TMI Tax Updates - e-Newsletter
September 7, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Extension of due dates for furnishing details/Returns for the months of July, 2017 and August, 2017. - Notification
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Income Tax:
Genuineness of expenditure paid to Doctor - ITAT placed an unfair burden on the Assessee to prove that the above expense was incurred bonafide for the business purposes of the Assessee. The Assessee had placed all the relevant details thereby discharging the initial onus. Thereafter, it was open to the Revenue to prove to the contrary - Matter restored before ITAT - HC
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Income Tax:
When direct CUP between the AE and Tata Communications from whom the assessee has taken the network on lease is available then the ALP has to be computed under CUP - However, when the assessee has expressed its helplessness to compute the margins separately in respect of the international transactions then the direct CUP available in case of the assessee would be an appropriate method of determination of ALP.
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Income Tax:
Embezzlement loss must be deemed to have arisen only when employer comes to know about it and realizes that the amount embezzled cannot be recovered and not merely from the date of acquiring knowledge in which that embezzlement has taken place.
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Income Tax:
Foreign travelling expenses incurred for purchase of Machinery from outside India cannot be treated as Capital Expenditure rather treated as Revenue Expenditure only for the purpose of business use only.
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Income Tax:
Depreciation on Quarry Land & Development - AO disallowed the claim of deprecation as, there is no block for such asset in the Income Tax Act to claim depreciation U/s 32 - CIT(A) has allowed the depreciation correctly.
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Income Tax:
Provisions of section 194-I of the Act are not applicable where the assessee has not claimed the expenses as deductions from the income.
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Income Tax:
Penalty u/s 271C - short deduction of tds - Whether TDS to be deducted @ 2% u/s 194C or 10% u/s 194J - assessee itself obtained the opinion from department itself clearly shows that there was bonafide intention on the part of the assessee not to make any default - no penalty
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Indian Laws:
If the bare statement of the accused stating that the cheque in question bearing his signatures and date was misplaced by him in the market is taken as gospel truth, then all accused persons under section 138 of the NI Act can easily get away from their legally enforceable liability by taking such sham and false defence. - HC
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Service Tax:
Power of access the premises of the assessee - Vires of Rule 5A(1) of the Service Tax Rules, 1994 - Access to the premises is a lesser power than the power to search the premises as granted under Section 82 of the Act of 1994. Sub-rule (1), therefore, cannot be construed to mean that, it is in excess of the parent power of searching the premises - HC
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Service Tax:
Renting of immovable property Service - on repair and maintenance expenditure - this amount is not towards lease rent - the said expenditure cannot be considered as extra consideration towards the lease rent - demand set aside
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Service Tax:
Evasion of service tax - When original invoice is available in computer and not duplicate copy, then no addition can be made on the basis of extra printed copy - we find no justification to demand the Service Tax on the basis of so called parallel/duplicate invoices and the same is hereby set aside.
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Central Excise:
Refund of unutilised CENVAT credit - export of goods - even the goods are not dutiable or attracted Nil rate of duty if it is exported, refund under Rule 5 is legally available to the assessee, therefore on this ground rejection of refund claim is not sustainable.
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Central Excise:
Excisability/duty liability - wash water - Since, it contains recoverable monomer as well as oligomer the same is put to further process. - wash water is nothing but a residual waste emerging in the process of manufacture of polyamide chips and is not an excisable commodity.
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Central Excise:
Classification of goods - body building for motor vehicles on chassis - Considering the nature of motor vehicle, which is for transport of goods, the same has to be classified under Heading 8704
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VAT:
Refund the amount of input tax credit (ITC) reversed by the petitioner - Appeals filed by the State are yet to be numbered - mere pendency of the Appeal without interim order will not amount to the grant of stay of the order passed by the Lower Court or Lower Forum - Revenue directed to consider refund application - HC
Articles
Notifications
GST-
29/2017-Central Tax - dated
5-9-2017
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CGST
Extension of due dates for furnishing details/Returns for the months of July, 2017 and August, 2017.
GST - States-
21/2017-State Tax (Rate) - dated
22-8-2017
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Chhattisgarh SGST
Amendments in the notification No. 12/2017-State Tax (Rate) dated the 28th June, 2017
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CGST/01/2017 (06) - dated
21-8-2017
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Chhattisgarh SGST
Notification for filing Return in Form GSTR-3B
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22/2017-State Tax - dated
17-8-2017
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Chhattisgarh SGST
The Chhattisgarh Goods and Services Tax (Fourth Amendment) Rules, 2017.
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28/2017-State Tax - dated
5-9-2017
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Gujarat SGST
Waiver of Late Fee For GSTR-3B of July 2017.
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78/ST-2 - dated
22-8-2017
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Haryana SGST
Amendment in the Notification No. 73/ ST-2, dated the 18th August, 2017
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77/ST-2 - dated
22-8-2017
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Haryana SGST
Amendment in Notification No. 52ST-2 dated 30.06.2017 regarding tax by electronic commerce operator under Section 9(5) of HGST Act, 2017.
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76/ST-2 - dated
22-8-2017
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Haryana SGST
Amendment in Notification No. 48/ST-2 dated 30.06.2017 under Section 9(3) of the HGST Act regarding reverse charge on services.
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75/ST-2 - dated
22-8-2017
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Haryana SGST
Amendment in Notification No.47/ST-2 dated 30.06.2017 - regarding exemption in rate of tax on services under Section 11(1).
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74/ST-2 - dated
22-8-2017
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Haryana SGST
Amendment In Notification No.46-ST-2 Dated 30.6.2017 In Rate of Tax on Services.
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73/ST-2 - dated
18-8-2017
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Haryana SGST
Amendment Notification by Commissioner of State Tax under rule 61(5) of the HGST Rules,2017 specifying class of registered persons, conditions and date of filling GSTR-3B
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72/ST-2 - dated
18-8-2017
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Haryana SGST
Amendment in Notification No. 35/ST-2 dated 30.06.2017 regarding tractors parts Schedule III 9%
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69/ST-2 - dated
10-8-2017
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Haryana SGST
For prescribing GSTR-3B as return for the month of July & August and its times of filling under HGST Rules,2017 & section 168.
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (9) TMI 321
TDS u/s 194C - assessee in default - failure to deduct tax or short deducted tax - liability to tax - Held that:- HC order confirmed [2017 (8) TMI 238 - ALLAHABAD HIGH COURT]. The Special Leave Petition is dismissed. HC has held Tribunal has rightly remanded the matter to the assessing authority to examine this aspect. If the assessing authority finds that the recipient-assesses, i.e., SAL was not liable to pay any tax during the relevant assessment year or has actually paid tax, the assessee cannot be held to be "assessee in default" merely for the reason that it has failed to deduct tax or has short deducted tax and for that reason alone the assessing authority cannot raise demand of tax from the assessee. We find that similar question has also been considered recently by this court in Ghaziabad Development Authority v. Union of India (2016 (8) TMI 1240 - ALLAHABAD HIGH COURT). - Decided against the Revenue
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2017 (9) TMI 320
Fringe Benefits Tax chargeability - Reading down of Section 115WB(2) of the Income Tax Act, 1961 - as contended 17 broad heads stipulated in Subsection (2) of Section 115WB will prompt any Assessing Officer to charge FBT - Employer-employee relationship - legal fiction extension beyond the purpose for which it is created - Held that:- A statute is to be read as a whole is the view expressed in Hindustan Bulk Carriers (2002 (12) TMI 10 - SUPREME Court). Ajmera Housing Corporation (2010 (8) TMI 35 - SUPREME COURT OF INDIA ) has held that, a taxing statute is to be construed strictly and that nothing is to be read in and nothing is to be implied, in respect of a taxing statute.Section 115WB is a part of Chapter XII-H of the Income Tax Act, 1961. Chapter XII-H of the Income Tax Act, 1961 was introduced to the statute from the year 2005-2006. It was deleted from the year 2009- 2010. Chapter XII-H deals with Fringe Benefits Tax. Section 115WA contemplates that, additional income tax referred to as Fringe Benefits Tax would be payable in respect of fringe benefits provided or deemed to have been provided by an employer to his employee during the previous year at the rate of 30 per cent of the value of such fringe benefits. There has to be an employer employee relationship between the persons for considering whether the employer is giving any fringe benefit to the employee or not. In other words, whether an employee is receiving a fringe benefit from the employer has to be considered and decided for Fringe Benefit Tax to be attracted. Fringe benefits are defined in Section 115WB. Sub-section (2) of Section 115WB stipulates that, fringe benefits shall be deemed to have been provided by the employer to his employees, if the employer has, in the course of his business incurred any expense on or made any payment for, the purposes stipulated thereunder. Basically 17 heads have been specified under Sub-section (2) of Section 115WB which attracts the legal fiction. Nandkishore Ganesh Joshi (2004 (10) TMI 610 - SUPREME COURT) and Sadan K. Bormal & Anr. (2004 (4) TMI 582 - SUPREME COURT) have held that, a fiction cannot be extended beyond the purpose for which it is created. Chapter XII-H of the Income Tax Act, 1961 is premised upon the legal fiction of fringe benefits being given by the employer to the employee. The petitioner is yet to establish that, the assessing officer has charged a Fringe Benefits Tax on an item which is not chargeable. Therefore, the petitioners cannot said to be have any cause of action for the Court to intervene. For the Court to admit such a resolution, an affected situation has to come before the Court for the Court to try and marry equity with the taxation law. In the present case, the Assessing Officer is yet to arrive at a finding whether the petitioner is liable to Fringe Benefits Tax on any head or not. It would not be prudent to enter into a discussion in the abstract, without any factual foundational basis. - Decided against the petitioners.
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2017 (9) TMI 319
Penalty u/s 271C - non deduction of tds - assessee admitted the liability and paid the tax with interest - Held that:- After the survey was conducted, the Assessee voluntarily filed revised its computation of tax and interest on 13th January 1999 without raising any dispute and without waiting for any demand or penalty notice. The ITAT held that in view of the decisions of this Court in Azadi Bachao Andolan (2001 (3) TMI 23 - DELHI High Court) in which the penalty under Section 271C had been deleted in similar circumstances, there was no legal infirmity in the order of the CIT (A). Non-deduction of tax from the salaries paid to expatriate employees outside India - non compliance u/s 192 - no intention of concealing any income or TDS - penalty was leviable under Section 271C - reasonable cause for the failure to deduct TDS - Held that:-Thus as the Respondent-Assessee had discharged the burden of showing reasonable cause for the failure to deduct TDS, the Court is not persuaded to entertain the present appeals. The question that has been framed does not require to be answered for the simple reason that the decision of this Court cannot possibly be contrary to what has been held by the Supreme Court on merits on the question of the liability of the Assessee to pay penalty under Section 271C of the Act.The Court declines to answer the question framed.- The appeals are dismissed
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2017 (9) TMI 318
Loss on account of embezzlement - Held that:- When embezzlement comes to the notice of an employer, it can be said that such embezzlement is detected by the employer.The word “discovers” has been interpreted by English Courts to means “comes to the conclusion from the examination the Inspector makes, and from any information he may choose to receive” or “has reason to believe” or “finds or satisfied himself” or “honestly comes to the conclusion from information before him.” The expression detection and discovery have different and distinct connotations in law and the expression “discovery” has to be interpreted so as to mean that loss must be deemed to have arisen only when employer comes to know about it and realizes that the amount embezzled cannot be recovered and not merely from the date of acquiring knowledge in which that embezzlement has taken place. Accordingly, the first substantial question of law is answered in favor of the assessee and against the Revenue. Loss by embezzlement being incidental to the banking business - allowed as deduction in the year of its detection or discovered - Held that:- The second substantial question of law framed by this Court is answered by stating that loss by embezzlement being incidental to the banking business should be allowed as deduction in the year it is discovered and the expression “discovered” has to be read in the context of Circular dated 24.11.1965 issued by Central Board of Direct Taxes. Accordingly, the second substantial question of law is answered in favor of the assessee and against the Revenue.
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2017 (9) TMI 317
Allowance of business expenditure u/s 37- honorarium paid to Dr.Saxena for consultancy services - travel, boarding and lodging expenses paid for Dr. Saxena to attend a Medical Advisory Board meeting for Asia pacific region held at Japan - Expenses incurred on sponsorship for organizing seminars and conferences - Held that:- Mr. Syali is right in his contention that the ITAT placed an unfair burden on the Assessee to prove that the above expense was incurred bonafide for the business purposes of the Assessee. The Assessee had placed before the ITAT all the relevant details thereby discharging the initial onus. Thereafter, it was open to the Revenue to prove to the contrary. It was not going to be possible for the Assessee to show that Dr Saxena “actually delivered any lectures, attended any meetings, provide training courses and seminars for Assessee etc.” The ITAT appears not to have considered the legal position as explained in Commissioner of Income Tax v. United Hotels Limited (2008 (10) TMI 4 - HIGH COURT DELHI) and CIT v. Ashok J. Patel (2013 (12) TMI 1480 - GUJARAT HIGH COURT) as regards burden of discharging the initial onus. It is also not in dispute that the ITAT dealt only with one of the disallowances in the sum of ₹ 13,14,548 and not the other two disallowances in the sum of ₹ 19,06,000 and ₹ 8 lakhs. Since the ITAT has not dealt with these aspects, the Court is of the view that it is necessary to remand the matter back to the ITAT and considers all the three disallowances in the entire appeal alongwith the question whether the CBDT’s Circular No. 05/2012 dated 1st August 2012 would apply to the AY in question of the Assessee on merits afresh.
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2017 (9) TMI 316
Condonation of delay - Held that:- As gone through the reasons pleaded in the application of the Revenue. We have also taken note of the fact that there are substantial questions of law involved in this appeal, for which the appeal was admitted. In such circumstances, we condone the delay and restore the appeal in its original file and number.
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2017 (9) TMI 315
Bogus expenses - materials consumed in respect of sand, dust and bajri - no supporting bills/vouchers - genuine expenditure - Held that:- However, out of the total amount of material consumed , supporting evidence in the form of bills/vouchers were not available for an amount of ₹ 46,84,809/- and it is that which has been disallowed by the AO and added back to the income of the assessee. The learned counsel for the revenue submits that there was absolutely no basis for the CIT(A) or the tribunal to have reduced the disallowance from ₹ 46,84,809/- to ₹ 9,36,962/- and ultimately to ₹ 4.00 lacs respectively.- Therefore, we are in agreement with the learned counsel for the revenue that the finding of the tribunal in limiting the disallowance to ₹ 4.00 lacs has no basis at all and there is no evidence to back the same.- Decided in favor of revenue. Addition of Site Expenses - no supporting bills/vouchers - Held that:- All the authorities below recognized the fact that expenditure in respect of site expenses has to be allowed though not in toto. The disallowance by all the three authorities has been based on their respective estimates. Since the tribunal is the final fact finding authority, we have nothing before us to challenge the estimation of the tribunal by restricting the addition to ₹ 4.00 lacs. In fact, we agree with the learned counsel for the assessee that this question is purely one of fact and is not a substantial question of law. - Decided in favor of revenue. Addition of non verifiable labour expenses made in cash - Held that:- The assessee had debited an amount of ₹ 4,82,25,191/- under labour expenses and the AO had made a disallowance of 5% thereon amounting to ₹ 24,11,260/- which was confirmed by the CIT(A). The reasoning adopted by the AO was that as the genuineness of payments to the aforesaid extent could not be ascertained, therefore, he considered it appropriate to disallow 5% of the expenditure as the same was made in cash and were not “properly verifiable”. However, the tribunal being the final fact finding authority has taken the stand that the muster roll which contained all the details of the labour and the payments made had not been rejected by the Assessing Officer and, therefore, no disallowance could be made on this account.- Decided in favour of assessee.
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2017 (9) TMI 314
Foreign Travelling Expenses - Treatment of expenditure as revenue or capital - Held that:- One of the partner of the assessee firm went abroad to purchase a machine for the purposes of business and the same was subsequently purchased and put to use in the business.In such a scenario, the foreign travelling expenses incurred by the assessee firm, since admittedly is for the purposes of business only and needs to be allowed as revenue expenditure - Decided in favor of assessee. TDS liability - addition u/s 40(a)(ia) - non-deduction of TDS on payment of interest being paid to M/s L&T Finance Ltd.- payee has included the amount paid by payer in its return of income - Held that:- As payee has included the amount of interest so paid by assessee in its return of income and tax due there on has been paid then there is no need to make any disallowance for non deduction of TDS on interest u/s 40(a)(ia) . See CIT vs Ansal Land Mark Townships Pvt. Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] - Decided in favor of assessee.
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2017 (9) TMI 313
Levy of penalty u/s 271(l)(b) - failure to comply with the statutory notices - Held that:- Failure to comply with certain statutory notices on a particular date was due to reasonable cause as highlighted by the assessee not only during the course of the assessment proceedings but also before the AO and Ld. CIT(Appeals) in the impugned penalty proceedings and hence penalty cannot be levied in such circumstances. Accordingly, the appeal of the assessee deserves to be allowed.
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2017 (9) TMI 312
Disallowance u/s 14A - AO made disallowance without recording his dissatisfaction on any cogent ground - Held that:- Following the decision rendered in judgment cited as Godrej & Boyce Manufacture Company Ltd. (2017 (5) TMI 403 - SUPREME COURT OF INDIA) and Hon’ble Delhi High Court in HT Media Limited (2017 (8) TMI 962 - DELHI HIGH COURT), we are of the considered view that the findings returned by AO that “the contention of the assessee company that it has not incurred any expenses for earning exempt income and take services of investment adviser is not acceptable” do not hold good because when the assessee has come up with categoric plea that it has not incurred any expenses to earn the exempt income from mutual funds and that the assessee has itself made disallowance to the tune of ₹ 1,00,000/- which has been accepted by the AO without pointing out any defect, provisions contained u/s 14A read with Rule 8D cannot be invoked. Because sub-section (2) & (3) of section 14A with Rule 8D of the Rules has only prescribed a formula for determination of an expenditure to earn the income which does not form part of the total income under the Act, which can only be invoked if the AO is not satisfied with the claim of the assessee. Therefore the addition made by the AO and affirmed by the ld. CIT (A) is not sustainable. - Decided in favour of assessee.
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2017 (9) TMI 311
Disallowing the deduction u/s. 35(2AB) - weighted deduction of 200 % R&D expenditure- rectification of mistake u/s 154 - technical defect - Held that:- The ld. CIT(A) pointed out the technical defect in Appeal with respect to filing of appeal against the order u/s 154 instead of order u/s 143(3). This technical defect was a curable defect, which does not go to alter the core issue involved in this appeal. The assessment Completed u/s 143(3) after disallowing the deduction u/s. 35(2AB) of ₹ 2,59,16,364/- representing to 200% of the expenditure incurred on R & D, as claimed by the assessee. The assessee filed application u/s. 154 before the AO, on which the AO restricted the disallowance to ₹ 1,29,58,182/- representing to 100% of the expenditure incurred on R & D on the premise that the expenses to the tune of ₹ 1,29,58,182/- stood already disallowed by assessee itself for claiming the weighted deduction under section 35(2AB).The appellant preferred an appeal before the ld. CIT(A) against the order u/s. 154, which was dismissed by the first appellate authority. The contention of the assessee is that this is despite the fact that the assessee applied for and received approval for their R&D facility as an in-house R& D facility from DSIR from the F.Y. 2011-12 and renewed till 31.03.2017. CIT(A) deem it expedient in the interest of justice to remit the case back to the file of ld. CIT(A) to decide the appeal afresh on merit of the core issue, i.e., disallowance u/s. 35(2AB) after giving reasonable opportunity of being heard to the assessee. The Assessee is directed to submit the subject approval of DSIR along with all the material/documentary evidences, which he deems fit to produce before the first appellate authority for examination and decision.appeal of Assessee is allowed for statistical purposes. .
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2017 (9) TMI 310
Allowable business expenditure u/s 37 - Whether expenses incurred in connection of business activity treated as revenue and charged to P&L A/c or treated as capital in nature - proof of business activity - Held that:- In the order of FAA, the findings have been recorded that there were no business activity from the sale and purchases and the activities shown by the assessee does not appear genuine as the sales bills were dated prior to the purchase bills. We also after hearing either sides and after examining the record, are in agreement with the conclusion drawn by the ld.FAA that the sales and purchase were shown in order to claim expenses which are not incurred wholly and exclusively for the purposes of business. At the most the said expenses could be capitalized. Accordingly, we affirm the order of the ld.CIT(A) on this issue.- Decided against assessee. Disallowance of interest expenditure - loan was not used wholly and exclusively for the purposes of business - Held that:- . At the time of hearing the ld. AR filed statements and contentions that the amount of loan is raised for further advancing to its director for business purposes but the same was finally returned by the Director of the company as the said loan was not used for the business purpose. The ld.AR raised the plea that since the money was received back and not used for business purposes, no disallowance was attracted. Thus as the statement produced before us contains the details of advances given on different dates and said statement was not before the authorities below restore this issue to the file of the AO as the matter requires verification and the AO is directed that in case money has not used by the director for any personal purposes and returned to the company as it is,the claim of the assessee is allowed and otherwise decide the allowance as per law and facts. - Decided in favor of assessee for statistical purposes.
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2017 (9) TMI 309
Addition u/s 69 on account of unexplained investment - purchase of tenancy right - Contention of the assessee that he did not purchase the property however, he took Room along with two other on monthly rent - Held that:- The assessee did not disclose the said transaction in his return income. It is also in dispute that an amount of ₹ 41,13,000/- was paid to acquire the tenancy right in the property mentioned above. The said agreement speaks about the fact that the assessee along with Kirtilal, M. Shah and Amarchand P Shah purchased the said property to the extent of 1/3 share each. The assessee failed to explain the source of the payment to the tune of ₹ 41,13,000/-.The full addition to the amount of ₹ 41,13,000/- u/s 69 doesn’t seems justifiable because the assessee was having only 1/3 share therefore, the addition to the extent of 1/3 share of ₹ 41,13,000/- is hereby ordered to be confirmed - Decided partly in favor of assessee. Disallowance of interest - Held that:- The figure of deposit and interest paid has duly discussed by CIT(A) in his order. Nothing distinguishable facts has been placed on record. Even, at the time of argument nothing was argued that which figure has wrongly being taken into consideration while declined the claim of the assessee regarding interest to the tune of ₹ 3,34,000/-. In view of the said circumstances we are of the view that the CIT(A) has rightly confirmed the said addition hence, the order of the CIT(A) in this regard is not liable interfere with at this appellate stage. Accordingly, this issue is decided against the assessee. Addition of personal expenses - AO has made the addition to the extent of 5,00,000/- on account of low withdrawal which was restricted by the CIT(A) to the extent of 2,00,000/- - Held that:- Since, it was incumbent upon the assessee to explain the expenditure which has not been explained. Moreover, nothing distinguishable material has been produced before us to justify the claim raised by the assessee therefore in the said circumstances we confirmed the finding of the CIT(A) on this issue.
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2017 (9) TMI 308
Addition made u/s 69A - unexplained bank account - peak credit - Held that:- No doubt, the verification is required to be done in connection with the assessing of the income of joint account to the tune of ₹ 19,85,100/- with the Jayesh K Vora. In this regard, we observed that the necessary verification is required to be done at the end of AO to justify the claim if, any raised by the assessee whether this income has been assessed at the end of her husband Jayesh K Vora or not. If, this amount has been assessed with the Jayesh K Vora, in the said circumstances, the said amount is not liable to be added with the income of the assessee. We direct accordingly. The other contention of the assessee is that he was having the SBI Account No.706 in which there was a deposit and withdrawal and the total deposit up to the year ended on 31.03.20111 was amounting of ₹ 22,08,800/-. The copy of the said account is lies at page 14 to 15 of the paper book in which there are number of withdrawal and deposit and the total deposit was to the tune of ₹ 22,85,800/-. The big amount of deposit is to the tune of ₹ 15,67,800/-. We are of the view that the peak amount is liable to be added to the income of the assessee specifically in the circumstances when there is a number of withdrawal and deposit. Since, we are restoring the matters controversy before the AO therefore, the AO is directed to assess the income of the assessee in view of the observation made above we set aside the finding of the CIT(A) on this issue and resorted the matter to the file of the AO for further adjudication Addition on account of unsecured loan credit u/s 68- confirmation on source of transaction - Held that:- The loan creditor has a debit balance of ₹ 1,54,118/-. Thus instead of declaring Shri Jayesh K Vora as sundry debtor for ₹ 1,54,118/, the assessee has declared him as a unsecured loan creditor for ₹ 13,42,83.51/-. This difference to the tune of ₹ 14,96,950/- was assessed as unexplained undoubtedly, this addition was not made by the AO. We are of the view that the said loan transactions are required to be examined at the end of the AO by giving an opportunity of being heard to the assessee. While raising the addition by the CIT(A) no opportunity of being heard was given to the assessee, therefore we are of the view that an opportunity being heard is required to be given to the assessee before the addition u/s 68 of the Act to the tune of ₹ 14,96,650/- in accordance with law. Therefore, we set aside the finding of the CIT(A) on this issue and direct the AO to verify the said transaction. Decided in favor of the assessee against the revenue.
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2017 (9) TMI 307
Addition u/s 69 to the extent of GP ratio - Information received from sales tax department in respect of bogus purchases- element of profit embedded in bogus purchases which the assessee would have made - Held that:- Assessee company being a trader of goods, AO not having doubted the genuineness of sales, could not have gone ahead and made addition in respect of peak balance on such purchases. When the corresponding sales have not been doubted and the quantitative details of purchases and sales vis-a-vis stock was available, we deem it appropriate considering the entirety of facts and circumstances of the case to restrict the addition to the extent of 2% of such bogus purchase. Accordingly, the order of both the lower authorities are modified and AO is directed to restrict the addition to the extent of 2% on such purchases. - Partly decided in favor of assessee and against revenue.
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2017 (9) TMI 306
Assessment of income - claim of the assessee that amount of cash found during survey has already been added to the income of his brohter - Held that:- The assessee has no objection if the said claim be verified. - The AO would pass the order afresh in this regard after giving an opportunity of being heard to the assessee. Accordingly, this issue is hereby decided in the favour of the assessee against the revenue. Addition of capital revenue not explained properly - CIT-A deleted 30% of capital revenue - Held that:- The only difference, between the opening and closing of capital account, was to be found of credit of ₹ 23,584/- CIT(A) has rightly sustained the addition of ₹ 23,584/- instead of ₹ 3,39,468/- Decided against the revenue. Assessment of profit - Sale of chemicals SBPS OR sale of Naptha - Held that:- In view of the said finding of the CIT(A) we noticed that CIT(A) has already directed the AO to verify the profit of ₹ 4.440/-per tanker from the business of SPBS which has been assessed to tax. The finding of the CIT(A) is on the basis of the record and relevant material was available with them. There is no need to discuss the same being the CIT(A) has already discussed the matter at length above.Verification is yet to be done by the AO. Nothing distinguishable has produced before us to deviate the finding of the CIT(A) on this issue. Therefore, we decided this issue in favor of the assessee.
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2017 (9) TMI 305
Legality /Validity of reopening of assessment u/s 148 - hawala transactions - bogus purchases - assessee agreed for addition but requested for a fair and reasonable estimate of profits embedded in these purchases - Held that:- Assessee has specifically stated that it does not want to challenge the legality and validity of reopening of assessment u/s 147/148 but want quite reasonable and fair addition and hence ground no. 1 stood dismissed as not being pressed. Addition to the tune of 12.5% of the alleged purchases are upheld towards profit embedded in these purchases wherein material was procured from grey market at lower prices while invoices at inflated price was obtained from these alleged bogus dealers, instead of 24.71% (GP of last year) as was upheld/sustained by lower authorities. We direct the A.O. to work out the additions to the income of the assessee at the rate of 12.5% of the alleged bogus purchases over and above declared income -Decided partly in favor of assessee.
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2017 (9) TMI 304
Addition in FDRs from cash received from directors - deemed dividend addition u/s 2(22)(e) - unexplained source of source of investment - Genuineness of transaction - whether sub creditor had the creditworthiness of making the investment? - Held that:- The second FDR of ₹ 4 crores was made in cash by the assessee company in CITI Bank, Gurgaon. The Ld. AR has referred to the ledger account in the books of M/s OEC Diascans Ltd. and the ledger account in the books of Mr. Harish Kanwar and Ms. Anjali Kanwar of M/s OEC Diascans Ltd which support the submissions made by the Ld. AR that the amount of ₹ 4 crores were received by the Directors Ms. Anjali Kanwar and Mr. Harish Kanwar from M/s OEC Diascans Ltd.The Department has not brought anything on record to dispute the aforesaid sequence of transactions. Moreover, the return of amount to the Directors and by the Directors to M/s OEC Diascans Ltd. is also evidenced by the bank statements and the certificate given by the bank to the Directors. This clearly shows that the transaction was genuine within the meaning of section 68 of the Act. Department had tried serving notice to M/s OEC Diascans Ltd. which remained un-served. However, the Department despite having the address of the changed company M/s Silver Sand Corporation did not make any enquiry with respect to the aforesaid transactions. The net worth of the company M/s Silver Sand Corporation Ltd. from its balance-sheet reveals that it is regularly filing its return of income and total sources of funds are ₹ 85.46 crores. The DIN and the address of the said company are also on record. The assessee had therefore, proved the genuineness, creditworthiness and identity as required under section 68 of the Act. The addition cannot be made in the hands of the assessee for not proving the source of source of investment and the assessee is not required to prove that the sub creditor had the creditworthiness of making the investment. - Decided in favour of assessee.
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2017 (9) TMI 303
Bogus purchases - Determination of GP Ratio - CIT(A) confirmed the additions @35% - Held that:- Keeping in view peculiar factual matrix of the case where no consumption/utilization of the material for manufacture of finished goods as well fall in GP ratio was not explained by the assessee nor genuineness of the purchases stood proved, the matter needs to go back to the A.O. for de-novo determination of the issue on merits in accordance with law. - matter remanded back.
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2017 (9) TMI 302
Reopening of assessment u/s 148 - receipt of information from the DGIT(Inv) Mumbai regarding issuing of bogus invoices of purchases - Held that:-Reopening of assessment is done on the receipt of information from the DGIT(Inv) Mumbai and as per the information from the Sales Tax Department, that the assessee has availed some entries of bogus purchases from the hawala dealers. Though assessee submitted various details in regard to above but in absence of nay response from suppliers against notice u/s 133(6) served upon them the ld.CIT(A) therefore is correct that the case of the assessee was rightly reopened. Accordingly, ground taken by the assessee on the issue of reopening of the assessment stands dismissed. Disallowance on account of bogus purchases - Held that:- We find that the assessee could not produce any documentary evidences to prove the genuineness of the purchases and even the notice sent u/s 133(6) of the Act were returned unserved but simultaneously, we find that the AO has not doubted the sales out of materials purchased by the assessee from these hawala operators which means that the assessee purchased the material from the grey market thereby making savings of taxes like VAT octroi etc. These purchases and sales were duly recorded in the books of accounts of the assessee. The co-ordinate benches of the Tribunal in similar cases have been taking a consistent view in such cases by upholding the disallowance @ 12.5% of such unverified purchases towards various savings and leakages of revenue. Accordingly, we set aside the order of ld.CIT(A)and AO is directed accordingly - Decided partly in favor of assessee. Addition on account of unexplained expenditure u/s 69C - evidences to prove the genuineness of purchase - Held that:- We find that the purchases from M/s Shree Sundha Steel Pvt Ltd amounting to ₹ 25,96,500/- were rightly deleted by the CIT(A) as the said party was not hawala dealer and the AO has not recorded any findings against M/s Shree Sundha Steel Pvt Ltd being hawala dealer when the assessee specifically submitted in that context during re-assessment proceedings by way of written submissions. However,in respect of the remaining parties, a reasonable disallowance at the rate of 12.5% of the total purchase should be made towards various savings of taxes and other levies which the assessee may have made by making the purchases from the gray market. Therefore, we direct the AO to apply 12.5% of the bogus purchases from remaining five parties who were declared hawala dealers from whom the assessee have purchased material to the tune of ₹ 12,57,357/-. The AO is directed to make addition @12.5% of ₹ 12,57,357/-. Accordingly, this ground is partly allowed.
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2017 (9) TMI 301
Allowable business expenditure u/s 37 - Bills of various expenditure are in the name of other sister concern - double claim of expenses once by assessee and other by its sister concern - Held that:- Tribunal held in earlier years that there cannot not be any double claim by different assessee towards the same expenditure. It is the duty of the assessee to establish that there is no double claim towards this expenditure and thereafter it is also proved that expenditure was incurred wholly and exclusively for the purpose of carrying on the business of assessee. Due to similarity of names of the other companies which are under the same management, suppliers/service providers by oversight raised such invoices on the names of the other concerns. With these observations, we remit this issue to the file of the AO for fresh consideration. This Grounds is partly allowed for statistical purposes. Violating provisions u/s 40A(3) - payments were made otherwise than by crossed cheque or demand draft - Held that:- The facts of the case are similar to those in earlier year and the expenditure was incurred towards horticulture, then it falls under exceptions provided in Rule 6DD of IT Rules. There cannot be disallowance u/s. 40A(3) of the Act. On the other hand, the assessee has to prove thereafter that the expenditure was incurred wholly and exclusively for the purpose of business and falls under the purview of Section 37(1) of the Act. Accordingly, we direct the AO not to disallow any payments made by cross account payee cheque if the assessee is able to prove that it is incurred for the purpose of business of assessee. In case of expenses incurred in cash, the assessee is not only to prove the incurring of the expenditure for the purpose of business, it has to be proved that there is no inflation of expenditure. Since, it was held already on earlier occasion that there is a chance of inflating the expenditure by assessee by way of cash voucher, 10% of that cash expenditure is to be disallowed. - Decided partly for statistical purposes. Disallowance of interest - interest bearing funds were found to be utilize for giving interest free loans to sister concerns - Held that:- In our opinion, assessee has to demonstrate that assessee has not borrowed any money to lend to its sister concern and it has lent its own funds or lent non-interest bearing funds and not resulted in any additional interest cost to assessee. In the present case, CIT(A) blindly followed the earlier order of the Tribunal without going into the actual facts of the case. In other words, CIT(A) has not gone into the money advanced to the sister concern as a measure of commercial expediency and only in such cases, no notional interest could be disallowed. With these observations, we remit the issue-in-dispute to the file of the AO with a direction to assessee to demonstrate that interest free funds are available with assessee as on date of advance to the sister concern and it is on account of commercial expediency so as to apply the ratio laid down by the Hon'ble Supreme Court in the case of S.A. Builders Ltd. Vs. CIT [2006 (12) TMI 82 - SUPREME COURT]. Thus emit the issue-in-dispute to the file of AO for his consideration. Allowability of Prior period expenditure - contention of the Ld.DR is that assessee is following the mercantile system of book keeping and as such prior period expenditure cannot be allowed - Held that:- If it is statutory payment covered by Section 43B, it is to be allowed on actual payment basis. In respect of other payments which are not covered by the provisions of Section 43B, it cannot be allowed in the assessment year under consideration which is not relating to the assessment year under consideration. More so, the assessee is following the mercantile system of book keeping which is on accrual basis. Accordingly, we remit the issue-in-dispute to the file of AO for fresh consideration. This ground is partly allowed for statistical purposes. Provisions of section 40(a)(ia) applicability - non deduction of tds liability - Held that:- Assessee has to prove that recipient of such income has declared the same in the return of income and paid tax on it. However, in the present case, assessee has not demonstrated this fact that recipient has paid the tax on the said income. Accordingly, the issue is remitted to the file of AO for fresh consideration with a direction to assessee to demonstrate that recipient of the said income has disclosed the same in their return of income and paid taxes thereon. Accordingly, we remit this issue to the file of AO for fresh consideration. This ground is partly allowed for statistical purposes. Short deduction of tax - invoking provisions of section 40(a)(ia) - Held that:- As decided in assessee' own case for previous year as in the case of SK Tekriwal (Infra) [2012 (12) TMI 873 - CALCUTTA HIGH COURT] has held that the disallowance u/s 40a(ia) is not applicable in the case of short deduction of TDS. It was held that when there is a shortfall due to a difference of opinion, the tax payer may be treated as a defaulter u/s 201 but no disallowance can be made u/s 40a(ia).We are inclined to dismiss this ground of appeal taken by the Revenue.
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2017 (9) TMI 300
Adjustment u/s 92CA - strictly relying on TNMM OR considered CUP as MAM - providing telecommunication net working services - adjustment on account of capacity under-utilisation of capacity - Held that:- entity level results comprising of international transactions and domestic transactions cannot be considered for the purpose of testing the price of the international transactions with comparable price being ALP. It is also pertinent to note that while selecting the comparable entity for the purpose of determining the ALP of international transactions an appropriate filter of not less than 75% of the revenue from exports is applied. - the appropriate method in our view would be CUP and particularly when the AE of the assessee was receiving the same services from Tata Communications just prior to the incorporation of the assessee. The assessee is using the same network bandwidth hired from Tata Communications and also claimed that during the year under consideration the assessee is in the testing phase and was not able to provide proper services as manifest from the agreement with the client. Thus it is apparent that the services of the assessee were not better than the earlier provided by Tata Communications to the AE of the assessee and therefore, the contention of the ld. AR is devoid of any substance or merit. Further in case CUP is adopted as a MAM the question of non-utilisation of network and corresponding adjustment on account of lease, charges would not arise. Accordingly, in the facts and circumstances of the case, when direct CUP between the AE and Tata Communications from whom the assessee has taken the network on lease is available then the ALP has to be computed under CUP. We further note that it is the stand of the assessee that the assessee as well as the TPO has accepted the TNMM as MAM. However when the assessee has expressed its helplessness to compute the margins separately in respect of the international transactions then the direct CUP available in case of the assessee would be an appropriate method of determination of ALP. Also the assessee claimed to have taken the network on lease from Tata Communications however the agreement filed before us by the assessee is with Tata Teleservices Ltd. (TTL)/Tata Teleservices (Maharashtra) Limited (TTML) and not Tata Communications Limited. Therefore this aspect is required to be verified properly. Hence when the assessee has substituted the Tata Communications Ltd. in providing the services to the AE then the CUP would be the MAM. Accordingly, we set aside the matter to the record of the TPO for determination of the ALP on the basis of CUP. Appeals of assessee are allowed for statistical purpose
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2017 (9) TMI 299
Depreciation on Quarry Land & Development - AO disallowed the claim of deprecation as, there is no block for such asset in the Income Tax Act to claim depreciation U/s 32 - Held that:- As we noticed that quarry land & development is an intangible asset being in nature of license for commercial right and for which the prescribed rate of depreciation as per the Income Tax Rules is at 25%. The assessee has submitted before the Assessing Officer as well as before the ld. CIT(Appeals) the various charts of depreciation explaining the provision on the amount of depreciation claimed by the assessee. Therefore, considering the nature of the business, we are of the view that the method adopted by the assessee to compute the depreciation on Quarry Land & Development is appropriate and, therefore, we confirm the order passed by the ld. CIT(Appeals).- Decided against Revenue. Disallowance of deduction under section 80HHC - Interest Income not Considered while computing profit - net of interest or gross interest - Held that:- As per Explanation (baa) to section 80HHC(4B) the ‘net interest income’ should be considered instead of the ‘gross interest receipt’.Also various Hon’ble High Courts have explained the above terms. Therefore tribunal confirm the order of the ld. CIT(Appeals).- Decided against Revenue.
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2017 (9) TMI 297
Penalty u/s 271C - short deduction of tds - Whether TDS to be deducted @ 2% u/s 194C or 10% u/s 194J - bonafide belief - reasonable cause for deducting TDS at a lower rate - Held that:- There was bonafide and reasonable cause on the part of the assessee for short deduction of TDS as the assessee was under a genuine and bonafide belief for not deducting the tax at source u/s 194J instead of 194C as stated by the company M/s NYSA Communications P Ltd on the basis of their previous invoices and as per the expert opinion of Chartered Accountant. Both confirmed that the TDS was deductible @2% and the same was accordingly deducted. Still being dissatisfied, the assessee asked the ITO TDS to advice on the said issue who advised to deduct tax @10%. Accordingly, the assessee deducted the tax @10% from next bill and paid the difference along with interest of first bill on the amount short deducted by it. The fact that the assessee itself obtained the opinion from department itself clearly shows that there was bonafide intention on the part of the assessee not to make any default and the correct TDS was deducted out of the next payment made to NYSA Communications (P) Ltd and paid accordingly. Hence it is not a fit case for levying penalty - Decided in favour of assessee.
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2017 (9) TMI 293
TDS u/s 194I - Non deduction of tax on provision of rent charged to P&L A/c - assessee declared rent as inadmissible expense u/s 40(a)(ia) - Held that:- we find merit in the contentions of the assessee that he has already made suo motto disallowance of lease rental u/s 40(a)(ia) of the Act at the time of filing the return of income and paid income tax accordingly without claiming any expenditure on the ground that the provision of rent were of contingent nature never ever paid. We therefore are inclined to set aside the order of the FAA and hold that the provisions of section 194-I of the Act are not applicable where the assessee has not claimed the deduction of the expenses. The AO is directed accordingly. The ground raised by the assessee is allowed. TDS liability on internet charges and leaseline charges - whether TDS u/s 194-C or 194-I or 194-J - Held that:- Assessee has availed internet services and paid internet /lease charges for the same. According to the AO, the said payment of lease rent/internet charges were liable to tax u/s 194-I of the Act. As per the contentions of assessee he has only availed the internet connection and was not using any asset, plant or machinery which involved payment of rent. In our considered view these charges are not falling within the provisions of section 194-I. Moreover the case of the assessee is squarely covered by the various decisions referred to by the ld AR. Accordingly we set aside the order of ld. CIT(A) on this issue by allowing the ground raised by the assessee.
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Customs
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2017 (9) TMI 296
Jurisdiction - power of DRI to issue SCN - Held that: - the notice issued by the DRI who was not a competent authority as per the ratio laid down in the case of Mangali Impex Ltd. Vs. UOI [2016 (5) TMI 225 - DELHI HIGH COURT] - In this connection, we note that similar issues have been dealt with in various cases by the Tribunal recently. It is held that the matters have to be remanded back to the original authority for a decision - appeal allowed by way of remand.
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2017 (9) TMI 281
Validity of suspension order - suspension of operation of the importer and exporter code (IEC code) allotted to the petitioner - non-speaking order - It is alleged against the petitioner that, the petitioner had allegedly involved itself in the export of consignment of red dry chilies of M/s. S.B. Impex - Held that: - there is no material to arrive at the finding that, the observation made in the impugned order that, there are no satisfactory explanation against the show cause notice, is perverse. The reason why the impugned order was passed is that, the explanation given is not satisfactory. This reason has not been substantiated to be perverse - suspension order upheld - petition dismissed.
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Insolvency & Bankruptcy
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2017 (9) TMI 278
Initiating the insolvency resolution process under Section 7 of the Insolvency & Bankruptcy Code, 2016 - petitioner proves to be a “Financial Creditor” - Held that:- Once the petitioner is proved to be a “Financial Creditor” and there being abundant evidence to determine the existence of default committed by the “Corporate Debtor”, the application under Section 7 of the Code is maintainable. Sub-section (4) of Section 7 of the Code reads as under:- “The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3).” In this case, the record relied upon by the “Financial Creditor” establishes the existence of default and the other conditions being satisfied, the instant petition deserves to be admitted. It is found that the application filed in the prescribed proforma is complete in all respect. Instant petition is admitted declaring the moratorium as determined.
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Service Tax
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2017 (9) TMI 298
Renting of immovable property Service - rent received from the lessee - repair and maintenance expenditure incurred by the lessee for the repair and maintenance of leased premises - Held that: - As regards the demand on service tax on repair and maintenance expenditure, we find that this amount is not towards lease rent - the said expenditure cannot be considered as extra consideration towards the lease rent. Lease rent is the only amount which is received by the appellant on account of lease of the premises to the lessee. Therefore, the demand on expenditure towards repair and maintenance is not sustainable. Lease rent - Held that: - According to agreement there is a lease rent fixed between the appellant as a lessor and the lessee. Therefore, the arrangement is nothing other than renting of immovable properties. The process of recovery of dues is in accordance with the SERFAESI Act, 2002 through rental income against the property of the defaulter of the loan of the appellant. There is no provision in the Finance Act, 1994 for granting any exemption in respect of receipt of service charges, which is towards the recovery of outstanding loan. Therefore, the arrangements of lease is squarely covered under the services of renting of immovable property - demand upheld. Appeal allowed - decided partly in favor of appellant.
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2017 (9) TMI 294
Mode of tax payment - utilisation of CENVAT credit - GTA service - The department asked the appellant to pay the tax by way of PLA (in cash) and not by adjusting CENVAT Credit - Held that: - the identical issue has come up in the case of Commr. of Central Excise, Indore Vs. Spendex Industries Ltd. [2012 (5) TMI 513 - CESTAT, NEW DELHI], where it was held that Cenvat credit can be utilised towards payment of Service Tax in respect of services received from Goods Transport Agency inasmuch as by a deemed fiction of law service recipient is held to be output service provider - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 288
Review of order - issuance of pre show cause notice - decision in the case of Commissioner of Central Excise, Customs & S.T. Versus Sanket Communications Pvt. Ltd. [2017 (9) TMI 236 - ORISSA HIGH COURT] contested - Held that: - The entire litigation arises out of the SCN under the Central Excise Act proposing to demand the payment of certain amount of Service Tax. In the circumstances, it is open to the petitioner to participate in the inquiry pursuant to the show cause notice and raise whatever objections that are available to the petitioner in law before the authority issuing the show cause notice - SLP dismissed.
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2017 (9) TMI 286
Power of access the premises of the assessee - Vires of Rule 5A(1) of the Service Tax Rules, 1994 - Rule 5A(2) of the Service Tax Rules, 1994 has been declared ultra vires once. Such a Rule was amended subsequently. The amended Rule is presently under challenge - Is Rule 5A(1) of the Service Tax Rules, 1994 ultra vires the Finance Act, 1994? - Held that: - Sub-section (2) of Section 82 employs the provisions of the Code of Civil Procedure, 1973 relating to searches for the searches to be made under the Act of 1994. The power to search given in Section 82, therefore, cannot be said to be unbridled. It has the checks, balances and parameters of the Code of Civil Procedure, 1973 governing its sphere of operation. Sub-rule (1) of Rule 5A of the Service Tax Rules, 1994 cannot be read to exceed the sphere of operation as circumscribed by Section 82 of the finance Act, 1994. In fact, the sub-rule does not profess to do so. It allows an officer to have access to any premises for the purpose of carrying out any scrutiny, verification and checks as may be necessary to safeguard the interest of the revenue. Access to the premises is a lesser power than the power to search the premises as granted under Section 82 of the Act of 1994. Sub-rule (1), therefore, cannot be construed to mean that, it is in excess of the parent power of searching the premises as granted under Section 82 of the Act of 1994 - decided against petitioner. Are the proceedings taken by the respondent no. 2 against the petitioner required to be quashed being in excess of the powers? - Held that: - An enquiry is under process with regard to the alleged procurement of CENVAT credit fraudulently. The enquiry is yet to be completed. The enquiry relates to the business of the first petitioner. The first petitioner ought to participate in such enquiry. The modus operandi stated in the affidavit of the respondent no. 2 with regard to the obtaining of CENVAT credit by a insurance company is such that, the petitioner who is engaged in the business of insurance and is suspected to have indulged in such wrongful practices is required to be examined so also officers of the petitioner involved in the transactions - In such circumstances, I am not in a position to say that, the proceedings taken by the respondent no. 2 against the petitioner are required to be quashed. The second issue is answered in the negative and against the petitioner. Petition dismissed - decided against petitioner.
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2017 (9) TMI 280
Recovery of CENVAT credit - payment of service tax on Goods Transport Agency (GTA) under reverse charge from Cenvat Credit - Whether the appellant can be said to be “Provider” of any “output services” and is entitled for utilization of Cenvat credit in terms of Rule 3(4) of Cenvat Credit Rules, 2004 prior to amendment dated 1-3-2008? - Held that: - In relation to service provided or agreed to be provided by GTA in respect of transportation of goods by road, where the person liable to pay freight is; any factory registered under or governed by the Factories Act, is such a category, any person who pays or is liable to pay freight either himself or through his agent for the transportation of such goods by road in a goods carriage is included within term ‘person liable for paying service tax’. Even after exclusion the normal term ‘liability’ under Rule 2(p)(q) and (r) of Rules, 2004 read with Rule 2(i)(d) of Rules, 1994 is clearly applicable to such category of persons as are covered therein irrespective of explanation or deemed fiction therein - recovery of credit set aside - decided in favor of assessee.
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2017 (9) TMI 279
Cargo Handling Service - Held that: - part of the demand stands admitted by the Appellants, and towards quantification of the breakup the learned counsel for the Appellants has submitted a certificate from the Chartered Accountant certifying the breakup of value of Service Tax into the various activities carried by the Appellants. Since the break up was not available with the adjudicating authority, we find it appropriate to set aside the impugned order and remand the matter to the original adjudicating authority for re-quantification of the demand Demand of tax - activity of stacking materials within the factory premises for SAIL as well as movement of materials within the factory - Held that: - the Tribunal s decision in the case of Gajananda Agarwal [2008 (6) TMI 163 - CESTAT KOLKATA] will be applicable, where it was held that any activity incidental to freight of cargo is liable to be taxed under “cargo handling service” - demand set aside. Appeal allowed in part and part matter on remand.
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2017 (9) TMI 270
Construction of complex services - whether the construction activity undertaken by the respondent is leviable to service tax under the category of construction of complex services? - Held that: - each of these clusters of houses will form a residential complex comprising of several individual residential houses with common area and various facilities. Consequently, these will be covered within the definition of construction of complex and liable to service tax. The adjudicating authority’s interpretation that more than 12 residential units should be part of one building situated in one plot of land is without any basis - In terms of the decision of Hon’ble Supreme Court in the case of Larsen & Toubro [2015 (8) TMI 749 - SUPREME COURT] such composite construction are liable to service tax only w.e.f. 01.06.2007 under the category of works contract services - matter is remanded to the original authority for a fresh decision, keeping in view the law laid down by the Hon’ble Apex Court in the case of Larsen & Toubro case. Construction of complex services - internal development works constructed by the respondent including roads and other infrastructure development such as construction of building, water supply and other facilities - Held that: - the construction of various infrastructure facilities have been provided by the respondent along with construction of residential complex. These covered by a separate contract and from the nature of activities carried out, we are of the view that these are in the nature of civic amenities being provided by the authority constituted under law on above commercial activities of GNIDA. Such welfare activities cannot be covered by the construction of complex services and the adjudicating authority has rightly dropped the demand for service tax. Construction of boys hostel for Gautam Budh University - Held that: - As is well known, a hostel cannot be considered as a residential unit and hence cannot be covered within the construction of complex services. In any case, such construction activity has been done for the use of Gautam Budh University which is an institution established solely for educational purpose - no service tax will be payable on construction of boys hostel. Appeal allowed - decided partly in favor of appellant.
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2017 (9) TMI 269
Evasion of service tax - clandestine rendering of services - it was alleged that has collected the Service Tax from its clients but not deposited the same in the Government exchequer - duplicate invoices - Held that: - When recipients are corporate entities, certainly they will have to make the payment through banking channel by showing in their books of account. The Department has not made any attempt to verify from their books of account that any payment was made other than the banking channel. From the record, it also appears that the parallel/duplicate invoices were the printed copies taken from the computer where they were found. There might be several copies printed by the concerned staff which were remained unsigned. When original invoice is available in computer and not duplicate copy, then no addition can be made on the basis of extra printed copy - we find no justification to demand the Service Tax on the basis of so called parallel/duplicate invoices and the same is hereby set aside. Unregistered office - Held that: - the assessee-Appellants were registered in the name of M/s Varsed Detective and Security Pvt. Ltd. at Gurgaon and opened another office in Bhiwadi in the name of M/s Varsed Services, which is a component of the main company. M/s Varsed Services was doing the business activity in the name of the main company with the same registration number. So, there is no scope for escapism. From the record, it appears that M/s Varsed Services has not received any payment or order. Whatever orders or payments were received are accounted in the main company. Hence, the second company may be slightly different in nomenclature but can be considered as a branch unit, especially when no business was carried out in its name. The services provided to SEZ were exempted from payment of Service Tax under Section 93 of the Act by virtue of Notification No. 4/2004 dated 31.03.2004. The exemption was available to SEZ developers and the units in SEZ. In the instant case, the assessee-Appellants had not charged or collected any Service Tax from the SEZ, so the same was not paid. Cleaning services - Held that: - assessee-Appellants were also providing cleaning services to Ajmer Fort at Jaipur which is an archaeological structure. The same cannot be considered as commercial or industrial unit. It was exempted from the clutches of the Service Tax as per the order supplied by the Archaeological Survey of India. In the instant case, it appears that the Commissioner has made addition to Service Tax demand on the basis of parallel/duplicate invoices which is not sustainable in the eyes of law. As stated above, the income was taken on accrued basis, but not on the actual basis. Regarding the SEZ services, it appears that for SEZ units, namely, DLF Kolkata; DLF IT Park, Hyderabad and DLF Rai Project, the assessee-Appellants have raised the invoices but when tax was not received the same was not paid. There is nothing on record to show that the assessee-Appellants received the Service Tax raised in the invoices. It may be mentioned that no Service Tax was charged during the period 2008 to 2010. The demand of Service Tax of ₹ 5,74,624/- in this regard is bad in law and the same is hereby set aside. Appeal allowed - decided in favor of appellant.
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2017 (9) TMI 265
Validity of SCN - whether the show cause notice have been issued without alleging short payment/non-payment of Service Tax and/or is vague? - Held that: - the SCN is defective as it do not have or annexed the contents of letter dated 21-1-2009 issued by DGCEI to the office of Commissioner, Customs and Central Excise, Meerut-I. Non supply of copy of information received by DGCEI from EPFO or any other source, render the SCN vague - the SCN is not tenable as the same is based on some incomplete information, which is not sustainable, leaving the assessee in dark as to what is the gist of accusation - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 264
Entitlement of Interest - refund of excess tax paid - Revenue was of the view that refund of interest is not admissible as benefit accruing from the amount of service tax paid by the assessee, had been enjoyed by the assessee by utilizing Cenvat credit for payment of duty on final products - Held that: - the amount so paid as per the audit objection, which was earlier paid by them and therefore, the said amount was adjusted in the subsequent month and there is no material available that the respondent availed Cenvat credit thereon - interest allowed - appeal dismissed - decided against Revenue.
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2017 (9) TMI 263
CENVAT credit - input service - Sales Commission Agent’s service - denial on the ground that the expenses incurred are in connection with sales and not confirmed to ‘sales promotion’ as specified in the inclusive part of definition of input service contained in Rule 2(l) of the Cenvat Credit Rules, 2004 - Held that: - the job performed by the commission agent is for promoting the sales of the appellant’s products and not related to mere selling of goods. Since the phrase ‘sales promotion’ is finding place in the definition of input service for the purpose of availment of Cenvat credit, the credit taken by the respondent is in conformity with the Cenvat statute - appeal dismissed - decided against Revenue.
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2017 (9) TMI 262
Business Auxiliary Service - The dispute in the present case relates to a portion of consideration received by the assessee/appellant from various Govt. authorities while undertaking the work of advertisement for such departments - Held that: - the activities of the appellant assessee should have been covered under one single category for tax purpose. Admittedly, their payment of service tax under advertisement agency service has been accepted by the Revenue, on part of the bill. The service tax being demanded now under BAS, is not legally tenable. The demand has been confirmed on the ground that the appellant assessee is not an advertising agency and are merely canvassing for the work by another advertising agency. If that being the case, the question of payment of service tax by the appellant-assessee and the acceptance of the same by the Revenue under the category of advertising agency is not correct. The whole consideration received by the appellant-assessee has to be either taxed under advertising agency or as a canvassing work (BAS) since full money has been collected from the Govt. Departments on a single bill. The dual approach by the Revenue is not legally sustainable. Appeal dismissed - decided against Revenue.
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2017 (9) TMI 261
Penalty u/s 76 - Delayed payment of service tax - Held that: - the appellant explained the delay in depositing the service tax on the ground of change of management. It is noticed that the appellant is a public limited company and therefore, was aware of the tax liabilities - There is no material available on record with regard to allegation of fraud, suppression of facts, etc. Taking into consideration the facts leading to delay in depositing tax, it is appropriate that the imposition of penalty u/s 76 should be waived - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 260
Tour Operator Service - levy of tax - penalty - Held that: - appellant let its vehicles on hire during the period November, 2004 to September, 2006 even though it was a tour operator. The vehicles so hired out being excluded from the purview of tax exemption granted by Section 72(1) of the Finance Act, 1994, to the extent of the hire charges received shall be exigible to Service Tax in respect of the vehicles let on hire - penalty set aside in view of the difficulties of appellant due to confusion in levy - decided partly in favor of appellant.
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2017 (9) TMI 259
CENVAT credit - duty paying invoices - Pro-forma Invoice - Rule 9 of the CCR, 2004 - Held that: - proforma Invoice is not a prescribed document for allowing Cenvat credit. Therefore, Cenvat credit on the said capital goods is not admissible to the Appellant - both authorities below has not extended the benefit of discharging 25% of the penalty imposed subject to fulfilment of the conditions laid down under the relevant provisions, namely, Section 78 of the Finance Act, 1994, read with Rule 15 of the CCR, 2004. Accordingly, the Appellant could avail the benefit of discharging 25% of the penalty imposed subject to fulfilment of the conditions laid down under the aforesaid provisions - appeal allowed - decided partly in fvaor of appellant.
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2017 (9) TMI 258
Clearing and Forwarding Agency service - case of appellant is that they are only forwarding the cargo from railway-yard to the godown owned by the clients and they also supplied labour and facilitated the transport upto the storage point. Since the tax liability under “Clearing & Forwarding Agent” will arise only for a person, who is engaged in both the activities of “Clearing & Forwarding”, they are not liable to tax - Held that: - it is clear that the appellants were obliged to clear the consignments from railways on behalf of their clients and in case of delay in getting RRs, they were to clear the cargo under necessary indemnity bond. They were also to bear the railway expenses incurred for getting the consignments cleared, liability for payment of demurrage, wharfage, penal wharfage, etc., which will be on the appellant’s account - it is clear that factually the appellants are involved in clearing activities also in terms of the statutory definition for C & F Agents - As the appellants were involved in both the clearing and forwarding activities along with maintenance of records for such dealings, their services are covered by tax entry - appeal dismissed - decided against appellant.
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2017 (9) TMI 257
Air Travel Agency Services - non-payment of Service Tax on a portion of consideration received by them when they sold tickets purchased from another travel agent - whether such portion to be considered under Business Auxiliary Services or otherwise? - Held that: - there is no arrangement either by contract or by otherwise between another travel agent and the appellant for promoting the business of another travel agent. The travelling public is getting only ticket with no identity linking the same to another travel agent. In such situation, it could not be said that the appellant is promoting the business of another travel agent, in their capacity as sub-agent. No such fact has been established in the impugned order by the lower authority - demand not sustainable - appeal allowed - decided in favor of appellant.
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Central Excise
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2017 (9) TMI 295
Benefit of N/N. 6/2002-CE dated 1.3.2002 - availing of Low Sulphur Heavy Stock (LSHS) falling under Heading 27.13 of CETA without payment of duty availing the exemption - denial of exemption on the ground that the appellant being a private limited company are not controlled or owned by the TNEB is not eligible for the benefit of exemption, and also on the ground that as lignite is primary fuel for generation of electricity and LSHS was not used as a fuel for generation of electricity, they are not eligible for the exemption - Held that: - The Tribunal has followed the judgment in the case of Neyveli Lignite Corporation [2006 (9) TMI 443 - CESTAT, CHENNAI], in which the said issue has been discussed in detail - In the present case, without such LSHS, the appellant cannot commission or start up the ignition of the furnace. That therefore it is an essential fuel for generation of electricity for the appellant. Therefore, denial of benefit of notification is unjustified - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 292
Scope of SCN - CENVAT credit - input services - aircraft hiring charges - the legal services obtained from abroad - case of appellant is that the SCN issued to them did not allege that there was no nexus between these services and output service. He argued that the SCN in respect of credit of service tax on aircraft hiring charges was solely based on the definition of input service - The order-in-original as well as the impugned order goes into the lack of nexus while denying the Cenvat Credit on these services - Held that: - the Hon’ble Apex Court in the case of Sun Pharmaceuticals Industries Ltd. [2015 (12) TMI 670 - SUPREME COURT] has held that it is not open to Revenue to go beyond the show-cause notice issued to them. Revenue cannot go into the issue of nexus between the input service and the output services - Revenue sought to distinguish this decision relying on the fact that in the case of credit, the onus of proving nexus between the input, input service and output service is on the claimant. He however could not point out any allegation regarding lack of nexus between input service and output service. Since both the lower authorities have travelled beyond the allegations in the notice, the impugned order is set aside - appeal allowed by way of remand to decided afresh.
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2017 (9) TMI 291
CENVAT credit - welding electrodes used for repair in the factory - Held that: - similar issue decided in the case of SAMRUDDHI CEMENT LTD. Versus COMMISSIONER OF CENTRAL EXCISE, INDORE [2012 (9) TMI 885 - CESTAT NEW DELHI], where the credit on welding electrodes has been allowed - credit allowed. CENVAT credit - steel items - Held that: - The exact use of the item has not been specified - the matter is remanded to the original adjudicating authority to give a decision after ascertaining the exact use of each item on which credit has been sought. Appeal allowed in part and part matter on remand.
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2017 (9) TMI 290
Penalty u/r 25(1)(a) of Central Excise Rules 2002 - default in payment of central excise duty - sub-rule (3A) of Rule 8 - Held that: - The decision of Praweg Conveyors [2016 (8) TMI 238 - CESTAT MUMBAI] has been passed in identical circumstances relying on the decision of the Hon'ble High Court in Indsur Global Ltd. [2014 (12) TMI 585 - GUJARAT HIGH COURT], where it was held that it is not the case of non levy/ short levy, non payment/short payment of duty by suppression or willful mis-statement, fraud and collusion or contravention of any provision of this act or rule made with intent to evade payment of duty, therefore appellant is not liable for penalty under Rule 25 - penalty set aside - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 289
CENVAT credit - services provided to SEZ - case of appellant is that Rule 6(6)(A) was given a retrospective effect from 10.02.2006 by virtue of Finance Act 2012. He pointed out that the period involved in this case is September 2004 to March 2008 and therefore the period from 10.02.2006 onwards is covered by the retrospective amendment and Rule 6(6)(A) of the CCR - Held that: - While interpreting the fact that Rule 6(6)(i) of Cenvat Credit Rules was amended by way of substitution, it was held that the same can be deemed to have a retrospective effect under certain circumstances. Consequently, it was held that the said sub-rule would be applicable with effect from 10.09.2004 when the Cenvat Credit Rules came into existence. It is however, seen that Rule 6(6)(A) was not introduced by way of substitution but it was a new Rule inserted in the Cenvat Credit Rules, 2004. There is no basis for extending the benefit of such insertion for period prior to 10.02.2008 - penalty and interest is consequently reduced - appeal allowed - decided partly in favor of appellant.
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2017 (9) TMI 283
Condonation of delay of 1527 days in filing appeal - The reason for delay is closure of the mill from 11.11.99 and the fact that the staff left the company since salary not paid - Held that: - we find absolutely no sufficient cause, except to state that the delay of 1527 days is bonafide and the staff of the Company had left. Even taking for granted that the Company is closed, it is the duty of the petitioner to see that the appeal is filed in time - No sufficient / bonafide cause is shown for condonation - COD application rejected.
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2017 (9) TMI 277
Refund of unutilised CENVAT credit - export of goods - denial on the ground that finished goods attracted Nil rate of duty and also on the ground of time limitation - Held that: - even though the finished goods attracted Nil rate of duty the refund in respect of input used in such goods is available under Rule 5 as per the judgment in case of Gujarat Ambuja Exports Ltd [2010 (12) TMI 323 - CESTAT, AHMEDABAD] - Rule 6(6)(5) also provides that where the goods are exported the Cenvat credit is admissible. Therefore even the goods are not dutiable or attracted Nil rate of duty if it is exported, refund under Rule 5 is legally available to the assessee, therefore on this ground rejection of refund claim is not sustainable. Time limitation - Held that: - filing the refund on quarterly basis is a procedural requirement and facility provided to the assessee that instead of one year appellant can file refund claim on quarterly basis - overall period of limitation for filing refund claim is one year as provided under Section 11B, therefore refund claim which is filed within one year, refund cannot be rejected on the ground that it was not filed on quarterly basis. Matter remanded to the adjudicating authority to pass a fresh order after verifying the other factual aspect - appeal allowed by way of remand.
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2017 (9) TMI 276
Jurisdiction - power of DRI to issue SCN - Held that: - the notice issued by the DGCEI who was not a competent authority as per the ratio laid down in the case of Mangali Impex Ltd. Vs. UOI [2016 (5) TMI 225 - DELHI HIGH COURT] - In this connection, we note that similar issues have been dealt with in various cases by the Tribunal recently. It is held that the matters have to be remanded back to the original authority for a decision - appeal allowed by way of remand.
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2017 (9) TMI 275
SSI exemption - denial on the ground that appellant did not file prescribed declarations - N/N. 9/2003-CE dated 01.03.2003 - Held that: - As there are divergent views of the Members, therefore, the matter is referred to the Hon'ble President to appoint third Member to resolve the issue - matter referred to third member appointed by Hon'ble President.
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2017 (9) TMI 274
CENVAT credit - input service - services used in the guest house as well as rehabilitation colony - Held that: - the guest house as well as rehabilitation colony are outside the factory premises and have been constructed only as a welfare measure and these have no nexus with the manufacture, storage or sale of the finished products - credit rightly denied. CENVAT credit - goods used in erection of 132KV transmission line to bring electricity to the appellant’s project site - Held that: - the benefit of cenvat credit on goods used in the construction of transmission line to bring electricity to the factory has been allowed by the Tribunal in the case of Prism Cement Vs. CCE [2017 (3) TMI 1283 - CESTAT NEW DELHI] - credit allowed. CENVAT credit - GTA service in respect of goods consigned on FOR basis upto the customer’s premises - Held that: - the same issue was before the Hon’ble High Court of Punjab & Haryana in the case of Ambuja Cements [2009 (2) TMI 50 - PUNJAB & HARYANA HIGH COURT] in which the Hon’ble High Court, after considering the definition of input service in detail, allowed the benefit of such cenvat credit upto the customer’s premises - credit on outward freight allowed. CENVAT credit - excise duty paid on M.S. pipe, galvanised fabric, tower parts, welding electrodes etc. which were used for maintenance of capital goods - Held that: - parts of capital goods are also entitled to the benefit of cenvat credit - Tribunal has also been consistently allowing the cenvat credit on items such as angles, section etc. which are used in the construction of support structure for capital goods also. The M.S. pipes are used in construction of water supply pipe lines which are essential in the factory for manufacture of goods and as such will be entitled to cenvat credit - credit allowed. Appeal allowed - decided partly in favor of appellant.
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2017 (9) TMI 273
Liability of duty - poly chips–both virgin and non-virgin, manufactured and consumed further by the appellant/assessee in the manufacture of 210d yarn which is exempted - marketability/excisability - whether batch non-virgin poly chips are marketable and chargeable to duty as excisable goods? - Held that: - the batch non-virgin poly chips are emerging due to deliberate manufacturing process by the appellant/assessee. During the course of polymerization of caprolactam the main virgin poly chips are produced which are washed in the hot water resulting in emergence of pure virgin poly chips and wash water. The wash water is put to further process, as already discussed earlier in this order, resulting in the production of batch non-virgin poly chips. Regarding requirement of nitrogen packing we note that such packing will be required when the product is cleared to some distance. In the present case, in an integrated chemical plant, for captive consumption there is apparently no need for such nitrogen packing as the product is stored and dealt with in controlled environment for the required use - Tribunal in J.C.T. Ltd. Vs. CCE, Jallandhar [2004 (4) TMI 359 - CESTAT, NEW DELHI] has held that if the product is captively consumed which does not require any packing nor any precaution is to be taken in respect of those products; this does not mean that the product loses the capacity of being marketed - Admittedly, non-virgin poly chips are in fact marketed and the appellants/assessee themselves indicated that M/s Suncity did market this product and wanted to compare the value of such sale for adopting to their excise valuation. Hence, we note that special packing required for removal of goods safely to the buyer, which is not required for captive consumption itself, cannot determine the marketability of any product - the batch non-virgin poly chips are excisable products. Benefit of N/N. 111/1995-CE dated 06/09/1995 - Held that: - It is apparent that the entire manufacturing process is aimed at producing main virgin poly chips. The technological necessity in the process results in a waste by-product in the form of wash water. In order to extract the available monomer/oligomer for further use from such wash water separate recovery processes are undertaken by the appellant/assessee. Incidentally, we note that in appellant/assessee’s own case the oligomer were held to be classifiable under Heading 3916 vide final order dated 05/06/1998 - while the Original Authority allowed the said exemption to batch non-virgin poly chips manufactured out of waste chips etc., he did not allow the said exemption to the non-virgin poly chips attributable to recovery process from unreacted monomer and oligomer contained in wash water. On careful consideration of the findings of the Original Authority and the submissions of the appellant/assessee we note that no distinction can be made in extending the said exemption and batch non-virgin poly chips are eligible for the exemption for the period 06/09/1995 onwards. Benefit of N/N. 47/1994-CE (NT) - Held that: - it is apparent that the entire production of chips by SRF Polymers is of batch non-virgin poly chips only. As such, the assertion of the appellant/assessee that SRF Polymers used only non-virgin poly chips in the export of yarn or twine is correct. We hold that subject to verification of supporting documents the consequential benefit available to the dutiable poly chips used in the manufacture of yarn/twine exported out of India should be considered and allowed by the Jurisdictional Authority - matter on remand. Valuation - correctness of assessable value for virgin poly chips for the period prior to 01/07/2000 - Held that: - when the appellant/assessee is having certified CAS-4 Standard Cast Data for the periods now in dispute the same should have been adopted by the Original Authority for arriving at the duty liability on virgin poly chips. Incidentally, we also note that in the first round of adjudication the duty demand was based on cost of production. Excisability/duty liability - wash water cleared by SRF Ltd. to their de-merged to sister unit located adjacent, namely SRF Polymers Ltd. - Held that: - It is apparent that wash water emerges as a technical necessity in the manufacture of nylon polyamide chips. In order to make virgin polyamide chips, it is necessary to wash the main polymerized chips. Admittedly, for manufacture of nylon polymerized chips the required quantity of caprolactam has to be used. It is not the case that for avoiding generation of wash water, lesser quantity of such caprolactam can be used. In other words, the entire quantity of caprolactam used as input in the manufacture of nylon polyamide chips are put to intended use. The unreacted or partially reacted caprolactam of 10% of total quantity is removed by hot wash. This results in emergence of wash water. Since, it contains recoverable monomer as well as oligomer the same is put to further process. We note that considering the process and the technical requirement, wash water cannot be considered as a manufactured product. Time limitation - Held that: - the Department is aware of the usage of various inputs in the manufacture of exempted yarn. The appellant/assessee relied upon letter dated 30/10/1991 issued by the Jurisdictional Superintendent of Central Excise as well as show cause notices dated 29/09/1993, 02/03/1994, 09/02/1995 and 26/05/1995 regarding disputed Modvat credit for exempted final product. In this situation, we note that the Department was aware of the manufacture of 210d yarn and various inputs used in such manufacture. The findings of the Original Authority that a particular nature of input used in the manufacture of 210d yarn is not known to the Department is not tenable. Appeal allowed in part and part matter on remand.
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2017 (9) TMI 272
CENVAT credit - duty paying invoices - ISD invoices - Held that: - Rule 7 (a) & (b) reveals that there is nothing in the rules against the distribution of such credit to the appellant’s unit upto 31.03.2012 - demand upto 31.03.2012 does not sustain. The CBEC circular dated 11.07.2004 was issued after introduction of sub rule 7(d) wherein it has been clarified that the distribution for the purpose of rule 7(d) will be done in this ratio in all cases irrespective of whether such common input services were used in all or some of the units. In the light of sub rule 7(d) we are of the view that services consumed wholly in the Vizag unit can also be distributed to the appellant unit subject to observance of restriction imposed in rule 7(d) - demand is to be sustained only pertaining to the period 01.04.2012 to 30.06.2012. The demand is to be sustained only pertaining to the period 01.04.2012 to 30.06.2012 - The demand prior to 01.04.2012 is set aside and for the period after 01.07.2012 it is required to be verified whether the restriction in rule 7(c) and (d) have been satisfied - appeal allowed by way of remand.
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2017 (9) TMI 271
CENVAT credit - consultancy service with reference to laying of pipelines for water supply to the mines - denial on the ground of nexus - Held that: - the issue has been settled in favour of the appellant in several decisions in the appellant’s own case [2017 (5) TMI 1184 - CESTAT NEW DELHI], where it was held that subject input service is having sufficient nexus with the manufacturing process of the appellant and is covered by the definition of ‘input service’ under Rule 2(l) of CCR, 2004 - credit allowed. CENVAT credit - consultancy service in connection with raising the embankment/ dam - Held that: - There is no dispute that water is an essential input which is used in the mines attached to the factory. The service tax credit availed under dispute, is towards consultancy service in connection with raising the embankment/ dam which is in connection with the procurement of the input, water - credit allowed. Appeal allowed - decided in favor of appellant.
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2017 (9) TMI 268
CENVAT credit - goods used for fabrication of plant and machinery - Held that: - the identical issues have come up before the Tribunal in appellant’s own case M/s Dalmia Cements (Bharat) Ltd. Versus CCE & ST (LTU) , New Delhi [2017 (3) TMI 1084 - CESTAT NEW DELHI], where it was held that the goods fabricated, using such structurals, will have to be considered as parts of the relevant machines. The definition of ‘Capital Goods’ includes, components, spares and accessories of such capital goods. Accordingly, applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat credit - credit allowed. CENVAT credit on capital goods - denial on the ground that appellant have not commenced production at the relevant time - Held that: - There is no irregular utilization of credit by the appellant and no such allegation has been made in the show cause notice. Even if the appellant has entered the credit in their books of accounts no utilization is possible without commencement of production. In effect, the credits available on the capital goods will come to be entered as availed and utilized only on production of dutiable final product. We find no justification to deny Cenvat credit on capital goods which, are otherwise legitimately available to the appellant - credit allowed. CENVAT credit - input services - construction of factory - denial on the ground that construction is with reference to immovable property and accordingly the credit is not available - Held that: - The credits availed by the appellant are with reference to construction of factory. The said activity is covered by the definition of input service during the relevant time. It is also to be noted that the definition of “input service” is very broad and includes those services which are used by the manufacturer whether directly or indirectly, in or in relation to the manufacture of final products. It is clear that the said service even if used indirectly by the manufacturer in relation to manufacture of final product, the same should be eligible for credit. Apart from this, there is a specific inclusion of services used in relation to setting up of factory. The services availed by the appellants are covered by the definition of input service - Considering the scope of the definition of input service during the relevant time, credit allowed. Appeal allowed - decided in favor of appellant.
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2017 (9) TMI 267
Captive consumption - benefit of N/N. 67/95CE - case of Revenue is that during the process of manufacturing of the finished goods, ‘armoured cable’ or ‘cable at armoured stage’ and sheathed wire were arising which are chargeable to duty and the benefit of captive consumption N/N. 67/95CE is not available as the finished goods were cleared without payment of duty - Held that: - identical issue has come up before the Tribunal in the case of KEI Industries Ltd. and others Vs. CCE, Alwar [2016 (12) TMI 532 - CESTAT NEW DELHI], where it was held that assessee was not liable to pay CE duty on copper wire manufactured and captively used in the manufacture of insulated (power) cables in the factory during the material period - the appellant is entitled for benefit of N/N. 67/1995 ibid for intermediate product emerging during the course of manufacture of final product - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 266
Classification of goods - body building for motor vehicles on chassis falling under CETH 8706 - The appellants placed reliance on Note 5 of Chapter 7 which states that building a body on chassis amounts to manufacture of motor vehicle. But the claim of the appellant was not accepted by the department - whether such goods cleared by the appellant are classifiable under Heading 8704 as “motor vehicles for transport of goods” or under Heading 8707 as “bodies for the motor vehicle of Headings 8701 to 8705”? - Held that: - identical issue has come up in assessee’s own case before the Tribunal in M/s. Commercial Engineers and Body Builders Co. Ltd. Vs. CCE & ST, Bhopal [2017 (6) TMI 855 - CESTAT NEW DELHI], where it was held that A plain reading of the chapter note alongwith the relevant tariff headings makes it clear that the product cleared by the appellant after body building activity is a “manufactured” motor vehicle. Considering the nature of motor vehicle, which is for transport of goods, the same has to be classified under Heading 8704 - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (9) TMI 285
Bail u/s 438 of the Code of Criminal Procedure, 1973 - false claim of sales against Form F, Form C, Form H under CST act - It is alleged that after obtaining the delivery of the goods in New Delhi under the guise of its branch transfer, the goods were in fact sold in the State of Gujarat; but a show was made as if the goods are sold in New Delhi, Haryana and Rajasthan by issuing Form ‘C’ in the name of certain business people most of whom were dealing in ready made garments. It is alleged that, in fact, such persons had received ready made garments referable to Form ‘C’ in question, but a wrongful claim was made as if tobacco / its products were sold to them. It is alleged that in some cases even the refund was claimed. Held that: - It cannot be disputed that as and when necessary and if the facts of the case so requires, an authorized Police Officer can obtain the custody of a person for investigation / interrogation either with or without warrant as the case may be. The arrest, however, cannot be made on mere imagination; but it can always be made inter alia on reasonable suspicion on fortification of the “reason to believe” on the basis of the information of the person having committed the offence. The necessity of the arrest of a person would, therefore, depend upon the facts and circumstances of each case and no straight jacket formula can be laid for that purpose. It is a settled legal position that a person can be proceeded against and can be tried even without arresting him. In so far as facts of the present case are concerned, it appears that the petitioners are sought to be proceeded against for the offences in question not in individual capacity but as Directors of the Company afore stated. The FIR avers the commission of the offence particularly by the Company by allegedly employing dubious method for avoidance of the tax as above stated. The Company, however, is not made a party to the proceedings and the FIR does not specify as to which of the nine Directors of the Company had played an active role. In this context, it would be relevant to refer to Sections 85 (1)(b)(c)(e)(f)(g), 85 (2)(g), 85(4) and Section 85(6) of the Gujarat Value Added Tax Act, 2003 (for short ‘VAT Act’), which deal with the procedure in relation to the offences by Company etc. The person incharge of the affairs of the Company at the time of commission of the offence and who was responsible to the Company for the conduct of its business is the person, who is deemed to be guilty of the offences; along with the Company. FIR contains averments in general against the directors and no other material is shown in agreement with above referred provision is placed on record of the case or shown to this Court. The petitioners are sought to be charged with offences under Sections 85(1)(b),(c),(e), (f),(g) as also Section 85(2)(g) and 85(C) of the VAT Act - It will be relevant to note that definition of dealer contained in Section 2(10) of the GST Act makes the dealer which would include CSA responsible for tax and the material has been produced on record indicating the movements of goods subsequent to issuance of Form ‘F’ by the CSAs and not the petitioners. The needle of suspicion is, therefore, rightly directed by the investigator against the said dealers and in absence of strong suspicion, sufficient enough to divert such needle of suspicion to the Company or its Directors, it is not possible at this stage to say that if the dealer turns out to be fake, the Company or its Directors would be beneficiaries as argued by the learned PP. It is also required to be noted that in absence of the material against the petitioners, so far the petitioners were not contemplated to be arrested and in the opinion of this Court rightly so. It is true that the statement of coaccused can form the basis for investigation at preliminary stage of anticipatory bail. However, the foregoing discussion would show that prima facie, the case against the petitioners is based upon imagination rather than the suspicion contemplated under Section 41 of the Cr.P.C., and therefore, even if the statement of the coaccused is taken into consideration, the case for admitting the petitioners to bail is made out. This Court, therefore, orders bail for the petitioners in anticipation of their arrest. Bail application allowed - the applicants shall be released on bail on their furnishing a personal bond of ₹ 1,00,000/- each with one surety each of the like amount - decided in favor of applicant.
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2017 (9) TMI 284
Refund the amount of input tax credit (ITC) reversed by the petitioner - Section 19 (2) of TNVAT Act, 2006 - Held that: - The settled legal position being that, mere pendency of the Appeal without interim order will not amount to the grant of stay of the order passed by the Lower Court or Lower Forum. In the instant case, it appears that the Appeals filed by the State are yet to be numbered. Therefore, this Court is inclined to issue appropriate direction in this Writ Petition - respondent directed to consider the petitioner's representation, dated 25.07.2017.
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Indian Laws
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2017 (9) TMI 287
Dishonor of cheque - Acquittal for the offence punishable under section 138 of the Negotiable Instruments Act, 1881 - legally enforceable debt proof - Held that:- All burden of proving that a legally enforceable debt did not exist against the accused lies on the accused himself which has to be discharged by bringing on record some cogent evidence to make the Court believe that the existence of such liability was not probable. The Trial Court has erred in not appreciating the provisions of section 139 and 118 of the NI Act and appears to be obsessed with idea that initial burden is on the complainant instead of the accused. The complainant was only required to prove that the cheque issued by the respondent No.3 was dishonoured, and the statement of complainant that it was issued by respondent against her liability/debt is sufficient proof of debt or liability thus shifting the onus to the respondent to rebut by way of cogent evidence and not by bare statement. Trial Court has erred in rejecting the complaint on the ground that no other invoice has been placed on record by the appellant to show that there had been dealing between the appellant and respondent no.3 upto December, 2010 and by dismissing the complaint on this score, the Trial Court has erred in putting the initial burden on the complainant/appellant without realising that initial burden was on the accused/respondents no.2 and 3. It was for the respondent no.3 to adduce cogent evidence and certainly not bare statement that there were no business dealings with the appellant after 2009 or that the goods in question were not purchased by her from the appellant. This is particularly so when respondent no. 3 admitted in her deposition that there was running account with the complainant and in the month of October/November, 2010, there was an outstanding balance of ₹ 9,200/-. The complainant while appearing as CW-1 in his examination in chief testified that he got issued one legal notice dated 31.12.2010 to the accused by registered AD & UPC dated 4.1.2011 which was duly served and despite service of notice the accused did not discharge the liability nor took any steps for repayment of the amount. The copy of the legal notice was exhibited as Ex.CW-1/C and postal receipts as Ex.CW-1/D (Colly.). In his cross-examination, the respondent/ accused had not disputed receipt of notice. She has failed to reply said notice which attracts the applicability of principles of Non-Traverse. It has been held by the Supreme Court in Rangappa’s case (2010 (5) TMI 391 - SUPREME COURT OF INDIA ) that the very fact that the accused had failed to reply to the statutory notice under Section 138 of the Act leads to an inference that there was merit in the complainant's version. If the bare statement of the accused stating that the cheque in question bearing his signatures and date was misplaced by him in the market is taken as gospel truth, then all accused persons under section 138 of the NI Act can easily get away from their legally enforceable liability by taking such sham and false defence. This Court finds that the impugned judgment is erroneous and perverse and is not sustainable both on facts and in law. In the result, the criminal appeal is allowed and and the accused/respondent No.3 is convicted for the offence under section 138 of NI Act.
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2017 (9) TMI 282
Grant of exemption from the levy of urban land tax - 90% of the petitioner-trust income has not been spent for the objects of the trust - Held that:- The petitioner's specific case is that when they have fulfilled the condition imposed in the Government Order and the expenditure for the block period of three years is taken into consideration it would be evident that the petitioner complied with the condition laid down for being entitled to exemption. The various charitable activities mentioned by the petitioner has not been disputed, while passing the impugned order. It appears that the property owned by the petitioner wherein the hospital has been established has also been exempted from the levy of property tax by the authorities concerned. The respondents ought to have examined the plea of exemption in a proper manner and not mechanically as had been done in the instant case. Thus, the impugned order deserves to be set aside. Writ petition is allowed and the impugned order is quashed and the matter is remanded to the first respondent for fresh consideration who shall afford an opportunity of personal hearing to the authorized representatives of the petitioner, peruse all the documents and take a fresh decision on merits and in accordance with law, uninfluenced by any observations made in the earlier proceedings or order. It is submitted that the petitioner has deposited 50% of the demand as a condition precedent for grant of stay. The said deposit shall remain as such and it shall abide by the orders to be passed by the first respondent in terms of the above directions. Till fresh decision is taken, the respondent shall not raise any fresh demand on the petitioner.
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