TMI Tax Updates - e-Newsletter
June 28, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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GST:
Input tax credit - rent-a-cab service - inputs/capital goods - purchase of motor vehicles - The credit of GST paid on the [inward supply] of motor vehicles for the supply of the rent-a-cab service is not admissible in terms of section 17(5)(a) of the GST Act.
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GST:
Nature of transaction - supply of goods or transfer of property - work orders is required to fill in the foundation or plinth by silver sand in layers and consolidating the same by saturation with water ramming which also involves earth work for filling in the compound, tank, low land, ditches etc. It is, therefore, not a contract for the supply of goods, but the transfer of property in such goods in the course of preparing the site for construction - it is works contract, as defined u/s 2(119) and taxable @ 18%
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GST:
Profiteering - footwear - benefit of rate reduction of GST from 18% to 5% - It is evident that the Respondent had increased the base price of the product when the rate of tax was reduced - non reduction of price is contravened the provisions of Section 171 of the CGST Act, 2017 - directed to reduce the price of the product and also pay profiteered amount and SCN for penalty
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GST:
Profiteering - supply of “Sanitary Napkins” - It's an admitted fact that the rate of tax on the product was reduced from 12% to NIL w.e.f. 27.07.2018 without the benefit of ITC - it was by found DGAP that the Respondent had increased his base price inspite of reduction in the rate of tax - directed to reduce the price of the product and also pay profiteered amount and SCN for penalty
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Income Tax:
Allowability of advertisement expenditure - view of the Tribunal regarding the allowability of advertisement expenditure as revenue expenditure was upheld by High Court - does not call for interference under Article 136 of the Constitution - SLP dismissed after discussion
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Income Tax:
Disallowance of loss of trading in commodity exchange - set off of loss - there is no finding by both the lower authorities challenging the genuineness of the commodity trading transactions entered during the year - It is true that it has been disclosed under head income from other source but according to Section 71(1) of the Act assessee is entitled to set off from income under the head Business & profession and income from other sources
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Income Tax:
Applicability of TP provisions of Chapter-X on Tonnage Tax Scheme(TTS) of the Chapter XII-G - TTS is a separate code by itself containing changing provision as well as method of computation of income and not dependent on receipt or expenditure - alter an expenditure invoking chapter-X (TP) has no bearing on the income of assessee - TP provision is not applicable
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Income Tax:
Capital gain arising out of sale of office used as registered office - not claimed depreciation under Income tax Act though claimed under companies Act - assessee being a private limited company, the Companies Act provides that the office premise should be shown as fixed asset, even if it is not held as a business asset but as an investment and earning rental income - taxable as LTCG
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Income Tax:
Delayed payment of employee Contribution of PF and ESI - expenditure was suo-moto disallowed while filing the return of income but pleaded for the allowance of the same during assessment proceedings - AO is directed to allow the same after verifying that contributions/payments were deposited before due date of filing of return of income and same was not claimed in any other AY
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Income Tax:
Penalty u/s 272A(2)(k) - delay in filing the TDS return - due to sudden resignation of the accountant, the assessee could not trace his left over jobs including non-filing of TDS returns and as soon the same was noticed, same were filed - there is no intentional default or motive to make any financial gain - sufficient cause for making due compliance u/s 273B - no penalty
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Income Tax:
Income estimation applying GP Rate - AO neither pointed out any defect in the books of accounts nor rejected u/s 145(2) - addition without verification of various expenditure and giving any benefit of difference in the business model, product dealt with, geographical area operated in etc. and merely compared the GP of other entities is not permissible
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Income Tax:
Reopening of assessment u/s 147 - AO has re-appreciated trial balance-sheet which is also available to him when original assessment order was passed and alleged escapement - proviso appended to section 147 puts an embargo in the exercise of power of AO in cases where scrutiny assessment has taken place and four years have expired from the end of relevant AY if assessee has disclosed all material facts fully and truly - reassessment quashed
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Income Tax:
Reassessment u/s 147 - In ‘Note’ in Annual Reports on Software development projects and the various stages of software development placed by the assessee before the AO discloses all information on project - it is presumed that AO has examined the entitlement of deduction u/s 10A in all angles and withdrawal of the same based on the assessment order for AY 2007-08 is without application of mind and nothing but change of opinion, which tantamounts to review and is not permissible
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Income Tax:
Revision u/s 263 - Pr. CIT directed to make addition/disallowance in respect of expenditure incurred towards R&D u/s 35(2AB); Capital R&D expense allocated to Sun Pharmaceuticals Industries and re-characterization of remuneration earned from partnership firm (SPI) as royalty income - similar disallowances were already subject matter of appeals before Tribunal in earlier years in favour of assessee - revision order is not sustainable
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Income Tax:
Addition of unexplained credit u/s 68 - assessee could not produce the party for examination before AO or CIT(A) - balance sheet of the lender clearly shows that the lender have deployed funds are non income producing funds, it does not result into any revenue to that company. The lender clearly is a paper company and nothing more than that - failed to discharge its initial onus as cast upon it u/s 68 - addition sustained
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Customs:
Confiscation of imported goods - cosmetic goods - improper importation - cosmetics generally cannot be said to be entitled to exemption as substances not intended for medicinal use
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Customs:
Import of Capital goods under EPCG Scheme - non-fulfillment of export obligations -The appellants are liable to pay interest on the delayed payment of customs duty foregone
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Customs:
Interest on delayed refund - limitation for Refund of Special Excise Duty and excess payment of CVD - refund has been sanctioned but has not been refunded within 3 months from the date of receipt of application - as per Section 27(a) being a statutory mandate, the Department is liable to pay the interest on the sanctioned amount for the delayed period
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Customs:
Anti Dumping Duty - Sunset review - imports of Ductile Iron Pipes from China - The impugned Final Finding recorded in the Notification cannot be said to be strictly as per Rule 23 as there is non-advertance to the material placed on record and there is non-compliance with the principle of natural justice as no requisite information was made available and the conclusions are not supported by the material on record - matter remanded and direct to extend the ADD
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Corporate Law:
Declaration of Dividend - company in liquidation - Since the unsecured creditors have filed individual claims and their claims were adjudicated issuing respective Form No. 69/70, the OL is directed to issue individual notices of dividend in Form No. 138 in the name of one preferential creditor and 43 unsecured creditors, dispensing with publication of notice of dividend in newspapers
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Service Tax:
Penalty u/s 78 of FA - there was a confusion at the field level for proper classification of activity undertaken by the appellant as to whether it is under ‘Business Auxiliary Service’ or under ‘Business Support Service’ and there have been multiplicity of interpretation - appellant had also deposited the entire amount of ST demanded under the SCN with interest before issuance of SCN - imposition of penalty u/s 78 is not warranted
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Service Tax:
Benefit of reduced penalty - penalty not deposited - get the benefit of reduced penalty of 25% of the service tax (ST) u/s 78(1) of the FA, 1994, assessee required to pay ST along with interest and deposits the 25% of penalty within a period of one month from the date of issue of determining order - Commissioner (Appeals) erred in reducing penalty at 25% from 100% of the ST demand without payment of the same
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Central Excise:
SSI Exemption - Use of brand name - The investigation has established beyond doubt that the appellants have been engaged in the manufacture of wall putty, decorative white cement etc. with the brand name of some other person - record of clearances it is established that the appellants have crossed the exemption limit which is available for SSI units - demanded duty is payable
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Central Excise:
Classification of manufactured goods - talcum powder - the product is manufactured not under drug license but under cosmetic license - the talcum powder except providing a cooling and refreshing effect on body is not providing any therapeutic value nor any treatment to any specific skin condition but only use for better feel and look of body and skin - it is a cosmetic product
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VAT:
Validity of assessment order - unable to obtain ‘F’ Forms for part of the turnover, on account of certain issues and non generation of the same online now - directed to first go before the Appellate Authority by way of a statutory appeal with further direction Authority to look into other evidence if Assessee is unable to produce ‘F’ Forms
Articles
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2019 (6) TMI 1269
Input tax credit - inputs/capital goods - purchase of motor vehicles - appellant engaged in supplying cabs on a rental basis - HELD THAT:- Rent-a-cab is not defined in the GST Act. Nature of the Applicant s service is, therefore, derived from what is stated in the Application and what can be ascertained from the invoices. The Applicant provides cab rental service inter alia to institutions like West Bengal Postal Service. The recipient, as discussed in para 4.6, has to pay the Applicant a certain amount per month as consideration irrespective of what distance the cab travels in a particular month. The additional amount has to be paid if the cab is retained for extra hours or requisitioned on holidays. To cover the cost of fuel, the distance travelled needs to be brought into play, but only if it crosses a certain threshold. The nature of the service the Applicant provides is classifiable under SAC 9966 as renting of a motor vehicle. The credit of GST paid on the [inward supply] of motor vehicles for the supply of the Applicant s service is not admissible in terms of section [17(5)(a)] of the GST Act.
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2019 (6) TMI 1268
Nature of transaction - supply of goods or transfer of property? - Applicant has procured two contracts from M/s. Mackintosh Burn Ltd (MBL) for filling in the compound, tank, low land etc. with silver sand and earthwork in layers, including spreading and compacting the same at the district Correction Home, Baruipur - whether it is classifiable as a supply of sand (HSN 2505)? HELD THAT:- In terms of the description of the work, contained in the work orders, the Applicant is required to fill in the foundation or plinth by silver sand in layers and consolidating the same by saturation with water ramming. The work also involves earth work for filling in the compound, tank, low land, ditches etc. with good earth spread in layers, including breaking clods and consolidating the same by ramming and dressing. It is, therefore, not a contract for the supply of goods, but the transfer of property in such goods in the course of preparing the site for construction of the New Central Correctional Home at Baruipur. It, therefore, amounts to improving and modifying land - an immovable property and is works contract, as defined under section 2(119) of the GST Act. The Applicant s supply is, therefore, classifiable as site preparation service (SAC Group 99543) and taxable @ 18% under Sl No. 3(xii) of Notification No. 11/2017-CT (Rate) dated 28/06/2017 (corresponding State Notification No. 1135-FT dated 28/06/2017), as amended from time to time. In this respect, this Authority agrees with the views of the concerned officer from the Revenue.
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2019 (6) TMI 1267
Learned Single Judge had omitted to consider and adjudicate upon other grounds raised in the writ petition - Constitutional validity of Section 174 of the KSGST Act - time limitation - HELD THAT:- Issue decided in the case of M/S. SHEEN GOLDEN JEWELS (INDIA) PVT. LTD. VERSUS THE STATE TAX OFFICER (IB) -1, AND OTHERS [ 2019 (2) TMI 300 - KERALA HIGH COURT ] where it was held that The petitioner's plea is rejected that the State lacks the vires to graft Section 174 into KSGST Act, 2017 Remittance of the writ petition for fresh consideration and disposal on the grounds raised other than the validity of Section 174 of the KSGST Act, would serve the ends of justice - The writ petition is restored on the files of this Court.
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2019 (6) TMI 1266
Profiteering - footwear - Respondent had not passed on the benefit of rate reduction of GST from 18% to 5% to him by way of commensurate reduction in price - contravention of provisions of Section 171 of the CGST Act, 2017 - HELD THAT:- It has been revealed that the Central Govt. vide Notification No. 18/2018- Central Tax (Rate) dated 26.07.2018 had reduced the rate of GST from 18% to 5% in respect of footwear priced between ₹ 500/- to ₹ 1000/-, with effect from 27.07.2018 and the benefit of the same was required to be passed on to the recipients by the Respondent as per the provisions of Section 171 of the CGST Act, 2017. It is evident that the Respondent had increased the base price of the product from ₹ 592.37/- to ₹ 665.71/-, when the rate of tax was reduced from 18% to 5% with effect from 27.07.2018. Thus, by increasing the base price of the product the benefit of reduction in tax rate was not passed on to the recipients and hence he has contravened the provisions of Section 171 of the CGST Act, 2017. The records clearly show that the Respondent has supplied a total number of 6380 footwears out of which 1451 were impacted by the reduction in the rate of GST from 18% to 5% w.e.f. 27.07.2017 - the Respondent is hereby directed to reduce the price of the products as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, by making commensurate reduction in the prices, keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients. Penalty - HELD THAT:- Respondent has issued incorrect invoices while selling the above products to his recipients as he had not correctly shown the basic prices which he should have legally charged from them. The Respondent has also collected additional GST on the increased prices through the incorrect tax invoices which would have otherwise resulted in further benefit to the customers which he had failed to pass on. It is also established from the record that the Respondent has consciously acted in contravention of the provisions of the CGST Act, 2017 by issuing incorrect invoices which is an offence under Section 122 (1) (i) of the above Act - respondent is liable for imposition of penalty under Section read with Rule 133 (3) (d) of the CGST Rules, 2017 - In the interest of natural justice, notice may be issued to the Respondent to show cause as to why penalty should not be imposed on him as per the provisions of Section 122 of the CGST Act, 2017 read with Rule 133 (3) (d) of the CGST Rules, 2017. Application disposed off.
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2019 (6) TMI 1265
Profiteering - supply of Sanitary Napkins - benefit of reduction in GST rate had not been passed on to the recipients by way of commensurate reduction in price - HELD THAT:- It's an admitted fact that the rate of tax on the product was reduced from 12% to NIL w.e.f. 27.07.2018 without the benefit of ITC. The DGAP vide Annexure-15 of his Report dated 29.03.2019 has found that the Respondent had increased his base price inspite of reduction in the rate of tax from 12% to NIL. Accordingly the DGAP has arrived at profiteered amount of Rs, 5,282.51/- which includes the profiteered amount of ₹ 894.88/- on the closing stock as on 26.07.2018 and ₹ 4,387.63/- on the fresh stock for the period 27.07.2018 to 30.09.2018. The Respondent has neither disputed the quantity nor the profiteered amount as has been arrived at by the DGAP. The Respondent is hereby directed to reduce the price of the product as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, by making commensurate reduction in the price, keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients. Penalty - HELD THAT:- Respondent has issued incorrect invoices while selling the above products to his recipients as he has not correctly shown the basic prices which he should have legally charged from them. The Respondent has also collected additional GST on the increased prices through the incorrect tax invoices which would have otherwise resulted in further benefit to the customers which he had failed to pass on. It is also established from the record that the Respondent has consciously acted in contravention of the provisions of the CGST Act, 2017 by issuing incorrect invoices which is an offence under Section 122 (1) (i) of the above Act - respondent is liable to penalty - In the interest of natural justice, notice may be issued to the Respondent to show cause as to why penalty should not be imposed on him as per the provisions of Section 122 of the CGST Act, 2017 read with Rule 133 (3) (d) of the CGST Rules, 2017. Application disposed off.
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Income Tax
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2019 (6) TMI 1264
Allowability of advertisement expenditure as revenue expenditure - HELD THAT:- High Court has adverted to two circumstances, while upholding the decision of the Tribunal: firstly, for the previous Assessment Year 2008- 2009, the same view of the Tribunal regarding the allowability of advertisement expenditure as revenue expenditure has not been challenged; secondly, the High Court has adverted to its own decision in the case of CIT v. Pepsico India Holdings India (P) Ltd . . [ 2012 (6) TMI 256 - DELHI HIGH COURT] . The learned Additional Solicitor General attempted to distinguish the decision on the ground that it dealt with advertisements on hoardings. We find no substance in that distinction In our considered view, the view which has been taken by the Tribunal and, sustained by the High Court, does not call for interference under Article 136 of the Constitution.
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2019 (6) TMI 1263
Deemed dividend u/s 2(22)(e) - loans given to the assessee by company wherein assessee holds 22.3% share holdings - HELD THAT:- In the case of Schutz Dishman Bio-Tech Private Limited [ 2016 (1) TMI 84 - GUJARAT HIGH COURT] held that the amounts were not in the nature of Inter Corporate Deposits and were, therefore, not to be treated as loans or advances as contemplated in Section 2(22)(e) of the Act. The Revenue is pressing for admission of this Tax Appeal only with regard to the transaction with B.R. Laboratories Private Limited. Therefore, we are not inclined to entertain this Appeal so far as the transaction with Schutz Dishman Bio-Tech Private Limited is concerned. We re-frame the question no.1 as - Whether the Appellate Tribunal has erred in law and on facts in deleting the addition of ₹ 16,03,933=00 made on account of the deemed dividend under Section 2(22)(e) of the Act for the Assessment Year 2005-06 in so far as the transaction with B.R. Laboratories Private Limited is concerned ?
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2019 (6) TMI 1262
Disallowance of Animal Breeding Expenses - nature of expenses - revenue or capital expenditure - HELD THAT:- The question, as raised, is no longer res integra in view of the decision of this Court in the case of Principal Commissioner of Income Tax 2, Vadodara vs. Gujarat Cop, Op. Milk Marketing Federation Ltd. [ 2018 (10) TMI 1385 - GUJARAT HIGH COURT] as held the activities carried under the said programme were all aimed at fertility improvement amongst milk animals. As part of the programme, the typical reasons for infertility such as improper practice in calf rearing, low body weight of animals, lack of nutrition/mineral, poor health condition, lack of awareness amongst farmers about improved breeding practices etc. In furtherance of such objectives, assessee would hold camps for village awareness, in select villages would carry out tagging and registration of animals, would hold fertility camps, would carry out mass deworming programmes, would distribute mineral mixture, carry out vaccination at mass scale, provide balanced cattle feed etc. The expenditure was general in nature and aimed at improving the practices for better fertility amongst milk animals by addressing the issues which caused infertility. The expenditure therefore was for the purpose of its business and would not be co-relatable to any tangible returns which can be expected out of such expenditure. - Decided against revenue
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2019 (6) TMI 1261
Reassessment u/s 147 r.w.s 148 - deduction u/s 10A - original assessment u/s 143(3) - reason to believe that the income chargeable to tax has escaped assessment - full and true disclosure of the material facts at the time of original assessment - alleged that Master Service Agreements, Work Orders, Scope of Works and invoices were not placed before the AO at the time of the original assessment - borrowed satisfaction HELD THAT: It is held that Note on Software development projects and the various stages of software development placed by the assessee before the AO discloses the stages wherein the petitioner assessee was required to carry out the project at the customer s site/onsite and the same are reflected in the Annual Reports. Considering these materials, deduction u/s 10A was allowed in the order passed u/s 143(3). In such circumstances, it is presumed that AO has examined the entitlement of deduction u/s 10A by the assessee in all angles. Withdrawal of the deduction allowed u/s 10A based on the assessment order relating to the assessment year 2007-08 is without application of mind and nothing but change of opinion, which tantamounts to review and the same is not permissible to initiate the proceedings u/s 147/148 of the Act. This Court is of the opinion that there was no material on record before the Assessing Authority to establish failure on the part of the assessee to disclose truly and fully the relevant material while passing the original assessment order u/s 143(3) and as such the respondent authority had no jurisdiction to invoke Section 147 and 148 of the Act for the assessment years in question. - Writ petitions are allowed.
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2019 (6) TMI 1260
Penalty u/s 271(1)(c) - in appeal against quantum addition ITAT has remitted the matter back to the original authority - HELD THAT:- In the light of the aforesaid trajectory pending writ petition, particularly the order of ITAT as well as the hearing in the instant case today before this Court impugned order dated 19.03.2019 is set aside. Respondent/original authority, shall first redo the assessment pursuant to the aforesaid remand order passed by ITAT in ITA No.2840/Chny/2018 dated 17.05.2019. Post assessment, in accordance with the remission made by the ITAT subject to outcome of the assessment proceedings before the respondent and obviously depending on the assessment, it is open to the respondent to initiate penalty proceedings afresh - writ petition is disposed off
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2019 (6) TMI 1259
Delayed payment of employee Contribution of PF and ESI - expenditure was suo-moto disallowed by the assessee while filing the return of income but pleaded for the allowance of the same during assessment proceedings - HELD THAT:- Keeping in view the fact that assessee s correct income was to be computed and keeping in view the decision of Jute Corporation of India Ltd. V/s CIT [ 1990 (9) TMI 6 - SUPREME COURT] , we admit the assessee s claim and restore the issue back to the file of Ld. AO to examine the same. The Ld. AO is directed to allow the same after verifying that the aforesaid contributions / payments were deposited before due date of filing of return of income and secondly, the deduction of the same was not claimed by the assessee in any other Assessment Year. The assessee is directed to substantiate the same. This ground stands allowed for statistical purposes. Interest income assessment - correct head of income - Business income or Income from Other Sources - HELD THAT:- Interest component include interest on income tax refund for ₹ 155.77 Lacs, which is, undoubtedly, assessable as income from other sources. - the decision of lower authority, to that extent, stand confirmed. The balance interest component as stated to be earned by the assessee from Bank deposits except for assessee s submissions, the aforesaid facts are not forthcoming. AR has submitted that the fixed deposits were kept to facilitate issuance of bank guarantees and to meet certain business obligations. These facts require examination verification by AO. Therefore, we deem it fit to restore the matter back to the file of Ld.AO for re-adjudication in the light of these submissions. The assessee is directed to substantiate the same and demonstrate the business nexus of these deposits and justify assessability of the same as business income. The ground stands partly allowed for statistical purposes. Disallowance on account of foreign exchange fluctuation loss - HELD THAT:- We direct AO to ascertain that the facts in this AY are pari-materia the same as in earlier years. AO is directed to examine the fact that the aforesaid liabilities have crystalized during impugned AY as per the terms of the settlement and these liabilities has fully been discharged by the assessee by making actual payment. Further, similar treatment has been given by the assessee to resultant gain, if any, arising out of these transactions in subsequent years. Both these grounds stand allowed for statistical purposes. Adjustment of foreign exchange losses from Book Profits u/s 115JB - HELD THAT:- The said matter also stands restored back to the file of Ld. AO. The same may be re-adjudicated in terms of the stand taken against ground nos. 1 2.
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2019 (6) TMI 1258
Income estimation - Extra profit by applying GP Rate at 6% on the basis of average gross profit of other entities engaged in the trade of wholesale liquor business - AO neither pointed out any defect in the books of accounts nor rejected u/s 145 (2) - HELD THAT:- Addition to the book results of the assessee without rejecting the books of accounts. To reject the books of accounts the learned assessing officer must find out latent, patent, and glaring defects in the books of accounts. In the present case, the AO has not found any defect in the books of accounts. Merely on the basis of comparison of gross profit with other parties, he has made the addition to the gross profit of the assessee. The learned departmental representative could not point out any infirmity in the order of the learned CIT (A ) and further failed to justify that without rejecting the books of accounts by finding out the latent, patent and glaring defects in the books of accounts whether the book results which are audited can be disturbed or not. On perusal of the order of the learned assessing officer, we did not find that the learned assessing officer has pointed out any defect in the books of accounts of the assessee. The learned AO also did not make any verification of various expenditure but has merely compared the gross profit of other entities without giving any benefit of difference in the business model, product dealt with, geographical area operated in et cetera. In view of this, we dismiss ground number 1 and 2 of the appeal of the learned assessing officer.
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2019 (6) TMI 1257
Penalty u/s 271(1)(c) - defective notice - penalty notice have been issued without striking off one of the twin charges for levy of the penalty - HELD THAT:- As held by the Hon'ble Supreme Court in CIT Vs. SSA Emerald Meadows [ 2016 (8) TMI 1145 - SC ORDER] wherein, it has been held that notice issued by the ld AO u/s 274 read with section 271(1)(c) is bad in law as it did not specified as to which limb of that section the penalty proceedings have been initiated. Respectfully following the decisions of the coordinate bench in case of sister concern of the assessee, we cancel the penalty as none of the charges of the twin charges were struck off. Accordingly, additional grounds raised by the assessee are allowed and appeal of the assessee succeeds on this ground. As we have quashed the penalty on the issue of validity of notice, other, issues in the appeal becomes academic. Accordingly, appeal of the assessee is allowed quashing penalty levied u/s 271(1)(c) - Appeal of the assessee is allowed.
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2019 (6) TMI 1256
Reopening of assessment u/s 147 - notice issued after expiry of four years from end of the relevant assessment year - HELD THAT:- Notice u/s 148 was issued after expiry of four years from end of the relevant assessment year. Notice was issued on 21.11.2014 whereas four years for the Asstt.Year 2009-10 will expire on 31.3.2014. Since scrutiny assessment was also there in this case, and in that situation, proviso appended to section 147 would come to the rescue of the assessee. The interdiction in the proviso appended to section 147 puts an embargo in the exercise of power at the end of the AO in cases where scrutiny assessment has taken place and four years have expired from the end of relevant assessment year. In such cases, the assessment cannot be reopened unless it its demonstrated that income has escaped assessment on account of failure on the part of the assessee to disclose all material facts fully and truly in respect of his assessable income. A perusal of the reasons would indicate that no such circumstances have been pressed by the AO. He has re-appreciated trial balance-sheet which is also available to him when original assessment order was passed. Therefore, reassessment is not sustainable. It deserves to be quashed. Accordingly, we quash the re-assessment order. Levy of penalty u/s 271(1)(c) - HELD THAT:- Sub-clause (iii) of section 271(1)(c) provides mechanism for quantification of penalty. It contemplates that the assessee would be directed to pay a sum in addition to taxes, if any, payable by him, which shall not be less than , but which shall not exceed three times the amount of tax sought to be evaded by reason of concealment of income or furnishing of inaccurate particulars of income. The quantification of the penalty is depended upon the addition made to the income of the assessee. In the present case, since we have already quashed re-assessment order, the very basis for computation of such penalty has been extinguished. Therefore, no penalty is imposable on the assessee. It is cancelled and ground of appeal of the assessee is allowed.
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2019 (6) TMI 1255
Capital gain arising out of sale of office premises - LTCG OR STCG - characterization of asset - not claimed depreciation under Income tax Act though claimed under companies Act - used the office as registered office - mandatory nature of depreciation - HELD THAT:- As decided in SAKTHI METAL DEPOT VERSUS ITO [ 2004 (11) TMI 507 - ITAT COCHIN] character of the asset does not change only for the reason that the flat was used as a business asset/depreciable asset in the past. A long-term capital asset even though used as a depreciable asset in the past still could be a long-term capital asset for the purpose of taxation, if the property was not treated as a depreciable asset at the time of sale. It is always possible that a particular asset can be a personal asset for some time and a business asset for some other time. It entirely depends upon the intention of the owners of the property in which way it should be used. The assessee s gain is arising out of sale of office premises is to be assessed as long term capital gain and consequential relief is to be allowed. Allowance of cost of improvement claimed - assessee is unable to file any evidence before the lower authorities as the transaction of the year 2003-04 and it is 16-year-old matter - HELD THAT:- As noted assessee had incurred various expenses on improvement of the 4 galas in the nature of certain architectural changes, during the A.Y. 2004-05 amounting to ₹ 46,45,700/- which was duly explained from the Schedule of Fixed Assets in the Audited Balance Sheet of the company for FY 2003-04. During the course of assessment proceedings, the AO had asked the AR of the assessee firm to produce various documentary evidences in order to substantiate the cost of acquisition as claimed. We direct the assessee to produce all the relevant evidences before AO and AO will consider the relevant accounts of the assessee including schedule of fixed assets from the balance sheet and will decide the issue afresh. Hence, this issue is set aside to the file of the AO. - Appeal of assessee is partly allowed.
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2019 (6) TMI 1254
Penalty u/s 272A(2)(k) - delay in filing the TDS return - resignation of the accountant - reasonable cause shown within the meaning of Sec 273B - HELD THAT:- Assessee had shown reasonable cause for his failure in complying with the provisions of section 200(3) hence no penalty could be levied. The assessee had deducted and deposited the tax within the prescribed period and thereby made substantive compliance. The government revenue was not defrauded or deferred. The assessee did not have any motive to make any financial gain. Due to sudden resignation of the accountant, the assessee could not trace his left over jobs which include non-filing of TDS returns in Form 26Q for Quarter-1 Quarter-2 for FY 2010-11. As soon the same was noticed, TDS both the returns were filed. The circumstance shows that the delay in filing the return was not intentional. The assessee was prevented by sufficient cause for making due compliance. Therefore, we note that assessee had shown reasonable cause as referred u/s 273B - Decided in favour of assessee.
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2019 (6) TMI 1253
Addition of unexplained credit u/s 68 - loans was taken long before the start of any activities by assessee - assessee submitted complete details such as income tax return, Annual report , bank account, confirmation of the above lender lender has net worth of ₹ 8.18 cores as share capital and reserves and surpluses - onus of proof - applicability of 68 on charitable institution - HELD THAT:- It is very strange that assessee could not produce the party for examination before ld AO, made no attempt to produce them before CIT (A), but found it convenient to make repayment of the loan by account payee cheque after passing of the assessment order but before the appeal disposed off by the ld CIT (A). The lender is a private limited company and is an artificial juridical entity; it functions through its directors. The directors whereabouts are not known, the company s address shows that it never existed at that address. Mere filing of the paper does not establish even the identity of the lender company. The depositors is a private limited company which has existed and carried out the activities therefore, its directors who are not found at the given address and further even they did not respond to the summons. The assessee could not produce them before the lower authorities and in case of some other assessee also it itself proves that the lender is nonexistent shell company. The lenders which has an asset base of ₹ 8.18 crores has earned a meager income of ₹ 37000/- and the income tax payable for Assessment Year 2009-10 is a meager sum of ₹ 108/- and ₹ 11739/- for the current year. Further this company does not have a fixed asset of single rupee. Further, the balance sheet produced before the lower authorities was also not accompanied with the schedules and the profit and loss account but a stray paper giving the list of various loans and advances etc was given . Further the bank account of the lender which is given for 9/1/2009 to 12/1/2009 to the AO does not show the name of the bank to which it pertains to similarly bank statement for repayment period was also 18/2/2010 to 05/3/2010 has the similar story to tell. The above conduct and the balance sheet of the lender clearly shows that the lender alleged to have deployed funds are non income producing funds, it does not result into any revenue to that company. The lender clearly is a paper company and nothing more than that. The lower authorities have correctly appreciated the whole transaction and confirmed the addition. In the present case the assessee failed to discharge its initial onus as cast upon it u/s 68 of the Act. The assessee was asked to produce the director which was found to be not traceable at the given address and further the assessee has also not produced the complete balance sheet. In the present case, the addition has been made correctly u/s 68 and same also applies to the AOP to whom the provisions of section 11 and 12 applies, if the impugned some was not credited to the income and expenditure account but is shown as a liability. The issue before us is also squarely covered by the Decision of Honourable Supreme court in case of Pr. CIT V NRA iron Steel Co Ltd [ 2019 (3) TMI 323 - SUPREME COURT] and Honourable Delhi High court in Pr. CIT V v. NDR PROMOTERS PVT. LTD. [ 2019 (1) TMI 1089 - DELHI HIGH COURT] . - appeal of the assessee is dismissed
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2019 (6) TMI 1252
Revision u/s 263 - Pr. CIT directed to make addition/disallowance in respect of expenditure incurred towards R D u/s 35(2AB); Capital R D expense allocated to Sun Pharmaceuticals Industries and re-characterization of remuneration earned from partnership firm (SPI) as royalty income - same disallowances were already subject matter of appeals before Tribunal in earlier years - HELD THAT:- Since issues are covered in assessee s own cases by the order passed by the Co-ordinate Bench in [ 2019 (4) TMI 868 - ITAT AHMEDABAD] and [ 2017 (9) TMI 1804 - ITAT AHMEDABAD] and wherein above disallowances/ additions were deleted. Taking into consideration the order passed by the Co-ordinate Bench in identical issue in assessee s own cases (supra), we find the disallowance ordered by the Learned PCIT is not sustainable in the eye of law. - assessee s appeal is allowed
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2019 (6) TMI 1251
Disallowance u/s 14A r.w.r. 8D - in the period prior to introduction of Rule 8D - HELD THAT:- It is not shown to us by learned DR as to how factual matrix in AY 2006-07 is different from that of AY 2007-08. Both the years are prior to AY 2008-09 from where onwards Rule 8D of the 1962 Rules is held to be applicable. Thus, Respectfully following the aforesaid decision of Hon ble Tribunal in assessee s own case for AY 2007-08 [ 2016 (7) TMI 1527 - ITAT MUMBAI] we are of the considered view that end of justice will be met in this case if disallowance of expenses incurred in relation to earning of an exempt income u/s 14A be restricted to 2% of dividend income . Ground no. 1 is partly allowed. Levy of interest u/s. 234C and 234D - HELD THAT:- As agreed by learned counsel for the assessee that levying of interest u/s 234C and 234D is mandatory and there is no dispute as far as mandatory nature of the interest u/s 234C and 234D is concerned but keeping in view facts and circumstances of the case no interest is exigible. Reference is made to the decision of Hon ble Supreme Court in the case of Anjum M. H. Ghaswala [ 2001 (10) TMI 4 - SUPREME COURT] DR did not objected if the matter is restored back to the file of the AO for verification of the contentions of the assessee and for deciding the quantum of interest u/s 234C and 234D in accordance with law. Remanded to AO with direction.
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2019 (6) TMI 1250
Disallowance of loss of trading in commodity exchange - speculation loss or normal business loss - set off against the profits and gains of business u/s 44AD - failure to get account audited u/s 44AB - HELD THAT:- Records shows that the assessee has filed the detailed statement of transactions carried out for commodity trading from KARVY Commodities Ltd. There is no finding by both the lower authorities challenging the genuineness of the commodity trading transactions entered during the year and the amount of loss suffered by the assessee. However in the instant case no question has been raised for the genuineness of the trading loss. It is true that it has been disclosed under head income from other source but according to Section 71(1) of the Act assessee is entitled to set off this commodity trading from income under the head Business profession and income from other sources. We accordingly direct the revenue authorities to allow the assessee s claim of commodity trading loss by way of set off to the extent of income under other heads for the year under appeal. Certainly assessee will be allowed to carry forward the loss to the subsequent years. Addition u/s 68 regarding opening cash balance - source of opening cash balance - HELD THAT:- Assessee has not provided any details in the shape of balance sheet or statement of affairs for the immediate preceding Assessment Year 2013-14. In the given facts and circumstances of the case it seems that the assessee s claim of having opening cash balance of ₹ 17,92,999/- is baseless and devoid of merit. Further Ld. Counsel for the assessee failed to make any submission which shows that assessee has no credible documentary evidences to support this ground. We therefore have no option left except to dismiss the assessee s Ground.
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2019 (6) TMI 1240
Alternate remedy - non assessment of income of the petitioner as same derived from the agriculture - benefit of the section 10(1) - HELD THAT:- Since an efficacious alternative remedy is available to the petitioner under Section 246 of the Income Tax Act, 1961, hence, present petition under Section 226 of the Constitution of India is not maintainable. Perusal of the impugned assessment year reveals that the assessee neither has filed his return of income nor has filed any written submission. This Court is of the considered view that the petitioner could not be permitted to abandon or by pass that remedy and invoke the jurisdiction of the High Court under Article 226 of the Constitution of India, when he had an efficacious and adequate remedy open to him by way of appeal before the Commissioner of Income Tax (Appeal).
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2019 (6) TMI 1238
Applicability of TP provisions of Chapter-X on Tonnage Tax Scheme of the Chapter XII-G - HELD THAT:- Tonnage Tax Scheme, as per Chapter XIT-G of the Act, is a separate code by itself in as much as it provides a self-contained changing provision as well as 'method of computation of income in the chapter, and, the method of computation of income under TTS is not dependent on receipt or expenditure of the assessee. Under Tonnage Tax Scheme, the income has to be computed as per the method prescribed in section 115VG. The income as per Tonnage Tax Scheme is computed on the basis of the weight of the vessel and number of days it is held, irrespective of its revenue realisations and the expenditure incurred for the purpose of the business. Hence, neither the business receipts nor the business expenditure of the assessee has any bearing on the method prescribed for computation of income under TTS as per section 115VG. The tonnage tax scheme, in that sense, is a presumptive method of computation of taxable income which is not dependent on actual receipts and expenditure of the assessee. The perception of AO that chapter X of the Act creates an independent or a separate charge of income, an aspect which is contrary to the judgment in the case of Vodafone Services Pvt.ltd. vs. UOI [ 2014 (11) TMI 881 - BOMBAY HIGH COURT] wherein after referring to an earlier judgment [ 2014 (10) TMI 278 - BOMBAY HIGH COURT] , held that chapter X does not contain any charging provision but is a machinery provision to arrive at an arms length price of a transaction between associated enterprises. In the instant case, the provisions of chapter X have been invoked to alter an expenditure, namely the mobilisation and demobilisation charges paid for a qualifying ship, an item which has no bearing on the income as computed under Chapter XIIG and accordingly the provisions of Chapter X have no application in computing the income of the assessee chargeable to tax as per Chapter XII-G of the Act. Transfer pricing regulations do not apply to the assessee to the extent of operations carried out through operating qualifying ships where the income is taxed under TTS - Appeal of the assessee is allowed.
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2019 (6) TMI 1237
Sale of property through power of attorney - transfer u/s 2(47) - sale of agricultural land - HELD THAT:- Assessee entered into an agreement for sale on 04.05.2012 with Shri V.R. Anbuvelrajan and Shri S. Balamurugan. The assessee did not execute any sale deed. Subsequently, in the year 2013, the assessee executed power of attorney in favour of the said Shri V.R. Anbuvelrajan and Shri S. Balamurugan. The assessee claims that the physical possession of the property was handed over to Shri V.R. Anbuvelrajan and Shri S. Balamurugan and entire sale consideration was also received from them. However, it appears no sale deed was executed by the assessee in favour of the said Shri V.R. Anbuvelrajan and Shri S. Balamurugan. The assessee claims that the sale was completed when the assessee entered into agreement for sale with Shri V.R. Anbuvelrajan and Shri S. Balamurugan and received the entire consideration after handing over the physical possession of the property. On the strength of the power of attorney executed by the assessee in favour of Shri V.R. Anbuvelrajan and Shri S. Balamurugan, they sold the property for higher consideration. Therefore, it is obvious that as claimed by the assessee, there are two different transactions. One transaction is between the assessee and Shri V.R. Anbuvelrajan Shri S. Balamurugan. The other transaction is between Shri V.R. Anbuvelrajan Shri S. Balamurugan with M/s Jacaranda Properties Pvt. Ltd. These two transactions have to be brought for taxation in the respective hands. These facts were not examined by the Assessing Officer. Therefore, the orders of both the authorities below are set aside and the entire issue is remitted back to the file of the Assessing Officer. - Appeal filed by the assessee is allowed for statistical purposes.
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Customs
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2019 (6) TMI 1279
Clearance of the goods to Respondent No.6 on payment of Appropriate duties of Customs - HELD THAT:- Learned advocate Shri Amit Laddha for Shri Modh, learned advocate for the petitioner places on record the order passed by Custom Authorities dated 13.5.2019 issued on 14.5.2019 permitting amendment in Import General Manifest and submits that, in that view of the matter, now nothing further survives in the matter. This petition is DISMISSED as having become infructuous.
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2019 (6) TMI 1278
Confiscation of imported goods - cosmetic goods - improper importation - it was alleged that goods imported or brought within Indian customs waters contrary to the prohibition imposed by law - HELD THAT:- So far as cosmetics are concerned, their importation into India cannot be made except through the points of entry specified under Rule 43-A. Rule 43-A contains restrictions in respect of drugs to be imported into India. It specifies the places, through which alone drugs can be imported into India by rail, road, sea or air. By virtue of Rule 133 of the Rules, the restrictions as to the points of entry specified under Rule 43-A have been made applicable to all cosmetics imported into India. Rule 132 gives exemption to cosmetics specified in Schedule D. Cosmetics specified in Schedule D are cosmetics which are imported for manufacture and export by units situated in Special Economic Zones as mentioned by Government of India (Item 6 of Schedule D); cosmetics generally cannot be said to be entitled to exemption as substances not intended for medicinal use (Item 1 of Schedule D). Once it is held that the import of goods by the Respondent is contrary to the prohibition contained in Rule 133 of the Rules, it is a foregone conclusion that the goods are improperly imported, and are liable to be confiscated under Clause (d) of Section 111 of the Customs Act, 1962. The action of the Commissioner in confiscating the goods, accordingly, cannot be faulted. Appeal allowed - decided in favor of Revenue.
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2019 (6) TMI 1277
Import of Capital goods under EPCG Scheme - non-fulfillment of export obligations - benefit of N/N. 49/2000 dt. 27/04/2000 - HELD THAT:- In the present case, the appellant could not fulfill the export obligation on account of reasons beyond his control as he has suffered huge financial loses and his factory was closed in 2007 - further the appellant have paid the entire customs duty foregone amounting to ₹ 22,14,833/- as on date. There is no force in the contention of the appellant that they had fulfilled the export obligation by earning foreign exchange of ₹ 28,28,526/- because both the authorities have not considered the same as export. Further there is no deliberate default in fulfilling the export obligation and therefore there is no justification for confiscation of the goods and imposition of redemption fine in terms of Section 125 of the Act - the confiscation, redemption fine of ₹ 5 lakhs in lieu of confiscation and penalty of ₹ 2.5 lakhs is set aside. Demand of Interest - HELD THAT:- The appellants are liable to pay interest on the delayed payment of customs duty foregone - case remanded back to the original authority for quantification of interest which the appellant would be liable to pay. Appeal allowed by way of remand.
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2019 (6) TMI 1249
ADD - Sunset review - invocation of provisions of section 9A of Custom Tariff Act and Rules - imports of Ductile Iron Pipes originating in or exported from China PR - HELD THAT:- The position of law in respect of the remedies on final findings is now clear. The decisions of Supreme Court in respect of JINDAL POLY FILM LTD. VERSUS DESIGNATED AUTHORITY ANR. [2018 (9) TMI 1294 - DELHI HIGH COURT] have been cited for contending that the alternative remedy in terms of Section-9C of the Act may persuade this Court in not interfering with the final findings. The judgments cited at the bar are of Delhi High Court and there cannot be any dispute to the proposition that the final finding in fact is amounting to determination or review regarding the existence, degree and effect of any dumping in relation to import of any article and hence, it may not have to await the formal order by the Central Government of accepting the same and issuing notification based thereupon. This Court is of the view that the Court at this stage need not go into the aspect of the tribunal s power to issue direction to the Central Government in exercise of the power u/s.9C(3) for extending the anti dumping duty notification. The vital facts and time-line of the instant case are itself sufficient to indicate that the remedy of appeal in a present case could not have been said to be an efficacious remedy so as to give sufficient opportunity to the petitioner for seeking appropriate relief after availing the opportunity of putting forward their case. The impugned Final Finding recorded in the Notification dated 01.04.2019, cannot be said to be strictly in accordance with the provision of Rule 23 of the Rules, as there is non-advertance to the material placed on record and there is non- compliance with the principle of natural justice as no requisite information was made available and the conclusions are not supported by the material on record - we are left with no other alternative, but to remand back the matter to the concerned authority after quashing and setting aside the same for reconsideration on the aspects which have been mentioned herein above and record its finding, as the extended period of notification of anti dumping duty is ending, the same is also required to be extended for appropriate time so that assessing the material and recording the final findings afresh could be undertaken meaningfully and without jeopardizing the parties right and contentions and rendering it infructuous. In that view of the matter, the respondent no.1 is hereby directed to to issue notification extending the anti dumping duty on the product in question, till the final findings are rendered. Petition allowed by way of remand.
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2019 (6) TMI 1248
Interest on delayed refund - time limitation for Refund of Special Excise Duty and on account of excess payment of CVD - N/N. 9/2006 dated 01.03.2006 - Section 27 of Customs Act - HELD THAT:- The refund claim was filed as back as 31.07.2012 and the subsequent application of refund dated 11.08.2014 was nothing but the continuation of the said previous application itself. The interest has been denied relying upon Section 27 (1B) (c) of Customs Act, 1962. Perusal of Section 27 makes it clear that the period of limitation of one year is for the person claiming refund - In the present case the application dated 31.07.2012 is within one year of the last Bill of Entry among 13 i.e. dated 05.01.2012. Even first Bill of entry dated 18.08.2011 fulfills the aforesaid limitation as applicable to the appellant. Section 27 (1B) prescribes the mode of computing the aforesaid period of limitation of one year. Thus, Sub-clause (c) thereof gives the extended time to the appellant and not to the Department. Section 27 (a) of the Customs Act says that if any duty ordered to be refunded under Sub-Section (2) of Section 27 to the applicant is not refunded within 3 months from the date of receipt of application under sub-section (1) of Section 27 they shall be paid to the applicant the interest at such rate as is mentioned in the said Section - the application for refund was filed on 31st July, 2012, another application in continuation thereof was filed on 11.08.2014. Reassessment was on 24.11.2015. Apparently, and admittedly, the amount of refund has been sanctioned but has not been refunded within 3 months from the date of receipt of the above mentioned application, Section 27 (a) being a statutory mandate upon the Department, the Department is liable to pay the interest on the sanctioned amount for the delayed period. Appeal allowed - decided in favor of appellant.
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Corporate Laws
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2019 (6) TMI 1247
Declaration of Dividend - authorisation to the Official Liquidator to open a separate dividend account - dispensation with the publication of notice of declaration of dividend in newspapers - HELD THAT:- Since the unsecured creditors have filed individual claims and their claims were adjudicated issuing respective Form No. 69/70, the Official Liquidator is directed to issue individual notices of dividend in Form No. 138 in the name of one preferential creditor and 43 unsecured creditors of the company in liquidation, dispensing with publication of notice of dividend in newspapers as required under Rule 276 of the Companies (Court) Rules, 1959. The Official Liquidator is authorized to open a separate dividend account in Punjab National Bank and pay the dividend to unsecured creditors out of the said account in terms of Rule 290 of the Companies (Court) Rules, 1959. He is also authorised to fix the schedule for making payment and also to pay the dividend due to any deceased creditor to his legal heirs upon production of a family member certificate or such other certificate other than a succession certificate and upon furnishing a personal indemnity in terms of Rule 280 of the 1959 Rules and to incur incidental charges from and out of the available funds of the company in liquidation. Application allowed.
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Insolvency & Bankruptcy
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2019 (6) TMI 1276
Admissibility of the application - Initiation of Corporate Insolvency Resolution Process - Corporate Debtor - Section 7 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In the present case, as we find that the parties have reached provisional settlement prior to issuance of the impugned order and finally settled the matter on 5th December, 2018 i.e. prior to the constitution of the Committee of Creditors , in the light of the decision of the Hon ble Supreme Court in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [ 2019 (1) TMI 1508 - SUPREME COURT ], we allow the Respondent to withdraw the application under Section 7. In effect, order (s), passed by the Adjudicating Authority declaring moratorium, freezing of account, and all other order (s) passed by the Adjudicating Authority pursuant to impugned order and action, if any, taken by the Interim Resolution Professional , including the advertisement published in the newspaper calling for applications all such orders and actions are set aside. Learned Adjudicating Authority will now close the proceeding - The Corporate Debtor (company) is released from all the rigour of law and is allowed to function independently through its Board of Directors from immediate effect. Appeal allowed.
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2019 (6) TMI 1246
Initiation of Corporate Insolvency Resolution Process (CIRP) - Corporate Debtor - default of repayment of financial debt - HELD THAT:- The present application is filed in conformity with the prescribed procedure and Rule by providing requisite information annexed with relevant documents. That apart, the present application is supported by a Board Resolution passed by the Corporate Applicant/Debtor company proposing CIRP for itself and by duly authorizing to Mr. Sanjay Mansukhbhai Ramani, being one of the directors, for filing the present application. It is also a matter of record in the present matter that the Respondent - Financial Creditor did not oppose the admission of the present IB Petition. It may be understood that under the provisions of Section 10(3)(b) of the Code it is mandatory on the part of the applicant to propose a name of an IRP in IB Petition, failing which such application may be found as incomplete. Therefore, the Corporate Applicant has properly proposed Mr.Vinod Tarachand Agrawal to act as IRP under the provisions of the Code. The present IB petition deserves admission under the Code. Therefore, the present IB Petition is admitted under Section 10 of the Insolvency Bankruptcy Code - moratorium declared.
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Service Tax
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2019 (6) TMI 1275
CENVAT credit - irregular availment of cenvat credit on various Bills of Entry - it was alleged that appellant had not produced Bills of Entry for defacement as required by law that prevailed during the relevant period - it was alleged that they have availed credit of ₹ 4,73,349/- 2/3 days prior to receipt of the inputs within the factory - also alleged that they have availed irregular credit of ₹ 27,446/- on goods which were not received in the factory at all. Disallowance of credit to the tune of ₹ 4,73,349/- and ₹ 27,446/- the allegation is that with respect to ₹ 4,73,349/- the credit entered in RG.23A Part II was made before receipt of the goods into the factory - HELD THAT:- Their mere allegation is that credit has been availed on the inputs before receipt of such goods into the factory. There is also no case that such inputs were not used in manufacture of finished products. Taking these facts into consideration, I am of the view that the availment of credit by making entries in RG.23A prior to receipt of the goods into the factory is only a procedural one and the substantive beneficial right of credit cannot be denied for such procedural lapse. Denial of credit of ₹ 27,446/- HELD THAT:- appellant has failed to establish that inputs were actually received into the factory. Credit in respect of ₹ 27,446/- is therefore disallowed and the demand is sustained along with interest. However, penalty in this regard is set aside as the penalty imposed is only composite penalty for both the issues. Further, the appellant has put forward explanation that these irregular availments occurred only because there was large number of documents to be entered and due to inadvertence the entries were omitted. The credit availed in respect of ₹ 4,73,349/- is eligible and the demand in respect of the same requires to be set aside - appeal allowed in part.
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2019 (6) TMI 1274
Imposition of penalty u/s 78 of FA - Suppression of facts or not - intent to evade - failed to pay service tax on the amounts so collected towards Business Auxiliary Services from October 2013 onwards - bonafide belief - short payment was later paid alongwith interest - HELD THAT:- In the impugned order, the Commissioner (A) has set aside the demand of ₹ 50,43,406/- on the ground that the appellant has been paying the service tax by debiting their CENVAT account every month. Further, the Commissioner (A) has also found that the appellant has paid ₹ 7,69,433/- being the short-paid service tax for the month of October 2014 and December 2014 along with interest in May 2015 but still the Commissioner (A) imposed the penalty of ₹ 3,84,717/- under Section 78. Once the appellant has paid the service tax along with interest, he is not required to pay penalty under Section 78. Appeal allowed - decided in favor of appellant.
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2019 (6) TMI 1245
Benefit of reduced penalty - penalty not deposited by assessee - whether the Commission (Appeals) was right in giving the benefit of reduced penalty of 25% under Section 78 of the Finance Act, 1994 even when the penalty has not been deposited by the respondent assessee? - HELD THAT:- The assessee can get the benefit of reduced penalty of 25% of the service tax determined, provided the assessee fulfills the following two conditions as per the proviso to Section 78(1) of the Finance Act, 1994, namely: (i) that the determined amount of service tax along with interest is paid within a period of one month from the date of issue of determining order; and (ii) that the penalty imposed is equal to the amount of service tax confirmed, however, if the assessee deposits the 25% of penalty within a period of one month, the amount of 100% or equal amount of penalty can be reduced to 25%. The learned Commissioner (Appeals) erred in determining the quantum of penalty at 25% of the service tax demand and wrongly extended the benefit to the assessee for 25% of mandatory equal amount of penalty as provided under section 78 of Finance Act, 1994. Penalty set aside - appeal dismissed - decided against Revenue.
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2019 (6) TMI 1239
Classification of services - Business Auxiliary services or not - appellant was acting as a marketing agent for several banks and financial institutions who are engaged in the business of car finance - HELD THAT:- The matter in its entirety is no longer res integra as it has been already been decided by this Tribunal in the case of BRIJ MOTORS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, KANPUR [ 2011 (11) TMI 410 - CESTAT, NEW DELHI] that the activity undertaken by the appellant as mentioned in the preceding paragraph is covered by the definition given under section 65 (19) of the Finance Act, 1994 and is appropriately classifiable under the category of Business Auxiliary Service - This Tribunal has taken a similar view in the case of VED AUTOMOTIVES VERSUS COMMISSIONER OF CENTRAL EXCISE, KANPUR [ 2016 (11) TMI 836 - CESTAT ALLAHABAD] whereunder it has been held by this Tribunal that the activity akin to the one taken by the appellant is rightly classifiable under service category of Business Auxiliary Service . Thus, the activity undertaken by the appellant is rightly classifiable under Business Auxiliary Service . Penalty u/s 78 of FA - HELD THAT:- The appellant had deposited the entire amount of Service Tax demanded under the Show cause notice dated 30 November, 2006 along with interest much before the issue of show cause notice. Secondly, there was a certain amount of confusion at the field level for proper classification of activity undertaken by the appellant as to whether it is classifiable under the category of Business Auxiliary Service or under Business Support Service and since there have been multiplicity of interpretation with regard to the applicability of service tax law in the nature of activity undertaken by the appellant, the issue of imposition of penalty under section 78 of Finance Act is not warranted - the imposition of penalty under section 78 in this case is not justified. The confirmation of Service Tax demand is justified but the imposition of penalty under section 78 of the Finance Act, 1994 is set aside - appeal allowed in part.
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Central Excise
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2019 (6) TMI 1273
Imposition of penalty - illegal diversion of goods - re-warehousing certificates were not received - appellant has alleged that the EOU was sourcing various raw material duty free from manufacturer and diverting the same in the open market in violation of the Central Excise Rules - HELD THAT:- It is apparent that the appellants were not careful enough and were willing party to the diversion of goods by the consignee. In this regard, the affidavit filed by the transporter regarding delivery of goods at the premise of M/s Resham Exports also appears to have been obtained without knowledge of the transporter. In this regard the observation of the Commissioner in the impugned order reproduced above becomes relevant. From the said observation, it is seen that Shri Abhinandan Kataria, Manager of M/s Vardhaman and Shri Harish Natwarlal Bhatt, Proprietor of M/s Nirav in their statements have admitted that goods cleared by M/s Modern have been illicitely diverted. It is also seen that these submissions are supported by the statements of Shri Bodu Gulam Shaikh which was the representative of the consignee involving in the diversion of the goods. It is seen from the statements of Shri Anil Kataria dated 02.04.2004 that he was aware of the diversion of goods after clearance from the factory. It is also admitted position of the appellant that Shri Anil Kataria was their regular transporter. In the statements of Shri H.N. Bhatt dated 07.07.2004 he had reaffirmed that he has informed the representatives of appellant namely Shri Manmohan Agarwal about the diversion of goods and route. He also confirmed that Shri VK Sharma, was also aware of the facts. Another factor which is relevant is that during the short period of about 10 days they had cleared almost 100 consignments weighing 884 tonnes to one party. This fact itself should have raised alarm bells and doubts in appellant s organization. In any case, it was responsibility of appellant s to ensure delivery of goods - it is apparent that the appellants were aware of the diversion of goods en-route. Penalty upheld - appeal dismissed - decided against appellant.
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2019 (6) TMI 1272
CENVAT Credit - input services - canteen services - denial mainly on the ground that after the amendment in the definition of input service w.e.f. 01/04/2011, canteen services / outdoor catering services has been excluded from the input services vide Rule 2(l)(C) of CCR, 2004 - Time Limitation - HELD THAT:- The issue of CENVAT credit on outdoor catering service has been finally settled by the Larger Bench of this Tribunal in the case of M/S. WIPRO LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE BANGALORE-III. [ 2018 (4) TMI 149 - CESTAT BANGALORE] wherein the Larger Bench has held that outdoor catering service is not eligible for input service credit post amendment dt. 01/04/2011 vide Notification No.3/2011 dt. 01/03/2011. Time Limitation - HELD THAT:- The appellant had a bona fide reason to believe that he is entitled to CENVAT credit as the issue relates to interpretation and therefore it cannot be alleged against the appellant that he has suppressed the material fact with intent to evade payment of duty - extended period cannot be invoked - the disputed service has been availed for the period from April 2011 to October 2013 whereas the show-cause notice issued on 02/01/2015 which is clearly beyond the normal period of one year as provided under the Act - demand is barred by limitation of time. Appeal allowed - decided in favor of appellant.
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2019 (6) TMI 1244
SSI Exemption - Use of brand name - Department has been of the view that since the appellant have been using the brand name of other persons they should have got themselves registered with the Department since inception in July, 2011 and should have paid Central Excise duty on clearances of branded goods - HELD THAT:- The investigations have brought it out very firmly and categorically that the appellants have been engaged in the manufacture of wall putty and decorative white cement and other cement paints etc. They have also been found using brand name Diamond Gold belonging to other person namely M/s. Diamond Waterproof Compound Pvt. Ltd. and even during the investigation, they have tried to mislead the proceedings by stating that the goods are being got manufactured on job work basis from some other manufacturers, however, it has been established that the goods were being manufactured by the appellants only. It can be seen that the price of Diamond Gold brand as well as for Suraksha Gold brand for 40Kgs packing of wall putty is same at ₹ 1050/-. The appellants have failed to adduce any concrete evidence to contradict the above findings of the adjudicating authority. There is nothing wrong in adopting the MRP which was found mentioned on the packing of finished goods which was put for seizure at the factory premises of the appellant for deciding the effective rate of clearance for the relevant financial years. The investigation has established beyond doubt that the appellants have been engaged in the manufacture of wall putty, decorative white cement etc. with the brand name of some other person and on the basis of record of clearances recovered by the investigation team, it is established that the appellants have crossed the exemption limit which is available for SSI units and therefore, they should have been taken a proper Central Excise registration from the Excise authorities. They were also required to make clearances of products manufactured and branded with other persons brand name on payment of Central Excise duty which they have failed. Appeal dismissed - decided against Appellant.
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2019 (6) TMI 1243
Classification of manufactured goods - cosmetic or a medicine? - Area Based Exemption - benefit of N/N. 49/2003-CE dated 10.06.2003 - manufacture of talcum powder, Himgange Cool Talc - it was alleged that they intentionally mis-classified their product as a pharmaceutical product, which is a talcum powder with intention of wrongly availing the benefit of the Notification - HELD THAT:- From the perusal of the provision of D C Act, it is observed that the license under Rule 140 of the Act is granted on an application in Form 31 praying for license to manufacture cosmetics. Thus, it becomes, clear that irrespective appellants were initially involved in manufacture of pharmaceutical products classifiable under Chapter 30 of Central Excise Tariff Act, 1985, but they subsequently started manufacturing the talcum powder not as a pharmaceutical product of Chapter 30 but as cosmetic product classifiable under Chapter 33. Their application in form 31 under Rule 138 of D C Act is opined to be an admission on their part to seek permission/license to manufacture the cosmetic product. Admissions are relevant unless and until rebutted. The ingredients lose their individual existence and the outcome product of those ingredients has to be considered in respect of its complete or precise description and in terms of the essential character being given by the components. Thus, irrespective menthol and camphor are Ayurvedic medicament products but their combination is giving rise to a product admittedly known as talcum power. The mere fact that the talcum powder is providing the refreshing and the cool feeling, the mere application thereof does not make it a pharmaceutics product/ medicament. In general, parlance, it is a talcum power. Apparently and admittedly, the same can be applied without any medical prescription. Also the same is not the cure for any of the specific medical condition. Thus the product is manufactured not under drug license but under cosmetic license. The cosmetic license was obtained when assessee was already engaged in manufacture of pharmaceutical products. Had this talc been a pharmaceutical product only, there was no need for the assessee to have a cosmetic license for the manufacture thereof. Apparently, in common parlance the product is a talcum powder, which can be used irrespective of any prescription about the dozes to be used thereof - the talcum powder except providing a cooling and refreshing effect on body is not providing any therapeutic value nor any treatment to any specific skin condition. The effect of the talcum powder is opined to be more of a cosmetic product that is the product for a better feel and look of body and skin - issue decided against the assessee in favour of the Department holding that the adjudicating authorities below have rightly classified the impugned Himgange Cool Talc as a product classifiable under Chapter 33 of CETA, 1985 i.e. as a cosmetic product. Whether the appellant had the malafide intention, while declaring its product as pharmaceutical product, while claiming the exemption of Notification No.49/2003? - HELD THAT:- Irrespective of the classification, which otherwise has been held for the talcum powder to be a cosmetic rather than to be a pharmaceutical product, the assessee was bound by his own act and conduct and was in fact, estopped from claiming the said talcum powder as a pharmaceutical product. These observations are sufficient to hold that despite the conscious knowledge of the impugned products to be a mere talcum powder a mere cosmetic, the benefit of Notification No.49/2003 was availed - Though the said benefit, the assessee would have been claiming with respect to his pharmaceutical product in manufacture whereof he was already involved but for taking the same benefit for a cosmetic product despite the above said conscious knowledge, the mis-declaration has been done with a malafide intention to take wrong benefit of the impugned Notification with the sole intention of evading duty. Penalty - HELD THAT:- The mis-declaration definitely invites penalty under Section 11AC of Central Excise Act, 1944 - penalty upheld. Appeal allowed in part.
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CST, VAT & Sales Tax
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2019 (6) TMI 1271
Principles of natural justice - validity of assessment order - the objections of the writ petitioner have been rejected summarily in one sentence without giving any reason as to why and how the objections are rejected - HELD THAT:- This Court has also put in a clear caveat and directed the authorities, not to be solely guided by the proposals submitted by the inspecting authorities. Notwithstanding the above obtaining position, a perusal of the impugned order reveals that the Assessing authority i.e., sole respondent has merely gone by the proposal given by the Enforcement Wing of the department. With regard to the detailed objections of the writ petitioner, in a cryptic manner, the Assessing authority has rejected the same without giving any reason as to why and how the same are rejected. The respondent should necessarily make an assessment independent of the proposal given by the Enforcement Wing of the department has been laid down by this Hon'ble Court in NARASUS ROLLER FLOUR MILLS VERSUS THE COMMERCIAL TAX OFFICER [ 2015 (4) TMI 361 - MADRAS HIGH COURT] - there is no disputation that ' Narasus Sarathy Enterprises Private Limited case' principle is now governing the field. Impugned assessment order set aside - Respondent is directed to assess afresh, after giving a personal hearing to the petitioner's duly authorized representative and after giving opportunity to the petitioner to file requisite records and documents - petition allowed by way of remand.
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2019 (6) TMI 1270
Validity of assessment order - principles of natural justice - service of order - change of address - HELD THAT:- After the writ petitions were heard out for some time, as much as the writ petitions were taken up for disposal by consent, it was agreed by both counsel that an order can be passed by consent to the effect that the petitioner Assessee will be given an opportunity to submit all the records within a prescribed time frame subject to the petitioner paying 15% of the disputed tax (obviously excluding penalty) as per the amount set out in the respective impugned orders. In other words, disputed tax and 15% of the same is in accordance with the amount set out in the respective Assessment Orders. The impugned order of assessment in each of these writ petitions are set aside and the matter is remanded back to the sole respondent for assessment afresh.
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2019 (6) TMI 1242
Validity of assessment order - Telangana VAT Act - grievance of the petitioner as against the impugned order of assessment is that the petitioner was unable to obtain F Forms for part of the turn over, from four different States, on account of certain issues and that these Forms cannot be generated now online, as the Forms related to the assessment year 2014-15 - HELD THAT:- The petitioner should first go before the Appellate Deputy Commissioner by way of a statutory appeal. The impugned order though dated 30.03.2019, was received on 28.05.2019 and the limitation for filing a statutory appeal has not expired. The Appellate Authority may examine whether it is a fit case for accepting other evidence as indicated by the Supreme Court in Ambica Steels Limited [ 2009 (3) TMI 550 - SUPREME COURT] Petition disposed off.
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2019 (6) TMI 1241
Rejection of stay application - petitioner has already paid 25% of the demand at the time of filing the first appeal before the VAT Appellate Tribunal - Classification of goods - rate of tax - HELD THAT:- The impugned order is set aside and the stay of recovery of the balance amount is granted, subject to the condition that the petitioner deposits with the concerned authority, 25% of the demand in addition to the 25% already paid. This amount shall be paid within a period of six (06) weeks. Upon such payment, the petitioner shall have the benefit of stay pending disposal of the appeal before the Tribunal - Petition allowed - decided in favor of petitioner.
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