TMI Tax Updates - e-Newsletter
June 7, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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GST:
Applicable GST rate on Priority Sector Lending Certificates (PSLCs), Renewable Energy Certificates (RECs) and other similar scrips.
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Income Tax:
Jurisdiction of AO to pass assessment order u/s 124(2) - it is necessary that the Assessing Officers having concurrent jurisdiction ensure that only one of them proceeds and adjudicate. This is the purport and objective behind sub-section (2) to Section 124 of the Act. - HC
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Income Tax:
Existence PE - dependent agent Permanent Establishment - All the substantive parts of the key activities in making sales were done by DAIPL from India. This shows that DAIPL constituted a dependent agent PE of the assessee in India. - AT
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Income Tax:
Permanent Establishment (PE in India) - scope of the agreement - the Indian hotel, Swissotel Kolkata, satisfies all the three tests and does constitute a fixed place PE of the Applicant with respect to these incomes - The existence of a PE of the Applicant in India gets established within the meaning of Article 7 of the DTAA. - AAR
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Income Tax:
Representative/liaison office (LO) - Doctrine of Mutuality - Applicant works on the principle of mutuality and is not an enterprise set up for the purpose of doing business or earning profit - The question of any PE coming into existence does not arise - AAR
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Income Tax:
Reopening of assessment before expiry of 4 years - no sufficient reason to believe - Merely because reopening of assessment was before expiry of four years from the end of the relevant assessment year, that by itself will not give licence to the AO to exercise his powers u/s 147 with impunity even in the absence or lack of fresh tangible material coming to his possession - AT
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Income Tax:
Disallowance u/s 40(b) - enhancement in the remuneration by amendment in the Partnership Deed through supplementary deed - assessee-firm is entitled to deduct the remuneration paid to the partners u/s 40(b)(v) - AT
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Customs:
Refund of IGST on export of Goods-Extension of date in SB005 alternate mechanism cases and Clarification in other cases
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Customs:
Pilot implementation of paperless processing under SWIFT — Uploading of supporting documents regarding
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Customs:
Import of unused goods - Secondary Second Choice Carbon Steel Pipes in Mix Size Mix Thickness - restricted item or not? - The second grade pipes cannot be termed as second hand as the pipes had remained unused.
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Customs:
Duty Drawback - description of the goods - Burnishable Leathers - exemption from export duty - whether test result of one shipping bill can be made applicable to other shipping bills? - Held Yes
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Service Tax:
CENVAT credit - input services - repairs and maintenance of the insured vehicles by the ‘Authorized Service Stations’ - insurgence company is hte recipient of service or not - Held Yes
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Service Tax:
Interest or service charge - Interest received for loan given to Subsidiary company for short period - The amount received by the appellant is interest cannot be said as charges of service provided by them - interest received by the appellant is not chargeable to service tax - AT
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Service Tax:
Business Auxiliary Service or Manufacture - activity of cutting, straightening and bending - The activity of appellant would fall under Clause (v) wherein, the processing of the goods for, or on behalf of the client has been considered as Business Auxiliary Service - AT
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Service Tax:
Benefit of N/N. 12/03 - reduction of the cost of materials for arriving at the value of such service tax liability - the restriction is for non-availment of credit of duty paid on goods and materials sold and not on the capital goods.
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Central Excise:
Cotton waste arising in the course of manufacture - cotton waste which arises during the manufacturing process is not leviable to duty of excise.
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Central Excise:
Refund of excess Excise duty paid - unjust enrichment - adjustments at the time of finalization of provisional assessments would be permissible without putting the excess duty paid to the test of unjust enrichment - refund allowed - AT
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2018 (6) TMI 230
Transitional credit - CENVAT credit - Rule 10 of the CENVAT Credit Rules, 2004 - Held that:- we dispose of the present petition by granting liberty to the petitioner to file a detailed and comprehensive representation raising all the pleas as raised in the present writ petition before the Nodal Officer within a period of five days - petition disposed off.
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Income Tax
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2018 (6) TMI 229
Reopening of assessment - disallowance of bogus purchases - reasons to believe - Held that:- Reopening was made on the basis of solid information from Sales Tax Department regarding the companies engaged in only issuing bogus bills - thus there was sufficient reason before the AO to reopen the assessment. Disallowance of bogus purchases - Held that:- The materials so purchased were alleged to be used for manufacturing and sales - however assessee failed to produce the suppliers and the notices issued by the AO to such suppliers were also returned unserved - thus it is proved assessee has not made purchases from the respective parties but purchases were made from gray market - hence disallowance is restricted to 12.5% of such bogus purchase - partly allowed in favor of assessee.
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2018 (6) TMI 228
Reopening of assessment - Rejection of application filed application seeking exemption under Section 12AA - Challenge to order of rejection of its application pending consideration before the Income Tax Appellate Tribunal - Held that:- Since the application is filed on 14.12.2016, therefore, the petitioner would be entitled to seek exemption for the AY 2017-18 onwards - same would not benefit the petitioner for previous assessment years - notice u/s 147 is issued for assessment year from 2010-2011 to 2014-15 - thus the question of interfering with the said notices on the premise that the petitioner has challenged the order of rejection of its application filed u/s 12AA and the same is pending consideration before the Income Tax Appellate Tribunal cannot be a basis to quash the said notices - hence notices which are issued for the years prior to AY 2016-2017, the petitioner does not have any right to challenge the same in this proceeding - writ petitions being dismissed.
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2018 (6) TMI 227
Nature of Income - Whether the income from lease rent of property is business income or house property income - nature of rental expense - Held that:- As in assessee’s own case for AY 1997-98 and AY 2001-02 AO is supposed to maintain consistency on his stand upto and unless there is material change either in the facts or on the law. No such thing is discernible from the assessment order. More so, the AO has not doubted the leasing business of the assessee because he has accepted the assessee’s version as far as the rental income received by the assessee on the properties taken on lease and thereafter subleased by it to the sister concerns. In view of the above discussion, we allow the appeals of the assessee and direct the AO to assess the rental income from leasing activity under the head business income. Consistently, we also allow the depreciation on the building as well as equipment provided by the assessee Disallowance u/s 14A r.w. Rule 8D - Held that:- Neither the AO nor the Ld. CIT(A) had the benefit in the case of GODREJ AND BOYCE MFG. CO. LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] which is relevant to the instant case, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to recompute the disallowance u/s 14A r.w. Rule 8D. Deduction of lower of brought forward business loss or depreciation as per books of accounts while calculating the book profit u/s 115JB - Held that:- the issue involved herein requires verification at the level of the AO. Therefore, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO for examination and passing an order, after giving reasonable opportunity of being heard to the assessee.
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2018 (6) TMI 226
Exemption u/s 10(23C)(vi) - Advances given to staff members and others - entitled to exemption u/s.11 - Held that:- Assessee is running minority education institution and the advances given by it to staff and others are in the normal course of activities of the society and there is no enquiry made by the AO to establish that these advances have been given for purpose other than purpose of the society i.e. education - thus assessee is entitled to exemption u/s.10(23C)(vi) the addition made under this head is difficult to be sustained and hence deleted - we do not find any good reason to interfere with the order of the CIT(A), which is hereby confirmed and ground of appeal of the revenue is dismissed. Additions under the head depreciation - whether claiming of depreciation in case of trust is amount to double deduction? - Held that:- The amount of depreciation debited to the accounts of a charitable trust has to be deducted to arrive at the income available for application to charitable and religious purposes - books of accounts of assessee were duly audited and assessee is running educational institution and had spent money under the head of maintenance of buildings - there is no enquiry to establish that these expenses were incurred for any other purpose - considering this CIT(A) deleted the addition made by AO - we find that no specific error in the order of the CIT(A) - thus appeal of the revenue is dismissed. Advance payment - Whether advances paid to Shri Durlabh Mahto application of income for educational purposes - Held that:- For the purpose of legal matter payment was made to Mr. Durlabh Mahto during the year - income and expenditure shown in the income and expenditure account related to the educational institution and the assessee neither received any income from any other source nor any amount was spent on any other objects - conditions u/s 10(22) is fulfilled - addition is deleted - appeal filed by the revenue is dismissed.
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2018 (6) TMI 225
Unexplained investment in purchase of land at Alangad village - payment on on money - Held that:- There is no evidence available on record that the assessee has paid on-money, on the basis of which the Assessing Officer has quantified the on-money payment, he cannot make the impugned addition. The evidence brought on record is having no direct link to suggest that the amount deposited in the vendor’s Bank account was by the present assessee towards payment of on-money and merely on the basis of the fact that the vendor had accepted the payment of on-money, no addition is to be made. Sometimes, intentionally a lesser value may be shown in the sale deed. Even if it is assumed to be so, unless it is proved that the agreement was acted upon and unless the amount stated in the agreement was paid for sale, the court cannot come to the conclusion that the price mentioned in the sale deed is not correct. In this case, appeal of the Revenue was dismissed - since the Assessing Officer has failed to prove the payment of on-money by bringing on any direct evidence, we are not in a position to sustain the addition - Decided in favour of assessee Disallowance of entire expenditure claimed against professional receipts as a result of changing head of income from business or profession to income from other sources - Held that:- when there is a valid agreement to render the services as a retainer and the assessee being an advocate, maintains office for the purpose of his profession, the Assessing Officer is not justified in disallowing the expenditure on the reason of non rendering of services to a particular client. In our opinion when the assessee made himself ready to be available to the client and the client has not availed his services as a retainer, we do not find fault with the assessee so as to disallow the expenditure incurred by the assessee. In our opinion, the Assessing Officer did not allow the expenditure only on the presumption that the assessee has not rendered the services though the assessee has kept himself ready to render the services. In AY 2009-10 and 2010-11, there is no such disallowance. - Decided in favour of assessee Unexplained deposit in the assessee’s Bank account - Held that:- The assessee was not able to prove the identity as well as the creditworthiness of the creditors. Hence, we do not find any infirmity in the finding of the CIT(A) and confirm it. This ground of appeal of the assessee is rejected. Cash gifts received from relatives - Held that:- There was an amount of ₹ 2.5 lakhs which is the opening balance and this credit was not emanating in the assessment year under consideration. As it is carried forward from earlier assessment years, it cannot be considered as unexplained credit in the assessment year under consideration. Hence, to that extent, the addition cannot be made in this assessment year. However, the balance ₹ 5 lakhs represents the cash gifts received by the assessee in the assessment year under consideration for which the assessee has not given any details to prove the identity of the party from whom it was received. Further, the genuineness of the transactions is not established. Hence, we have no hesitation in confirming the addition to the extent of ₹ 5 lakhs. Consideration paid in cash for the purchase of the land as unexplained investment - Assessing Officer while arriving at the fair market value of the impugned land, considered the average value of six properties mention in the earlier para - Held that:- property bearing Document No. 1755/08 is a small plot with asphalted roads. This property is in a better position and the value of this property cannot be compared with the value of the impugned property of the assessee. Further, the property in Document No. 1985/109 mentioned earlier, is a small plot with house and asphalted roads. This property also cannot be compared with the impugned property of the assessee. Being so, these two properties are to be taken out from comparison. The remaining four properties are to be considered to arrive at the fair market value of the property. For this purpose, we remit this issue to the file of the Assessing Officer to re-calculate the value of the assessee’s property on the basis of average value of the property Unexplained investment in construction of building at Annamanada - sole basis for addition was the DVO report - Held that:- . In this case, there is no rejection of books of accounts by the Assessing Officer. Hence, in our opinion, referring the matter to the DVO for valuation of the property itself is bad in law. Even otherwise, the Assessing Officer has no other evidence than the DVO report. In our opinion, the DVO report cannot be the only basis for making the addition. More so, the DVO has applied Central PWD rates. When the property is situated in a mofussil area, the State PWD rates have to be applied. - Decided in favour of assessee Addition as unexplained credits - Held that:- Lower authorities came to the conclusion that the assessee‘s explanation regarding the credit could not be accepted and we cannot disturb such finding as the assessee has not brought any fresh material on record before us. More so, mere furnishing of name and address of the lender would not amount to sufficient discharge of the burden placed upon the assessee u/s. 68 of the Act. This is because u/s. 68 of the Act, the assessee has to prove all the ingredients as mentioned earlier. When the identity of the creditor and the creditworthiness of the credits were not established, addition u/s. 68 of the Act is justified. Addition of agricultural income as undisclosed income - no separate books of account are kept for agricultural income - Held that:- a small farmer like the present assessee cannot be expected to maintain separate accounts for agricultural income as stated by the Assessing Officer. Since the Assessing Officer has not doubted the owning of the agricultural land and raising of crops, it is appropriate to estimate the income from such agricultural activities at ₹ 1,50,000/- as against ₹ 2,45,198/-. Accordingly, this ground of appeal of the assessee is partly allowed. Revision u/s 263 - incurring of development expenditure on the land at Varapuzha - Held that:- Since the Assessing Officer has taken a judicial view consciously based on proper enquiry and appreciation of the relevant facts and legal aspects of the case, the judicial view taken by the Assessing Officer placed the matter outside the purview of sec. 263 of the Act. The CIT has not shown what kind of enquiry is to be made by the Assessing Officer so as to make the disallowance. Further, the loss of revenue as a consequence of the order by the Assessing Officer cannot be treated as erroneous or prejudicial to the interests of the Revenue so as to invoke the provisions of sec. 263 by the CIT. In our opinion, the CIT cannot assume jurisdiction u/s. 263- Decided in favour of assessee Disallowance of expenditure claimed against professional receipts as a result of changing head of income from business or profession to head of income from other sources - Held that:- Assessing Officer is precluded from changing the head of income from profession to the head of income from other sources. We direct the Assessing Officer to allow the above expenditure incurred by the assessee Value of motor car - Held that:- In this case the payment towards purchase of car was paid by M/s. Rosy Blue (India) Pvt. Ltd., though the registration was in the name of the assessee as per the valid agreement. On the basis of the agreement dated 30/06/2009, the assessee sold the car at ₹ 2,90,000/- and the amount was repaid to M/s. Rose Blue India Pvt. Ltd. This fact was not at all disputed by the lower authorities. According to the Ld. DR, it is only a make believe arrangement. To say like this, the Department has no material in its possession. It is only a surmise and conjecture. By any stretch of imagination, it cannot be presumed that the assessee has routed her own money through M/s. Rosy Blue India Pvt. Ltd. In such circumstances, we are inclined to delete the addition Disallowance of depreciation on motor car - @ 50% OR 15% - use for purposes of bunions purposes - Held that:- The period of acquisition of commercial vehicle on or after 1st June, 2009 or on or before October, 2009 was amended as per the amended provisions with effect from 1.4.2009. Being so, commercial vehicle purchased upto October, 2009 is entitled for higher depreciation. Hence, we direct the Assessing Officer to grant depreciation at the rate of 50% on the commercial vehicle acquired by the assessee. Thus, this ground of appeal of the assessee is allowed.
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2018 (6) TMI 224
Nature of expense - capital or revenue - installation expenses - Held that:- As per the observations of CIT(A) the addition made by the AO is pure guess as is evident from the following “company may have booked these expenses on revenue account under the head “Repairs of P&M” - thus an addition made on pure guess cannot be sustained - hence we upheld the findings of CIT(A) and dismiss the ground of appeal of Revenue. Expenditure incurred on social overheads - revenue or capital - Held that:- CIT(A) correctly observed that no defect in the maintenance of books of accounts have been pointed - Assessing Officer has not established whether the system of accounting followed by the appellant was not as per AS-2 or was not consistently followed. No evidence has been brought on record by the Ld. Assessing Officer to show that the stock was that of ‘E’ grade coal and not ‘G’ grade coal. The Ld. Assessing Officer has presumed that all the stock at Gidi washery was ‘E’ grade coal without considering the evidence brought on record by the appellant. - Decided in favour of assessee Expenses under the head Donation in the nature of sports promotion expenses and community development expenses - allowable as business expenditure - Held that:- the appellant has not been able to bring out any evidence to show as to how were these expenses ‘wholly and exclusively laid out for the purpose of business’ - thus this ground of appeal of the assessee is dismissed. Disallowance on account of arrear of salary - AO disallowed the same on the ground that the same was not an ascertained and had not crystallised during the year - Held that:- We find that this issue has been decided in favour of the assessee by this bench of the Tribunal in assessee’s own case for the assessment year 2004-05 wherin held AO has taken the view that the claim of the assessee falls in the category of unascertained liability, which in our view, is not correct. In the instant case, there is certainty about the liability, but the exact quantification could be known to the assessee in the future upon finalisation of the wage agreement. We find support for this view from the decision rendered by the Mumbai bench of Tribunal in the case of TATA communications Ltd Vs. JCIT [2013 (2) TMI 506 - ITAT MUMBAI] Disallowance on account of transfer of free issue of coal - AO observed that expenses claimed by the assessee is to be gratuitous in nature and therefore, not wholly and exclusively laid out for the purpose of business and disallowed the same - Held that:- We perused the documents placed before us and are of the considered opinion that the matter needs verification and examination by the CIT(A) and accordingly we remit this issue to the file of CIT(A) who shall verify and examine the documents and pass order after providing adequate opportunity of hearing to the assessee.
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2018 (6) TMI 223
Unexplained jewellery - Held that:- Jewellery stands released at the time of the search itself on the basis of the invoice shown by the assessee at the time of the search itself. No doubt has been raised about the invoice. The invoice produced before the AO has not been doubted. This very invoice was before the authorized officer at the time of the search. The jewellery was also physically present before him on the date of search. Thus, the assumption made by the CIT(A) that the Authorized Officer would have been released the jewellery only after comparing the jewellery as per the invoice and as physically available is a correct assumption. There is no doubt about items not matching with the invoice. However, DR was fair enough to admit that there is no other difference in the item and the same are matching.
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2018 (6) TMI 222
Rejection of the books of accounts - Held that:- Assessee was not maintaining such accounts which may show the correct position of raw material /production of finished goods/remaining stock/shortage etc and detail of day to day consumption of raw material - assessee was not maintaining the quantitative records of consumption and production and there were other discrepancies found in respect of maintaining record - thus AO has correctly invoked the provisions of section 145 - Decided against the assessee. Unexplained expenditure incurred for marriage of son - Held that:- CIT held that no separate addition on this account is required as the same has to be telescoped against the addition on account of other additions. We have already reduced the other additions in the case of the assessee, therefore, after taking into account the facts and circumstances of the case we do not find any merit in the appeal of the assessee Additions of unaccounted sales - Held that:- There are so many factors which affect the net production and shortage, non-excisable products, ferrous and non-ferrous scrap etc., the Ld. CIT(A) has provided adequate relief to the assessee by restricting the addition to the extent of ₹ 19 lac being 50% - the fact that there are incomplete maintenance of records by the assessee we considered it will be appropriate to restrict the disallowance to the extent of 16 lacs - appeal of the assessee is partly allowed.
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2018 (6) TMI 221
Proper service under the provisions of Section 282(2) - Validity of reopening of assessment - service of notice at the factory premises of the Assessee on the security guard - difference between “served” and “issued” - Held that:- Discussion and conclusions/findings recorded by the first appellate authority, un-ambiguously do not reflect and show that ground of invalidity of service in terms of Section 282 of the Act was raised. There is no discussion on the issue; whether the service by registered post or by the Inspector on the security guard would be valid. Legal effect and consequences were not considered. This would un-mistakenly support the submission of the appellant-Revenue that this ground was not taken at the initial stage and when the first appeal was preferred and decided. Moreover, what is important and relevant is whether this contention was raised before the Assessing Officer. Respondent-assessee accepts that this contention was not raised before the Assessing Officer. We find sufficient justification and reason to allow the present appeal and answer the substantial question of law in favour of the appellant-Revenue and against the respondent-assessee. It is held that the assessment proceedings under Section 147/148 are not invalid or void for want of proper service of notice. However, an order of remand is required to be passed as the Tribunal has not adjudicated and decided the appeal filed by the respondent-assessee on merits.
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2018 (6) TMI 220
Rejection of books of account - Trading addition - CIT(A) has deleted the addition by observing that the AO’s action to reject the books of account is not tenable - Held that:- In assessee's own case for the Assessment Year 2011-12 had granted relief to the assessee for the same issue. It is also noted that the assessee had filed the statutory audit report before the CIT(A) which had not been disputed by the Department. AR of the assessee also submitted the reason of decrease in percentage of G.P. is increase of input cost in comparison to previous year. AR further that the cost of material and wages increased due to production of high quality product but the price of the product could not be increased in same proportionate due to stiff competition with China. No addition to be confirmed - Decided in favour of assessee Addition of ESIC and PF (employee’s contribution) - sum not deposited within time - Held that:- addition of ₹ 9,706/- observing that the assessee collected employees contribution towards ESIC but did not deposit it within the due date as prescribed under the relevant Act and treated the same as income u/s 2(24)(x) of the Act. In first appeal, the ld. CIT(A) has deleted the addition taking the support of Jurisdictional High Court in the cases of CIT vs Udaipur Dugdh Utpadak Sahakari Sangh Ltd [2014 (8) TMI 677 - RAJASTHAN HIGH COURT] and in the case of CIT vs SBBJ [2014 (5) TMI 222 - RAJASTHAN HIGH COURT]. It is pertinent to mention that such liabilities were paid by the assessee before due date of filing of return then no such disallowance can be made. - Decided against revenue
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2018 (6) TMI 219
Employees contribution to PF & ESI beyond the prescribed time limit provided in respective Act - Held that:- This issue is now covered by the decision of CIT vs. State bank of Bikaner & Jaipur [2014 (5) TMI 222 - RAJASTHAN HIGH COURT] as well as the decision in case of CIT Jaipur Vidyut Vitran Nigam Ltd. [2014 (1) TMI 1085 - RAJASTHAN HIGH COURT] as held where Contribution were paid by the assessee before filing of the return and proof of payment was submitted before the Assessing Officer, the amounts were deductible as deduction - Decided in favour of assessee.
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2018 (6) TMI 218
Denial of the exemption u/s. 11 - assessee was held to be not an association created/established for charitable purposes within the meaning of provisions of Section 2(15) - taxability of interest income on FD's - Held that:- Respectfully following decision of the tribunal in assessee’s own case PRABHODHANGOREGAON VERSUS ITO (E) -II (1) [2017 (8) TMI 1381 - ITAT MUMBAI] we set aside and restored the matter to the file of the AO determination of the issue - thus appeal of the assessee is allowed for statistical purposes.
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2018 (6) TMI 217
Reopening of assessment - Unexplained purchase of land - Held that:- The document relied on by the AO has no mention or information relating to unexplained investment or passing on of unaccounted payment to the vendors by the assessee. The said document bearing No.A/SLT/3/39 has no relevance on the assessee in as much as there was no mention of the assessee names and they are not parties to the agreement. Therefore, we hold that the reopening of assessment u/s 147 of the Act is bad in law and accordingly, we quash the notice issued u/s 148 of the Act and the consequent assessment made u/s 147 r.w.s. 143(3) is cancelled. Additions made by AO for unexplained investment relating to purchase of the land - Held that:- The agreement was signed by the vendors and does not bear the signature of the vendee, hence the said agreement cannot be held as valid agreement - the agreement was neither signed by the assesses nor their names were mentioned, thus the assesses have never become the parties for the agreement and no other material is available to show that the assessee’s have paid the consideration over and above the consideration recorded in the sale deed, thus there is no material in the case for forming a belief to hold that there was an escapement of income in the hands of the assessee - mere suspicion, presumption, surmises are not sufficient reasons to reopen the assessment - thus there is no case for making addition u/s 69 - Decided in favor of assessee.
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2018 (6) TMI 216
Validity of the revisionary order passed under section 263 - Held that:- Inspite of clear explanation given by assessee, in its reply to the show cause notice, Ld.CIT did not give any findings on the issues but held that AO has completed assessment without proper enquiry and overlooking the vital aspects - thus we are of the opinion that the order of AO is neither erroneous nor prejudicial to the interest of Revenue. Since the twin conditions are not satisfied and since CIT has not given any specific instance of overlooking ‘the vital aspects’, we cannot uphold the order U/s. 263 - thus order u/s 263 is set aside and order of original assessment u/s 143(3) is restored. - Decided in favour of assessee.
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2018 (6) TMI 215
Disallowance u/s 40(b) - remuneration paid to the partners in excess to the amount eligible - enhancement in the remuneration by amendment in the Partnership Deed through supplementary deed - Held that:- Assessee in its supplementary partnership deed has clearly mentioned that the amended provisions of Section 40(b) will be applied as applicable for determination of remuneration - also following the judgment of CIT vs. Anil Hardware Store [2009 (9) TMI 15 - HIMACHAL PRADESH HIGH COURT] as held the assessee has determined the remuneration payable to the partners as per the provisions of Section 40(b) of the Act - we held that the assessee-firm is entitled to deduct the remuneration paid to the partners under section 40(b)( v) - Decided in favor of assessee.
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2018 (6) TMI 214
Reopening of assessment - Disallowance u/s 80IAB in respect of income earned from house property - validity of reason to believe - reopening before expiry of four years - Held that:- Merely because reopening of assessment u/s 147 was before expiry of four years from the end of the relevant assessment year, that by itself will not give licence to the AO to exercise his powers u/s 147 with impunity even in the absence or lack of fresh tangible material coming to his possession - thus we uphold the order of the learned CIT(A) on this issue - appeal filed by Revenue is dismissed
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2018 (6) TMI 213
Disallowance of business loss on the ground of prior period expense - crystalization of liability - Year of allowability - Held that:- It is very clear that the liability of expenditure is to be considered in the year in which it is finally settled for expenditure - In view of the judgement in case of COMMISSIONER OF INCOME-TAX VERSUS RAJ MOTORS. [2005 (9) TMI 49 - ALLAHABAD HIGH COURT] held that nature of the liability was a contractual liability finally settled in AY 2008-09 therefore CIT(A) is justified in allowing the same - Decided in favor of assessee.
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2018 (6) TMI 212
Addition u/s 14A - Disallowance of direct expenses paid for paid towards security transaction tax in relation to exempt dividend income - Applicability of Section 14A with regard to dividend income on which tax is paid u/s 115-O - Held that:- The dividend income had been assessed to tax at lower rate u/s 115-O - following the judgement in case of GODREJ & BOYCE MANUFACTURING COMPANY LIMITED VERSUS DY. COMMISSIONER OF INCOME-TAX & ANR. [2017 (5) TMI 403 - SUPREME COURT OF INDIA] it is held that Section 14A of the Act would operate to disallow deduction of all expenditure incurred in earning the dividend income u/s 115-O which is not includible in the total income of the assessee. Addition u/s 14A r.w.r. 8D - Held that:- Assessee had derived interest income of ₹ 1.12 crores as against interest expenditure of ₹ 64.10 lakhs - following the decision of Gujarat high court’s decision in DCIT vs. Nirma Credit and Capital Pvt Ltd. [2018 (4) TMI 872 - ITAT AHMEDABAD] - we hold that that such a disallowance is not sustainable in case of net surplus interest income based on netting method - thus not sustainable. Administrative expenditure disallowance u/s.14A - Held that:- Taken as average value of opening and closing value of investments leads to administrative expenditure disallowance of ₹ 1,76,352/- only as against that of ₹ 2,17,750/- taken in the course of assessment. We therefore modify the instant disallowance figure to ₹ 1,76,352/- only. Rent received as treated as income from house property than from "other" sources - Held that:- Relevant rent agreement has been correctly appreciated in the course of lower appellate proceedings - receipts as rent stand accepted as rent income in preceding assessment years - thus CIT(A) has rightly held the assessee’s rent sums of ₹ 147,27,864/- as income from house property - Decided in favor of assessee.
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2018 (6) TMI 211
Validity of reopening of assessment - notice issued u/s 148 - lack of jurisdiction - whether the transfer of case from one ward to another ward is valid - Jurisdiction of AO to pass assessment order u/s 124(2) - Held that:- Section 124(5) of the Act saves assessment made by an assessing officer provided that the assessment does not bring to tax anything other than income accruing, arising or received in that area over which the assessing officer exercises jurisdiction. However, notwithstanding Section 124(5), the Act does not postulate multiple assessments by different assessing officers, or assessment of part or portion of an income [see Kanjimal & Sons Vs. Commissioner of Income Tax, New Delhi, [1982 (3) TMI 41 - DELHI HIGH COURT]]. Thus, it is necessary that the Assessing Officers having concurrent jurisdiction ensure that only one of them proceeds and adjudicate. This is the purport and objective behind sub-section (2) to Section 124 of the Act. Contention of the petitioner that the transfer by Income-Tax Officer, Ward-1(1), Noida to Income-Tax Officer, Ward-58 (2), Delhi required an order u/s 127 is fallacious and without merit - since Income-Tax Officer, Ward-1 (1), Noida accepted the request/prayer of the petitioner and had transferred pending proceeding to the Assessing Officer, Ward-58 (2), Delhi, therefore there was no need to invoke and follow the procedure mentioned u/s 127(2) - Section 127 of the Act would come into play when the case is to be transferred from the Assessing Officer having jurisdiction to a third officer not having jurisdiction over an assessee u/s 120 - thus Income-Tax Officer Ward 1(1), Noida would not per se lack jurisdiction, albeit he had concurrent jurisdiction with the Income-Tax Officer Ward 36(1)/58, Delhi. In the facts of the present case the contention raised about the lack of jurisdiction would not justify quashing the notice under Section 147 /148 of the Act - petition is dismissed.
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2018 (6) TMI 210
Existence PE - dependent agent Permanent Establishment (PE) of the assessee - The assessee paid 10% commission to DAIPL on its direct sales - Held that:- In the absence of the assessee furnishing any shred of credible evidence showing its direct involvement from Japan in making sales to customers in India and proving that the role of DAIPL was simply confined to a communication channel, the inescapable conclusion which follows is that the entire activity starting from identifying customers, approaching them, negotiating prices with them and finalization of products and prices were done by DAIPL in India not only for the products sold directly by them as distributor, but also for which the assessee is claiming to have made direct sales. Not even a single direct e-mail between the assessee and its customers in India has been provided, which reinforces the view that no activity resulting into direct sales in India was done by the assessee and such marketing activities were done by DAIPL alone. The facts stated hereinabove amply prove that DAIPL was habitually exercising authority in India to conclude contracts on behalf of the assessee, though such contracts were formally signed by the assessee in Japan. Sub-para (c) of para 7, which has also been invoked by the AO, is clearly magnetized inasmuch as DAIPL was securing orders in India `almost wholly’ for the assessee. All the substantive parts of the key activities in making sales were done by DAIPL from India. This shows that DAIPL constituted a dependent agent PE of the assessee in India. Determination of ALP - Held that:- the benchmarking of the receipt of commission @ 10% in the hands of DAIPL was done only with reference to two functions of forwarding customers’ request to DIL and forwarding DIL’s quotations to the customers. As such, the other functions performed by DAIPL in negotiating and finalizing contracts in India on behalf of the assessee remained excluded from the process of determination of the ALP by the TPO. - Under such circumstances, the argument of the ld. AR becomes untenable. Determination of the quantum of income attributable to the PE - Held that:- It is not understandable as to why the amount of commission was reduced straightway from the amount of direct sales and then what is the logic in applying 79.85% and then allowing expenses at the rate of 5%. Correct method in such circumstances is to first find out the amount of profit which would have been earned by the assessee in India from direct sale to end customers and then reduce it with the amount which has already suffered taxation in the hands of its subsidiary, DAIPL, through the transaction of commission. It goes without saying that there can be no hard and fast rule of determining the rate of profit attributable to marketing activities carried out in India. It is a fact based exercise, depending upon the role played by the PE in the overall generation of income. Considering the whole gamut of the facts and circumstances prevailing in the instant case, we estimate 30% of the above total profit @ 10% of the sales, as attributable to the operations carried out by the PE in India. Accordingly, the amount of net profit attributable to the marketing activities carried out in India would be 30% of the amount of net profit relatable to sales in India at ₹ 4,54,01,172/-, which comes to ₹ 1,36,20,352/-. Amount of profit attributable to the PE which has already been taxed in the hands of DAIPL through Since necessary details of income offered by DAIPL from the receipt of commission at ₹ 4.54 crore are not readily available on record, it is not possible at our end to work out the exact amount of further income chargeable to tax in the hands of the assessee as attributable to the PE in India. We, therefore, set aside the impugned order and remit the matter to the file of the AO to determine the amount attributable to the PE in India in the manner indicated above. Needless to say, the assessee will be allowed an opportunity of hearing in deciding the issue. the transaction of commission payment. Interest u/s 234B - The liability to pay advance tax and the consequential interest u/s 234B will not be eclipsed merely if income is liable for deduction of tax at source. Unless the payer actually deducts tax at source, the liability to pay advance tax and interest u/s 234B will continue in the hands of the payee. Since the assessment year under consideration is 2006-07 and the proviso is applicable from the A.Y. 2012-13, we hold that the assessee is not hit by such proviso and as such is not liable to pay interest u/s 234B of the Act. - Decided partly in favour of assessee.
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2018 (6) TMI 209
Permanent Establishment (PE in India) - scope of the agreement - payments received by the Applicant from the Indian hotel owner for provision of global reservation services (‘GRS’) - DTAA between India and Luxembourg - Royalty / Fee for technical services (FTS) - Held that:- the Indian hotel, Swissotel Kolkata,satisfies all the three tests and does constitute a fixed place PE of the Applicant with respect to these incomes. The Applicant is carrying on its entire business operations from this fixed place. The existence of a PE of the Applicant in India gets established within the meaning of Article 7 of the DTAA. We have held that the income of the Applicant is attributable to the fixed place PE in India, the question whether it can be characterised as ‘royalty’ or ‘fees for technical services’ becomes wholly academic. The payments received by the Applicant from the Indian hotel owner for provision of global reservation services (‘GRS’) would be chargeable to tax in India under section 9(1)(i) read with Articles 5 and 7 of the India-Luxembourg DTAA as business income and is attributable to the Applicant’s permanent establishment in India. In view of this, the question whether these payments would be characterised as ‘royalty’ or ‘fees for technical services’ becomes wholly academic, and is, therefore, not considered necessary to be answered.
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2018 (6) TMI 208
Representative/liaison office (LO) - Doctrine of Mutuality - India-Belgium DTAA - whether the liason office proposed to be established by in India would be liable to income-tax or India – whether membership fee and contribution from the Indian members would be liable to Income-tax – Applicant is rendering specific services for its members, income derived by it falls under section 28(iii) as ‘Profits and Gains of Business and Profession’? - PE in India - Held that:- Simply because some incidental activity of the assessee-society is revenue generating, the same does not provide any justification to hold that it is tainted with ‘commerciality’ and reaches a point where relationship of mutuality ends and that of trading begins. Where the principle of mutuality operates,and the profits cannot be distributed, but can only be utilized for the benefit of members and confined to the objects of the organization, receipts or income cannot be brought to tax. - the Applicant’s activities are on the principle of mutuality, and it is not created for doing business or earning profits. A PE to come into existence, within the meaning of Article 5 of the said DTAA, in the first place there should be a fixed place of business through which the business of an enterprise is wholly or partly carried on. Once we hold that the Applicant works on the principle of mutuality and is not an enterprise set up for the purpose of doing business or earning profit, the question of any PE coming into existence does not arise. The Liaison Office (LO) proposed to be established would not be liable to tax in India under the provisions of the Income-tax Act, 1961 or the India-Belgium DTAA. Membership fee and contribution from members received by IZA Belgium from the Indian members would not be liable to Income-tax in India under the provisions of the Income-tax Act, 1961 or the India-Belgium DTAA.
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2018 (6) TMI 207
Existence of a business connection - P.E. in India - fastening the tax liability on the income earned on supply of telecommunication equipment to the Indian Customers - whether the profit on such supply of telecom equipment in India was attributed to assessee? - Article-5 of the India-Singapore DTAA - Held that:- The income of the assessee from supply of equipment in India was not chargeable to tax in India and therefore any such income or any part thereof is not attributable to the activities of assessee in India following the decision in assessee’s own case reported in (2016 (5) TMI 373 - DELHI HIGH COURT) answer the grounds in the appeals preferred by the assessee accordingly in favour of the assessee. Royalty - supply of embedded Software - Held that:- The payment for the embedded software is not separately taxable in the hands of assessee in India either as royalty or as business income. Initiation of penalty - no-grant of credit of TDS - Held that:- Initiation of penalty proceedings challenged by the assessee is premature and it cannot be adjudicated - we direct the Assessing Officer to given eligible credit of TDS, as per rules, after verification. Levy of interest under section 234B - Held that:- Issue being consequential in nature, the Assessing Officer is directed to act accordingly as per Rules. Allowability of deduction of Research and Development expenses while computing the taxable income of the asessee’s alleged PE in India - Held that:- The view is covered by the assessee’s own case reported in (2016 (5) TMI 373 - DELHI HIGH COURT) - thus we dismiss these grounds of appeal of the Revenue.
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Customs
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2018 (6) TMI 206
Bail Application - Evasion of duty - Detention of CHA - fraud involving the scrips - Section 3(1) of the COFEPOSA Act - the allegation against the Detenue is that he was engaged in utilizing the tampered, fictitious, non-existent licenses/scripts by hatching a scheme with Mr Vinod Kumar Pathror. He was alleged to have fraudulently entered wrong details in the Customs EDI System after illegally gaining access to the system. Held that:- It is not a simple case where the Detenue could have just hacked into the EDI System of Customs and tampered with the details the licenses, as is alleged. Unless the officers of the Customs Department were themselves involved, which angle is still under investigation, it is difficult to accept that the Detenue was the one who was involved in the racket of tampering with the licenses. Further, co-accused Mr Vinod Kumar Pathror is still said to be a PO. Absence of live link with the alleged tampering of the licenses - there does not appear to have been any prejudicial activity undertaken by the Detenue which has been referred to in the grounds of detention. The non-considering of vital facts which have a bearing on whether the Detenue should continue to be detained would vitiate the entire detention order. There is merit in the contention that the sponsoring authority erred in not referring to the various circulars issued by the Commissionerate which demonstrates how the verification of the genuineness of the scripts was to be done. Without the participation of various customs officers, it would have not been possible to hack the system and tamper with the details concerning the scripts/licenses. There being a two-layer verification process by means of a secret password allotted to the Superintendent, it would have been impossible for an individual to tamper with or hack into the system. The exact manner of tampering with the system has not been explained. Since no past antecedents of the Detenue have been pointed in the grounds of detention, there was no material to support the conclusion that the Detenue possesses the propensity or potentiality to indulge in smuggling activities in the future. The detention order is held to be bad in law and is hereby quashed - petition allowed.
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2018 (6) TMI 205
Import of unused goods - Secondary Second Choice Carbon Steel Pipes in Mix Size Mix Thickness - restricted item or not? - no Confiscation - Redemption fine - penalty - Held that:- In terms of FTP Policy the restriction was in respect of “ all second hand goods, except second hand capital goods are restricted for import and are allowed to be imported only in accordance with provisions of FTP, ITC (HS), HBPV1, Public notice or an authorization issued in this regard. The second grade pipes cannot be termed as second hand as the pipes had remained unused. Appeal dismissed - decided against Revenue.
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2018 (6) TMI 204
Mis-declaration - evasion of duties of customs on the imports - Penalty u/s 112 of CA - value was mis-declared and that the contents were described as 'ship stores' to suppress the link to the offshore project - principles of natural justice denied - case of appellant is that they were not heard before they were visited with detriment and that various documents which were necessary for defending themselves had not been provided to them. Held that:- Appellant's absence at the hearing on the scheduled date, is attributed in the grounds of appeal to non-furnishing of relevant documents. The appellants had one reason or other for not being presented at the hearing on the scheduled date - considering that plea for documents had been made to the lower authority and that the principles of natural justice had been deviated from in denying them an opportunity heard compounded by the absence of any finding against each of the appellants separately, the impugned order is in jeopardy. Imposition of penalty, especially on customs brokers, should be in proportion to the gravity of the involvement. In view of the specific plea for hearing and furnishing of documents having been denied, it would be appropriate to set aside the penalties imposed on the three appellants and to remand the matter back to the adjudicating authority for fresh determination - appeal allowed by way of remand.
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2018 (6) TMI 203
Duty Drawback - description of the goods - exemption from export duty - N/N. 133/2000 dt. 17.10.2000 - whether test result of one shipping bill can be made applicable to other shipping bills? - Held that:- The description of the goods and the conditions applicable from the DGFT Public Notice are different for each of the three 3 shipping bills, which have been placed on record by the appellant page from 21 to 25 of the paper book. Even though the consignee is the same the fact that the goods declared were different for the three shipping bills and different conditions were claimed in terms of Public Notice No.21/2009-14 dt.1.12.2009 for each of the impugned shipping bills - Commissioner (Appeals) is correct in its view that test results of one shipping bill can be made applicable to other shipping bills. The export goods were declared to be covered under S.No.(I) and (XIII) of Public Notice No.21/2009-14 dt.1.12.2009. and the condition No.VI “Burnishable Leathers (All subtracts including butts and bends)” clearly is not applicable to shipping bill No.194. Appeal dismissed - decided against Revenue.
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Service Tax
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2018 (6) TMI 202
Refund of interest on the refundable interest - delayed payment of service tax - Section 11B of CEA - Held that:- Though the amount refundable under section 11B is duty or interest paid on such duty, whereas under section 11B the interest is payable only on the duty which is refundable. Therefore, there is no explicit provision on refund of interest on the interest paid on the service tax - the lower authority has rightly denied the claim of interest for delayed sanction of refund of interest paid on service tax - appeal dismissed - decided against appellant.
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2018 (6) TMI 201
CENVAT credit - telecast of serials produced - denial of credit on the ground that the telecasting of the serials occurs after the production of the serials - Held that:- The issue has been decided in the case of RADAAN MEDIA WORKS (I) LTD. VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI [2018 (2) TMI 331 - CESTAT CHENNAI], where it was held that the telecasting charges paid are used for providing the said output service of 'Sale of space or time for Advertisement' and it was already found that the appellant is not liable to discharge service tax under the category of programme producing service. The contention of the department that programmes are telecast after production of the serials etc. is flimsy and not supported by any legal basis - credit cannot be denied - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 200
CENVAT credit - input services - repairs and maintenance of the insured vehicles by the Authorized Service Stations - insurgence company is hte recipient of service or not - Held that:- From the definition of Rule 2 (l), the input service means any service used by a provider of taxable service for providing an output service. In this case, the output service rendered by the appellant is general insurance service. The general insurance service provided by the appellant basically insures the vehicle against damages. It is obvious that such service can be provided to the customer ie., owners of the vehicle only by way of reimbursement of the repair charges - the service tax paid on the bill of the ASS is to be considered as falling within the definition of the input service which is used for providing the output service of the vehicle insurance. The appellant being the service receiver will be entitled to the credit of service tax paid in terms of Rule 2 (l) ibid. Revenue has also raised the issue that the invoices issued by the ASS which is the document based on which the appellant has availed the Cenvat credit, is invariably in favour of the owner of the vehicle and is not in favour of the appellant - Held that:- It is a fact that the insurance claims will be admitted by the appellant only after proper survey and further from the record it is seen that the credit availed by them is restricted to the portion of the repair bill reimbursed by the appellant. There is also nothing on record to suggest that the owner of the vehicle has also made claims for Cenvat credit. Consequently, not having the invoice in favour of the appellant should be considered only as a procedural infraction and should not be used to deny the credit which otherwise they are eligible. Appeal allowed - decided in favor of appellant.
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2018 (6) TMI 199
Consulting Engineer Service - Body Corporate - non/short-payment of service tax - It has been alleged that the appellants have failed to pay service tax in terms of Section 68 at the rates specified under Section 66 of the Finance Act, 1994 within the time specified under Rule 6 of the Service Tax Rules, 1994 - whether the appellants being a body corporate are liable to pay duty as Chartered Engineer prior to the period 1.5.2006? - Held that:- The definition of “Consulting Engineering Service” has been changed w.e.f. 1.5.2006. Prior to this date, the definition of ‘Consulting Engineer’ means any professionally qualified engineer or any body corporate or any other firm who, either directly or indirectly renders any advice, consultancy or technical assistance in any manner to any person in one or more disciplines of engineering. With effect from 1.5.2006, “Consulting Engineer” means any professionally qualified engineer or an engineering firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to a client in one or more disciplines of engineering. The appellants being a body corporate are liable to pay service tax as a ‘Consulting Engineer’ only post 30.4.2006 whereas the demand pertains to the period 2000-01 and 2001-02. Maintainability of Question of law being raised at the appellate stage - Held that:- The appellants are within their rights to raise their issue - also, the question of law being remanded back the case to the original adjudicating authority at this juncture would not serve any purpose other than prolonging the litigation on a squarely settled matter - Question of Law is maintained. Appeal allowed - decided in favor of appellant.
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2018 (6) TMI 198
Service tax on the lease rentals under ‘Storage and Warehousing Services’ - on such lease Rentals appellants are paying VAT/CST - Held that:- It is the containers / bullets in which the LPG is stored that is leased out to the customers. The lease is in the nature of right to use these bullets for storage. As per clause 1.3 of the contract, it is the customers who are responsible for carrying out connection from the tap off point to various equipments installed by customer for use of LPG. The storage units are installed in the customer’s premises and appellants do not have any control over the LPG stored in them. Similar issue was decided in the case of Inox Air Products vs. Commissioner of Central Excise, Raigad [2015 (1) TMI 460 - CESTAT MUMBAI], where it was held that as the appellant is not having any control over the goods and they are not responsible for the security of the goods, the appellant is not covered under the category of Storage and Warehousing Services as defined under Section 65(102) of the Finance Act, 1994. The demand cannot sustain - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 197
Interest or service charge - Interest received for loan given to Subsidiary company for short period - Chargeability to service tax - Banking and Other Financial Service or not - whether the amount shown by the appellant in their balance sheet as interest is actually interest or service charges? - Held that:- There is no iota of evidence to discard the amount shown by the appellant is not an interest, merely saying that the amount received by the appellant is service charges for providing deposit to their subsidiary companies is without any evidence and the same cannot be accepted. The amount received by the appellant is interest cannot be said as charges of service provided by them - interest received by the appellant is not chargeable to service tax - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 196
Application for Rectification of Mistake - appellant had paid service tax before issuance of SCN but not the interest - waiver of penalty - Held that:- appellant discharged part amount of the interest liability on 30.08.2013 i.e. before issuance of SCN dated 19.05.2014 and the balance amount of interest was paid on 20.06.2014 - They never claimed that they have interest also before issuance of SCN - there is no record which needs to be corrected - application for ROM rejected.
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2018 (6) TMI 195
Classification of services - Activity of re-rubberisation of rollers/spindles for printing industry - whether classified under maintenance or repair of service or Business Auxiliary Services? - Held that:- Identical issue came up before the Tribunal in the case of Zenith Rollers Ltd [2013 (12) TMI 620 - CESTAT NEW DELHI], where it was held that the activity undertaken by appellant would fall under the category of “business auxiliary service” appellant is eligible for the benefit of notification No. 14/2004-ST, dt. 10.09.2004 which exempts the activity from payment of service tax liability - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 194
CENVAT credit - various input services - denial on account of nexus - Held that:- All the input services involved in the present appeal fall in the definition of ‘input service’ and they have a direct impact on the output services of the appellant and has been held to be ‘input service’ in the decisions relied - credit allowed. CENVAT credit - duty paying documents - denied on the ground that the documents submitted by the appellant claiming to be cenvatable documents does not provide for certain details and also on the ground that credit has been availed without support of relevant documents which is in contravention of Rule 9 of CCR 2004 - relaxation in terms of Rule 4A of STR - Held that:- The CENVAT credit of ₹ 19,27,868/- was availed on banking services on the strength of the documents issued by the bank and the said documents have also been placed on record which shows the payment of service tax to bank for various services rendered by the bank - further, Rule 4A of the Service Tax Rules, 1994 clearly covers the case of the appellant - decided in favor of appellant. Time limitation - Held that:- Though the appellant has taken the limitation point in both the appeals but I am not giving any findings on the limitation when both the appeals are allowed on merits. Appeal allowed - decided in favor of appellant.
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2018 (6) TMI 193
Utilisation of CENVAT credit - Reversal of CENVAT credit - provision of exempted as well as taxable services - non-maintenance of separate records - Rule 6(3)(c) of the CCR - non-utilization of CENVAT credit in excess of 20% - time limitation - Held that:- The demand of tax liability is only in respect of the two months September, 2004 and December, 2004 wherein CENVAT credit in excess have been utilized - there is no time period mentioned in Rule 6(3) (c) of the CENVAT Credit Rule for collecting the CENVAT credit. In respect of same assessee, similar issue raised in the case of IDEA CELLULAR LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, ROHTAK [2009 (2) TMI 91 - CESTAT NEW DELHI], where it was held that if during certain months, the credit utilization for payment of service tax was less than the 20% ceiling specified in Rule 6(3) (c) of CENVAT Credit Rules, 2002, the unutilized credit of those months has to be adjusted against utilization in excess of the 20% ceiling, in other months. Appeal allowed - decided in favor of appellant.
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2018 (6) TMI 192
Business Auxiliary Service or Manufacture - activity of cutting, straightening and bending - whether the activity amounts to manufacture or provision of Business Auxiliary Services? - Extended period of limitation - Held that:- There is no dispute as to the fact appellant is undertaking the activity of bending, straightening cutting of steel wire rod coils received from the traders, this activity would be covered under the Business Auxiliary Service. The activity of appellant would fall under Clause (v) wherein, the processing of the goods for, or on behalf of the client has been considered as Business Auxiliary Service and the service tax liability would arise - demand of service tax liability with interest upheld. Extended period of Limitation - Held that:- Since the appellant failed to take any registration/certificate the service tax, demand for the extended period is correctly confirmed. Penalty u/s 76 and 78 - Held that:- Since, the demand of service tax liability which is confirmed under Proviso to Section 73 of the Finance Act, 1944, is upheld, the equivalent amount of penalty under Section 78 gets attracted - penalty under Section 76 need not be imposed as both the penalties u/s 76 and 78 are not to be imposed. The service tax liability with interest and equivalent penalty under Section 78 is upheld, while penalty imposed under Section 76 is set aside - appeal allowed in part.
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2018 (6) TMI 191
Photography Services - benefit of the reduction of cost of materials - N/N. 2/2003 as amended - Held that:- The calculation as recorded by the first appellate authority and the reason as reproduced herein are as per the acceptable principles of the accountancy norms and has correctly arrived at the decision based on the materials consumed as reported in the balance sheet. CENVAT credit availed on the machinery procured by the appellant - depreciation - Held that:- Revenue has not been able to bring on record that the depreciation is claimed by appellant during the period in question, was inclusive of Central Excise Duty on which CENVAT credit has been availed - In the absence of any supportive evidence for argument of revenue, the first appellate authority was correct in extending the benefit of CENVAT credit to the appellant in respect of the machinery procured by them. Benefit of N/N. 12/03 - reduction of the cost of materials for arriving at the value of such service tax liability - Held that:- On perusal of amending notification No. 12/2004, it is found that the conditions for availing the benefit of N/N. 12/03 does not include non-availment of CENVAT credit on capital goods - the restriction is for non-availment of credit of duty paid on goods and materials sold and not on the capital goods - benefit allowed. Penalty u/s 78 - Held that:- It can be seen from the records that the demand is confirmed for the period 2001-02 to 2006-07 by invoking the proviso of Section 73 of the Finance Act, 1994, hence, the penalty imposed by the first appeallate authority under section 78 is correct - penalty upheld. Appeal dismissed.
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2018 (6) TMI 190
Valuation - inclusion of the cost of free supply of material by Kochi Refineries Limited in assessable value - Contract for Fabrication and Laying of cross country pipelines - Commercial or Industrial Construction Services - Held that:- Apex Court in the case of Bhayana Builders (P) Ltd., [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] has upheld the judgment and order of the Larger Bench of Tribunal holding that cost of free supply of the materials cannot be included for arriving at the gross value for calculation of service tax liability - demands raised on appellant for non inclusion of cost of free supply of materials stands held in their favor. Benefit of N/N. 04/2004-ST - service tax liability from June, 2006 to December, 2007 - Held that:- Since the appellant has not contested non extension of benefit of Notification No. 04/2004-ST, the demand on this amount is liable to be upheld subject to the requantification of the service tax liability. Appeal allowed in part.
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2018 (6) TMI 189
Hiring of buses - Hiring of buses to Andhra Pradesh State Road Transport Corporation (APSRTC) for consideration - Liability of Service Tax - amount received by the appellant from APSRTC for the period 2008-09 to December, 2011 - Held that:- this Bench in the case of M.D. Yousuf Pasha and others [2017 (8) TMI 70-CESTAT - Hyderabad] held that service tax along with interest needs to be upheld, but set aside the penalty - there is no reason to deviate from such a view already taken by the Tribunal - the confirmation of tax liability along with interest is correct - penalties set aside - appeal allowed in part.
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Central Excise
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2018 (6) TMI 188
Cenvat credit on the sales/clearances returned on rejection by the buyer - Extended period of limitation invoked - Section 9D of CEA - admissible piece of evidence to prove default - Held that:- The evidence in the shape of statement of Shri Ashwani Agarwal the Authorised Signatory of M/s Rana Steels is not admissible piece of evidence, as the same is hit by Section 9D of the Act - further, the courts below have not considered the applicability of Rule 16 of CER, 2002. The query regarding taking of Cenvat on the goods returned, was made by revenue on 24/06/2009 which had been replied along with evidence by the appellant-assessee. Accordingly, the impugned order is vitiated being not based on evidences on record and for relying upon evidences, having no evidentiary value. Further, the cogent explanation given by the appellant have not been found untrue in the course of investigation. Thus, the whole case of revenue is based on presumptions and assumptions. Appeal allowed - decided in favor of appellant.
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2018 (6) TMI 187
N/N. 6/2002-CE dated 1.3.2002 - Concessional rate of duty availed by two units of appellant separately - the two units having separate registration and existence - Clubbing of clearances - Department contended that both the units are not eligible to avail the concessional rate of duty separately - Held that:- It was held in the case of Rollatainers Ltd. vs. CCE, Delhi [2004 (7) TMI 92 - SUPREME COURT OF INDIA] that simply because both the factories are in the same premise that does not lead to an inference that both the factories are one and the same - In the present case, from the facts, it is apparent that though the factories are situated in the same premise and managed by the same authority, they have separate labour force, electricity connection, license of the boilers department, license of the factories department and Central Excise department also. Both Units 1 and 2 managed by the appellants are different factories so as to make them eligible separately for the exemption contained in the Notification No.6/2002 - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 186
Refund of unutilized CENVAT credit - clearances made to SEZ - Exports - rejection of refund on the ground that clearances made to SEZ cannot be treated as exports - Held that:- In the case of Hon’ble High Court of Chattisgarh in Union of India Vs. Steel Authority of India Ltd. [2013 (5) TMI 460 - CHATTISGARH HIGH COURT] it has been unequivocally held that goods supplied from DTA to developer of SEZ are to be treated as exports in view of Section 2M of the SEZ Act - refund to be allowed - appeal dismissed - Decided against Revenue.
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2018 (6) TMI 185
CENVAT credit - various input services - works contract service - renting of immovable property service - security services - cleaning service - internet service - business auxiliary service - time limitation - Penalty - Held that: - Post 01.04.2011 the definition of input services specifically excludes credit of tax paid on works contract services, if they are rendered from setting up factory - credit rightly denied. Other input services - Held that:- These services are rendered by the service providers at the Mumbai premises which was used by the appellant for the sales related activity, marketing and research of the few products - R & D activity was undertaken at Mumbai as there cannot be any dispute that it is in interest of the business, research and development is a primary requirement - the appellant is eligible to avail CENVAT credit of service tax for the Renting of Immovable Property, Security Services, Cleaning, Internet, Works Contract Services - CENVAT credit on other services disallowed. Time Limitation - Held that:- The demand is raised on audit objection, wherein, Audit party, has specifically stated that CENVAT credit cannot be availed and this is first audit of the assessee - case on the limitation for the setting aside demand of CENVAT credit on the works contract services, is devoid of merits and is rejected. Penalty - Held that:- As regards confirmation of demand on works contract services appellant is correctly penalized under the provisions by the lower authorities for the amount of tax liability which has been upheld by the adjudication authority as ineligible - penalty upheld. Appeal allowed in part.
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2018 (6) TMI 184
Refund of interest recovered from Revenue - Non-issuance of SCN - Kar Vivad Samadhan Scheme, 1998 (KVSS) - Levy of additional duty of excise(goods of special importance) - rejection of KVSS application on the grounds that the declaration filed is not against any SCN issued prior to 31.03.1998 - entire case is based on the interpretation of the Hon’ble Supreme Court order in the respondent’s case M/S. SHARDA SYNTHETICS LTD. VERSUS UNION OF INDIA & ORS. [2015 (11) TMI 604 - SUPREME COURT] which was passed with reference to application filed under the KVSS 1998. Held that:- The Hon’ble Supreme Court has very consciously held that Revenue recovered the entire amount by encashing bank guarantee on 13-10-2013 in view thereof it is not necessary to go into issue and we are of the opinion that having regard to the peculiar facts of this case and also that the appellant has some arguable case on merit interest of justice would be sub-served if no interest is demanded. The conclusion of the entire findings is that entire demand of interest was set aside. Even if overall circumstances are observed it is seen that whole case is based on the application made in KVSS 1998. As per the KVSS the 50% of duty, interest and penalty are liable to be waived as immunity provided under the scheme. The respondent is clearly eligible for the refund of interest recovered by the Revenue for ₹ 48,05,753/- - appeal dismissed - decided against Revenue.
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2018 (6) TMI 183
Cotton waste arising in the course of manufacture - Dutiability - imposition of penalty - Held that:- in the case of M/S CT. COTTON YARN LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, INDORE [2013 (1) TMI 249 - CESTAT NEW DELHI], the Bench presided over by President, has come to a conclusion that the demand of duty on cotton waste which arises during the manufacturing process is not leviable to duty and set aside the entire demand - appeal dismissed - decided against Revenue.
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2018 (6) TMI 182
Issuance of necessary clarification - principles of natural justice - remand order to reconsider the issue - Held that:- The adjudicating authority has more or less followed the directions given by Tribunal in denovo adjudication - We do not find any reason to pass any clarification let alone a necessity to offer any clarification in the denovo adjudication undertaken by adjudicating authority - appeal disposed off.
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2018 (6) TMI 181
Manufacture or not - CENVAT credit of the counterveiling duty paid on imported Hydrogen Peroxide - imported Hydrogen Peroxide in 30 Kgs and 65Kgs individual cans - demand of CENVAT credit on the ground that there is no manufacture - It is the case of the appellant that they are undertaking the activity of addition of stabilizers, stirring the Hydrogen Peroxide and relabeling the said containers as their own product, is an activity recognised as a manufacture - Held that:- The activity would amount to manufacture if labelling or relabelling of the containers are undertaken after repacking from bulk packs - In the case in hand it is undisputed that Hydrogen Peroxide imported in 65 Kgs and 30 Kg containers were relabelled after adding stabilizers and stirring the Hydrogen Peroxide as their own product. The activity of repacking from bulk pack to retail packs has not taken place in the case in hand, hence chapter note 9 of Chapter 28 is not applicable. As already recorded, in the case in hand, appellant has paid less duty than the CENVAT credit availed on Hydrogen Peroxide cleared as manufactured product - demand upheld. Appeal dismissed - decided against appellant.
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2018 (6) TMI 180
Demand of Interest and Penalty - availment of cenvat credit on the input service viz. rent-a-cab service - reversal of irregularly availed CENVAT credit - input services - rent-a-cab services - Held that:- On going through the definition of input service and exclusion provided therein, it is found that the rent-a-cab service is excluded only in a case where the motor vehicle used by the service provider is not a capital goods for them - In the present case, the vehicle is owned by the service provider who has given the vehicle on rent to the appellant. Therefore, the motor vehicle which is given on rent is a capital goods for the service provider. Therefore, the rent of motor vehicle does not fall under the exclusion clause provided in the definition of input service. The demand which was confirmed by the original authority, shall stand maintained as the appellant has not challenged the demand against the original order before the Commissioner (Appeals), but legally the cenvat credit is admissible on input service viz. rent-a-cab. In this position, demanding interest and penalty will be unjustified, even though the demand attained finality - demand of interest and penalty set aside. Appeal allowed - decided in favor of appellant.
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2018 (6) TMI 179
Remission of duty - loss of material due to flood in the factory - remission application was rejected on the ground that documents such as survey report, insurance claim papers etc. were not submitted by the assessee - penalty u/s 11AC of CEA - Held that:- Once the insurance claim was filed and the same was processed, all the proceeding of insurance claim itself is sufficient to establish that the goods were destroyed in flood. Therefore, no further document is required - However, as per the finding of the Commissioner, insurance related documents were not submitted by the assessee. In these circumstances, the remission matter needs to be reconsidered. Penalty u/s 11AC - Held that:- This is admitted case of loss of goods in flood. In this fact, the ingredient to invoke the penalty under Section 11AC does not exist, as it is beyond the control of the assessee that the goods were lost in flood - penalty not invocable. Appeal allowed by way of remand.
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2018 (6) TMI 178
CENVAT credit - non-receipt of capital goods sent to job-worker - return within 180 days - Case of the department is that the appellant has not followed the procedure laid down under Rule 4(5) of CCR and also the capital goods so sent were not returned back within 180 days - demand of interest and penalty - Held that:- There is no dispute in the fact that the capital goods on which credit was availed were sent to their own unit No.2 for carrying out the production activity. Therefore, such removal is clearly covered under Rule 4(5)(a) as the appellant’s unit No.1 has admittedly issued the challan. In case of removal of capital goods under Rule 4(5), the capital goods should be returned back within 180 days. In the cases where capital goods are returned within 180 days, Rule 4(5)(a) provides that if there is a delay beyond 180 days, the assessee is required to reverse the credit, but subsequently, as and when the capital goods are received, they are entitled for the recredit. So, even if there is a delay and the capital goods were received back, the appellant shall be entitled for the credit and, therefore, no demand will exist. It has been accepted by appellant that all the records were not produced before the original authority regarding the movement of capital goods for the reason that the capital goods which were not returned within 180 days were subsequently received back after the visit of the officers. In such case, the return of the capital goods needs verification on the basis of the records to be produced by the appellant to the adjudicating authority - The adjudicating authority also needs to verify the payment of interest. Penalty on unit no. 2 - Held that:- Since the entire obligation to follow the procedure of Rule 4(5)(a) is on the sender of the capital goods, i.e. unit No.1, there is no reason to impose any penalty on unit No.2. Therefore, I set aside the penalty imposed upon unit No.2. Penalty u/r 26 on Director - Held that:- Since there is only a procedural lapse as the removal of capital goods has been recorded in the challan and it is well within the two units of the same company, the penalty on the director is also not sustainable. Appeal allowed in part and part matter on remand.
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2018 (6) TMI 177
Reversal of CENVAT credit - Manufacture of exempt as well as dutiable goods - non-maintenance records - whether the appellant is required to reverse an amount equivalent to 6% of the value of their goods cleared by them as exempted under the provisions of Central Excise (Removal of Goods at Concessional Rate of Tariff for manufacture of excisable Goods) Rules 2001? - Held that:- Hon'ble Rajasthan High Court in the case of Hindustan Zinc Ltd vs. UOI [2007 (1) TMI 94 - HIGH COURT RAJASTHAN] has held that goods cleared under (the erstwhile) Chapter X procedure in terms of Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules 2001 are not to be considered as exempted goods and therefore, there is no need to reverse credit under Rule 6(3)(i) of CENVAT Credit Rules, 2004 - the said judgment was carried in SLP before the Apex Court which was dismissed in the case of UNION OF INDIA & OTHERS VERSUS M/S. HINDUSTAN ZINC LTD. [2014 (5) TMI 253 - SUPREME COURT]. There is no requirement for reversal of CENVAT credit - appeal dismissed - decided against Revenue.
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2018 (6) TMI 176
Penalty on partner - bogus invoices without supply of the goods to 15 manufacturers/traders in NCR - whether penalty can be imposed on the partner when the main firm has been penalized? - Held that:- The appellant was fully and deeply involved in the fraud of issuing of bogus invoices by M/s Isha Enterprises. This is evident from the detailed statements of Sh. Gulshan Bhatia, the main partner, describing the modus operandi adopted by them to issue such bogus invoices without supply of any goods to 15 manufactures/traders in NCR and sending the goods to some other parties without any bills - the appellant has not only admitted his culpability in the statement dt. 15.02.2011, but also had knowledge of everything and owned up his responsibility in the statement and volunteered to deposit Rs. one crore to compensate revenue loss. The statements of appellant and other partners have not been retracted at any stage. Since the appellant had a crucial role in the offence with the assistance of the other partners and was actively involved in the fraud, imposition of penalty is justified in the facts and circumstances of the case - appeal dismissed - decided against appellant.
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2018 (6) TMI 175
Valuation - apportionment/amortization of costs - apportioning the cost of patterns to assessable value of castings made from patterns - captive consumption of tools for which tooling costs received - CBEC in Circular dt. 23.01.1996 - Department alleged that the element of cost of tooling had not been included and apportioned in the assessable value of their final products - Held that:- The issue of apportioning the cost of patterns to assessable value of castings made from patterns was considered by CBEC in Circular dt. 23.01.1996, where it was laid down that the proportionate cost of pattern has to be included in the assessable value of the casting even in cases, where such patterns are being supplied by the buyers of the casting or are got prepared/manufactured by the job workers at the cost of the buyer. The issue of apportionment of the cost of moulds and dies, where the use of moulds and dies is spread over long period was dealt by this Tribunal in the case of Flex Industries Ltd. [1997 (1) TMI 173 - CEGAT, NEW DELHI], wherein this Tribunal after considering the aforesaid Board’s Circular dt. 23.01.1996 has held that the conclusion arrived at by the lower authorities that entire value of the cylinders is to be added to the value of printed pouches manufactured during the relevant period without reference to the expected life and capability of the cylinders has to be set aside and the matter has to be considered afresh by the respective adjudicating authorities. There is an element of surmise or presumption in the order of the Commissioner (Appeals), wherein he says that even they have not paid 50% of the duty in the above period of six years and on that basis, without testing the assertions made by appellants in their submissions and documentation before him, concludes that amortization was done incorrectly - the stand of the Commissioner (Appeals) that the appellants should have amortized the entire cost of tools by taking into account the ordered quantity of the goods appears to be fallacious. Appeal allowed - decided in favor of appellant.
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2018 (6) TMI 174
Refund of excess Excise duty paid - unjust enrichment - finalization of provisional assessment - Section 11B of the Central Excise Act - Revenue has argued that even in the case of provisional assessment finalization, refund can be granted only subject to the test of unjust enrichment. Held that:- An identical issue came up before the Tribunal in the case of Indian Telephone Industries [2016 (11) TMI 14 - CESTAT BANGALORE] where it was held that adjustments at the time of finalization of provisional assessments would be permissible without putting the excess duty paid to the test of unjust enrichment - refund allowed - appeal dismissed - decided against Revenue.
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CST, VAT & Sales Tax
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2018 (6) TMI 173
Clarification for the rate of tax - "Ready Mix Concrete - supply to SEZ - TNVAT Act - Held that:- It is clarified that "Supply of Ready Mix Concrete to SEZ" is exempted from tax as per the terms and conditions laid down in G.O. Ms.No.193 dated 30.12.2006.
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