03 May 2018   

CASE STORY

CX - Rule 6 applies on trading activity only in a case when goods are purchased and sold without taking credit and without payment of duty - clearance u/r 3(5) of CCR is not exempted service: CESTAT

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CASE LAWS

2018-TIOL-824-HC-DEL-IT

VEDANTA LTD Vs PR CIT: DELHI HIGH COURT (Dated: March 19, 2018)

Income Tax - Sections 32(1)(iia) & 80IB.

Keywords: Additional depreciation - compulsory allowance - mandatory

The assessee company, apart from additional depreciation of Rs. 538.66 crore, claimed depreciation of Rs. 503.24 crores in its revised return. During the assessment proceedings, the assessee withdrew its claim of additional depreciation and thus, the same resulted in a considerable increase in its original claim made u/s 80IB. But, by invoking the Explanation 5 to Sec. 32(ii), the AO allowed the withdrawn additional depreciation and held that the judgment of the Supreme Court in Goetze India Ltd. Vs. Commissioner of Income Tax 2006-TIOL-198-SC-IT ruled out claims during the course of assessment proceedings after the completion of the time for filing revised return. The ITAT turned down the assessee's appeal on this count.

On appeal, the counsel for the assessee argued that an Explanation must be interpreted having regard to the context, purpose and legislative history. It was further argued that additional depreciation under Section 32(l)(iia) of the Act was in the nature of an incentive and cannot therefore, be treated at par with normal depreciation (on account of wear and tear and obsolescence) and as mandatory and not optional in nature. The Counsel urged that Explanation 5 was inserted below Section 32(l)(i) and (ii) of the Act and thus applied to normal depreciation only. He further argued that Section 32 (iia) of the Act was inserted w.e.f. 01.04.2003. On the other hand, Explanation 5 was inserted w.e.f. 01.04.2002. The expression "this sub-section" in Explanation 5 thus only referred to Section 32(l)(i) and 32(l)(ii) of the Act. He also argued that Section 32(l)(iia) was in the nature of an incentive providing for accelerated depreciation and hence cannot be imposed upon the assessee.

On appeal, the High Court held that,

Whether when the plain text of the provisions of Sec 32(1)(ii) relating to additional depreciation makes it mandatory in nature, an interpretive gloss can be allowed to lend it a new connotation merely because the assessee is at disadvantage - NO: HC

++ the plain text of the Explanation 5 leaves no room for admitting the interpretive gloss that the assessee wishes to place over it. There can be a multitude of circumstances where, but for the provision, the incentive, available to all those for whom the benefit of additional depreciation was intended, could have been deprived of it;

++ undoubtedly, the amount of the assessee's claim under Sec. 80IB increased, when it sought to withdraw the additional depreciation claim. However, that single circumstance should not influence this Court to ignore the plain intendment of the statute. Since Parliament clearly stated that the provisions of "this sub-section" in Explanation 5 to Sec. 32(1)(ii) would apply, "whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income". This Court cannot re-write the statute, as is sought to be urged. For these reasons, the Court is of the opinion that no question of law arises on this aspect.

Case admitted

2018-TIOL-823-HC-DEL-CUS

PRASHUN JAIN Vs CC: DELHI HIGH COURT (Dated: April 17, 2018)

Cus - some goods, declared as spare parts of weaving machine, were imported & bill of entry was filed - Since these goods attracted nil rate of duty, they were cleared - Since the Department had information about mis-declaration & clandestine import, the consignment was put under surveillance - When the appellant herein turned up to collect the consignment, it was intercepted - Thereupon the appellant gave statements admitting mis-declaration and that the consignment actually consisted of Micro SD cards - Examination of the consignment revealed Micro SD cards - Besides, the entity in whose name the bills of entry had been submitted, claimed to have not imported such goods - Duty demand was raised with penalties being imposed u/s 112 and u/s 114AA - Subsequently, the Tribunal set aside the duty demand raised as well as the penalty imposed u/s 112, while the penalty u/s 114A was reduced.

Held - the contents of the consignment, their misdeclaration or appellant's role in collecting them is not disputed - The appellant acknowledged that he requested for transportation of the goods - He also admitted to having prior knowledge of such mis-declaration - He also admitted to having used a fake gate pass and other fake documents to collect the consignment - Penalty u/s 114 can be imposed for intentionally using, making or signing any false or incorrect statement or document - Considering the appellant's admissions, such penalty is squarely applicable - The Tribunal's findings warrant no interference: HC (Para 2,6-9,11)

Appeal Dismissed

2018-TIOL-822-HC-DEL-IT

SURENDRA KUMAR JAIN Vs PR CIT: DELHI HIGH COURT (Dated: April 27, 2018)

Income Tax - Limitation - stay - coercive measures - recovery.

Held: Since Revenue has challenged the Full bench decision in the case of Odeon Builders Pvt Ltd but the same not being stayed, Revenue is prevented from taking coercive steps for recovery of demand. Notice issued.

Stay granted

2018-TIOL-10-AAR-GST

NATIONAL PLASTICINDUSTRIES LTD: AAR (Dated: January 03, 2018)

GST - Classification - PVC floor mat is correctly classifiable under Customs Tariff Heading 3918 – Product is described as being a PVC Carpet Mat and, therefore, the impugned product would fall in the Entry no. 104A of Schedule III and attract tax at the rate of 18% (9% each of CGST & SGST): AAR

Application disposed

2018-TIOL-09-AAR-GST

KANSAI NEROLAC PAINTS LTD: AAR (Dated: January 06, 2018)

Carried forward KKC in Electronic Credit Ledger cannot be considered as admissible Input credit - AAR

Observations by AAR:

+ Applicant seeks advance ruling on the question – ‘Whether accumulated credit by way of KrishiKalyanCess (KKC) as appearing in the Service Tax return of Input Service Distributor (ISD) on 30.06.2017 which is carried forward in the Electronic Credit ledger maintained by the company under the CGST Act, 2017, will be considered as admissible Input Tax credit?'

+ By express provisions in rule 3 of CCR, 2004 as amended by notification 28/2016-CE(NT) dated 26.05.2016, it was made clear that KKC would be utilized towards payment of KKC only and that the list of items in respect of which CENVAT credit is available would not be utilized for payment of KKC.

+ Under GST law, there is no levy of KKC.

+ In Cellular Operators Association of India, Delhi High Court - 2018-TIOL-310-HC-DEL-ST while dismissing the petition held that it would be improper to treat the two Cesses viz. Education Cess and Secondary and Higher Education Cess as duty of excise or service tax and, therefore, could not be allowed to be cross-utilised against the excise duty or service tax; that what the petitioner seeks is an amendment of the Scheme to allow them to take cross utilization of unutilized EC and SHE (upon the two cesses being withdrawn) towards excise duty and service tax, though this was not the position even earlier.

+ In view of the above, KKC cannot be treated as excise duty or service tax inasmuch as the CENVAT Credit referred to in sub-section (1) of Section 140 of the CGST Act, 2017 would not include the credit in respect of KKC.

+ FAQ brought out by the Board explaining SBC (Swachh Bharat Cess) apply with equal force to KKC and in fact, under the GST Act too, the FAQ issued by CBEC clarifies at point 112 that ITC of Swachh Bharat Cess or KrishiKalyanCess cannot be carried forward under GST.

+ Therefore, the accumulated credit by way of KrishiKalyanCess (KKC) as appearing in the Service Tax return of Input Service Distributor (ISD) on 30 th June 2017 and which has been carried forward in the Electronic Credit Ledger maintained by the Company will not be considered as admissible Input credit.

++ Held accordingly.

Application disposed of

2018-TIOL-1424-CESTAT-MUM + Story

SUYASH AUTO PRESS COMPONENTS AND ASSEMBLIES PVT LTD Vs CCE: MUMBAI CESTAT (Dated: April 19, 2018)

CX - Rule 6 applies on trading activity only in a case when the goods are purchased and sold without taking credit and without payment of duty - though removal of steel sheets is indeed a trading activity, but the said clearances were made on payment of excise duty in terms of rule 3(5) of CCR, 2004, therefore, it cannot be considered as an exempted service – impugned order demanding 5%/6% of the value of traded goods and imposing penalty u/s 11AC of CEA, 1944 is set aside and appeal is allowed: CESTAT [para 4]

Appeal allowed

2018-TIOL-1423-CESTAT-BANG

Cus - the Department seized an imported motorcycle from the appellant herein, on the belief that it had been smuggled into India - When a detention order was passed, the appellant challenged the same through writ - The High Court set aside the detention order & directed that such proceedings can be subject to final outcome of the adjudication - The appellant appeared before the investigating officer & submitted the original RC and related documents - He also recorded statements claiming to have purchased the bike & getting it registered - However, the Department again seized the bike - Upon approaching the High Court again, the Department was directed to issue an SCN & follow proceedings prescribed under law - Thereupon the appellant was served SCN raising duty demand but without any valuation or specific demand - Thereupon, an O-i-O was passed, confiscating the bike & imposing redemption fine as well as penalty u/s 112(a) - On appeal, the Commr.(A) dropped the duty demand but upheld the redemption fine & penalty.

Held - Admittedly, the the bike was imported in 2008 & was seized in 2014 - Hence the five-year period u/s 28 for demanding duty expired in 2013 - Hence duty demand is unsustainable, and also because it was raised without ascertaining the value of the bike - Further, the appellant is not the importer & the actual importer gave controdictory statements - Besides, since the bike herein is not a notified item, the burden is on the Department to prove that it was illegally imported - Such onus is not upon the person from whom the non-notified goods are seized - Although there is evidence that the bike was imported under a forged bill of entry, it is not established that the appellant forged it - Moreover, the adjudicating authority at Cochin lacks jurisdiction to issue SCN or conduct adjudication, since evidence suggests that the bike was imported through Calcutta port & was registered in Mumbai - The Apex Court in CCE Vs. MMK Jewellers held that where no duty is imposable due to limitation, no penalty can be imposed as well - Following such decision, the confiscation proceedings are unsustainable - Also considering the Apex Court's decision in Hindustan Steel Vs. State of Orissa that penalty is imposable only for deliberate defiance of law or dishonest conduct, no penalty can be imposed for technical breach of provisions flowing from bona fide belief that an offender is not liable to act in a particular manner - Further, a contradictory statement by the importer herein cannot be relied on to build a case against the appellant - Since the bill of entry carries the name of the importer, the duty demand should be raised against him, something which the Department omitted to do - Hence the demands are set aside & Revenue's appeal is dismissed: CESTAT (Para 2,5,6)

Assessee's Appeal Allowed