TMI Tax Updates - e-Newsletter
September 4, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Government waived the late fee for late filing of FORM GSTR-3B, for the month of July - Notification
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Income Tax:
Rate of TDS - payment to non residents - @25% u/s 206AA in the absence of PAN or 10% as per DTAA - where the tax has been deducted on the strength of beneficial provisions of DTAA, provisions of section 206AA of the Act cannot be invoked by the Assessing Officer to insist that the tax deduction should be @ 20%
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Income Tax:
Penalty U/s 272A(2)(c) on bank - delay in furnishing information under the various codes asked by issuing notice by the ITO - non-compliance was not willful but it was due to lack of required infrastructure and man power - no penalty.
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Customs:
Classification of goods - “Tail Brush FIRC” - Parts of Tunnel Boring Machine (TBM) - it would be covered under Chapter Heading 8431 and under its sub-headings 8431 4310 or 8431 43 90.
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Customs:
Classification of the imported vehicles - Sportsman Forest Tractor - it can accommodate only one person i.e. driver of the vehicle - The vehicles are rightly classifiable under 8701 2010
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Customs:
Maintainability of appeal - Section 9C of the Customs Tariff Act - ADD - As the Central Government did not determine imposition of ADD, no appeal could be considered against the finding of the Designated Authority
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Corporate Law:
Insolvency and Bankruptcy Code, 2016 - its applicability when in conflict with state act - the Maharashtra Act cannot stand in the way of the corporate insolvency resolution process under the Code. - SC
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Service Tax:
Rule 6A (1) read with Section 6A (2) of the ST Rules, insofar as it seeks to describe export of tour operator services to include non-taxable services provided by tour operators, is ultra vires the FA and in particular Section 94(2) (f) of the FA and is, therefore, invalid. - HC
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Service Tax:
Reverse charge mechanism - The act of deduction of an amount as charges for transfer of the foreign exchange to the Indian bank from the sale proceeds of the appellant is only a facility for collecting such charges from the Indian bank - appellant cannot be treated as service recipient and no Service Tax can be charged
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Service Tax:
Business of Photography - The appellants were paying service tax of 25% of the gross value of services and discharging VAT on the balance amount - there is no allegation by the department that 25/75 ratio of Service Cost to Material Cost being followed by the appellants is incorrect - valuation sustained.
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Service Tax:
SSI exemption upto 10 lakhs - Notification 6/2005-S.T. - brand name - The contention that when the service recipient is the owner of brand name then how can the Noticee use the same brand name for providing service to the owner of the brand, also deserves acceptance on merits.
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Service Tax:
Construction service or girls hostel - The hostel for girls can neither be covered under the category of Commercial Construction nor under the category of Residential Complex - demand of service tax set aside.
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Central Excise:
Manufacture - the bulk LLP/HLP in tankers was filled by the appellants in drums and sold to the customers - LLP/HLP cannot be considered as either lubricating oils or lubricating preparations.
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Central Excise:
CENVAT credit - whether the Cenvat credit in respect of service tax paid on services received at Depot by the appellant are admissible? - Held Yes
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VAT:
Classification Mileage Drinking Powder - By eating these products, hunger of a person does not come to an end and, therefore, to say that it is an eatable product, as claimed by the Revenue, is not well reasoned - Merely because these products supplies some nourishment or sustenance, it cannot be said to be an eatable product - HC
TMI Short Notes
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (9) TMI 124
Reassessment u/s 147 - Notice for income escapement u/s 148 beyond 4 years – Barred by limitation - reasons to believe - Held that:- SLP dismissed. HC order confirmed. [2013 (7) TMI 317 - DELHI HIGH COURT] notices under Section 148 have all been issued beyond the said period of six years. Therefore, we are of the view that the said notices are time barred-notices under Section 148 of the said Act are set aside and so, too, are all the proceedings pursuant thereto, including the assessment orders that have been passed – Decided in the favour of the assessee.
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2017 (9) TMI 123
Penalty u/s 271(1)(c) - Whether under Section 271(1)(c) as it stood prior to the insertion of Explanation 5, levy of penalty is automatic if return filed by the assessee under Section 153A of the Act discloses higher income than in the return filed under Section 139(1)? - Held that:- As decided by HC [2017 (2) TMI 1002 - DELHI HIGH COURT] once the assessee files a revised return under Section 153A, for all other provisions of the Act, the revised return will be treated as the original return filed under Section 139. When the A.O. has accepted the revised return filed by the assessee under Section 153A, no occasion arises to refer to the previous return filed under Section 139 of the Act. For all purposes, including for the purpose of levying penalty under Section 271(1)(c) of the Act, the return that has to be looked at is the one filed under Section 153A. As for the relevant assessment years, 2005-06 & 2006-07, no material was recovered during the search. Rather, the assessee added ₹ 21,65,932/- in the return filed pursuant to notice under section 153A. That amount was not relatable to any sum recovered or article seized. Therefore, the question of adding or not adding amounts after the search and falling within the mischief of Explanation 5 to Section 271 (1) (c) cannot arise in the facts and circumstances of this case. The Special Leave Petition is dismissed leaving the question of law open.
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2017 (9) TMI 122
Expenses incurred for replacement of membrane cells-II - nature of expenditure - revenue v/s capital expenditure - rule of consistency as Revenue itself treated such expenditure as revenue expenditure - Held that:- As decided by HC [2015 (2) TMI 118 - GUJARAT HIGH COURT] the attempt to contend that life of membrane would be spread over from 3 to 5 years or that the amount involved for replacement of membrane is huge and, therefore, the departure on the part of the Revenue could be said as justified, in our view, cannot be countenance for two reasons. One is that the amount involved would not make difference for chargability of the tax but the nature of expenditure would be relevant for the chargability of tax. It hardly matters whether the amount is more or less. Further, on the aspect of life of the membrane, nothing is referred to by the A.O. nor by C.I.T. (Appeals) that earlier, such aspect, namely, life of the membrane spread over from 3 to 5 years was not considered or it had missed or otherwise. - Decided in favour of the Assessee.
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2017 (9) TMI 121
Reopening of assessment - reopening was after the expiry of 4 years from the end of the relevant AY - Sanction for issue of notice u/s 151 - whether a scrutiny assessment was made? - Held that:- It is not understood how from the records available for AY 2006-07 it was not clear whether a scrutiny assessment was made. The records obviously would have contained the order of the AO under Section 143 (3) of the Act. If, as is the case, there was no such order then clearly the only conclusion to be drawn was that the return was processed under Section 143 (1) of the Act. Since it is not the case of the Department that the file for AY 2006-07 went missing, as was the case for AY 2005-06, the above statement in the counter affidavit filed on 9th September 2014, more than a year after the reopening, is inexplicable. At the highest, the note prepared by the AO should have been candid in Column 8 that it was not clear whether the assessment was being made for the first time or not. That, at least, would have told the Court that the AO had applied his mind to the facts of the case. In any event, if such a note had been put up to the Addl. DIT and thereafter to the DIT, either of those officers could have applied their minds and ascertained if indeed the return was processed under Section 143 (1) of the Act or picked up for scrutiny. The explanation now offered in the counter affidavit only underscores the non-application of mind at all three levels in the Department.
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2017 (9) TMI 120
Reopening of assessment - reopening was after the expiry of four years from the end of the relevant AY - mandatory requirement under Section 151(2) - necessary approval - Held that:- Where the original assessment is processed under Section 143 (1) of the Act, and the reopening is sought to be done after the expiry of four years from the end of the relevant AY, the mandatory requirement under Section 151 (2) of the Act is that the approval for the reopening of the assessment should be by an officer of the rank of the Joint Commissioner (in this case, the Addl. DIT) and not other officer including a superior officer. The argument that the approval by an officer superior to the Joint Commissioner will satisfy the requirement of Section 151 (2) of the Act, was categorically negated by this court in the aforementioned decision in SPL’s Siddhartha Ltd. [2011 (9) TMI 640 - DELHI HIGH COURT] No hesitation in concluding that in the present case, the mandatory requirement under Section 151 (2) of the Act, as it stood at the relevant time, has not been fulfilled and therefore, the reopening of the assessment for the AY 2005-06 by the impugned notice is bad in law. For the aforementioned reasons, the notice dated 28th March 2012 issued by the AO to the petitioner under Section 148 of the Act and the order dated 25th January 2013 passed by the AO rejecting the Petitioner’s objections thereto are hereby quashed. - Decided in favour of assessee.
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2017 (9) TMI 119
Guilty of criminal contempt of court - making allegation against the revenue counsel - failure to prove its allegations - Held that:- After the respondent’s intervention application was rejected on 23.09.2008, his continued engagement in communication with the standing counsel for levelling allegations against them, addressing e-mail directly to this Court and placing on record an affidavit detailing the allegations, even after stating that he will withdraw them vis-a-vis the standing counsel but would nevertheless press the same allegations elsewhere constitutes criminal contempt of court. Mr. Gupta has levelled irresponsible and serious allegations against the counsel for the Revenue, including an application to the Chief Judicial Magistrate seeking to register a case against the standing counsel for the Revenue as recorded in the order dated 03.03.2015. The respondent has chosen to represent these proceedings in person despite having been given the assistance of a Senior Advocate as Amicus Curiae. The respondent has resiled from his various undertakings. He fully understands the import of these proceedings and is open to the consequences of the same. The actions of the respondent may well have been impelled by his conviction of self-righteousness, however, such delusion as may be, would not mitigate the ill-effects of his deliberate actions which the Court finds to be contumacious. He would, therefore, have to be held responsible for the same. The Court is of the view that the conduct of the respondent, insofar as he has leveled baseless allegations against counsel who appeared and assisted the Court and as well as for the other reasons specified in the Show Cause Notice, tantamount to substantial interference in the administration of justice. In the circumstances, the respondent Mr. Rakesh Kumar Gupta is found guilty of criminal contempt of court. He is sentenced to simple imprisonment of one week along with a fine of ₹ 2000/-. The fine shall be deposited within one week from today in this Court in the name of Registrar General, failing which he will undergo further simple imprisonment for seven days. In view of the fact that the contemnor has stated that he will prefer an appeal against the sentence, the same is suspended for 60 days, in order to enable the contemnor to prefer a statutory appeal, in accordance with law. If the order is not modified, the same shall come into effect after 60 days from today and the contemnor shall be taken into custody and sent to Tihar Jail to undergo the sentence imposed herein. A copy of this order has been provided to the contemnor, Mr. Rakesh Kumar Gupta.
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2017 (9) TMI 118
Eligibility for deduction under Section 80HHE - television news software produced and exported by the Assessee outside the country - whether it is customized electronic data eligible for deduction under Section 80 HHE - Held that:- . The expression ‘any customized electronic data’ is preceded by the disjunctive ‘or’ which clearly indicates that any customized electronic data would also be considered to be ‘computer software’ under the inclusive part of the definition. The principle of ejusdem generis will not apply in the instant case particularly in the context under which this provision was introduced. Circular No. 772 dated 23rd December 1998 explained the rationale behind introduction of these words. It acknowledged that “software exports have grown exponentially in recent years” and there was need to increase India’s market share in the international arena. Therefore, the expression ‘any customized electronic data’ requires a liberal interpretation. The amendment to clause (b) of the Explanation makes it more explicit. Section 80HHF (1) now envisages computer software including television news software. Therefore, the position for the AY 2000-01 onwards is not in doubt. Assessee has been able to demonstrate that the television news software produced by it for the AY in question was indeed ‘customized electronic data’ which was exported from India to a place outside India. The entire process of making the programmes was to meet the requirement of STAR TV during the AY in question and the use of several software programmes for such production was sufficient to enable the ITAT to conclude in favour of the Assessee. - Decided in favour of the Assessee and against the Revenue
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2017 (9) TMI 117
Disallowance of “other expenses (administrative expenses) as loss on Amritsar Project” written off in the books - Held that:- Subsequent to the AY 2010-11 nothing new happened giving rise to a cause of action in favour of the assessee to write off the so called cost/expenditure/ loss treating it as bad debt. We, therefore, have no hesitation to hold that the Assessing Officer is perfectly justified in reaching the conclusion that the amount of ₹ 64,72,52,645/- written off under the head “other expenses (administrative expenses) as loss of Amritsar project” written off was disallowable as the same does not relate to the AY 2012-13. In view of this conclusion, we deem it not necessary to deal with the nature of expenditure. On this premise, we confirm the orders of the authorities below and also the addition. - Decided against assessee. Addition u/s 14A - contention of no exempt income - Held that:- CIT vs. Holcim India Pvt. Ltd. (2014 (9) TMI 434 - DELHI HIGH COURT) wherein it was held that Section 14A cannot be invoked when no exempt income was earned. On this aspect it is not the case of Revenue that the assessee earned any exempt income. We, therefore, while respectfully following the decision in CIT vs. Holcim India P. Limited (supra) direct the AO to delete the addition of ₹ 2,84,430/- on account of invocation of Section 14A of the Act read with Rule 8D of the Rules. Decided against revenue
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2017 (9) TMI 116
Addition u/s 68 - onus of proving the claim - Held that:- It is well settled law that onus of proving the claim is initially on the assessee but the burden shifts on the A.O. when the assessee discharged its primary onus. In the present case, the assessee had fully discharged its primary onus by submitting the relevant and cogent evidences before A.O. to establish the genuineness of the transaction in the matter. The A.O. however, did not do so anything in the matter and has not pointed out how the claim of assessee was factually incorrect. Simply because the share applicant company did not have sufficient income would not prove the case of the A.O. because the share applicant company has huge worth to make investment in assessee-company. The assessee thus, proved the identity of share applicant, its creditworthiness and genuineness of the transaction in the matter. - Decided in favour of assessee.
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2017 (9) TMI 115
Penalty u/s 271(1)(b) - alleged breach or non-compliance - failure to comply with the 2 statutory notices/date fixed for hearing - Demand in the quantum proceedings reduced to “nil” - Held that:- It is seen that nowhere the Assessing Officer has mentioned about any particulars of statutory notice/s for which there was any default on part of the assessee. Failure to comply with certain notices on a particular date was due to reasonable cause as highlighted by the assessee not only during the course of the assessment 8 proceedings but also before the Assessing Officer and Learned CIT(Appeals) in the impugned penalty proceedings and hence penalty cannot be levied in such circumstances. Demand in the quantum proceedings has been reduced to “nil”, after giving effect to the first appellate order and there has been no substantive non-compliance either during the course of the assessment proceedings or during the appellate proceedings. In such circumstances such an alleged breach or non-compliance is mere technical and venial in nature and therefore, penalty should not be levied for such venial breach. Accordingly, the levy of penalty of ₹ 20,000/- u/s 271(1)(b) for all the assessment years is unsustainable for the reasons given above and is directed to be deleted. Thus, grounds raised by the assessee are allowed.
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2017 (9) TMI 114
Reopening of assessment - addition u/s 115JB and directed to levy tax @30% and not @10% - Held that:- Reopening has been made on perusal of the schedule P under the head other income. The original assessment u/s 143(3) of the Act was completed on 15.10.2009 at an income of ₹ 4096000/- in the original return of income. The assessee has shown the total income of ₹ 31323000/- and out of which ₹ 27227000/- as transfer of IEDC and ₹ 4096000/- was offer for taxes @ 10%. The claim of the Revenue is that the assessee should have offered the entire sum of ₹ 2727272000/- as total income of the assessee as interest income. However, in the assessment proceedings only ₹ 4096000/- was made. In view the above we carefully considered the orders of the lower authorities and we are of the view the above addition of ₹ 4096000/- u/s 115JB of the Act would required to be deducted tax @10% only. In view of this appeal of assessee is allowed.
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2017 (9) TMI 113
Addition on account of arm’s length price - adjustment on account of cost allocation in respect to shared services from AE - comparability - comparable selected are operating since long and the assessee is in the initial stages of operation - Held that:- The assessee has pointed out specific instances which were not considered by the ld. CIT(A) and certain informations relating to comparables which were available at the time of preparing the TP study were not later on available and furnished to the ld. CIT(A), but those were not appreciated in right perspective. Moreover, from the submissions of the assessee before the ld. CIT(A) as discussed in the former part of this order, it is clear that the comparables selected by the TPO were operating since long and the assessee is in the initial stages of its operation then considerable adjustments has to be made to the operating expenses in order to give due leverage to the contribution of income to the fixed cost so as to bring it at the level playing field with the comparables. In view the decision in case of MGE UPS System India Pvt. Ltd. Vs DCIT, Circle-6(1), New Delhi (2016 (5) TMI 1387 - ITAT DELHI) deem it appropriate to set aside this case back to the file of the AO/TPO to be decided afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee. Appeal of the assessee is allowed for statistical purposes.
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2017 (9) TMI 112
Allocation of the expenses while determining the arm’s length price - allocation of expenses under the head manufacturing and other expenses in the profit and loss account to the trading segment and the addition on account of difference in the arm’s length price - Held that:- In the present case, it is an admitted fact that the allocation of the expenses while determining the arm’s length price also included some direct expenses e.g. depreciation, consumables and wages etc. which were related only to the manufacturing segment. So those expenses cannot be allocated to another segment i.e. trading segment. We, therefore, remand this issue back to the file of the TPO/AO for proper allocation and determining the arm’s length price. Accordingly, the directions given by the ld. DRP are modified to this extent that expenses which are directly related to the manufacturing activity are to be excluded from the list of the total expenses to be allocated to the trading segment on the basis of turnover ratio.
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2017 (9) TMI 111
Rectification of mistake u/s 154 - income from other sources cannot be set off from brought forward losses and the same was not allowable - assessee filed NIL return of income - Held that:- The brought forward losses of depreciation of earlier years can be set off from the income from other sources, the assessee has shown other income of ₹ 12,184,164/- as stated under different heads. The assessee has justified before the Ld. CIT(A) regarding lease rent income of ₹ 10,718,878/- and misc. Income of ₹ 456,688/- reasons for showing under the head other income of the balance sheet which cannot be controverted by the Ld.DR, unabsorbed depreciation and carry forward of losses is governed u/s 32(2) and S.72(2) of the Act. Order of Ld. CIT(A) does not require any interference with regard to carry forward and setting off unabsorbed depreciation of earlier years, the assessee had rightly claimed for setting off the unabsorbed depreciation from the income from other sources. We uphold the order of Ld. CIT(A) and passing of order u/s 154 by the A.O. is not justified because there is no mistake apparent on record. Therefore we dismiss the appeal of the Revenue.
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2017 (9) TMI 110
Credit of municipal taxes paid under the had income from house property denied - Held that:- AR has demonstrated through documents submitted before the Assessing Officer that the municipal tax was paid by the assessee which is through the bank account of the assessee paid through its proprietor firm only. Therefore, Ground is allowed in favour of assessee. Addition u/s 14A - Assessing Officer made disallowance holding that some expenditure must have been incurred. - Held that:- Assessing Officer has not made any effort to record his findings as to why the claim of the assessee that no expenditure was incurred was not correct and made disallowance just by holding that some expenditure must have been incurred. Judgment of CIT Vs. Taikisha Engineering India Ltd. [2014 (12) TMI 482 - DELHI HIGH COURT] is applicable and no disallowance is warranted as it held that the Assessing Officer at the first instance must examine the disallowance made by the assessee or the claim of the assessee that no expenditure was incurred to earn the exempt income. If and only if the Assessing Officer is not satisfied on this count after making reference to the accounts, that he is entitled to adopt the method as prescribed i.e. Rule 8D of the Rules. Thus, Rule 8D is not attracted and applicable to all assessee who have exempt income and it is not compulsory and necessary that an assessee must voluntarily compute disallowance as per Rule 8D of the Rules. Also we find that the assessee was holding shares as stock in trade and not as investments as is apparent from the balance sheet of the assessee, therefore, disallowance u/s 14A was not warranted. - Decided in favour of assessee.
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2017 (9) TMI 109
Cost of acquisition of the assets - acquisition of assets registered in the name of the assessee and his wife - entitlement to indexation benefit - Held that:- The property was booked in the name of the assessee jointly with her wife in the FY 2008-09 and the substantively amount of the cost of property were also paid to vendors. Annual property has got registered in the FY 2003-04 effect to the issue for giving indexation benefit to the assessee because the substantial value of the property had already been paid at the time of booking of the capital assets. The Tri-party Agreement was also made with the ICICI bank at the time of sanctioning of the loans for the purchase/construction of the plot and the loan amount was directly paid to the vendors. In totality of the facts and circumstances of the case and considering the order of the lower authorities and submissions of the assessee, the assessee is entitled for the indexation benefit from the FY 1999-2000 and onwards in respect of interest paid to the banks in respect of his share in the property. Therefore, this ground is allowed in favour of the assessee. Addition on the car running expenses restricted to 10% During the scrutiny proceedings - Held that:- the AO asked for the log book but the assessee submitted that no log book has been maintained. Therefore, the estimation made by the AO and restriction made upto 10% by the Ld.CIT(A) is justifiable. Once the AO or appellate authority raised certain queries and the assessee failed to properly respond the same, the authorities below were quite justified to disallow the expenditure, keeping in view the nature & size of assessee’s business and other attending facts & circumstances of the case. - Decided partly in favour of assessee.
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2017 (9) TMI 108
Disallowance u/s 14A r.w.r. 8D - interest towards investments made in the Fund - Held that:- As balance sheet indicates the assessee’s net worth at ₹ 70.85 crore. As against the shareholders’ fund of this magnitude, the assessee made investment in the Fund, yielding exempt dividend income, only to the tune of ₹ 1.00 crore and odd. This shows that investment in Funds is much less than the assessee’s shareholder’s fund. The Hon'ble Karnataka High Court in CIT & Anr vs. Microlabs (2016 (4) TMI 219 - KARNATAKA HIGH COURT) has held that when investments are made from common pool and non-interest bearing funds are more than the investment in tax free securities no disallowance of interest expenditure u/s 14A can be made. Disallowance being ½% of the average value of investment - Held that:- As the assessee suo motu offered disallowance of ₹ 25,003/- u/s 14A in its return of income. This factual finding recorded on page 19 of the impugned order has not been controverted by the ld. DR. If the assessee offered disallowance of this magnitude, then naturally the total amount of disallowance u/s 14A ought to have been reduced with the amount already offered by the assessee. In the given circumstances, we sustain the disallowance u/s 14A read with Rule 8D(2)(iii) for a sum of ₹ 46,361/- (Rs.71,364/- (-) ₹ 25,003/-). Addition on account of downward sales adjustment - As in the immediately preceding year tribunal upheld the deletion of addition except for reconciliation difference, which, in the preceding year, was ₹ 1.15 crore and in the current year is ₹ 7.45 lac. In the absence of any distinguishing facts having been brought to our notice either by the assessee or by the Department, respectfully following the precedent, we order for the deletion of addition of ₹ 3.20 crore and remit the matter to the Assessing Officer as regards reconciliation difference amounting to ₹ 7.45 lac to be decided in conformity with the view canvassed in the preceding year pursuant to the order passed by the Tribunal. Addition on account of interest - Held that:- AR has brought to our notice that such amount was suo motu added by the assessee in its computation of total income for the immediately succeeding year, namely, A.Y. 2011-12. It was submitted that a direction may be given to delete such suo motu addition. In view of the fact that we have upheld the addition of ₹ 55,92,096/- and ₹ 12,828/- in the instant year, if these amounts were, in fact, suo motu added by the assessee in the computation of total income for succeeding year, then, the same should be deleted. We direct the Assessing Officer to verify the assessee’s contention in this regard and, if the same is found to be true, then, the corresponding relief should be given in the assessment of the succeeding year.
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2017 (9) TMI 107
Rate of TDS - payment to non residents - @25% u/s 206AA in the absence of PAN or 10% as per DTAA - Sec.206AA overrides the provision of sec.90(2) or not - Held that:- Where the provisions of section 206AA of the Act cannot override the provisions of charging sections 4 and 5 of the Act and also where under section 90(2) of the Act, it is provided that DTAAs would override domestic law, in cases where the provisions of DTAAs are more beneficial to the assessee. Hence, the same would also override the charging sections 4 and 5 of the Act. Interpreting the provisions of the Act, therefore, where the tax has been deducted on the strength of beneficial provisions of DTAA, provisions of section 206AA of the Act cannot be invoked by the Assessing Officer to insist that the tax deduction should be @ 20%. Accordingly, since the assessee had received PAN number, it was obliged to pay the taxes as per DTAA i.e. @ 10% of the payment received and if the payee had deducted the tax @ 20% under section 206AA of the Act but the provisions of DTAA being more beneficial had to be applied. - Decided in favour of assessee.
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2017 (9) TMI 106
Deduction under section 36(1)(viia) - provision for bad and doubtful debts - assessee claimed deduction u/s 36(1)(viia) at 10 per cent. of the average agricultural advances made by its rural branches - CIT-A allowed the claim - Held that:- In the present case, the Assessing Officer himself admitted in the assessment order at page No. 3 that the assessee had claimed deduction under section 36(1)(viia) of the Act at ₹ 105,69,80,000 which is 10 per cent. of the aggregate rural advances of the bank. The aforesaid claim was allowable to the assessee as per the ratio laid down in the aforesaid referred to cases of Southern Technologies Ltd. v. Joint CIT [2010 (1) TMI 5 - SUPREME COURT OF INDIA] and Catholic Syrian Bank Ltd. v. CIT [2012 (2) TMI 262 - SUPREME COURT OF INDIA]. The impugned order passed by the Commissioner of Income-tax (Appeals) is in consonance with the observations made by the Income-tax Appellate Tribunal "F" Bench, New Delhi having the same combination in the assessee's own case for the assessment year 2009-10 i.e., Prathma Bank v. CIT [2016 (12) TMI 56 - ITAT DELHI]. We, therefore, considering the totality of the facts as discussed hereinabove, do not see any valid ground to interfere with the findings given by the learned Commissioner of Income-tax (Appeals). - Decided against revenue.
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2017 (9) TMI 105
TDS u/s 194H - assessee sold RTL products to the end users through retailers at a discounted price on the MRP - disallowance u/s 40(a)(ia) - AO treated the discount allowed to the retailers as commission - Held that:- The assessee i.e. the distributor M/s. Dhruba Communication, records the sales to the retailers at a discounted rate which is below the MRP. This is the rate at which the sale is made. There is no payment of the differences between discounted rate and the MRP by the retailer to the distributor or vice versa. This quantum of discount from the MRP has never been claimed as expenditure by the assessee in its books of account. Under these circumstances, we are of the considered opinion that no disallowance can be made under section 40(a)(ia). When nothing is claimed as a deduction under sections 30 to 38 of the Act or in the computation of income no disallowance can be made under section 40(a)(ia) of the Act. In the instant case, the impugned amount of discount of ₹ 71,42,777 over the gross value of RTL products sold/supplied by the assessee to the 110 retailers has not been claimed as deduction by the assessee under sections 30 to 38 of the Act. Hence, the question of making any disallowance or adding back of the said discount to the income of the assessee under section 40(a)(ia) of the Act does not arise. - Decided in favour of assessee.
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2017 (9) TMI 104
Nature of expenditure - revenue or capital - cost reimbursement as well as transfer pricing - whether cost reimbursement agreement between the assessee and the parent company of the assessee was only an afterthought and there is no presumption that every reimbursement of expenditure would be capital in nature? - Held that:-Though it is contended by the Revenue that the cost reimbursement agreement was not produced before the Assessing Officer, the fact remains that paragraph No. 4.3(i)(e) of the assessment order refers to such an agreement. Therefore, it is beyond any doubt that though claimed the expenditure and debited to the profit and loss account the sums of ₹ 13,22,53,000 spent for acquisition of business and a sum of ₹ 5,65,90,030 the expenditure which is allegedly reimbursable, during the assessment year 2011-12, the assessee voluntarily withdrew such claim in the revised computation of income and offered the same for tax. Whether or not the sum of ₹ 13,21,53,000 was capital expenditure, the fact remains that no deduction was claimed and tax was paid on it. Coming to the contention of the Revenue that the said amount was shown as revenue expenditure in the earlier year, it is patent to note that the revised computation for the assessment year 2011-12 was filed on May 25, 2012 i.e., subsequent to the cost reimbursement agreement that is to be found it page Nos. 63 to 64 of the paper book. All this is much earlier to the assessee filing their return of income for the assessment year 2012-13 on November 27, 2012. Therefore, it cannot be said that it is an afterthought for the assessee to put forth the prior period expenses in the current year. It is borne out by the record that by the date of the revised computation and the filing of the return for the assessment year 2012-13, the revised computation for the assessment year 2011-12 was filed, wherein the claim for deduction of ₹ 18,63,61,346 was withdrawn. Therefore, we are not inclined to accept the contention of the Revenue that the assessee is trying to camouflage the earlier year revenue expenditure as current year's capital receipt. At the same time we are also not inclined to believe that the assessee is guilty of suppressing the best evidence available in their custody and withheld it from producing before the Assessing Officer as contended by the learned Departmental representative basing on section 114(i)(g) of the Evidence Act. In view of the undisputed fact that a sum of ₹ 18,63,61,346 was offered to tax though it was originally debited to the profit and loss account during the assessment year 2011-12, and because of the cost reimbursement agreement between the assessee and the parent entity on May 18, 2012 pursuant to which a sum of ₹ 13,21,53,000 and ₹ 5,44,13,490 was credited to the profit and loss account, we hold that the assessee has rightly deleted the said amounts from computation of income for the assessment year 2012-13 though the same was credited to the profit and loss account. It is only an adjustment of book entries and there is no real income for the assessment year 2012-13. However, the sum representing the 4 per cent. of mark-up as per the transfer pricing agreement to a tune of ₹ 21,76,540 is revenue in nature and the income of the assessee during the assessment year 2012-13. Therefore, the additions of ₹ 13,21,53,000 and ₹ 5,44,13,490 are liable to be deleted, whereas the sum of ₹ 21,76,540 has to be sustained. We, therefore, direct the Assessing Officer to delete ₹ 13,21,53,000 and ₹ 5,44,13,490 while sustaining the addition of ₹ 21,76,540. - Decided partly in favour of assessee.
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2017 (9) TMI 103
TPA - comparability - selection procedures - Held that:- Assessee carries on information technology enabled services [ITes] in the form of research activities according to the terms of its agreement with its associated enterprises which is driven by business information, market research and intellectual property research, thus companies functionally dissimilar with that of assessee need to be deselected from final list of comparable.
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2017 (9) TMI 102
Penalty u/s 271(1)(c) - inaccurate particulars of income or concealment of income - Held that:- Assessing Officer while completing the assessment has not recorded the satisfaction and has not initiated the penalty proceedings. Similarly, at the time of imposing the penalty under section 271(1)(c) of the Act, the Assessing Officer has levied the penalty, but did not mention under which limb the penalty has been imposed whether it is on account of inaccurate particulars of income or concealment of income. Therefore, the entire penalty proceedings stand vitiated. - Decided in favour of assessee.
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2017 (9) TMI 101
Penalty U/s 272A(2)(c) - delay in furnishing information under the various codes asked by issuing notice by the ITO (Intelligence), Kota U/s 133(6) - reason for non-compliance - Held that:- ITO (Intelligence), Kota asked the information from the branch by issuing notice U/s 133(6) of the Act. During this relevant period, there was no permanent posting of Branch Manager in that branch. The branch was not having adequate software to compile such information to be provided in compliance of notice U/s 133(6) of the Act. The facts of the case also suggest that the non-compliance was not willful but it was due to lack of required infrastructure and man power. During the period, such difficulties were being faced by the branches located in the remote areas of Jhalawar district. Therefore, in my considered view, the non-compliance was due to reasons beyond the control of the persons to whom the notices were issued. It was also stated during the hearing that there is no noncompliance of any notice subsequent to these notices. The notices issued subsequently have been complied with in time. Direct to delete the penalty levied U/s 272A(2)(c) of the Act for all the years under appeal. - Decided in favour of assessee.
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2017 (9) TMI 100
Reopening of assessment - no notice under section 143(2) having been issued - non-compliance with section 163(2) - no opportunity of being heard was provided to people holding power of attorney on behalf of the assessee - protective addition in hands of power of attorney - Held that:- Since the beginning of the proceeding on January 28, 2015 nothing has been brought on record to prove that any such opportunity of being heard was provided to Shri Muzarraf Shah and Shri Akram Shah who were holding power of attorney on behalf of the assessee. This is a clear non-compliance with section 163(2) of the Act. AO has made protective addition in the hands of both the agents namely Shri Muzarraf Shah and Shri Akram Shah at ₹ 16,63,000 and no substantive addition has been made. For a protective addition to stand for, there has to be a substantive addition. Assessing Officer has proceeded in this matter in a haste and without complying with the necessary provisions of law and not providing any opportunity of being heard by merely observing that he had no other option except to pass the order u/s 144 as the matter was getting time barred. We are of the considered opinion that limitation of time in the hands of the Assessing Officer to frame the assessment cannot give him the power to make high pitched assessment without providing proper opportunity of being heard and not complying with the necessary provisions of the Act. We are therefore, of the view that the order passed under section 144/147 is not valid and needs to be quashed. - Decided in favour of assessee.
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2017 (9) TMI 99
TPA - comparable selection - admission of additional ground - Held that:- Merely making a reference about their functional dissimilarity without pointing out specific functional dissimilarity in the function of the assessee vis-a-vis comparable prima facie, the assessee cannot be allowed to resile from the comparables selected by it. This shows that the assessee has taken the Government machinery for a ride for 11 years. Therefore the claim of the assessee for admission of additional ground is on weak footing except that the assessment year involved is the assessment year 2006-07 which is very near to the assessment year (AY 2004-05) for which the appeal is decided by the Special Bench in Deputy CIT v. Quark Systems P. Led. (2009 (10) TMI 591 - ITAT, CHANDIGARH ), holding that those were the initial years of transfer pricing assessments. The co-ordinate Bench has not laid down a law that anytime and every time the assessee can resile from a comparable. Therefore, after pointing out the above facts, respectfully following we admit the additional ground of appeal of the assessee in interest of justice. Determination of functional profile of the assessee - high-end service provider or low-end service provider - Held that:- In view of the categorical finding of the co-ordinate Bench for the assessment year 2005- 06 based on the transfer pricing study report of the assessee itself now it is not possible to assume the functional profile of the assessee as low-end ITES provider. It is also not possible to ignore the findings of the co-ordinate Bench for the assessment year 2007-08 further the appeal before us is the assessment year 2006-07 which is in between the year of both the above years decided by the co-ordinate Bench. The two comparables objected by the assessee also cannot be directed for its exclusion without reaching at the correct functional profile of the assessee. Therefore, in the interest of justice and to dig out the correct functional profile of the assessee amidst host of confusion, we set aside the whole issue of transfer pricing adjustment back to the file of the learned Assessing Officer/Transfer Pricing Officer for ascertaining the correct functional profile of the assessee for this year without being influenced by the order of the co-ordinate Bench for the assessment year 2007-08, then carry out examination of comparability analysis and then determine the arm's length price of the international transactions. Needless to say that the assessee shall be duty bound to provide correct functional profile of the assessee and its complete search process and its steppers results to the learned Transfer Pricing Officer/Assessing Officer along with its justification for claim of working capital adjustments or capacity utilisation for examination by the learned Assessing Officer/Transfer Pricing Officer. Whether deduction under section 10A of the Income-tax Act is allowable after setting of brought forward losses of the previous year, or before that? - Held that:- According to us after the decision of the Hon’ble Supreme Court in the case of CIT v. Yokogawa India Ltd. [2016 (12) TMI 881 - SUPREME COURT] issue is squarely covered in favour of the assessee.
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Customs
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2017 (9) TMI 67
ADD - USB flash drives - import from Peoples Republic of China and Taiwan - scope of subject goods under investigation for ADD - appellants submitted that USB flash drives having storage capacity of above 64 GB and USB flash drives of 3.0 specification are not to be included for ADD enquiry - Held that: - the technology is dynamic, we find no reason to make a distinction based on storage capacity to consider USB flash drives into two categories. It is also to be noted that the inter-changability of higher capacity flash drives, if available on competitive price, for low capacity usage also cannot be ruled out. It is not incorrect on the part of the DA to consider such dynamic change in technology and potential threat of like products while examining the case for ADD levy. Similar reasoning can be adopted in respect of flash drives with 3.0 specification. The advancement in technology and the possibility of inter-changeable use and threat to USB flash drive of 3.0 specification, also requires consideration - we find no merit in the objections raised by the appellants regarding treatment of scope of products under consideration by the DA. Principles of Natural Justice - inconsistency in import data - Held that: - the DA did act with deligence while collaborating the data during the course of analyzing the parameters for the need to impose ADD on the subject goods. We also note that many meetings have been held by the DA with interested parties and the aspects of import data have been disclosed and discussed. This is not being denied by any interested party. However, the dispute is relating to disclosure of complete transactionwise details. We find such disclosure is governed by the confidentiality condition put in by the DGCIS. We find the non-disclosure of individual transaction details by itself did not vitiate the proceedings of the DA and adversely affected the interest of the appellants - We find no merit in the points raised by the appellants regarding inconsistency in import data and also violation of principles of natural justice. It is noted that import of subject goods from third countries are negligible and could not have caused injury to the DI. The economic parameters of the DI, the price under selling, price suppression and depression, of the subject goods has been examined in detail for different grades of subject goods starting from 1 GB to 64 GB and others of USB flash drives. The inconsistency in analysis as claimed by the appellants are based on comparison of CYBEX import data and DGCIS import data. As already noted that the DA has mainly relied on the data furnished by DGCIS. As such, we find no merit in the submission of the appellants that the analysis suffered inconsistency because of inconsistency between date of CYBEX and DGCIS. Appeal dismissed - decided against appellant.
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2017 (9) TMI 66
ADD on PVC resin - provisionally assessed and cleared consignments of the respondent during July to September, 2012 - N/N. 15/2013-Cus - N/N. 70/2010-Cus - Held that: - the provisional duty ordered to be continued for six months by the Tribunal is as per the rate applicable on the date preceding the N/N. 70/2010 Cus. - the N/N. 15/2013-Cus is not legally made retrospective and it cannot revive N/N. 70/2010-Cus, which has been set aside - the difference between the provisional duty under AD and provisional assessment for regular Customs duty has not been appreciated by the Revenue while preferring this appeal - appeal dismissed - decided against Revenue.
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2017 (9) TMI 65
Classification of goods - “Tail Brush FIRC” - Parts of Tunnel Boring Machine (TBM) - whether classified under CTH 8431 43 90 or under CTH 9603? - Held that: - Chapter 8431 covers the parts which are suitable for use solely or principally with the machinery of headings No. 8425 to 8430; whereas brooms and brushes (including brushes, which are part of machines and appliances in general). A reading of Chapter 9603 makes it clear that it covers normal brushes which could also be part of certain machines and appliances - there is no dispute that the item imported is specifically suitable for use solely or principally with the Tunnel Boring Machine (TBM). The respondent has specifically mentioned that the item is customised only for Tunnel Boring Machine (TBM) having the specific purpose of shielding the flow into the TBM. Further, it appears that TBM would be covered under Heading 8430 and when the item imported is solely or principally for use as part the TBM, there should not be any doubt that it would be covered under Chapter Heading 8431 and under its sub-headings 8431 4310 or 8431 43 90. The right classification for the subject item would be 84314390 only - appeal dismissed - decided against appellant-Revenue.
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2017 (9) TMI 64
Classification of the imported vehicles - Sportsman Forest Tractor - classified under CTH 87012010 or under CTH 87031090? - The department is of the view that such vehicles are all train vehicles capable of being used not only on road but also in other places like farms, golf course etc. But the claim of the appellant is that the vehicles are constructed essentially for hauling or pushing another vehicle, and satisfy the condition of Note-2 to Chapter 87 and hence classifiable as a Tractor under 8701 - Held that: - Only the vehicles which satisfy the Note-2 to Chapter 87 will merit classification under 8701 whereas heading 8703 will accommodate motor vehicles principally designed for the transport of persons. There is no dispute about the fact that Note-2 to Chapter 87 is satisfied by the imported vehicles. On a perusal of the booklet pertains to the imported vehicles, it is easily seen that it can accommodate only one person i.e. driver of the vehicle. The appellant has submitted copies of the tariff ruling by the U.K. as well as that of the European customs authorities wherein identical goods have been classified under heading 8701 9020 in accordance with the General Interpretation Rules as well as Rule 2 to Chapter 87. It is to be recorded that the Indian Customs Tariff is aligned with the HSN and hence the HSN explanatory notes as well as various decisions in connection with the classification of goods under HSN will have persuasive value. The vehicles are rightly classifiable under 8701 2010 as claimed by the appellant in the Bills of entry - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 63
Maintainability of appeal - Section 9C of the Customs Tariff Act - ADD - AA Dry Cell Batteries - imported from China PR and Vietnam - Held that: - the Government of India, Ministry of Finance, Department of Revenue who is the Competent Authority to impose any ADD on goods in terms of Section 9A, did not issue any order either imposing or reviewing the imposition of ADD on subject goods. Though the DA initiated investigation in terms of the statutory powers conferred on him, on conclusion of the investigation he issued the final findings stating that there is no case for imposition of ADD. Thereafter no order has been passed or notification issued in terms of Customs Tariff Act or the Rules of 1995. The Tribunal in Indian Spinners Association vs. Designated Authority [2000 (6) TMI 54 - CEGAT, COURT NO. I, NEW DELHI] held that the DA is purely a recommending authority. The determination of levy of ADD is by the Central Government. As the Central Government did not determine imposition of ADD, no appeal could be considered against the finding of the Designated Authority - there is no notification in the official gazette. An information obtained under RTI Act cannot be equated to a notification issued under official gazette in terms of exercise of statutory powers vested in the Central Government. There is no determination of ADD levy by notification as published in the official gazette by the Central Government under Rule 18 and, as such, the appeals under Section 9C in the present case are not maintainable - appeal dismissed being not maintainable.
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Corporate Laws
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2017 (9) TMI 57
Grant of relief under Sections 41(1), 45, 72(3) and 115 JB of the Income Tax Act, in compliance with the Scheme sanctioned by the BIFR - Held that:- The petitioner is granted liberty to approach NCLT, Calcutta for appropriate relief, as advised. Liberty is also granted to the respondents to approach NCLT, Calcutta for seeking transfer of such a petition, as and when filed by the petitioner, which shall then be decided in accordance with law.
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Insolvency & Bankruptcy
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2017 (9) TMI 58
Insolvency and Bankruptcy Code, 2016 - its applicability when in conflict with state act - whether State statute prevailing over Parliamentary legislation - restructuring of the corporate debtor - Held that:- the earlier State law is repugnant to the later Parliamentary enactment as under the said State law, the State Government may take over the management of the relief undertaking, after which a temporary moratorium in much the same manner as that contained in Sections 13 and 14 of the Code takes place under Section 4 of the Maharashtra Act. There is no doubt that by giving effect to the State law, the aforesaid plan or scheme which may be adopted under the Parliamentary statute will directly be hindered and/or obstructed to that extent in that the management of the relief undertaking, which, if taken over by the State Government, would directly impede or come in the way of the taking over of the management of the corporate body by the interim resolution professional. It will be noticed that whereas the moratorium imposed under the Maharashtra Act is discretionary and may relate to one or more of the matters contained in Section 4(1), the moratorium imposed under the Code relates to all matters listed in Section 14 and follows as a matter of course. In the present case it is clear, therefore, that unless the Maharashtra Act is out of the way, the Parliamentary enactment will be hindered and obstructed in such a manner that it will not be possible to go ahead with the insolvency resolution process outlined in the Code. The later non-obstante clause of the Parliamentary enactment will also prevail over the limited non-obstante clause contained in Section 4 of the Maharashtra Act. For these reasons, we are of the view that the Maharashtra Act cannot stand in the way of the corporate insolvency resolution process under the Code. Tribunal and the Appellate Tribunal were right in admitting the application filed by the financial creditor ICICI Bank Ltd.
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PMLA
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2017 (9) TMI 55
Prevention of Money Laundering - provisional attachment order - Held that:- The impugned notice, in the present case, no doubt, has serious fiscal/penal consequences in case the explanation offered by the petitioner is not accepted by the Adjudicating Authority. But entertaining a writ petition seeking quashment of the aforesaid notice would amount to exercising discretion in the matter of arrogating jurisdiction only by virtue of the location of the Adjudicating Authority which is in Delhi. The petitioner, otherwise also has various stages and forums available to him for challenging any decision/action of the respondent or the Adjudicating Authority, viz. the Appellate Tribunal and the High Court. Section 42 of the Act clearly indicates that in case the matter travels upto the Appellate Tribunal under Section 26 of the Act, any person aggrieved against the order of the Appellate Tribunal could approach the High Court within the jurisdiction of which the aggrieved party ordinarily resides or carries on business or personally works for gain. In case the Central Government is the aggrieved party, the High Court within the jurisdiction of which the respondent, or in a case where there are more than one respondent, any of the respondents ordinarily resides or carries on business or personally works for gain, shall have the jurisdiction. In that view of the matter, the respondent would be forced to, if it is aggrieved finally by an order of the Appellate Tribunal to challenge such order before the High Court of Kolkata only whereas if the contention of the petitioner is accepted and if this Court assumes the jurisdiction of exercising its discretion, two options would be available to the petitioner namely of Kolkata High Court and Delhi High Court. This would definitely militate against the principle of forum convenience. This Court, therefore, is of the view that this Court ought not to entertain the present writ petition. In case the petitioner is so advised, an appropriate petition could be preferred before the High Court of Kolkata for the needful. In that view of the matter, the Adjudicating Authority shall not pass any final order for a period of 15 days to be counted from the date of the present order so as to enable the petitioner either to assail the present order before the superior Court or file appropriate petition before the Kolkata High Court. The petitioner in that event shall not be permitted to raise any objection with regard to the delay for the aforesaid period in completing the proceedings within the statutory period of 180 days.
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2017 (9) TMI 54
Prevention of Money Laundering - Provisional Attachment - accused of criminal proceedings - Held that:- Admittedly, neither the banks nor employees of these appellants are accused in any criminal proceedings nor there is any allegations against them that they are involved in the commission of alleged crime or generating “proceeds of crime”. The amounts of loan sanctioned are public money and they are entitled to get back their money by selling the mortgaged property as a first charge. The Parliament has amended the SARFAESI Act, 2002 by inserting the section 31 B in the said Act w.e.f. 01.09.2016. The effect of the said amendment has already been discussed in our judgment dated 14th July, 2017 (Supra). The facts and the legal issues involve in the present appeals are identical to the facts and the legal issues involved in the groups of matter which has been decided by this tribunal on 14.07.2017 (Supra). Keeping in view, the facts and circumstances of the present appeals and the judgments cited herein above in the group of matters of State Bank of India and 11 others Banks (Supra), we are of the considered view that the Impugned Order dated 16.06.2016 and the Provisional Attachment Order dated 17.12.2015 are not legally correct and liable to be set aside. Accordingly the appeal is allowed. The schedule property is released from the attachment and the appellant‟s Bank may take the possession of the property mortgaged with them as secured assets.In the circumstance, the allegation of money laundering prima facie found to be unsustainable for the purpose of attachment under the PMLA, 2002.
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Service Tax
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2017 (9) TMI 98
Services provided by Indian tour operators to foreign tourists - place of provision of services - Vires of Rule 6A of the Service Tax Rules, 1994 - validity of Section 94 2 (f) of the FA - the present petition is concerned with the question of payment of service tax by the Indian tour operators in respect of the services provided by them to foreign tourists during the period between 1st July 2012 and 1st July 2017 - Held that: - Turning to Section 94 (2), it basically lists out the topics on which rules can be made. It talks of laying down the procedure for carrying out various tasks set out in the FA or to provide the form in which returns are to be filed, appeals preferred. Specific to the case on hand, Section 94 (2) (f) empowers central government to make rules for 'determining' when export of 'taxable services' can be said to take place. It does not empower the central government to determine whether there can be an export of non-taxable services viz., services provided outside the taxable territory. Secondly, it does not empower the central government to make rules levying or making amenable the provision of certain services to service tax. Section 94 (2) (hhh) also permits making rules regarding the 'date for determination of rate of service tax' and 'place of provision of taxable service'. It does not provide for making rules on determination of taxability of a service. 'Subjecting certain types of services to tax is an essential legislative function. In this case, since the FA envisages Chapter V applying only to taxable services, bringing non-taxable services within the ambit of service tax, is impermissible. Since tour operator services are intermediary services and under Rule 9 of the PPSR 2012 the place of provision of service is the location of the service provider, the package tours service provided by an Indian tour operator to a foreign tourist will, notwithstanding that some part of it is provided outside India, be treated as service provided in India. As a result no Indian tour operator can expect the service rendered by him to a foreign tourist to be considered as an 'export of service' under Rule 6A as he will never be able to meet the requirement of Rule 6A (1) (d) of the ST Rules. Thus under a combination of Rule 6A of the ST Rules and Rule 9 of the PPSR 2012 something which is non-taxable under the FA is sought to be brought to tax. While it is one thing to say that tour operator service provided in India is not in the negative list under Section 66 D of the FA and is, therefore, amenable to service tax, it is another to contend that notwithstanding that Chapter V of the FA applies only to taxable services by virtue of Section 64 (3) FA, a non-taxable service that is provided outside the taxable territory can also be included by Rule 6A of the ST Rules in determining what constitutes export of services. Thus not only Rule 6A but even Section 94 (2) (f) of the FA would also be unconstitutional if it were to be interpreted to permit determination of even export of non-taxable services not to talk of bringing to tax what is non-taxable under the FA. Section 6A (1) of the ST Rules, insofar as it applies to export of tour operator services, suffers from the vice of excessive delegation inasmuch as the central government has been permitted to determine what shall constitute export of services, both taxable and non-taxable. Such an essential legislative function could not have been delegated to the central government. Once the Parliament determines by law what is amendable and not amenable to service tax, the modalities for working out the procedure for levy and collection of such tax can be left to the Rules. However, the question of whether certain services should be amenable to tax cannot be left to be determined by rules made by the central government. The services provided by Indian tour operators to foreign tourists during the period 1st July 2012 to 1st July 2017, which has been paid for in convertible foreign exchange would not be amenable to service tax. Rule 6A (1) read with Section 6A (2) of the ST Rules, insofar as it seeks to describe export of tour operator services to include non-taxable services provided by tour operators, is ultra vires the FA and in particular Section 94(2) (f) of the FA and is, therefore, invalid. Section 94 (2) (f) or (hhh) of the FA does not empower the central government to decide taxability of the tour operator services provided outside the taxable territory. They only enable the central government to determine what constitutes export of service, the date for determination of the rate of service or the place of provision of taxable service - Section 66 C of the FA enables the central government only to make rules to determine the place of provision of taxable service but not nontaxable service. Petition allowed - decided in favor of petitioner.
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2017 (9) TMI 97
Business Auxiliary Service - payment towards the services received by the said foreign company for promotion of the appellant's products - reimbursement of expenses - Held that: - the Revenue, apart from making a bald allegation that such expenses were for promoting their business from India, have also not referred to any basis for entertaining the above view. If the Revenue is making an allegation, the onus to establish the allegation is upon them. We note that there is no reference to any services having been provided by the holding company for promoting the assessee s business from India - both the sides are lacking in establishing their stands by production of sufficient evidences. In such a view, we are of the opinion that the matter requires re-adjudication - matter is being remanded for re-adjudication on merits.
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2017 (9) TMI 96
Reverse charge mechanism - appellant have been receiving the sale proceeds of exports remitted by the foreign purchaser in the bank located in the foreign country and thereafter collected and remitted to the appellant's account through the Indian bank - department was of the view that the foreign bank has been providing taxable service from a non-taxable territory to the appellant which is located in taxable territory for which the appellant as a service recipient is liable to discharge service tax under reverse charge mechanism - Held that: - The foreign bank in which the overseas buyer deposits the sale proceeds is chosen by the foreign buyer and not by the appellant, who is situated in India. By no stretch of imagination can such foreign bank be considered as a service provider for the appellant who in most cases would not even be aware of the identity of such foreign bank. The act of deduction of an amount as charges for transfer of the foreign exchange to the Indian bank from the sale proceeds of the appellant is only a facility for collecting such charges from the Indian bank. This cannot be considered as payment of charges for services by the appellant to the foreign bank. It is actual charges deducted being bank to bank transaction. Similar issue decided in the case of GREENPLY INDUSTRIES LTD. Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR-I [2015 (12) TMI 80 - CESTAT NEW DELHI], where it was held that the appellant cannot be treated as service recipient and no Service Tax can be charged from them under Section 66A read with Rule 2(l)(2)(iv) of the Service Tax Rules, 1994. The levy of service tax is unsustainable - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 95
Cenvat Credit - Tribunal held that the respondent shall be deemed to be an output service provider under Rule 2(p) of the Cenvat Credit Rules, 2004 and was therefore entitled to Cenvat credit for the Service Tax paid by it prior to the period 5-3-2004 - the decision in the case of Union of India Versus Jindal Steel and Power Ltd. [2015 (2) TMI 1112 - CHHATTISGARH HIGH COURT] contested, where it was held that The Rules having come into force on 10-9-2004 only, and not having been made retrospective in operation, the Tribunal erred in holding that during the relevant period prior to 5-3-2004, the respondent would be deemed to be an output service provider under Rule 2(p) giving it retrospective effect - Held that: - the decision in the above case upheld - appeal dismissed - decided against Appellant.
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2017 (9) TMI 94
Works contract service - composite contracts - natural justice - Held that: - Undoubtedly ‘commercial or industrial construction service’ and ‘erection, commissioning or installation service’ are amenable to coverage within the definition of ‘works contract service’ if goods are sold along with the providing of service. To the extent that the said contracts are composite, tax liability would arise only after 1st June 2007 and prior to that even if these services existed prior to that date - It would appear that the appellant has not been able to substantiate that the consideration was not limited to the service itself. In view of the strenuous argument put forth before all authorities, it would be inequitable if an opportunity to produce such evidence is not afforded to appellant. It is necessary that each of contracts be scrutinized to ascertain if they are composite or otherwise for application of the tax levy - appeal allowed by way of remand.
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2017 (9) TMI 93
Penalty u/s 78 - non-payment of service tax - Held that: - no case of deliberate defiance of the provisions of law is made out. At best it only a case of delayed deposit of tax - the appellant had disclosed the error in their revised return in July, 2009 before the audit pointed out in August, 2009. Accordingly, the ingredients of levy of penalty under Section 78 are not made out - appeal dismissed - decided against Revenue.
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2017 (9) TMI 92
Refund of unutilised CENVAT credit - Investment Advisory Services - export of services - location of recipient of services - order beyond the scope of show cause notice (SCN) - Held that: - there is proper agreement between the parties, for rendering of services by the appellant and receiving of services by the recipient of service, who is located outside India - Clause 3 of the Notification provides that the manner for receipt of foreign exchange by payment in Rupees from the Account of a bank situated in any country other than member Countries of Asian Clearing Union or Nepal or Bhutan - all conditions for export of service, under Export of Service Rules, 2005 have been fulfilled and impugned order is bad for holding that there is no export of service. The appellant as a service provider is entitled to receive both fees and reimbursement of expenses incurred, for rendering the service. As such, the two together form gross amount of service charges, as defined under Section 67 of the Finance Act, 1994. The service has been used and received by the recipient of service located outside India. It is of no consequence, whether such advisory service received by the recipient located outside of India, is used by recipient for making investment decision, for making investment in India. Unjust enrichment - time limitation - Held that: - neither there is any question of unjust-enrichment, nor the refunds of Cenvat credit under Rule 5 of CCR, 2004, are hit by time bar, as no time limit has been provided for utilization of Cenvat credit, once it has been taken. The appellant in the facts and circumstances has admittedly proved that due to its business being export of service, have been unable to utilize the Cenvat credit taken. Accordingly, they are entitled to refund of Cenvat credit without any time bar. Jurisdiction - Held that: - some of the issue not raised and/or decided in the impugned orders are wholly without jurisdiction being- (i) service provided do not classify as export of taxable service, as per Export of Service Rules, as no such allegation is made in show cause notice for the period July, 2007 to September, 2007. Scope of SCN - Held that: - the adjudication orders for the period July' 11 to March' 12, being refund claim dated 29th June, 2012 for ₹ 11,32,572/-, ₹ 13,43,033/- filed on 28th March, 2013 for the period April' 12 to December' 12 and claim for ₹ 18,48,921/- dated 29th June, 2012 for the period, April' 12 to June' 12 are bad, as no show cause notice was issued for these matters and as such, I hold that the adjudication orders are wholly without jurisdiction. Appeal allowed - the adjudicating authority directed to grant the refunds with interest, as per rules - decided in favor of appellant.
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2017 (9) TMI 91
Reverse charge mechanism - commission paid to commission agents located outside India - Held that: - it is a well settled principle that service tax is a consumption/destination based tax and the services of commission agents were availed and used by the appellants located in India. The tax liability in such situation in terms of Section 66A has been upheld - demand upheld. Extended period of limitation - Held that: - the issue relating to service tax liability on the recipient of service was a subject matter of large number of litigations - there is no justification for invoking allegation of willful mis-statement, suppression of fact with intend to evade service tax etc - demand barred by limitation. Appeal allowed - decided in favor of appellant.
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2017 (9) TMI 90
Valuation of services - reimbursement of expenses - includibility - appellant is in the business of providing services as "Recovery Agent" to various nationalized banks for the past many years - Held that: - the excludability of any expenses claimed to be reimbursed depends on the facts and circumstances of each case and the terms of the agreement relevant to the said case - In the present appeal, the appellant categorically claimed that in terms of the agreement with client banks, they are incurring various expenses during the course of providing service as recovery agent. These expenses were reimbursed to them on actual basis. This aspect can be verified in terms of the agreement, documents/invoices supporting the claim of the appellant - matter on remand. Time limitation - the period involved is 1.5.2006 to 31.3.2009 and the notice was issued on 8.10.2010 - Held that: - the appellants maintained records of all the expenses and the present demand was based on such records. In such situation, the demand cannot be invoked by alleging willful misstatement, fraud and intention to evade payment of tax - the extended period was invoked on the ground that the information was not disclosed to the Department. When there is a bonafdide doubt based on the interpretation of the legal provisions, the question of suppression and willful misstatement cannot be sustained - appeal allowed. Appeal allowed in part and part matter on remand.
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2017 (9) TMI 89
Business of Photography - The appellants were paying service tax of 25% of the gross value of services and discharging VAT on the balance amount - The department was of the view that the appellants are liable to discharge service tax on the entire value of the services - whether constitutes fully service element or some part of sale element is also involved? - Circular No.12/2003-ST, dated 20.06.2003 - Held that: - The ratio of Safety Retreading Co, Pvt Ltd [2017 (1) TMI 1110 - SUPREME COURT] will have to be applied to these appeals, where the appellants had been paying service tax only on the labour component after taking 70% towards materials cost on the gross tyre retreading charges billed and received. The Hon'ble Supreme Court, while taking note of the Notification No.12/2003-ST, dated 20.06.2003 as also CBEC Circular, dated 07.04.2004 held that the assessee is liable to pay tax only on the service component quantified at 30%. In the present case, it emerges that all the appellants herein were discharging service tax liability on 25% of the gross billing based on the ad-hoc arrangement arrived at by their Association pursuant to Board's letter dated 07.04.2004 to The Punjab Colour Lab Association. We also find that there is no allegation by the department that 25/75 ratio of Service Cost to Material Cost being followed by the appellants is incorrect. Appeals will required to be remanded back to the original authority for the limited purpose of working out the net service tax liability after taking the value on which they have discharged sales tax/VAT - appeal allowed by way of remand.
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2017 (9) TMI 88
Restoration of appeal - condonation of delay in making the pre-deposit - Held that: - Once the appeal has been dismissed for non-compliance, the Tribunal becomes functus officio - The applicant/assesse cannot choose the time at his own within to comply with the direction to make pre-deposit when there was a specific direction prescribing the time limit. If an assessee whose appeal has been dismissed for non-compliance of pre-deposit can choose to make the pre-deposit even after a period of ten years and file an application before the Tribunal for restoration of appeal along with condonation in making pre-deposit, there will be no finality to litigations - the applicant has chosen to make the deposit after dismissal of appeal saying that there is delay of 253 days. Such practice adopted by the applicant cannot be entertained - restoration application dismissed - appeal dismissed - decided against appellant.
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2017 (9) TMI 87
CENVAT credit - royalty - Revenue entertained a view that in terms of the High Court order the two entities become one and as such there is no warrant for payment of royalty by the appellant to the brand owner and the invoice for such payment become “infractuous” for the purose of availing that credit - Held that: - The financial transaction between two legal entities as existing during the relevant time were valid and legal and the same does not become “infractuous” simply because these legal entities were amalgamated later, though effective date for record has been mentioned as 01.04.2006 - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 86
Construction of commercial or industrial complex Services - case of appellant is that Since these are buildings for educational institutions, they cannot be called as commercial buildings and the construction is not leviable to tax - Held that: - Buildings used for educational purpose by recognized educational institutions cannot be categorized as “commercial buildings” - The use of the building will decide the tax liability. Regarding individual residence claimed to have been used for occupation by the persons, we find no categorical supporting evidences have been submitted by the appellant. No detailed examination has also been made by the lower authorities. Matter requires re-examination - appeal allowed by way of remand.
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2017 (9) TMI 85
Business Auxiliary Services - whether the appellant is liable to pay service tax on the turnover achieved by Tiems Telecom (P) Ltd. (a company) having separate Service Tax registration number? - Held that: - The said company was registered with the Service Tax Department and was carrying on business since 2004-05. The appellant started business w.e.f. 14-2-2008 - appellant is not liable to tax for such turnover achieved by the Pvt. Ltd. Company, M/s. Tiems Telecom Pvt. Ltd. on and before 14-2-2008. Whether the appellant is entitled to deduction for reimbursement of certain expenses from the principal under the provisions of Section 67 of the Finance Act? - Held that: - Section 67 of the Finance Act, 1994 provides that whatever is received by the service provider in his capacity as pure agent, such amounts shall not form part of the gross turnover liable to tax. I further find that proper findings have not been recorded as to the exact nature of receipts and as to deductibility - appeal allowed by way of remand to adjudicating authority. Penalties u/s 76 and 78 - Held that: - it is not a case of deliberate default, as the appellants have paid substantially the amount of taxes and there appears to be interpretational issue in regard to gross amount taxable - there was a dispute among the Directors of the Pvt. Ltd. company, which finally lead to the closure of the business in February, 2008 - penalties set aside. Appeal allowed in part and part matter on remand.
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2017 (9) TMI 84
SSI exemption upto 10 lakhs - activity of promoting sale of “Koutons” brand of readymade garments supplied by M/s. Charley Creations Pvt. Ltd., the owner of said brand - Department entertained a view that the appellants are not eligible for exemption under Notification 6/2005-S.T. as they have been rendering service of business promotion and marketing of branded products - Held that: - the services provided under a brand name of other persons are not eligible for the exemption under the aforesaid Notification - The mere fact that a certain brand of goods are being sold through sales outlet of the service providers, would not automatically conclude that the said brand is used for providing business auxiliary services to the client by the service provider. Such a suggestion with reference to many service like cargo handling, C&F, Business Auxiliary, GTA, etc., would make all such service providers out of the purview of Notifn. 6/2005-S.T., as all of them handle goods bearing the brands of other, which certainly is not the intent of the Legislature. In the present case, the Noticee have only handled the goods bearing the brand name of the client in the course of providing the business auxiliary services to the client and except this there has been no other evidence to substantiate the charges of the show cause notice. There is no evidence whatsoever to indicate that the Noticee are providing the business auxiliary service under any brand name owned by other - The contention that when the service recipient is the owner of brand name then how can the Noticee use the same brand name for providing service to the owner of the brand, also deserves acceptance on merits. Appeal allowed - decided in favor of appellant.
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2017 (9) TMI 83
Business Support Services - appellants are engaged in supply of water to M/s. Chhattisgarh State Industrial Development Corporation (CSIDC) - Revenue entertained a view that the arrangement between the appellant and the CSIDC, for such supply of water, will be covered for service tax purpose under the category of “Support Services of Business or Commerce” - Held that: - Plain reading of the statutory definition will indicate that the scope of tax entry is basically for outsourcing service of such nature and do not dealt with any sale or purchase of items without reference to third party. In the present case, there is no reference to third party in the agreement or the transaction between the appellant and CSIDC. To call such sale of water, on a project developed, owned and maintained by the appellant as infrastructure support service is not tenable - the activities falling under the scope of the agreement 1998, for consideration on sale of water, cannot be taxed under the category of “support of services of business or Commerce” - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 82
Rectification of mistake - Held that: - suffice it to say that the final order of the Tribunal requires corrections as it does contain various errors apparent on record. The scope of all the “errors” which the applicant contends are amenable for rectification, however, requires closer scrutiny - we find it fit and proper to recall the Final Order dated 8-7-2016 of the Tribunal allowing the miscellaneous application - ROM application allowed.
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2017 (9) TMI 81
Site formation and clearances, excavation and earth moving and demolition service - benefit of N/N. 17/2005-S.T., dated 7-6-2005 - the original authority had reservation in extending the benefit of this notification, since, the construction work has been carried out for a private railway and not for the Government railway - Held that: - From the notification, it is evident that service provided by any person for construction of roads, airports, railways, transport terminals, bridges, tunnels, dams, ports are exempted from Service Tax. There is no dispute that the activity carried out by the respondent was in connection with construction of railways - the benefit of N/N. 17/2005 is to be extended irrespective of whether the construction has been carried out for private or Government railway - appeal dismissed - decided against Revenue.
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2017 (9) TMI 80
Service of Commission Agent - job work of Cutting - taxability - Held that: - service as Commission Agent, has been exempted by N/N. 13/2003-S.T. - credit notes relates to relates to April, May and June and as such, are covered by the exemption notification - demand set aside. Cutting charges - Held that: - In terms of Section 65(19) ‘Business Auxiliary Services’ does not include any activity that amounts to ‘manufacture’ within the meaning of Section 2(f) of Central Excise Act, 1944. As such, we find no justification to the service tax liability on such activities. Appeal allowed - decided in favor of appellant.
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2017 (9) TMI 79
Construction service or girls hostel - construction of Residential Complex Service - Held that: - the impugned order considered the said hostel as residential complex having more than 12 units. We find that such inference, based on the number of rooms in hostel, is fallacious. The hostel for girls can neither be covered under the category of Commercial Construction nor under the category of Residential Complex - the individual room in the said hostel cannot be equated to a residential house or a flat which are covered under the category of Construction of Complex service for the purpose of service tax - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 78
Refund of service tax on GTA services - N/N. 41/2007-S.T. - C.B.E. & C. Circular No. 120/01/2010-S.T., dated 19-1-2010 - Held that: - circular conveys that in budget 2009 the scheme under N/N. 41/2007-S.T. was simplified in N/N. 17/2009-S.T. by providing self certification or Chartered Accountant’s certification about co-relation and nexus between input Services & the exports. That above logic can be followed for N/N. 5/2006-C.E. (N.T.) where such simplification of N/N. 17/2009-S.T. may not be available - As the benefit of C.B.E. & C. Circular dated 19-10-2010 were not available before the adjudicating authority, the matter is remanded back to the Adjudicating authority to decide the matter on the basis of Chartered Accountant’s certificate to establish the co-relation required under N/N. 41/2007-S.T. - appeal allowed by way of remand.
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Central Excise
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2017 (9) TMI 77
Benefit of N/N. 32/97 and N/N. 34/97 - DEPB benefit - jobbing - the appellants had availed benefit of both the N/N. 32/97 (jobbing) as well as N/N. 34/97 (DEPB) - case of Revenue is that imports under N/N. 32/97 are basically for jobbing and therefore such exports could not be made under DEPB N/N. 34/97 - whether beneficial duty exemption provided under N/N. 32/97-Cus. can be denied even when substantive fulfilment of the conditionalities of that notification have been fulfilled, only on the ground that dual benefit under N/N. 32/97-Cus as also DEPB credit benefit under N/N. 34/97-Cus. cannot be availed? Held that: - the Tribunal in Sierra Trading (P) Ltd. [2011 (3) TMI 82 - CESTAT, CHENNAI], has held that benefit of N/N. 32/97-Cus. could not be denied - following the ratio set down by the Tribunal in the Sierra Trading case, especially when department has not filed any appeal against allowing of DEPB under N/N. 34/97-Cus., the benefit of N/N. 32/97-Cus. cannot be denied to the appellant - benefit allowed - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 76
Manufacture - the bulk LLP/HLP in tankers was filled by the appellants in drums and sold to the customers - Revenue entertained a view that LLP/HLP are to be categorized as lubricating oils or lubricating preparations of CETH 2710 and the activities so carried out by the appellant/assessee amounted to manufacture - penalty - Held that: - LLP/HLP cannot be considered as either lubricating oils or lubricating preparations. These products are for specific use mainly in cosmetics, foods and pharmaceutical industries. These are different from lubricating preparations, which are blended products containing more than 70% of the petroleum oils and other additives, to impart specific properties to reduce friction - CBEC Circular dated 4.5.1988 clarifies liquid paraffin IP as a separate product under Heading 271099. HSN Explanatory Notes for Heading No.2710 indicates three categories of products. LLP/HLP (White Oils) are covered under Category A. LLP and Light Parafffin are defined in Indian Pharmacopeia - there is no manufacture and demand is set aside - penalty set aside - appeal allowed - decided in favor of assessee.
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2017 (9) TMI 75
Interest - penalty - reversal of CENVAT credit on being pointed out - manpower supply services - Held that: - decision in the case of Ind-Swift Laboratories Ltd. [2011 (2) TMI 6 - Supreme Court], relied upon where it was held that if the Cenvat credit availed by the assessee wrongly but same has been reversed before utilization of the same, no interest is payable by the assessee. Penalty - Held that: - appellant is a Central Public Sector Undertaking, no charge of allegation of suppression can be made against the appellant - penalty set aside. Appeal allowed - decided in favor of appellant.
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2017 (9) TMI 74
CENVAT credit - input service - construction services - case of Revenue is that major part of appellant's claim of Cenvat credit pertains to supply of readymix concrete, which is an activity in the domain of manufacturing and the activity being under the category of manufacturing the same cannot be an input service for claiming Cenvat credit - Held that: - as per the relevant law the appellant is entitled to Cenvat credit on the ‘construction services’, during the relevant period prior to 31.3.2011 (2008-2009 to 2010-2011), as the amendment excluding the ‘construction services’ from the definition of input service under Rule 2(l) of CCR, 2004 came into with effect from 1.7.2012 only vide N/N. 28/2012-CE(NT) dated 20.6.2012. Scope of SCN - Cenvat credit in case of supply of readymix concrete - Held that: - This reasoning given by the impugned order has not been part of the Show Cause Notice issued to the appellant. If it is so, the denial of Cenvat credit on this reasoning is set aside - The Hon’ble Supreme Court’s decision in the case of CCE Vs. Ballarpur Industries Ltd. [2007 (8) TMI 10 - SUPREME COURT OF INDIA] has held that the Show Cause Notice is the foundation in the matter of levy and recovery of duty, penalty and interest; if there is no invocation of any rule in the Show Cause Notice it would not be open to the adjudicating authority to invoke the same - the appellant is entitled to Cenvat credit in case of supply of services relating to readymix concrete, which would be covered by ‘construction service’. The appellant is entitled to Cenvat credit for the services which are covered by ‘construction service’ except in the case of the invoice(s) pertaining to construction activity near Railway station, where credit of ₹ 4,496/- is involved and for which the appellant during hearing has withdrawn their claim of Cenvat credit. Appeal allowed - decided partly in favor of appellant.
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2017 (9) TMI 73
CENVAT credit - rails - concrete sleeper - Check Rail - Fish Plates - Held that: - the issue is covered by the Hon’ble Supreme Court decision in the case of Jayaswal Neco Ltd. v/s CCE Raipur [2015 (4) TMI 569 - SUPREME COURT], where it was held that it is apparent that the use of railway tracks is related to the actual production of goods and without the use of the said railway track, commercial production would be inexpedient, credit is allowed - demand set aside. Demand of interest on late reversal of credit - scope of SCN - appellant holds that the subject matter was not in appeal before Commissioner (Appeal). Therefore, the finding given by the impugned order in this regard is beyond scope of the department’s appeal before Commissioner (Appeals) - Held that: - When the department has not raised the issue of charging interest on late reversal of credit in the appeal filed before Commissioner Appeals, the assessee also did not get the opportunity to defend and put up their view point on the same - The Tribunal’s decision in case of CCE Mumbai V/s Echay Forging Pvt. Ltd. [2014 (8) TMI 322 - CESTAT MUMBAI] also supports this stand holding that when there is no challenge to the finding of lower authority before the appellate authority, finding of the lower authority is to be upheld - demand of interest set aside. CENVAT credit on Roof Truss and Roof Girder - The appellant has withdrawn credit claim for Cenvat credit amounting to ₹ 72,295/- in respect of Roof Truss and Roof Girder, and therefore, they have reversed the said credit along with interest. Consequently the impugned order in this regard is sustained - demand upheld. Appeal allowed - decided partly in favor of appellant.
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2017 (9) TMI 72
Classification of goods - Preparation of Meat - Preparation of Vegetable - Preparation of Chocolates - Preparation of Meat, Preparation of Vegetable and Preparation of Chocolates, which were proposed to be classified under Chapter Sub-heading 1601.10, 2001.10 and 1803.00 respectively of the Central Excise Tariff Act 1985 by assessee, whereas the adjudicating Authority decided the classification of preparation of meat under CSH 1601.10 and preparation of vegetable under CSH 2001.10. However, the demand on preparation of Chocolates proposed to be classified under CSH 1803.00 was dropped - Extended period of limitation - Held that: - the adjudicating authority has decided that the food preparation served/sold by the appellant to the customer from their restaurant is in unit container which qualifies the term unit container as per the definition given under Section IV of the Central Excise Tariff Act, 1985. However, we find that the definition of unit container has been interpreted in the various judgments cited by the Ld. Counsel, which was not considered by the adjudicating authority while arriving at his independent opinion. Therefore in our considered view the matter needs re-consideration by the adjudicating authority - appeal allowed by way of remand.
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2017 (9) TMI 71
Clandestine removal - removal of scrap - job-work - N/N. 214/86-CE dated 25-3-1986 - Held that: - department has not made out any case of clandestine removal or any diversion of manufactured ingots either by the job worker or by the appellant. In both the cases the sample of 0.267 gms out of total sample 220 gms - In the present case aluminium waste and scrap is mixed with so many foreign particle therefore every batch of waste and scrap will vary from other batch of waste and scrap. Therefore entire quantity of waste and scrap being not standard goods if any, samples are drawn the same will not represent the composition of the entire waste and scrap therefore test report alone cannot be relied upon to conclude the demand - once the test was conducted and the appellant found that same is not correct while requesting for retest appellant should have asked for the specific parameter for conducting retest such as how much material to be tested and in what manner. I find even in the second test also the composition of the content of aluminium is on higher side. Matter to be reconsidered by the adjudicating authority - appeal allowed by way of remand.
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2017 (9) TMI 70
CENVAT credit - whether the Cenvat credit in respect of service tax paid on services received at Depot by the appellant are admissible? - Held that: - since it is used in the overall business activity of the appellant therefore even if it is received at depot, credit cannot be denied - reliance placed in the case of COMMISSIONER OF C. EX., BANGALORE-I Versus ECOF INDUSTRIES PVT. LTD. [2011 (2) TMI 1130 - KARNATAKA HIGH COURT], where it was held that Merely because the input service tax is paid at a particular unit and the benefit is sought to be availed at another unit, the same is not prohibited under law. Whether Cenvat credit in respect of Customs House Agent Services, Export Documentation Services, Motor Vehicles Services and Repair and Maintenance Services are admissible to the appellant? - Held that: - the services are used for the business activity of the appellant and export of goods therefore same are input service and credit are admissible - reliance placed in the case of THE COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, MANGALORE Versus M/s MANGALORE REFINERY AND PETROCHEMICALS LTD. [2016 (1) TMI 481 - KARNATAKA HIGH COURT], where the credit on similar services were allowed. Appeal allowed - decided in favor of appellant.
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2017 (9) TMI 69
CENVAT credit - GTA service - ‘place of removal’ - Rule 2(I) of CENVAT Credit Rules, 2004 - Held that: - the appellant before the Commissioner (A) has categorically conceded the service tax liability and has paid the entire service tax amount of ₹ 4,77,000/- and also promised to pay interest in due course which of course has not yet been paid. Further, I also find that in paragraph 5 of the impugned order, the learned Commissioner (A) has recorded the factum of admission by the appellant and thereafter, the learned Commissioner (A) has not given any findings whether the appellant is entitled for CENVAT Credit on service tax paid on GTA or not. As far as interest liability is concerned, the appellant is liable to pay the interest as promised by the appellant before the Commissioner (A). As far as penalty is concerned, in view of the facts and circumstances enumerated above, I am of the view that appellants are not liable to pay the penalty and therefore, I set aside the penalty imposed by the learned Commissioner (A). Appeal allowed - decided partly in favor of appellant.
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2017 (9) TMI 68
100% EOU - CENVAT credit - manufacture - activities of Segregation of Shredded mixed metal - case of Revenue is that the process of segregation of scrap not treated as manufacturing activity specified under Section 2 (f) of CEA, 1944 and as such the appellant is not entitled for the Cenvat Credit under rule 6(1) CCR 2004 - Held that: - it is not under dispute that segregation of scrap was sold on payment of duty in the domestic market. Once the excise duty has been paid on the final product and same is not under dispute Cenvat credit on the input stage cannot be denied. For this reason itself, appellant is entitle for the CENVAT credit - it is not disputed that appellant have cleared the goods on payment of duty therefore, in terms of Rule 16 also appellant is entitle for the CENVAT credit - Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (9) TMI 125
Classification of goods - Mileage Drinking Powder - Whether in the facts and circumstances of the case of Rajasthan Tax Board was justified in law in classifying “Mileage Drinking Powder” at general rate and not the rate of tax for the specific entry in which it falls? - Held that: - the products as they stand, namely “Coco, Drinking Chocolate and Bournvita” or “Mileage Drinking Powder” cannot be straight away eaten or used directly but have to be mixed with milk or other drink. Eatable in normal parlance or common parlance is an item which can directly be taken through mouth - these products are not substitute for food though these products can be taken every day like adding flavour to the milk or otherwise but these are not taken as a food but only as nutritive supplant/element. By eating these products, hunger of a person does not come to an end and, therefore, to say that it is an eatable product, as claimed by the Revenue, is not well reasoned. These products as they stand, cannot be taken alone, but mostly mixed with milk or other drinks. By adding these products to milk, the taste of milk which normally the children do not like, enhances the taste and deliciousness of the milk and merely because these products supplies some nourishment or sustenance, it cannot be said to be an eatable product. It is true that these products are not used by common people and by & large taken by people other than common people - the claim of assessees that the above products do not fall in entry 184/186, is well reasoned - appeal dismissed - decided against Revenue.
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2017 (9) TMI 62
Jurisdiction - rectification / revision of order - whether the First Appellate Authority was within its jurisdiction in imposing tax upon the dealer under Section 3F in proceedings under Section 22 of the U.P. Trade Tax Act? - Held that: - On plain reading of Section 22 of the Act makes it clear that a mistake apparent from the record is rectifiable. In order to attract the application of Section 22, the mistake must exist and the same must be apparent from the record. The power to rectify the mistake, however, does not cover cases where a revision or review of the order is intended. "Mistake" means to take or understand wrongly or inaccurately; to make an error in interpreting; it is an error, a fault, a misunderstanding, a misconception. "Apparent" means visible; capable of being seen, obvious; plain. It means "open to view, visible, evident, appears, appearing as real and true, conspicuous, manifest, obvious, seeming." A mistake which can be rectified under Section 22 is one which is patent, which is obvious and whose discovery is not dependent on argument or elaboration. The ambit and scope of Section 22 is distinct and different, the section does not confer power of appeal or revision as contemplated under Section 9 or 10B of the Act respectively. Nor does Section 22 confer power upon the assessing authority to assess or reassess the dealer on whole or any part of the turnover of the dealer that has escaped assessment to tax or has been under-assessed or has been assessed to tax at a lower rate or any deduction or exemption has wrongly been allowed. Section 22 merely confers upon all the authorities under the Act to rectify any mistake that has crept into the order which is apparent on the face of the record. The rectification can be sought by a dealer or by a person interested which in my opinion would include the assessing authority. The assessing authority can rectify the mistake in its order on its own motion, but where the order is subjected to challenge in appeal and the appellate authority has disposed of the appeal, then in that event the assessing authority being the interested person is empowered to move an application for rectification. The second proviso requires providing opportunity of hearing to the affected party be it the dealer or the other person, meaning thereby that the expression "other person" would include the assessing officer. The mistake is apparent on the record of the order of the first appellate authority which was rightly rectified under Section 22 of the Act. The rectification and subsequent assessment to tax under Section 3F does not amount to review/revision but a rectification of mistake apparent on the record in the order of the first appellate authority in view of retrospective application of Amendment Act restoring Section 3F and validating all actions taken thereunder - revision dismissed.
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2017 (9) TMI 61
Application to grant moratorium for the unexpired portion of the period of exemption granted to original manufacturer from 23.12.2002 to 30.10.2006 - exemption under Section 5(4-A) of U.P. Trade Tax Act, 1948 - Notification dated 31.03.1995 - Petitioner as a successor manufacturer and transferree of ice-cream unit, moved application on 24.01.2003 to Additional Director, Industries, Agra with a request to issue fresh eligibility certificate incorporating petitioner's name therein so as to enable it to avail benefit of exemption/deferment for unexpired period of exemption and amount - Petitioner also requested to be permitted to honour payment obligation of deferred tax already availed by M/s DFL, Agra - Whether petitioner is entitled for deferment in payment of tax under Section 8(2-A) of Act, 1948 and Rule 43 of Rules, 1948? Held that: - wherever benefit under sub-section (2-B) of Section 4-A is claimed that has to be read with sub-section (1) and (2) of Section 4-A - Section 8(2-A) read with Rule 43 has to be read with Section 4-A(2-B) as well for the reason that Successor Manufacturer when gets eligibility certificate, it is referable to Section 4-A(1) and (2) and said benefit could not have been denied by confining meaning of "discontinuance of business" under Rule 43(4)(a) to principal manufacturer and not to the successor one. In order to support the ground that benefit of deferment under Section 8(2-A) read with Rule 43 would be available to only original manufacturer and not to Successor, who is also held entitled for similar exemption under Section 4-A(1) and (2) of Act, 1948 by virtue of Section 4-A(2-B) inserted with retrospective effect of 1983, learned Standing Counsel could give no satisfactory reply at all. Competent Authority directed to reconsider petitioner's application and pass a reasoned order - petition allowed by way of remand.
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2017 (9) TMI 60
Time limitation - validity of assessment - case of petitioner is that initiation of assessment barred by limitation - Held that: - Under Section 22 of the VAT Act, the time limit prescribed for issuance of notice for re-assessment is three calendar years from the date of order of assessment - the order of assessment in the present case for the assessment year 2001-02 was 28.01.2005 and under the new law i.e. VAT Act, the notice for re-assessment could have been issued within three years from the date of order of assessment i.e. by 28.01.2008. For argument sake even if we take three years from coming into force of the new law, the notice could have been issued only by 28.01.2009 as VAT Act came into force w.e.f. 01.04.2006 and the notice for reassessment as mentioned earlier was 14.06.2010 which again is much beyond the prescribed period under Section 22 of the VAT Act for issuance of notice of re-assessment. The notice of re-assessment issued by the respondents were beyond the period of prescribed limit. No plausible explanation has been furnished by the State Govt. justifying the delay part. Neither does the Act empower the authorities under any circumstances to proceed for re-assessment beyond the limitation period prescribed under Section 22 of the VAT Act - assessment not sustainable and is quashed. Petition allowed - decided in favor of petitioner.
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2017 (9) TMI 59
Release of detained goods - intra-state sale - jurisdiction - case of appellant is that the 2nd respondent has no jurisdiction to detain the consignment, since it was an interstate sale, where the appellant had already paid the Central Sales Tax - Held that: - The appellant has not invoked the provision under Article 269 of the Constitution of India, in the grounds stated in the writ petition. The said fact has to be urged before the Appellate Authority. By an interim order passed by this Court in M.P. No. 1 of 2012 on 08.02.2013, the appellant's interest has been safeguarded, as an interim measure. Therefore, it is open to the appellant to prefer an appeal as per Section 54 of the TNVAT Act. Since the appellant has got the benefit of the interim orders for release of goods, by furnishing bank guarantee as security, no prejudice would be caused for the appellant to file an appeal, before the appellate authority, by raising all the grounds - appeal dismissed - decided against appellant.
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Indian Laws
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2017 (9) TMI 56
Eligibility of arbitrator - persons who become “ineligible” to be appointed as arbitrators - Applicability of Sections 12 and 14 of the Arbitration and Conciliation Act, 1996 - Held that:- Reading the heading which appears with Item 16, namely “Relationship of the arbitrator to the dispute”, it is obvious that the arbitrator has to have a previous involvement in the very dispute contained in the present arbitration. Admittedly, Justice Doabia has no such involvement Item 16 cannot be read as including previous involvements in another arbitration on a related issue involving one of the parties as otherwise Item 24 will be rendered largely ineffective. It must not be forgotten that Item 16 also appears in the Fifth Schedule and has, therefore, to be harmoniously read with Item 24. It has also been argued by learned counsel appearing on behalf of the respondent that the expression “the arbitrator” in Item 16 cannot possibly mean “the arbitrator” acting as an arbitrator, but must mean that the proposed arbitrator is a person who has had previous involvement in the case in some other avatar. According to us, this is a sound argument as “the arbitrator” refers to the proposed arbitrator. This becomes clear, when contrasted with Items 22 and 24, where the arbitrator must have served “as arbitrator” before he can be disqualified. Obviously, Item 16 refers to previous involvement in an advisory or other capacity in the very dispute, but not as arbitrator. It was also faintly argued that Justice Doabia was ineligible under Items 1 and 15. Appointment as an arbitrator is not a “business relationship” with the respondent under Item 1. Nor is the delivery of an award providing an expert “opinion” i.e. advice to a party covered by Item 15. The fact that Justice Doabia has already rendered an award in a previous arbitration between the parties would not, by itself, on the ground of reasonable likelihood of bias, render him ineligible to be an arbitrator in a subsequent arbitration. We have not been shown anything to indicate that Justice Doabia would be a person holding a pronounced anti-claimant view The appointment of Justice Doabia was also attacked on the ground that he had not made a complete disclosure, in that his disclosure statement did not indicate as to whether he was likely to devote sufficient time to the arbitration and would be able to complete it within 12 months. We are afraid that we cannot allow the appellant to raise this point at this stage as it was never raised earlier. Obviously, if Justice Doabia did not indicate anything to the contrary, he would be able to devote sufficient time to the arbitration and complete the process within 12 months. Also faintly urged that the arbitrator must without delay make a disclosure to the parties in writing. Justice Doabia’s disclosure was by a letter dated October 31, 2016 which was sent to the Secretary General of the International Centre for Alternative Dispute Resolution (ICADR). It has come on record that for no fault of Justice Doabia, the ICADR, through oversight, did not handover the said letter or a copy thereof to the appellant until November 24, 2016, which is stated in its letter dated November 29, 2016. This contention also, therefore, need not detain us. As argued that under Explanation 3 to the Seventh Schedule, maritime or commodities arbitration may draw arbitrators from a small, specialized pool, in which case it is the custom and practice for parties to appoint the same arbitrator in different cases, this is in contrast to an arbitrator in other cases where he should not be appointed more than once. We are afraid that this argument again cannot be countenanced for the simple reason that Explanation 3 stands by itself and has to be applied as a relevant fact to be taken into account. It has no indirect bearing on any of the other items mentioned in the Seventh Schedule. Appeal dismissed.
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