NOTIFICATION
cnt43_2018
CBIC notifies new Customs Exchange rates effective from May 18, 2018
CASE LAWS
2018-TIOL-201-SC-SERVICE + Case Story
ROJER MATHEW Vs SOUTH INDIAN BANK LTD: SUPREME COURT OF INDIA (Dated: May 16, 2018)
Service Matter - in continuation of the earlier order dated May 7, 2018, the three-member committee be set up as directed - However, it is clarified that the requirement, of one member being a former judge of the Apex Court who has worked in a Tribunal, is no longer necessary - Further, where a former Chief justice or judge of the Apex Court is required to be appointed in a Tribunal or Commission, and a suitable person is not available, such vacancy can be filled up by appointing a former judge of a High Court - Thereby, constitution of such committee is left to the Govt - The Committee may be constituted within two months and may give its report within three months thereafter - Matter listed for November 13, 2018 - Since the petitioner's grievance was not considered on merits, he is free to approach the High Court again: SC
Case Deferred
2018-TIOL-200-SC-SERVICE
ROJER MATHEW Vs SOUTH INDIAN BANK LTD: SUPREME COURT OF INDIA (Dated: May 7, 2018)
Service Matter - the issue at hand involves the restructuring of the Tribunal system, based on interpretations laid down in various precedent cases of this court and expert studies on the issue - The Apex Court in L. Chandra Kumar versus Union of India had examined a concept note recommending the creation of an independent body exercising oversight over Tribunals to ensure that the Tribunals or their members should not be required to seek facilities from the sponsoring or parent ministries or concerned departments - The 74th Report of the Parliamentary Standing Committee too recommended creating a 'National Tribunal Commission' for oversight over all the Tribunals in India - It would deal with the appointent & removal of members of various Tribunals by constituting sub-committees - The concept note also sugests holding a national-level competition for recruitment of Tribunal members or else recruiting from serving officers in higher judicial service - It also suggests that recruited members be retained on the basis of efficiency, rather than making Tribunals a place for retired personnel - It also sought to avoid influencing of decisions by the Govt - It also suggested that bypassing High Court jurisdiction under Article 226 & 227 had to be remedied by excluding direct appeals to the Apex Court - It also suggested putting in place proper mechanism for members.
Held - this concept meets with the approval of the Court, subject to certain exceptions - Regular cadre for Tribunals may be necessary - Their functioning & performance be reviewed by an indepedent body - Direct appeals be checked - Tribunal members must be e eligible for appointment to the High Courts & a mechanism be considered whereby due consideration is given to them similar to members of Higher Judicial Service - This would provide requisite talent for High Courts to deal with issues arising from Tribunal decisions - This would also protect the objective behind Tribunals to provide speedy & inexpensive justice - Also where there is only one seat of a Tribunal, it should have benches in all states or in all regions wherever litigation arises - The resolution of these issues requires the establishment of a committee - Such committee should preferably comprise of three members, one of whom must be a retired judge of the Apex Court who may have served in a Tribunal - Matter listed for further hearing: SC (Para 1,3,14-20)
Case Deferred
2018-TIOL-926-HC-AHM-IT + Case Story
MARWADI SHARES AND FINANCE LTD Vs DCIT: GUJARAT HIGH COURT (Dated: March 7, 2018)
Income Tax - Writ - Sections 147 & 148.
Keywords - Borrowed satisfaction - Client code modifications - Escaped assessment - Fictitious losses - Reasons for reopening - Transfer of jurisdiction.
The assessee company, engaged in share broking, had filed its return showing income of Rs. 33,31,55,229/- and the assessment was finalized u/s 143(3) determining income of Rs. 33,31,80,070/-. Subsequently, an information was received in respect of fictitious losses created by some brokers by misusing the client code modifications facility in F & O segment on NSE during March 2010. The assessee was reported to be one of the beneficiaries of such fictitious losses, which was utilized by assessee by adjusting them against the profits in the A.Y 2010-11 which had resulted in suppression of taxable income to the tune of Rs. 5,73,65,135/-. This led to commencement of reopening and issuance of notice u/s 148. When this notice was put to challenge by filing Special Civil Application on the ground of unsatisfactory recording of reasons, the Department was directed by the High Court to withdraw the previous notice of reopening and issue a fresh one. The Department agreed for the same and issued fresh notice, and thus requested that the fresh notice be treated as continuation of the old notice and therefore be considered as having been issued within four years. Such a request was however rejected by this Court by observing that when the AO had consciously withdrawn the notice of reopening even without the permission to treat the fresh notice as continuation of the original and therefore having been issued within a period of four years from the end of the relevant assessment year, he could not resile from such a decision. Again, fresh notice of reopening was issued after recording fresh reasons. The assessee raised objections to the reopening notice, which were however rejected.
In Writ, the HC held that,
Whether reopening proceedings can be invalidated merely because the reasons recorded for reopening were based on outside information, even though the AO has independently applied his mind to such information - NO: HC
Whether Department can be criticized for making no factual protestation on an issue, which was not formally put to challenge during assessment - NO: HC
Whether simultaneous fresh notices of reopening can be issued one after another, when the former one was neither withdrawn nor concluded - NO: HC
Whether mere abandonment of previous reopening notice, will not be construed as its withdrawal, and hence the fresh notice issued under such circumstances will be rendered invalid - YES: HC
++ it is seen that in the previous notice, the reasons recorded merely stated that the information was received by the office in response to fictitious losses created by some broker by misusing client code modifications facility. The assessee was reported to be one of the beneficiaries of misuse of such facility. Such fictitious losses had been adjusted by the assessee against the profits of other years. Thus, it could be argued that the AO had merely proceeded on the information received by him. His approach was therefore possible of being faulted as having acted on bare information without his own application of mind and thus relying on borrowed satisfaction. In the fresh reasons, he gave some background facts which, to be honest, were highly jumbled up. He referred to the past litigation and recorded that the High Court had directed recording of fresh reasons. This obviously was a clear error. In any case, the order of the High Court which is reproduced in this judgement nowhere records any such direction. However, this by itself would not be fatal to the cost of the Revenue. The background facts are clearly severable from the reasons which succeed which formed the core of the recorded reasons by the AO. Thus, the reasons summarized the information available with the AO principally suggesting that there was systematic misuse of the client code modification facility with a view to buy losses to be offset against the profit of the year. The AO formed a belief that the assessee had claimed fictitious losses of Rs. 5.69 crores through this process. Clearly, the AO having recorded his reasons which were based on information supplied to him, this is not a case where the AO had mechanically proceeded on the basis of the borrowed satisfaction. At this stage, when the Court is examining the validity of notice of reopening, the Court would only prima facie consider the reasons recorded by the AO. It is not necessary for the AO to demonstrate beyond doubt that invariably and unfailingly, additions will be made in the hands of assessee;
++ coming to the question of unauthorized transfer of jurisdiction, it is noticed that there is no formal challenge to such transfer. Since there is no formal challenge to the transfer of the assessment, the Department cannot be faulted for not making any further factual averments in this regard. Nevertheless, the original files which show that the question of transfer of assessment emanated from the Office of the Director General of Income Tax (Investigation) as can be seen from a letter written to the Principal Director of Income-tax (Inv), Ahmedabad. Thus, the Pr CIT, Rajkot, granted approval for transfer of the case of assessee. Since the transfer of the jurisdiction was within the same city, there was no requirement of hearing the assessee. Regarding the contention of invalid sanction, the assessee has not made any further elaboration. As, in the proposal placed before the Joint CIT for his comments, he in his own handwriting, had commented as "fit case for reopening u/s 147". Thus, there was clear application of mind on part of the sanctioning authority who had, after perusing the reasons recorded by AO and other materials, granted necessary sanction. Despite such observations and conclusions, the question is, should the reassessment process be allowed to continue. Answer to this question would depend on the question of validity of the fresh notice, without withdrawing the previous notice. In this regard, it is seen that till the disposal of the petition, the previous notice was not yet withdrawn. It was only conveyed to the Court that the same would be withdrawn. Even when the Revenue filed a review petition, clearly there was no formal order passed withdrawing the notice. By the time the High Court disposed of the writ petition, four years had lapsed from the end of the relevant assessment year. Any fresh notice therefore would be beyond a period of four years. The Revenue desired that in view of the special events, the fresh notice may be treated as an extension of the original notice and deemed to have been issued within four years from the end of the relevant assessment year. The Court while rejecting such a prayer did make a passing remark that the AO had consciously withdrawn the notice of reopening. Fact of the matter is there is no formal withdrawal of notice till date;
++ it is to be noted that there can be only one process of assessment or reassessment. Pending any such assessment or reassessment, there cannot be a notice of reopening. The Courts have held that there cannot be reopening of assessment which is not yet complete. It is seen that this Court in the case of Aditya Medisales Ltd, had observed that: "....There cannot be two parallel assessments based on two notices. As long as first assessment is not completed, question of reassessment would not arise. Once a notice is issued u/s 148, it triggers initiation of proceedings for assessment or reassessment of income which may have escaped assessment earlier. During such assessment, any income which may come to the notice of AO may also be brought to tax. Till this assessment is not completed, it would not be possible for him to form a belief that income chargeable to tax had escaped assessment. Until the assessment, be it original or reopened, is pending before the AO, the question of issuing notice for reopening would not arise...." When therefore in the present case, the first notice of reopening of assessment was not withdrawn, there was no scope, nor permissible in law to issue fresh notice of reopening. Counsel for the Revenue, however, vehemently contended that such withdrawal of notice of reopening must be deduced from facts and attendant circumstances. His contention was that the Revenue had, all along, intended to withdraw the notice and the fact, that such notice was abandoned, was sufficient to establish withdrawal thereof. We, however, hold a slightly different belief. A notice of reopening which is once issued would remain in operation unless it is specifically withdrawn, quashed or gets time barred. By mere intention to abandon the proceedings arising out of the notice, the AO cannot bring about the desired result of withdrawing the notice. The material on record would clearly demonstrate that the AO in the present case did not travel beyond expressing his clear intention to withdraw the notice. The law does not recognize two parallel assessments. In absence of withdrawal of the first notice of reassessment, the proceedings would survive making the subsequent notice of reopening invalid.
Assessee's petition allowed
2018-TIOL-925-HC-AHM-VAT + Case Story
STATE OF GUJARAT Vs SUPER TILES AND MARBLES PVT LTD: GUJARAT HIGH COURT (Dated: April 27, 2018)
Gujarat Value Added Tax - Section 14A & Rule 28(8) - Entry 10(1) of Schedule II.
Keywords: Composition of tax - Conventional bricks - Common parlance test - Curb stones - Paver block - Paver brick - Residuary entry - Taxing statute word & Works contract.
The assessee company, engaged in interlocking paving blocks and curb stones, had returned income for the relevant AY. During the assessment proceeding, the assessee was of the opinion that such interlocking paving blocks and curb stones were bricks and the same was covered in entry 10(1) of Schedule II. However, to avoid future controversy, the assessee applied for determination of this issue u/s 80 before the competent authority. The assessee had also raised an issue regarding composition of tax before the Determining Authority. In respect with the issue of classification of paving blocks, the authority by an order dated March, 2009 held that the said product was not brick and hence, was taxable under the residuary entry at a higher rate. Simultaneously, towards the issue regarding composition of tax, the assessee had submitted that it was granted with a contract for construction whereby, the paver blocks were utilised. The Determining Authority decided that the goods used by the assessee in execution of such contract were not having tax and hence, the benefit of composition of tax would not be available to the assessee.
Aggrieved assessee, approached the Tribunal wherein, it was held that the paver blocks and curb stones were bricks and were also covered under entry 10(1) of the Schedule II. In the context of composition of tax, the Tribunal held that the requirement was that the goods used in execution of works contract should borne tax and not the transfer of property. When the uses in the taxable goods in execution of works contract, it could not be said that the assessee failed to comply with the provisions of Rule 28(8).
On appeal, the High Court held that,
Whether a dealer using self-manufactured goods in execution of the works contract, can seek benefit of composition of tax - NO: HC
++ the question of composition of tax is already covered by a recent judgment of this Court in the case of BSCPL Infrastructure Limited wherein, it was held that "... A commodity would become taxable goods when taxable event arises. Merely because upon sale of such goods, tax is prescribed which is not exempt u/s 5 of the VAT Act, and therefore, is taxable goods would not for the purpose of relevant portion of Rule 28(8) of the VAT Rules become taxable goods. The term taxable goods and tax payable under the Act have to be harmoniously construed ... there is no provision under the Act or the Rules which debars a dealer from using self manufactured inputs in execution of the works contract ... Even if the assessee wanted to pay tax on such goods, there is no provision under the Act under which it could do so. Since the assessee had not purchased the goods from market but had self manufactured it from the mines taken on lease, there was no occasion to pay the tax ..." In view of the said judgment, this question is answered against the Department;
Whether in the absence of any statutory definition for a particular word, can the dictionary meaning or common parlance understanding should be accepted - YES: HC
Whether therefore, Entry 10(1) of the Schedule-II should be given a wider amplitude and hence, will include both 'paver blocks' and 'curb stones' - YES: HC
++ in respect to the issue of correct classification of the goods in question viz. interlocking paving blocks and curb stones, we noted that entry 10(1) of the schedule-II to the VAT Act includes bricks of all kinds including fly ash bricks, refractory bricks, eco bricks and hollow block bricks. In plain terms, the intention of the legislature is thus to include all kinds of bricks within the fold of this entry. The entry is consciously and advisably worded widely. The bricks as understood in common usage and parlance need not require any description. Use of the paver blocks also in the recent times has become quite common. From the literature provided by the Counsel for both the assessee and Revenue, we gather that such interlocking paver blocks are made of concrete. They are used for making footpaths, used in gardens, passenger waiting areas, bus stops and such other public places. These are prefabricated systematic blocks of definite sizes and shapes mostly come with self interlocking patterns. By combining these blocks in desired numbers, a footpath, a portion of ground, a waiting area or such like can be paved with minimum effort and with greater durability. When used in different shapes or colours one can also create design or patterns on the floors so paved. Besides being easy to install, they are also easy to remove in case there is a possibility of frequent installation and relaying of underground ducts, pipelines or wires or the likes;
++ in case of Advance Bricks Company, the Supreme Court referred to various sources to better understand the term 'brick' which was not defined under the relevant statute i.e. Haryana General Sales Tax Act and observed that "... The term 'brick' has not been defined in the Act. The High Court has adopted the definition given in the order, where it has been defined as 'piece of burnt clay having geometrical shape fixed in a kiln'. In the absence of a statutory definition of the term 'brick', the common parlance meaning of the word as found in dictionaries has to be accepted ... According to the oxford English Dictionary 'brick' means 'a substance formed of clay, kneaded, moulded, and hardened by baking with fire, or in warm countries and ancient times by drying in the sun'. Encyclopaedia Britannica indicates that 'after the bricks are formed, they must be dried to remove as much free water as possible. Drying, apart from sundrying, is done in drier kiln with controlled, draft and humidity' ..." ;
++ from such materials, it could be seen that the paver blocks are also sometimes referred to as paver bricks. These paver bricks are superior to the conventional bricks in number of ways including the durability, the ease of laying and removing. In other words, these paver blocks fulfill the same purpose as the conventional bricks would do insofar as levelling and paving of ground surface is concerned. These uses of paver blocks and the conventional bricks overlap and are in fact interchangeable. It is however true that these paver blocks are not known to be used for the construction of walls and buildings which use the conventional bricks and other eco friendly and hollow bricks could be used for. In terms of legal implications, what would be the effect of this facts, may now examined;
++ in case of Maruti Yeast India Pvt. Ltd., the Apex Court held that "... if there is a conflict between two entries one leading to an opinion that it comes within the purview of the tariff entry and another the residuary entry, the former should be preferred ..." Further, in case of Porritts & Spencer (Asia) Ltd., it was observed that it is well settled that "... in a taxing statute words of everyday use must be construed not in their scientific or technical sense but as understood in their common parlance ..." From the principles emerging from the said judgments, we would have to give the widest amplitude to the entry in question. Only if we find that the entry does not through such interpretation also include the product in question can be fall back on the residuary entry. In the process, we would apply the common parlance test;
++ applying all the principles and on the basis of the usage and the purpose of manufacturing both the products, as also looking to the language used in the entry, we hold that the Tribunal was correct in coming to the conclusion that paver blocks and curb stones are classifiable within entry 10(1) of Schedule II to the VAT Act. We are conscious that Division Bench of Karnataka High Court in case of H. H. Cement Products has taken a contrary view. However, despite the view of the Karnataka HC, if the assessee or other similarly situated dealers, could produce the materials before the Statutory authority to canvass that the paver blocks are nothing but the bricks, the authority could take an independent view. Hence, this question is also answered against the Revenue.
Assessee's appeal allowed
2018-TIOL-1563-CESTAT-MUM + Case Story
VENKATESHWARA EARTHMOVERS Vs CCE: MUMBAI CESTAT (Dated: February 28, 2018)
ST - Amounts paid by the appellants in cash take the shape of duty/tax only when the same are adjusted by filing the return against the duty/tax liability - facility of filing late returns is only a facility to be used in exigencies and is not meant to be a mechanism to avoid payment of taxes - by not filing return for a period of over three years and not by paying tax despite collecting the same from the service recipients, even though they had taken the registration, they have made themselves liable to penalty under Section 78 - however, benefit of 25% penalty allowed subject to compliance with the conditions mentioned in s. 78 of FA, 1994 - no penalty is imposable u/s 76 in view of decision in First Flight Courier Ltd. - 2011-TIOL-67-HC-P&H-ST - Revenue appeal allowed in part: CESTAT [para 5, 6]
ST - Appellant have merely asserted that they were discharging the cash element of the duty liability after adjusting the cenvat credit - duty paid by assesse for input/services becomes cenvat credit only when the same is claimed by the appellant by filing a return in this regard - Duty paid by the appellant for input/input services does not automatically become cenvat credit at the hands of the appellant - Interest rightly held payable by appellant u/s 75of FA, 1994 by adjudicating authority in view of decision of Tribunal in the case of Toyo Engineering Corporation Ltd. - 2014-TIOL-2020-CESTAT-MUM - Appeal dismissed: CESTAT [para 4]
Assessee appeal dismissed/Revenue appeal partly allowed
