlani who was on payroll of CIPL. Payment of salary costs to Mr. Jitesh was responsibility of CIPL. Part of such costs has been paid by the appellant to Jitesh which were later on reimbursed by CIPL. All the salary costs including those paid by the appellant have been offered to tax in India. The payments made by the appellant to Mr. Jitesh were infact obligations of CIPL and therefore subsequent payments made by CIPL to the appellant are reimbursement in nature. Therefore, it cannot be held that appellant has provided any technical service within meaning of section 9(1)(vii) of the Act or Article 12(4) of DTAA. The impugned payments are not in nature of FTS and hence not taxable in India. Interest u/s 234B of the Act is not leviable in this case as payments made to the appellant were subject to withholding tax u/s 195 of the Act. The ground of appeal is allowed. - Decided against revenue
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2018 (6) TMI 1184
Refer a property for valuation to the Valuation Officer - capital gain computation - resort to manner as prescribed under section 50C(2) - Held that:- Since the AO has determined the value of the property without following due procedure as provided u/s 50C(2), the CIT(A) was right in directing the AO to determine the value of the property in accordance with provisions of section 50C(2). As decided in the case of Sunil Kumar Agarwal vs CIT [2014 (6) TMI 13 - CALCUTTA HIGH COURT] has held that in all such cases where the AO seeks to take the value of the property assessed for stamp duty purpose as the full value of consideration as a result of transfer, then the AO is under a bounden duty to give the assessee an option to get the property valued by the valuation officer as prescribed u/s 50C(2) of the Act. CIT-A has directed the AO to refer the valuation of the property to the valuation officer and to assess capital gain thereafter in the manner as prescribed u/s 50C(2) of the Act. We find that there is no cause of grievance for the revenue - Decided against revenue
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2018 (6) TMI 1183
Estimation of profit element embedded in bogus purchases - Held that:- Hon’ble Gujarat High Court in the case of CIT vs Simit P Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] observed that no uniform yardstick could be adopted for estimation of profit on bogus purchases. In case of bogus purchases, only profit element embedded in such purchases needs to be taxed but not total purchases that too, when assessee has filed certain evidence to justify such purchases and also where the AO has not doubted sales declared by the assessee and not pointed out any mistakes in books of account maintained for the financial year. We direct the AO to estimate net profit of 12.5% on total alleged bogus purchases from mentined two parties.
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2018 (6) TMI 1182
Addition made on account of undisclosed purchase - Held that:- An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect. SEE PULLANGODE RUBBER AND PRODUCE COMPANY LIMITED VERSUS STATE OF KERALA AND ANOTHER [1971 (9) TMI 64 - SUPREME COURT] Both in the post survey proceedings and scrutiny assessment proceedings, detailed explanations were submitted by the assessee which was supported by proper evidences and documents to establish why the statement made at the time of survey is not being adhered to - the assessee in the assessment proceedings intimated to the ld AO what are the correct facts and filed evidences in support of its claim. The assessee had supported its contentions based on the entries in the regular books of accouns that were duly audited and submitted before the ld AO - AO categorically agrees that the said books of accounts were examined by him in the assessment proceedings and no adverse remarks were passed on the same by him in his order. The books of accounts submitted by the assessee were not rejected by the ld AO - DR could not produce any contrary evidence on record to prove that the addition has been made other than placing reliance on statement recorded from the partner - Addition to be deleted - Decided against revenue
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2018 (6) TMI 1181
GP estimation - rejection of books of accounts - Held that:- Without pointing out any specific defects / deficiencies in the books, it was not justified in rejecting books of accounts merely because the assessee reflected low Gross Profit. Proceeding on the same analogy, estimating the profit merely on the basis of profit reflected by the comparables was not justified and therefore, the action of Ld. AO, to that extent, could not be sustained. The assessee was dealing in varied quality of diamonds, the price of which ranged from $28 to $9400 which necessitate the assessee to maintain adequate quantitative as well as qualitative details of stock so as to arrive at the true profits for the impugned AY. The assessee has apparently not maintained these qualitative details and merely harping on the point that furnishing of quantitative details was sufficient enough to discharge the obligation casted on him in this regard. We are not convinced with the same particularly in view of the fact that the assessee has undertaken majority of the transactions with the related party. Further, we find that the month-wise quantitative details as given in summary of stock for the period 2009-2010 do not matches with ledger extract of monthly summary of cut & polished diamonds. Keeping in view the totality of facts, we deem it fit to restore the matter back to the file of Ld. AO for re-appreciation of the books of accounts of the assessee and profitability reflected therein. Revenue’s appeal stands allowed for statistical purposes
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2018 (6) TMI 1180
Sale of scrap generated while repairing building - to be taxed as separate income or to be adjusted against the written down value of the block of asset - Held that:- Sale of scrap is related to the building, which is accepted by AO therefore, there is no reason in absence of any other evidence not to grant the same as credit against the returned down value of the assets. Even otherwise, the assessee has been granted less depreciation with respect to the above addition. DR could not controvert the fact that during the year the major repairs and renovation work was going on in the hotel of which the scrap is stated to be by the assessee. No infirmity in the order of the CIT – A in considering that the scrap sale to be adjusted against the written down value of the assets. Addition on account of payment of loan processing fees - Held that:- The revenue did not show it at any time that this sum of ₹ 90 crores has not been used for the purposes of the business by the assessee. The assessee produced the enough evidence before AO about the claim of the above expenditure. AO further enquired under section 133 (6) with the bankers who also confirmed the payment of the above sum. The bank has also confirmed that the loan has been paid to the assessee as term loan. In view of this we do not find any infirmity in the order of the Ld. CIT – A in deleting the disallowance. Disallowance under section 14A - non recording of satisfaction - Held that:- AO did not recorded any satisfaction with respect to the correctness of the claim of the assessee after examining the books of accounts but straightway proceeded to disallow 2% of the other expenditure without any basis - In absence of any satisfaction recorded by the AO, we do not find any infirmity in the order of the Ld. CIT – A in deleting the disallowance - Revenue appeal dismissed.
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2018 (6) TMI 1179
Penalty u/s. 271 (1)(c) - assessee has omitted to include interest income from Government of India Bonds in return of income - voluntary filling revised return - Held that:- Assessee has omitted to include interest income from Government of India Bonds by mistaken belief of the facts - no reason for the AO to levy penalty u/s 271(1)(c) for furnishing inaccurate of income, more so, when the assessee has voluntarily filed revised statement of total income including interest received on Government of India Bonds before completion of assessment. This legal proposition is further supported by the decision of Hon’ble Supreme Court in the case of Suresh Chandra Mittal [2001 (6) TMI 63 - SUPREME COURT] wherein the Hon’ble Supreme Court held that voluntary surrender of income cannot be considered as concealment of particulars of income or furnishing of inaccurate particulars of income. - decided in favour of assessee.
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2018 (6) TMI 1178
Rental income - income offered under the head "business and profession " or as " income from house property" - Held that:- The assessee has invested almost all its resources like Share capital Reserves and Surplus and Unsecured loans to invest in -a single residential flat amounting to ₹ 3.53 crores(approx.) and no other resources were left with the company to do a business or invest in any other avenues. Only a miniscule amount of ₹ 10 (lacs approx..) was given by company as loans and advances, ₹ 10 lacs(approx.) invested in shares and an amount of ₹ 13 lacs(approx..) was left as bank balances. The company is not doing any sort of business from many years. The investment in flat is shown as Asset of the company and not as stock in trade. The said flat purchased by the assessee after investing all its funds has' been given to its director on a fixed rent of ₹ 25,000/- p.m from the year 1998 to till date without citing any reason for not increasing the rent. Even though assessee has offered the income under the head "business and profession‟, however, no depreciation has been claimed as per I.T. provisions in respect of alleged business assets in the profit and loss account over these years. As mentioned in the lease agreement that the property was purchased for the purpose of trading and it is being temporarily leased because market conditions are not good, even though market conditions improved, the assessee neither sold the property nor even increased the rent. Thus, the conduct of the assessee over the years shows that the main purpose of acquisition was to provide the same to the Director at a very nominal rent. We do not find any infirmity in the order of lower authorities for not treating rental income as income from business and profession. Computation of ALV - we are in agreement with the AR that AO has not properly computed the ALV. Accordingly, ALV is directed to be computed on the basis of principle laid down in the decision of Jurisdictional High Court in the case of Tip Top Typography [2006 (5) TMI 55 - MADHYA PRADESH HIGH COURT]. We direct accordingly. Reopening of assessment - Allowance of minimum business expenditure to run the company is concerned, we are of the view that minimum expenditure to maintain status of company is required to be allowed. These expenditure are to be allowed to be set off against the income from house property as per the provision of Section 71 of the IT Act. So far as reopening is concerned, as per the reasons recorded, we are in agreement with the lower authorities that there was sufficient reason to reopen the assessment.
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2018 (6) TMI 1177
Disallowance of expenditure incurred in relation to exempt income u/s 14A r.w.s. 8D(2) - non recording of satisfactions by AO - Held that:- On perusal of the facts available on record, though the AO in a cryptic manner said that “I am not satisfied with the claim of the assessee that no expenses were incurred for earning exempt income and the expenditure relates to the exempt income is to be determined as per Rule 8D(2) of the Income-tax Act, 1962”, filed to record a satisfaction having regard to the accounts of the assessee that the assessee has incurred particular expense in relation to earn exempt income. Since the AO has not recorded his satisfaction in the assessment order before determining disallowance contemplated u/s 14A of the Act, invoking Rule 8D(2) to compute such disallowance is not in accordance with law. Sufficiency of own funds - if there are funds available both interest free and overdraft and / or loans, then a presumption would arise that investment would be out of the interest free funds generated or available with the company, if the interest free funds are sufficient to meet the investments. In this case, the assessee has filed necessary evidences to prove that its interest free funds are more than its investments in partnership firm which yielded exempt income and accordingly, the AO was erred in determining disallowances by invoking Rule 8D(2)(ii) of Income-tax Rules, 1962 in respect of interest expenditure. Addition towards unpaid service tax liability u/s 43B - Held that:- Hon’ble Delhi High Court in the case of CIT vs Noble & Hewitt India Pvt Ltd [2007 (9) TMI 238 - DELHI HIGH COURT] held that when assessee did not debit the amount in the P&L account as an expenditure and nor he made the claim of deduction in respect of the said amount, the question of disallowing the deduction not claimed would not arise. In this case, on perusal of facts available on record, we find that the assessee has treated service tax collected from customers under the head ‘current liability’ based on the interim order passed by the Hon’ble jurisdictional High Court[2010 (7) TMI 461 - HIGH COURT OF BOMBAY] - there is a valid and sound reason for the assessee to keep service tax collected from its customers under the head ‘current liability’. We further observe that the assessee has remitted service tax collected from customers in the subsequent assessment year as soon as the issue of constitutional validity has been decided by the Hon’ble High Court. Therefore, we are of the considered view that the AO was erred in making disallowance - decided in favour of assessee
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2018 (6) TMI 1176
Reopening of assessment - after the expiry of a period of 4 years from the end of the relevant assessment year - Held that:- Relief has been given by the Ld. CIT(A) to the assessee on this issue by relying inter alia on the decision of the Delhi High Court as well as that of the Division Bench on this Tribunal stating no failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment but the Ld. CIT(A) failed to examine the facts of this case in which original assessment was done u/s 143(1)(a) and no u/s 143(3) and hence first proviso to section 147 did not apply in the instant case. Uphold the impugned order of the Ld. CIT(A) deciding the preliminary issue relating to the validity of the assessment made by the AO under section 143(3)/147 in favour of the assessee and dismiss the appeal of the revenue. As a result of the decision rendered by me upholding the impugned order of the Ld. CIT(A) on the preliminary issue while disposing of the appeal of the revenue, the cross-objection filed by the assessee raising the issues relating to the additions made by the AO in the assessment under section 143(3)/147 on merit have become infructuous. The same is accordingly dismissed.
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2018 (6) TMI 1175
Validity of reopening of assessment beyond 4 years - capital gains - reasons to believe - assumption of the fact - proof of filing of return - there is no mention that income amounting to ₹ 1 lac or more is believed to have escaped assessment - Held that:- In the absence of anything in the reasons recorded to suggest that the income chargeable to tax which has escaped assessment is one lac rupees or more, the notice issued u/s 148 of the Act beyond four years of the end of the relevant assessment year, is invalid. See MAHESH KUMAR GUPTA VERSUS COMMISSIONER OF INCOME TAX & ANOTHER [2013 (4) TMI 444 - ALLAHABAD HIGH COURT] - Decided in favour of assessee.
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2018 (6) TMI 1174
Money in a foreign country to be taxed in India - Addition of deposits in HSBC Account, Geneva in the hands of non-resident assessee - foreign bank account as sourced from India - test of taxability of non-resident - Held that:- CIT(A) recorded a finding to the effect that the source of deposits is no where proved by the four instances relied on by the AO being termed as circumstantial evidence. AO has himself observed based on the survey report dated 18 November 2011 that the assessee had retired from partnership of M/s Kanubhai B. Shah & Co. since October 1978. Also, the learned AO observed in the next para that the assessee became a non-resident as per section 6 of the Act since 1979 which is the year after which he retired from being the partner in the firm. Thus, the addition of undisclosed income of the firm M/s Kanubhai B. Shah &: Co. during the FY 2011-12 has no connection with the assessee, as he was not a partner during this period. In the instant case, even it is seen that the bank account with HSBC Bank, Geneva was opened during the year 1997. Hence, the circumstantial evidences discussed above including the report of Indian express of 10 February 2015, relied by the learned AO nowhere conclusively establishes that the source of the deposits, since the inception, in the bank account was from India. In view of the above discussion, we do not find any infirmity in the order of CIT(A) for deleting the addition made in respect of deposits in HSBC Account, Geneva in the hands of non-resident assessee - decided against revenue
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2018 (6) TMI 1173
Addition made on account of unaccounted production and sale - Held that:- the issue has been decided by the co-ordinate bench of the Tribunal in assessee’s own case for AY 2002-03 wherein it has been held that production loss depends on number of factors and in absence of any comparable to show that loss shown by the assessee is excessive and thus the appeal was decided in favor of the assessee - thus we find that no evidence of purchases and sales outside the books of accounts were brought before the authorities below - hence following the earlier order we dismiss the ground raised by the Revenue. Disallowance of credit in respect of retained modvat credit relating to the opening stocks - Held that:- following the decision of co-ordinate bench of the Tribunal in case of [2013 (6) TMI 286 - ITAT MUMBAI] wherein it is said that provisions of section 145A, has been brought on statute w.e.f. 1st April 1999. Therefore, the same will be applicable in the AY 1999-- 2000 - hence restore this issue back to the file of the AO to decide the same as directed. Disallowance u/s 40A(2)(b) - Held that:- for making disallowance u/s 40A(2)(b) AO has to demonstrate the excessive or unreasonable payment in the current year also vis a vis the market rate of such services. The AO has failed to prove that payment is unreasonable and excessive and we, therefore, following the co-ordinate bench of the Tribunal and maintaining the consistency with the earlier year, dismiss the ground raised by the Revenue. Disallowance of depreciation on testing equipment provided to laboratories and hospitals free of charge - Held that:- the issue involved is squarely covered in favour of the assessee by the decision of the co-ordinate bench of the Tribunal in [2014 (2) TMI 978 - ITAT MUMBAI] for A.Y. 2002-03 wherein it has been held that the assessee is entitled to the depreciation on testing equipments provided to the laboratories and hospitals free of charge - thus decided against the revenue. Technical knowhow royalty payment @ 2%/4% instead of 1% - Held that:- the issue is covered in favour of the assessee by the decision of the co-ordinate bench of the Tribunal in [2014 (2) TMI 978 - ITAT MUMBAI] for A.Y. 2002-03 - Decided against the revenue.
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2018 (6) TMI 1172
Assessment u/s 153A - Addition u/s 68 - Held that:- No doubt, the presumption under section 132 (4A) is first upon assessee to discharge its onus of rebutting the documents not belonging to, but once sufficient materials have been provided to assessing officer regarding the same, it was the duty of assessing officer to investigate upon the material/evidences in order to corroborate it with seized materials. As apparent from records that no such investigations have been conducted by Ld.AO - we hold that the burden had shifted to revenue to show the basis of some reliable and tangible material which could indicate undisclosed receipts out of books of accounts in the hands of assessee. We do not wish to comment upon the documents seized are dumb or not. Ld. AO was in a much better position during assessment proceedings to investigate upon the facts and to corroborate the materials obtained during the course of investigation with the seized materials. However now with the passage of time being almost 6 years from the date of search, relating to 6 assessment years prior to the date of search, we cannot improve upon what AO could have done himself - delete the addition made by AO on account of alleged receipts of cash for assessment years 2005-06 and 2006-07. - Decided in favour of assessee. Unreported cash - data maintained on laptop relied - Held that:- As receipts are neither entered in regular cash book nor in IBM laptop data and that the data received from laptop has been partly ignored by Assessing Officer. Assessing Officer has wrongly taken cash balance as per IBM laptop as a positive figure as on the year ending 2005, whereas cash balance as per laptop was in negative which has been categorically observed by CIT (A). AO failed to establish the laptop data to be a duplicate set of books of accounts maintained by assessee. DR has also not been able to controvert these differences that have been categorically observed by CIT (A) by way of any material/evidences on record. No infirmity in the observations of CIT (A) in deleting the addition. - Decided in favour of assessee.
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2018 (6) TMI 1171
Mandate for E-filling of appeal - Dismissal of appeal on the ground that the assessee has not filed the appeal electronically before the appellate Commissioner - Held that:- The Hon’ble Supreme Court in the case of ‘RaniKusum Vrs. Kanchan Devi,’ [2005 (8) TMI 709 - SUPREME COURT OF INDIA] a procedural law should not ordinarily be construed as mandatory, as it is always subservient to and is in aid of Justice. Any interpretation, which eludes or frustrates the recipient of Justice, is not to be followed. From the facts of the present case, we gathered that the assessee had already filed the appeal in paper form, however only the e-filing of appeal has not been done by the assessee and according to us, the same is only a technical consideration Since in the present case, we find that appeal in the paper form was already with Ld. CIT(A), therefore in that eventuality the Ld. CIT(A) ought not to have dismissed the appeal solely on the ground that the assessee has not filed the appeal electronically before the appellate Commissioner. - Decided in favour of assessee.
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2018 (6) TMI 1170
Reassessment proceedings - reasons to believe - reopening based on information of Investigation Wing - Held that:- The reopening after four years from the end of the assessment year completed under section 143(3) is not permissible without satisfying the condition precedent as provided under the provisions of section 147 of the Act. The subsequent information received by the AO cannot remove or relax the said condition provided under the provisions of section 147 that the assessee failed to disclose fully and truly all the material necessary for assessment. When the AO has already conducted an enquiry on the issue and the assessee is not expected to furnish more than what was already furnished during the assessment proceedings, then the reopening based on the information from the Investigation Wing on the same issue is nothing but change of opinion and to review the order passed by the AO under section 143(3) which is not permissible under law. Once the assessment was completed by rejecting the books of account and G.P. rate was estimated then trading accounts including the purchases stood merged in that estimation of the income and any further action U/s 148 of the Act for the reason that certain purchases were not verifiable shall amount to change in opinion which is not permitted by law. See ACIT Vs. ICICI Securities Primary Dealership [2012 (8) TMI 754 - SUPREME COURT] - Decided in favour of assessee.
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2018 (6) TMI 1169
Grant of approval u/s 10(23C)(vi) - claim granted from assessment year 2017-18 onwards only, while it had been sought from assessment year 2016-17 onwards - Held that:- The only reason for shifting thereafter the applicability of the approval from assessment year 2016-17 to A.Y 2017-18 appears to be the fact that the assessee had in the meanwhile filed its return of income for assessment year 2016-17 claiming exemption of its income u/s 10(23C)(vi) of the Act though it had still not been granted approval under the said section. It is indeed, we find, a very strange reasoning on the part of the Ld.CIT(E). How this act on the part of the applicant assessee justifies shifting of grant of approval from A.Y. 2016-17 to A.Y. 2017-18, when otherwise the applicant assessee has been found eligible for grant of approval and has also filed application for the same within time for approval from A.Y. 2016-17, we fail to understand. In the absence of any justifiable reason for shifting the grant of approval to A.Y.2017-18 when otherwise the applicant assessee was eligible for approval from A.Y. 2016-17, we direct the Ld.CIT(E) to grant approval to the applicant assessee from A.Y. 2016-17 onwards. - Decided in favour of assessee.
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2018 (6) TMI 1168
Addition u/s 40A(2)(b) - loans from specified persons - whether payment of interest at the rate of 18% to such persons on the loans availed from them is excessive or not, having regard to the fair market value of such loans? - Held that:- No doubt, AO took into consideration interest rate at 12%. This is the rate on which banks used to grant small time loans. This rate was also keeps on fluctuating from 12% to 14%, but it is to be kept in mind that loans availed by the assessee were unsecured loans. It has avoided a large number of formalities, such as, giving securities, pledging something etc. In such situation a little payment of higher rate of interest could not be termed as excessive. Therefore, we are of the view that the ld.CIT(A)has rightly deleted the disallowance. Addition on purchase of car - as per AO since car was purchased in the name of Manager, it was not owned by the assessee, therefore, expenditure incurred for acquiring car as well as depreciation is not admissible to the assessee - Held that:- Car was used practically for the business purpose of the assessee. It has provided finance for purchasing the car. The only name of the Manager is being reflected in the registration certificate. Otherwise, for all other practical purposes car was used by the assessee. CIT(A) has looked into supporting evidence, and thereafter allowed incidental expenses as well as depreciation. After going through order of the ld.CIT(A), we do not find any reasons to interfere in it Addition u/s 40(a)(ia) - non deduction of tds - CIT-A deleted this addition on the ground that M/s.Narmada Chem has filed its return and included receipts from the assessee in its taxable income - Held that:- The issue in dispute is covered in favour of the assessee by the decision of the Hon’ble Delhi High Court in the case of CIT Vs. Ansal Landmark Township P.Ltd. (2015 (9) TMI 79 - DELHI HIGH COURT) held that second proviso to section 40(a) of the Act is to be read as applicable with retrospective effect. According to this proviso, if a payee has filed its return disclosing payment received, then the assessee would not be considered in default. Additional depreciation on lab equipments and electrical installation - Held that:- According to the assessee, it is part of plant & machinery and additional depreciation is eligible as per proviso of section 32(1)(a). Since this electrical machine required additional power and it is inter-connected with its manufacturing activity, it cannot be said that these cables etc. would not be part of manufacturing process. Similarly, lab equipments are linked to manufacturing process, and depreciation would be applicable. The ld.CIT(A) has rightly held that the assessee is entitled for additional depreciation on these items. - Revenue appeal dismissed.
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2018 (6) TMI 1128
Penalty u/s 271AAB - assessment u/s 143(3) r.w.s. 153B - as per assessee show cause notice did not contain any particulars of undisclosed income with reference to which the penalty was leviable - Held that:- When the assessee is not required to maintain the books of account as per section 44AA, then the matter is required to be examined whether the alleged undisclosed income is recorded in the other documents maintained in the normal course as per clause (c) to Explanation to section 271AAB. Undisputedly the alleged income was found recorded in the diary which is nothing but the other record maintained in the normal course, thus the same would not fall in the definition of undisclosed income. Once the said income is found as recorded in the other documents maintained in the normal course, then it cannot be presumed that the assessee would not have disclosed the same in the return of income to be filed after about one year from the date of search. Hence, in view of the above facts and circumstances of the case as well as the various decisions on this point, we hold that the penalty levied under section 271AAB is not sustainable and the same is deleted. - Decided in favour of assessee
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Customs
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2018 (6) TMI 1166
Double benefit of DFIA Scheme availed - N/N. 40/2006-Cus denied - certificate regarding use of goods not produced - shortage of 997.340 MT of coal in the factory - The only defense of the appellant is that though there is shortage of being a small quantity which is due to transit loss the exemption in respect of such shortage could not be denied - Held that:- The Notification prescribes various condition unlike in the Notification 13/1997-Cus. As per the conditions, the importer is duty bound to execute a bond binding himself to use the imported materials in his factory and not only that, he has to submit a Certificate of the jurisdictional Excise Officer regarding enduse of the goods - Since the appellant could not use quantity of 997.340 MTs, the Jurisdictional Officer also did not issue enduse Certificate. All these conditions are mandatory in case of N/N. 40/2006-Cus. In failure to comply with this substantive condition, the appellant is not eligible for exemption Notification. Reliance placed in the case of BPL Display Devices Ltd. [1991 (8) TMI 83 - SUPREME COURT OF INDIA], where it was held that the exemption cannot be denied on the ground that the goods imported is notified for use and there is no dispute that in the present case also the goods imported were notified for use in the manufacture - Held that:- The Hon ble Supreme Court held that when substantive conditions prescribed for extending the benefit of exemption notification, should be scrupulously followed and in failure to follow the condition, the benefit of exemption cannot be allowed. Therefore, it is clear that all the conditions prescribed in the Notification 40/2006-Cus are not identical in the case of N/N. 13/1997-Cus. - Therefore, the case of Hon ble Supreme Court in the case of BPL Display Devices stands distinguished. There is a clear violation of the condition of the N/N. 40/2006-Cus, therefore, the appellant is not entitled for the benefit of said Notification - demand confirmed in respect of the short receipt quantity is sustainable - appeal dismissed - decided against appellant.
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2018 (6) TMI 1165
Rectification of Mistake application - relief from duty liability on the ground that the norms of wastage had been revised - Held that:- There is no mistake in the order pronounced in the Tribunal as the obligation of any adjudgement is to apply known law to established facts. As these facts now brought out were not established in the hearing, the order was passed on available record - The failure on the part of applicant to make the Tribunal cognisant of the facts is not a mistake that can be corrected. To do so would be tantamount to review of our order and it would be a neverending process of piecemeal introduction of records. That would bring about chaos which is not the ends of justice. An appellant seeking justice should submit itself to the embrace of justice. While making this application, no explanation for their negligence has been brought to our notice. ROM Application dismissed.
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2018 (6) TMI 1164
Valuation - Undervaluation of imports to evade duty - allegation of paying excess consideration by diversion of funds - Scope of SCN - Territorial limits of national jurisdiction - it was alleged that a parallel transaction on the same goods operated entirely outside the country between M/s IMR Metallurgical Resources AG and the Singapore-based subsidiary of the appellant-importer, M/s Knowledge International Strategy Systems Pte Limited, involved procurement from mines of coal that did not meet the threshold specifications and for consideration far less than that declared at the time of import - interpretation of statute. Held that:- A harmonious construction of section 46, requiring all goods imported into India to be covered by correct entry, which includes specified particulars, and of section 47, entitling goods to be cleared for home consumption, is that such goods, as are prohibited or have not discharged the duty liability as assessed, should remain in custody without being cleared for home consumption. Goods that are cleared for home consumption carry with them the presumption of duty liability having been discharged in full and the goods are not prohibited for import under any law. It is only these two aspects of the goods that can deny clearance for home consumption. Once the goods have been cleared, they cease to be imported goods within the meaning assigned in section 2 of Customs Act, 1962 thus ending jurisdiction over the goods under Customs Act, 1962. Revival of the jurisdiction is contingent upon establishing that duty has not been paid in full or that the goods are prohibited for import. Assessment of duty is empowered under section 17 as final, or as provisional for subsequent finalization, under section 18 of Customs Act, 1962. The impugned goods had been provisionally assessed to duty under section 18 of Customs Act, 1962 which, upon subsequent finalization, rendering a closure to the assessment and implied freezing of duty liability. It is not the case of Revenue that duty has been short-levied thus foreclosing the invoking of section 28 of Customs Act, 1962 - the goods have been cleared for home consumption in the most legally undeniable manner one that does not admit of recall under the provisions relating to imported goods which prescribes only two inherent and inextricable pre-requisites duty and prohibition - for such clearance. A conjoint reading of the definition and the authority to proceed with confiscation supra would lend credence to the inference that goods that have been properly cleared for home consumption, as provided in section 47 of Customs Act, 1962, cannot be subjected to confiscation. This casual dismissal of application of rule 5 and 6 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 is contrary to the provisions of law. The adjudicating authority is not in compliance with the mechanism prescribed in law. In view of our extensive findings on the scope of actionability on goods cleared for home consumption, the compliance with the valuation scheme of Customs Act, 1962 and the erroneous finding on facts, we do not propose to examine the grounds of appeal that were not pressed during the hearing - appeal allowed.
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Corporate Laws
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2018 (6) TMI 1167
Overriding of Insolvency and Bankruptcy Code, 2016 - whether the present proceedings can continue or whether the NCLT order appointing the IRP could be allowed to act in terms of IBC, 2016 while the present proceedings in relation to the Company are pending before this Court? - Held that:- This Court finds that the Company Petition has been registered on the basis of the recommendations made by the BIFR under Section 20. Thus, the avenues for trying to revive the Company were all tapped by the BIFR before it referred the case to this Court for recommending for winding it up. This Court has also attempted earlier to revive the Company and even the State Government invited proposals from various stake holders with the purpose to revive the Company. However, all attempts virtually failed. The process as laid down under the IBC provides firstly of appointing of an IRP, who is required to conduct all information relating to assets, finances and operations of the corporate debtors. As this Court has already appointed a Provisional Liquidator, the duties as provided under Section 18 of IBC 2016, are similar to that of the OL, the power available to the OL under the Act of 1956 would take into its notice all the provisions contained under IBC 2016 which the interim resolution professional or the resolution professional would be conducting. The legislature clearly intended to transfer the proceedings where no action has been taken by the concerned Court whereas in the present case, the proceedings have been going on since 2002 and the present case is not of such a nature where it can be said that notices have not been issued or the steps under the Act of 1956 have not been undertaken with regard to winding up. Thus, there was no occasion for the applicant ALCHEMIST to have approached the NCLT for invoking the provision of the Rules of 2016. Every winding up petition under clause (e) of Section 433 which is pending before the High Court and which is not served by the petitioner on the respondent company shall stand transferred to NCLT under Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016. If such pending petition is served by the petitioner on the respondent, the petition will continue to be dealt with by this court and the applicable provisions will be the provisions of 1956 Act. Since NCLT is not a forum superior to the High Court, it's orders cannot be construed as injuncting this Court from proceeding with a winding up proceeding in which it has clear jurisdiction to hear and decide. That is the effect of Section 41(b) of the Specific Relief Act, 1963, particularly when the IBC itself permits such continuation under the notifications issued under Sections 239 and 255 of the IBC. The principle of Comity of Courts cannot be invoked to restrain the High Court from proceeding with a winding up petition which Parliament intended the High Court alone to decide as per the notifications issued under Sections 239 and 255 of the IBC. Since this winding up petition did not get transferred to the NCLT by virtue of the notifications dated 7.12.2016 and 29.6.2017 issued under the very IBC, the NCLT cannot have any jurisdiction in regard to the petitioner or to the winding up petition and it's order cannot be interpreted to restrain this Court. Another aspect in the present case is in relation to the clubbed cases filed by the workmen under Article 226 of the Constitution of India which are to be heard commonly with this Company Petition. Since such petitions cannot be transferred or even examined by the NCLT, the present application moved by the applicant Alchemist was against the provisions of the Companies Act and the Rules as well as have to be treated as non-est. This Court while examining the present Company Petition is also examining three Company Appeals whereby the order passed by the NCLT in favour of the applicant is under challenge. The NCLT has held the ALCHEMIST to be possessing 51% shares which is a subject matter of examination before this Court. Thus, the order of NCLT, while invoking the provisions under IBC 2016 is without jurisdiction and the entire proceedings of appointment of IRP is held to be non-est and liable to be ignored as per law laid down by the Apex Court in the case of Union of India and another Vs. Association of Unified Telecom Service Providers of India and others [2011 (10) TMI 580 - SUPREME COURT] Tribunal had no jurisdiction to decide on the validity of the terms and conditions of the license including the definition of Adjusted Gross Revenue incorporated in the license agreement. Hence, the order dated 07.07.2006 of the Tribunal in so far as it decides that revenue realized by the licensee from activities beyond the license will be excluded from Adjusted Gross Revenue dehors the definition of Adjusted Gross Revenue in the license agreement is without jurisdiction and is a nullity and the principle of res judicata will not apply. Accordingly, the State Government is directed not to allow the IRP to function or take over any asset of the Company and ignore the order passed by the NCLT dated 13/04/2018. The Managing Director of Jaipur Metals, who has been appointed by the State to provisionally hold the charge of the Company, has failed to bring to the notice of the NCLT the facts, as noted above. It is also noted that the concerned Managing Director did not inform the State Government about the proceedings and the likelihood of the complications which would arise on account of the same and thus, prima-facie there has been failure on his part to discharge his duties. The State Government is therefore, directed to immediately transfer the said officer and handover the charge to some other responsible officer and also initiate appropriate proceedings against the concerned Managing Director.
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Insolvency & Bankruptcy
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2018 (6) TMI 1194
Corporate insolvency process - proof of default - Held that:- Since the Corporate Debtor despite repeated service has not appeared before this Tribunal and a default of debt due to the Operational Creditor is also in existence remaining unsatisfied as evident prima facie, this Tribunal is of the considered view that this petition requires to be admitted and that CIRP process is required to be initiated against the Corporate Debtor. Application/Petition stands admitted in terms of Section 9(5) of IBC, 2016 and the moratorium shall come in to effect as of this date. A copy of the order shall be communicated to the Operational Creditor as well as to the Corporate Debtor above named by the Registry.
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2018 (6) TMI 1193
Corporate insolvency resolution process - Default to the corporate debtor - Non adherence to mandatory nature of service of Notice of Demand - Held that:- Since the decision of the Hon'ble Supreme Court in Mobilox Innovations (P.) Ltd [2017 (9) TMI 1270 - SUPREME COURT OF INDIA] case is directly on the point, this Tribunal is guided by the same and in view of the position that the Petitioner has not been able to demonstrate with proof or evidence the delivery of notice of demand as contemplated under Section 8 of IBC, 2016 upon the Corporate Debtor at its registered office which is the starting point and triggers the entire process contemplated under IBC, 2016 and the same being absent and not furnished despite a week's time being granted, this Tribunal is constrained to dismiss the petition in view of Section 9(5)(ii)(c) of IBC, 2016
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2018 (6) TMI 1192
Initiation of corporate insolvency resolution process by financial creditor - Held that:-It is evident from the record that the application has been filed on the proforma prescribed under rule 4(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of IBC. We are satisfied that a default has occurred and the application under sub-section (2) of Section 7 is complete. It is also patent no disciplinary proceedings are pending against the proposed Interim Resolution Professional. Thus, the application warrant admission. As a sequel to the above discussion, this petition is admitted and Mr. Rajiv Chakraborty, 12 Sukhdev Vihar, Ist Floor, New Delhi-110025, email id chakrabortyrajiv72@gmail.com is appointed as an Interim Resolution Professional. In pursuance of Section 13(2) of IBC we direct that public announcement shall be immediately made by the Interim Resolution Professional with regard to admission of this application under Section 7 of the Code. We also declare moratorium in terms of Section 14 of the Code. The Interim Resolution Professional shall perform all his functions religiously as are contemplated, inter alia, by Sections 15, 17, 18, 19, 20 & 21 of the Code
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Service Tax
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2018 (6) TMI 1163
Construction of petrol pumps for Indian Oil Corporation Ltd. - the decision in the case of M/S EXCEL ENGINEERING VERSUS COMMISSIONER OF CENTRAL EXCISE & S.T., MEERUT-II AND VICE-VERSA [2017 (2) TMI 490 - CESTAT ALLAHABAD] contested - Held that:- there is no reason to interfere with the judgment under appeal - delay condoned - Appeal dismissed.
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2018 (6) TMI 1162
Voluntary Compliance Entitlement Scheme - Interpretation of Statute - Section 106 (2) of the Finance Act, 2013 - denial of benefit of VCES on the ground that the audit was conducted in the premises of the appellant on 25.02.2013 and 28.02.2013 and the same was not completed as on 01.03.2013, namely the cut of date, and the provision of renting of immovable property service was unearthed during the course of audit. Held that:- Once it is shown that an audit has been initiated and it is pending, there is no scope for restricting the sweep of Section 106(2)(b) to an audit in relation to a particular kind of service. If at an audit, the department is able to unearth a service being rendered by the assessee, which has neither been registered nor been assessed to, it is definitely open to the department to require the assessee to pay the service tax and the penalty payable for providing such service. The rigour of such taxing statute cannot be whittled down by the appellant by seeking to invoke so called voluntary compliance that too after the fact that the service has not been registered or has not been taxed was discovered by the department. Benefit of VCES rightly rejected - appeal dismissed - decided against appellant.
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2018 (6) TMI 1161
GTA Service - SCN was issue to them invoking extended period of limitation - suppression of facts or not? - Held that:- In the instant case, the SCN does not bring out any fact to sustain the charge of suppression, miss-declaration etc. - we are unable to upheld the allegation in support of invoking extended period of limitation in the instant case - appeal allowed on limitation.
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2018 (6) TMI 1160
Classification of services - royalties pertaining to the sale of the final product - Intellectual Property Service or not? - Reverse Charge Mechanism - Held that:- Appellant had imported certain manufacturing equipment and the terms of agreement prescribed payment of some fees that were linked to sale of the output in India. Consequently, the classification of the service as ‘scientific and technical consultancy’ would appear to be inappropriate and should, have been, instead of ‘intellectual property service’ - The question of a reverse levy of tax on the recipient of the service under section 66A of the Finance Act, 1994 would arise only if the service itself is taxable and, in the absence of any reason to subject the said royalty to tax, the demand under section 66A would not survive. Appeal disposed off.
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2018 (6) TMI 1159
Valuation - Mailing List Compilation and Mailing Services - inclusion of franking cost in assessable value - Held that:- The costs related to franking are paid directly to the Post Master General by the appellant’s clients or are otherwise paid by the appellant and subsequently, reimbursed by the said clients. Therefore, it cannot be alleged that the said charges are accruing to the appellants - the franking cost cannot be made part of the value of taxable service. Business Auxiliary Services - rebate received from the postal department - Held that:- It cannot be treated as a commission or an amount received for promoting the postal services. Such incentives are given by the postal authority to encourage use of franking machines, especially where the volumes are above a certain threshold level - these are required to be taxed under Business Auxiliary Services. Appeal allowed - decided in favor of appellant.
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2018 (6) TMI 1158
Valuation - Advertising agency services - inclusion of amount of discount extended by the broadcaster, in the value of the advertisement of slot billed to the customers - Held that:- An identical issue had already been considered by the Tribunal in the case of Mccann Erickson India Pvt. Ltd. [2008 (1) TMI 137 - CESTAT NEW DELHI] in which it has been held that the 15% discount extended by the broadcasters cannot be included for the purpose of charging service tax under the category of advertising agency from the clients - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 1157
Refund claim - Time limitation - the refund was rejected on the ground that the refund of Service Tax paid by the appellant was not filed within one year from the date of payment of Service Tax - Held that:- As per audit the appellant was not supposed to pay Service Tax on 100% gross value, whereas, in terms of N/N. 30/12-ST, they were supposed to pay on 25% of the gross value. Since, appellants paid the Service Tax on 100% and the same was availed by the recipient as the Cenvat credit, there was no occasion for filling any refund claim, refund has arisen only as per the audit objection and compliance thereof by making the payment towards Cenvat credit and interest thereon. The relevant date should be from the date when audit has raised an objection and compliance thereof. The appellant admittedly filed the refund claim well within one year of that date i.e. on 22.02.2015. Therefore, the refund is not time bar, as the same was filed within one year from the relevant date as per facts of the present case - rejection of refund on time bar not sustainable. Appeal allowed.
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2018 (6) TMI 1156
Service or sale - appellant had leased their various types of machines to Roots Casts (P) Ltd., Roots Polycraft and M/s.Roots Prevision Products Pvt. Ltd. by entering into lease deeds and received lease rents from lessees - whether the activity would amount to Supply of Tangible Goods Service or deemed Sale? - Held that:- It is abundantly clear that the nature of renting of the machineries caused through lease deeds was in the nature of deemed sale. It is also seen that it is the lessees and not the appellants had effective possession and control of such machineries leased. It is also not the case that the these activities were outsourced to the appellant on these machineries. On the other hand, manufacturing activity was got done with the help of these machineries only by the lessee at their own control and fancy and not on any direction or control of the appellants. This being so, the ingredients required for bringing the activity within the fold of supply of Tangible Goods Service for the purpose of Section 65 (105) (zzzzj) ibid are not satisfied. Renting has satisfied the requirements of “deemed sale”. This being so, in view of the activities will not fall either within the scope of Business Support Service for the earlier periods or for that matter, under the supply of Tangible Goods Service for subsequent periods. Appeal allowed - decided in favor of appellant.
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2018 (6) TMI 1155
Club and association service - amounts charged and collected by the appellants for providing various facilities, including bar, games, library, accommodation of guests, office members etc. for the period 01.10.2009 to 28.02.2011 - whether appellant liable to Service Tax or not? - CENVAT credit - Held that:- Hon’ble High court of Jharkhand in Ranchi Club Ltd. [2012 (6) TMI 636 - JHARKHAND HIGH COURT] has inter alia held that rendering service by club to its members is not taxable under the Finance Act, 1994. Impugned order is set aside and the appeal is allowed to the extent that the remaining demand of service tax with interest thereon and penalties imposed on that account will not sustain and are set aside - the appeal by the appellant for being allowed to avail cenvat credit will in consequence fail and is therefore rejected. Appeal allowed in part.
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2018 (6) TMI 1154
Rectification of Mistake - case of Revenue is that applicant should have resorted to appellate remedies instead of seeking review of the decision through section 35C of Central Excise Act, 1944 - Held that:- Reliance placed in the case of M/S. INDIAN COFFEE WORKERS' CO-OPERATIVE SOCIETY LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, ALLAHABAD [2014 (4) TMI 407 - ALLAHABAD HIGH COURT], where it was held that when there is a defective application, the Designated Authority should return the application for rectification. This order is to be read as a corrigendum of our order A/94088-94089/16/STB dated 29th November 2016 and application is allowed.
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2018 (6) TMI 1153
Business Auxiliary Services - appellants are engaged in distribution of pre-paid cards and recharge coupons owned by M/s. IDEA Media Communications Ltd., Cochin - demand of service tax with education cess - Held that:- CESTAT has continuously held that telecom operators discharging service tax on the whole MRP value of SIM cards and recharge cards there could be no further service tax liability on the persons who are dealing / selling the said SIM cards or recharge cards to the public - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 1152
Interior decoration services - the services in relation to planning, design and beautification of spaces - whether the services are covered by the definition of "Interior Decoration Service"? - Held that:- A similar issue had come up before this Tribunal in the case of Spandrel vs. CCE, Hyderabad/Kochi [2010 (5) TMI 299 - CESTAT, BANGALORE], wherein the appellants in that case were undertaking interior works such as pest control, demolition & dismantling, masonry work, wall preparation viz. cement, plaster, POP punning, flooring & cladding, works like wall paneling, false ceiling, interior furnishing, partitioning of Banks, Financial Institutions and other firms etc. The activities which had been undertaken, have now been specifically included. This would indicate that prior to 16-6-2005, these were not included in the category of 'interior decorator service' - In the instant case, the respondents had approached the Department for registration under Interior Decoration Service, but no action was taken by the Department on their application for registration under the said service. Appeal dismissed - decided against Revenue.
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2018 (6) TMI 1151
Rectification of Mistake - The Revenue has stated that the Final Order passed by the Tribunal has held that the present appeal cannot proceed and will abate in view of Rule 22 and accordingly, held that the demand also abates - proceedings against deceased person - Section 86(7) of the Finance Act, 1994 read with Section 35C(2) of the Central Excise Act, 1944 - Held that:- As per Rule 22 of CESTAT (Procedure) Rules, the appeal shall abate on the death of the appellant unless an application is made for continuation of such proceedings by or against the successor in interest, executor, administrator, receiver, liquidator or other legal representatives of the appellant or applicant or respondent, as the case may be. The widow of the proprietor is not contesting the appeal on merit but only filed the appeal because the show-cause notice has been served on her demanding the duty against the dead man and in her appeal, she has categorically stated that the show-cause notice against the dead person is not legally sustainable. In the Final Order No.23254/2017 dated 14.12.2017, we have observed that the proprietor Shri Harsha P.S. has died during the pendency of the appeal whereas actually he died much before the issuance of show-cause notice. This is the only error in the Final Order and therefore, we allow the application of the window and hold that the proprietor died much before the issuance of show-cause notice and has not died during the pendency of the appeal. ROM application allowed.
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2018 (6) TMI 1150
Refund of Service Tax paid - time limitation - Section 11B of the Central Excise Act 1944 - Held that:- The Commissioner (A) vide his order dated 22.8.2014 in para 10.1 has clearly held that the appellants are entitled to refund and he directed the lower authority to grant the refund along with interest and the original authority after following the directions of the Commissioner (A) has allowed refund along with interest - this categorical finding by the Commissioner (A) in para 10.1 has not been challenged by the Department and therefore, it has attained finality and on the basis of the said findings, if the lower authority has sanctioned the refund, there is no infirmity in sanctioning the refund - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 1149
Rectification of Mistake Application - case of applicant is that the Final Order allowing withdrawal of this appeal No.ST/20806/2014 is an error apparent on the face of the record, which needs to be corrected by allowing this application - Held that:- There is an error in allowing the withdrawal of appeal No.ST/20806/2014 by the Tribunal's Final Order dated 28.9.2017 - appeal No.ST/20806/2014 may be considered as deleted - ROM Application allowed.
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2018 (6) TMI 1148
Goods Transport Operator Service - reverse charge mechanism - Held that:- From the very beginning appellant have been claiming that the computation of demand is erroneous and filling inflected. From the records, primafacie, we finds force in the argument of the appellants, therefore, the accepting the correct liability pertaining to the Panoli Unit, the matter made to be remanded to the Adjudicating Authority, in the interest of justice - appeal allowed by way of remand.
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2018 (6) TMI 1147
Refund claim - service tax paid was exempted from payment of service tax by virtue of exemption Notification No. 25/2012 ST dated 20.06.2012 w.e.f. 01.07.2012 - unjust enrichment - Held that:- It is clear that services rendered by way of transportation of chemical fertilizer, etc. by rail or vessel, it is exempted from service tax, a fact not disputed by the department. Also, on scrutiny of the invoices annexed with the appeal paper book, the appellant had recovered the charges from the customers M/s IPL mentioning as transportation charges of MOP cargo by barges from ship to shore. In these circumstances, the appellant are eligible to the refund claim of service tax paid for undertaking the transportation of MOP from vessel to shore. Unjust enrichment - Held that:- The adjudicating authority, after considering the Chartered Accountant’s Certificate, the entries made in their books of account, where under it is shown as receivable and also the letter of M/s IPL that they have not reimbursed the amount of service tax paid to the appellant on the ground that no service tax is payable, indicates that the appellant had not passed the burden of service tax, to their customers now claimed as refund. The order of the adjudicating authority restored - appeal allowed.
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2018 (6) TMI 1146
Refund of Service Tax paid - various input services - Clearing and Forwarding Agent Services - service charges in industrial set up of effluent treatment plant - Held that:- As far as refund on Clearing and Forwarding Agent service is concerned, the appellant is entitled to the refund as the said service fall in the definition of 'input services'. As far as service tax paid on service charges for setting up of effluent treatment plant is concerned, the matter needs to be remanded back to the original authority to verify the nature of services. Appeal allowed by way of remand.
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Central Excise
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2018 (6) TMI 1145
Principles of Natural Justice - Ext.P11 order is though appealable in terms of the Finance Act, 1994, the petitioner challenges Ext.P11 order in this writ petition under Article 226 of the Constitution of India on the ground that the same is vitiated for non compliance of the principles of natural justice - Held that:- In Ext.P10 explanation, the petitioner specifically sought for an opportunity of hearing. In so far as the petitioner sought specifically an opportunity of hearing in the matter in Ext.P10 explanation filed before passing the impugned order, in the light of the provisions contained in Section 33A of Central Excise Act, the second respondent should not have passed orders on the show cause notice, without affording the petitioner an opportunity of hearing. The order passed on 16.10.2017 is vitiated for noncompliance of the principles of natural justice. Petition allowed.
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2018 (6) TMI 1144
Manufacture - process of mixing base paint with the colourants to obtain the pain of a desired shade known as “Tinting” - Held that:- The appellant at the depot are carrying out the activities of tinting, i.e., mixing of base paints with colourants. Therefore, the said product is packed and sold to the dealer. The said activity is amount the manufacture by the fiction of the law as per section 2(f) (iii) of Central Excise Act, 1944. All the activities such as packing, repacking, labelling, relabeling, declaration or alteration of retail sale price or adoption of any other treatment of product to render the product marketable will independently amount to manufacture - In the facts of the present case, the appellant have carried out activities of mixing base paint with colourants. Thereafter it is packed in unit containers and sold in the market. Even if it is accepted that the activities is that which render the product marketable to the consumers is manufactured only when the goods are sold to the ultimate consumer, all other activities such as packing or repacking or labelling or relabeling individually amount to manufacture. Therefore, under any circumstances, the activity carried out by the appellant is indeed manufacture. Time Limitation - Held that:- the provision of section 2 (f) (iii) is very clear and there is no ambiguity therein - It cannot be said that the issue is of interpretational nature - Therefore the demand for the entire period along with the penalty is sustainable. Penalty on Sh. P.S. Choudhary, who is the Regional Manager, marketing - Held that:- It cannot be said that Sh. P.S. Choudhary, as individual has any role in evasion of duty. Accordingly, considering the overall facts and circumstance, we set aside penalty imposed on Sh. P.S. Choudhary. Appeal allowed in part.
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2018 (6) TMI 1143
CENVAT credit - Banking and other Financial Services - Reverse Charge Mechanism - Revenue was of the view that the appellant was required to reverse 50% of the cenvat credit on input and input service taken, on monthly basis as stipulated under Rule 6(3B) of the Cenvat Credit Rules, 2004 - Held that:- It is evident that company, which accepts deposits from public for the purpose of lending or investment, will be considered as banking company - In view of the Explanation to Section 5(c) of the Banking Regulation Act, 1949, the appellant will not fall within the category of ‘Banking Company’ since they are primarily engaged in the manufacture of iron steel items. Also, Since the appellant’s principal business is not receiving deposits and lending money in any manner, it cannot be said that they fall within the category of NBFC. The provisions of Rule 6(3B) will be applicable only to a banking company and financial institution including a non banking financial company. Since the appellant does not fall within any of the categories, the provisions of Rule 6(3B) will not be applicable to the appellant. Appeal allowed - decided in favor of appellant.
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2018 (6) TMI 1142
Manufacture - conversion of tissue papers, C-fold tissue, M-fold tissue, paper napkin/serviette of different sizes, toilet roll, kitchen roll, JRT roll and HRT roll etc. from jumbo rolls of paper - whether the activity carried out by the appellant in their factory amounts to manufacture? - Held that:- There is no doubt that the final products of the appellant are perceived in the market place as different from the jumbo rolls which are raw materials. No doubt both the jumbo rolls and final products such as napkins are made of the same tissue paper. But there is no doubt that the transformation of jumbo rolls into either toilet rolls/ kitchen rolls or in the form paper napkins bring out a distinctive and different use in the article. Evidently, the resultant products are perceived differently in the market - The process undertaken by the appellant is to be considered as a process of manufacture. The liability for payment of excise duty is, therefore, incurred by the appellant. Time Limitation - Held that:- The demand upheld even on the basis of extended time limit. Appeal dismissed - decided against appellant.
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2018 (6) TMI 1141
CENVAT credit - various input services - denial of credit on the ground that these services are not utilized in relation to manufacturing of goods - Held that:- Since the issue of credit in respect of the services already stands settled in favour of appellant in their own case, and by this Tribunal in various decisions, therefore applying the same ratio, in present appeal also credit is available to the appellant in respect of said services - appellant is eligible for the credit of Service Tax paid on above services - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 1140
Rectification of Mistake application - Tribunal in the Final Order dt. 24/10/2017 have used the words baggase whereas the product involved in the present appeal was compost - Held that:- There is an error apparent on the face of the record and the Tribunal in the Final Order dt. 24/10/2017 have used the words baggase whereas the product involved in the present appeal was compost. But the outcome of the case would be the same even if it is compost - wherever the word baggasse is used in the Final Order dt. 24/10/2017, it should be read as "compost". But the overall findings will remain the same - ROM Application allowed.
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2018 (6) TMI 1139
Availment of Excess CENVAT credit - SCN was issued to the appellant proposing to recover the excess CENVAT credit availed along with interest by invoking the extended period of limitation - Held that:- In the SCN there are no specific allegations of violation of the Act and Rules and the entire show-cause notice is based on the audit report without verifying all the documents which the appellant claims to have in its possession - the appellant has claimed that they have all the documents / invoices in their possession on basis of which, the appellant has taken cenvat credit and they are ready to show the documents to the Department if the case is remanded back to the original authority. This case needs to be remanded back to the original authority because the documents which are in possession of the appellant have not been considered by both the authorities - appeal allowed by way of remand.
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2018 (6) TMI 1138
CENVAT credit - duty paid on Naphtha and Furnace Oil which are used in generation of electricity - credit denied on the ground that furnace oil and Naphtha used in generation of electricity was wheeled outside the factory - Held that:- Tribunal in similar circumstances in the appellant s own case considering all aspects of the case ULTRATECH CEMENT LTD VERSUS C.C.E S.T., BHAVNAGAR [2018 (2) TMI 564 - CESTAT AHMEDABAD] held that the Appellants are not eligible to the credit on Naphtha used for generation of electricity wheeled outside the factory and due to conflicting views on the issue, imposition of penalty is uncalled for. Credit rightly denied - penalty set aside - appeal allowed in part.
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2018 (6) TMI 1137
Penalty u/r 25 and 26 of CER - unaccounted stock of finished goods - benefit of N/N. 12/2012-CE dated 17.03.2012 denied - It is the contention of the appellant that the said goods were in semi-finished condition - Held that:- Considering the fact that, no finding has been recorded by the adjudicating authority, even though in their defence, the appellant has vehemently argued about the fact that the goods were semi-finished condition, in my opinion, on the face of the Chartered Engineer’s Certificate and also since the goods are still lying in the factory premises, the matter is to be remanded to the adjudicating authority to verify the fact whether the goods are in semi-finished condition or in finished condition, in the interest of justice - appeal allowed by way of remand.
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2018 (6) TMI 1136
Rectification of Mistake - appellant submits that in the list of services mentioned in Para 2 of the order, the CHA Service and Transport Agency charges paid on exports and the case law viz. Commissioner vs. Dynamic Industries Ltd. [2014 (8) TMI 713 - GUJARAT HIGH COURT], even though argued and dictated, but, in the typed order, the same has been left out - Held that:- The necessary rectification allowed to be carried out - In the third line of para 2, should be read as “on the CHA Service and Transport Agency charges paid on export”, Group Insurance service, Courier service……………..” and in the ninth line be read as, “Commissioner vs. Dynamic Industries Ltd. [2014 (8) TMI 713 - GUJARAT HIGH COURT], respectively. Rectification application allowed.
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2018 (6) TMI 1135
Valuation - inclusion of “handing charges” and “Service Charges” from their customers in the assessable value - time limitation - Held that:- The appellant could not produce the evidences, like conditions of sale, purchase orders, relevant invoices, in support of their claim that handing and other charges are post manufacturing/removal expense, hence, not includible in assessable value - there is no substance in the contention of Ld. Advocate for the appellant on merit of the case. Time Limitation - Held that:- Appellant could not able to rebut the observation of the Ld. Commissioner (Appeals) on the aspect of limitation as no evidence was produced to show that the recovery of handing charges and other charges from the customers was disclosed/informed to the department during the relevant period - the demand has been rightly restricted to the period of five years. Matter remanded to the adjudicating Authority to re-quantify the demand accordingly and arrive at the quantum of penalty thereafter - appeal allowed by way of remand.
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2018 (6) TMI 1134
Rectification of Mistake - case of appellant is that no finding have been given in respect of interest and penalty - Held that:- I have considered the argument put forth in Rectification of Mistake application and I find that no finding has been given in the impugned order - the requisite paragraph added after para 9 on the basis of findings - ROM Application disposed off.
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2018 (6) TMI 1133
Remission of duty - there was a delay of 6 days in filing intimation of the accident of fire with the department - Held that:- This Tribunal has been consistently holding the view that the delay in filing the intimation of incident of fire cannot be considered as fatal to the right of seeking remission of duty under Rule 21 of Central Excise Rules - It is prudent to remand the matter to the Adjudicating Authority to consider the evidences on record and that would be produced by the appellant in support of the remission application - appeal allowed by way of remand.
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2018 (6) TMI 1132
CENVAT credit - input services - Renting of Immovable Property Services - denial on account of nexus with the manufacturing activity - Held that:- Appellant has failed to produce the documents before him justifying the claim of cenvat credit and other material facts which are in dispute - appellant submits that he has got all the records and the documents to produce before the adjudicating authority if the matter is remanded back to the original authority to examine the claim of the appellant afresh. The present case needs to be remanded back to the original authority - appeal allowed by way of remand.
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2018 (6) TMI 1131
Excess paid duty - Suo-moto Credit availed by the appellant - case of Revenue is that the appellant cannot take the suo motto credit and he is required to file the refund claim after he has paid the excess duty - Held that:- The appellant cannot take the suo motto credit of the excess duty paid by him. The appellant is a small scale entrepreneur and has no knowledge of the Excise law and in bona fide belief he has taken the suo motto credit of the excess duty paid by him and therefore there is no infirmity in the said taking of suo motto credit by the applicant - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2018 (6) TMI 1130
Levy of Interest - Section 24 (3) of the TNGST Act - Held that:- Hon'ble Supreme Court in the case of EID. PARRY (INDIA) LTD. VERSUS ASSISTANT COMMISSIONER OF COMMERCIAL TAXES, CHENNAI (AND ANOTHER APPEAL) [2005 (5) TMI 302 - SUPREME COURT OF INDIA], where it was held that the impugned proceedings, levying interest under Section 24 (3) of the Act are quashed - levying interest under Section 24 (3) of the Act are quashed - petition allowed - decided in favor of petitioner.
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2018 (6) TMI 1129
Assessment of escaped turnover - Service of notice - It is the case of the petitioner that there was no communication thereafter to the firm from the Department - principles of Natural Justice - Held that:- True, in so far as one of the partners of the firm is doing business with others in the very same premises, they must have received Ext.P3 notice. But, that does not mean that they should always get the notices sent in that address - the case of the petitioner that Ext.P6 order is vitiated for noncompliance of the principles of natural justice deserves to be accepted - petition allowed.
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