10 July 2018   

2018-TIOL-252-SC-IT

Income Tax - Section 14A & Rule 8D.

Keywords: Borrowed fund - Disallowance of interest & Exempt income.

The assessee company, engaged in the business of manufacturing cement, had returned income for the relevant AY. During the assessment proceeding, the AO noted that the assessee, in its return had on its own disallowed an expenditure u/s 14A i.e. expenditure incurred to earn exempt income. However, the AO after holding that he was not satisfied with the correctness of the disallowance of expenditure made by the assessee applied Rule 8D and determined a further disallowance of Rs 4.03 crores. Therefore, the disallowance in the aggregate was Rs 4.53 crores u/s 14A in the assessment order. On appeal, CIT(A) upheld the order of AO holding that AO had recorded his non satisfaction with the disallowance made by assessee u/s 14A. On further appeal, the ITAT restored the issue so far as disallowance of interest was concerned to AO to determine the extent to which the investments in tax free units were made out of borrowed funds or out of its own funds, to AO in the subject AY.

When the matter reached before the High Court, it was held that in order to make disallowance u/s 14A r/w Rule 8D, it was mandatory for the AO to record reasons to show fallacies in the computation of disallowance made by the assessee.

Having heard the parties, the Apex Court dismissed the SLP.

Revenue's SLP dismissed

2018-TIOL-251-SC-IT

Income Tax - Sections 143(3) & 153C.

Keywords: Bogus purchases - Interest free loans - Notional interest - Search block assessments.

A search operation was conducted in the 'Amprapali group' of cases and consequent to which, notice u/s 153C was issued to the assessee, which was a partnership firm. During the assessment proceedings, the AO made an addition on account of bogus purchases of raw materials and also on account of notional interest on the interest free loan. On appeal, the CIT(A) rejected the challenge to the validity of the assessment. However, the additions on the bogus purchases of raw materials and the addition on account of interest were deleted. On further appeal, the ITAT held that the initiation of proceedings against the assessee u/s 153C was bad in law.

When the matter reached before the High Court, it was held that proceedings u/s 153C on account of evidences "pertaining to assessee" found during search, had to be rendered invalid, if the provision at the time of said proceedings itself authorises such action only in case of evidences "belonging to assessee".

Having heard the parties, the Apex Court condoned the delay and dismissed the SLP.

Revenue's SLP dismissed

2018-TIOL-1303-HC-MUM-IT + Case Story

Income tax - Writ - Section 245D(4)

Keywords - bonafide claim - full disclosure - settlement application

The assessee company preferred present petition challenging the order passed by Income-Tax Settlement Commission u/s 245(D)(4) dismissing the application for settlement made by assessee in pending cases for A.Ys 2008-09 to 2014-15. Consequently, the pending assessments were restored to the AO to complete the assessment in accordance with law. The said application for settlement was rejected on the ground that there was failure to make a full and true disclosure of its income on the part of assessee.

On Writ, the HC held that,

Whether non-acceptance of a bonafide claim made by taxpayer leading to disclosed income, will per se render the application for settlement as bad for failure to make full disclosure - NO: HC

++ it is found that assessees had made a full and complete disclosure of primary facts. It is on the undisputed facts, that a bonafide claim was made leading to the disclosed income. Non-acceptance of the claim would not ipso-facto lead to making the application for settlement bad for failure to make full and true disclosure of income. Infact this Court in Principal Commissioner of Income-Tax V/s. Income-Tax Settlement Commission - 2017-TIOL-362-HC-MUM-IT has held, that to establish there was failure to make a full and true disclosure of income as required under Section 254(C)(1), it would be necessary for the Revenue to prove that there was a non-disclosure of primary facts and not merely non-acceptance of certain claims made before the Commission. Moreover, in the present facts, so far as, retention money is concerned, the claim was made by assessee on the basis of the decision of this Court in Commissioner of Income-Tax V/s. Associated Cables Pvt. Ltd, [2006] 286 ITR 596 (Bom). Therefore, there shall be interim relief in all of the petitions.

Case disposed of

Income tax - Sections 40(a)(ia) & 145(3)

Keywords - non disclosure of profit - rejection of books

The assessee, an individual, had submitted his return declaring total income at Rs.82,35,555/-. His main source of income was from contract awarded by the Railway and Public Works Department and the assessee had disclosed a total receipt of Rs.1581.26 lacs for the year in question as against receipt of Rs.1285.89 lacs for the previous year. During the course of assessment, the AO found that rate of net profit was declared for only 5% of turnover against 5.10% for the preceding year. He therefore rejected the assessee's books of A/c u/s 145(3) and determined the net profit at the rate of 8% of the total contract received and accordingly determined the income of assessee at Rs.1,26,50,146/-.

On appeal, the FAA reduced the additions to Rs.47,42,596/- on basis of profit not disclosed in the books. On further appeal, the Tribunal disallowed certain additions said to have been made by the FAA u/s 40(a)(ai).

On appeal, the HC held that,

Whether once books of A/c are rejected and profit is estimated at certain percentage of turnover, then same books of A/c should not be relied upon for purpose of making addition u/s 40 - YES: HC

++ it is canvassed that once the addition was made based on the statutory provision, the Tribunal committed an error in rejecting the same and, therefore, it is stated that the substantial question of law arises for consideration as to whether the addition made as per the statutory provision could be interfered with in a manner done. Upon analyzing the reasons that weighed with the Tribunal for rejecting the justification given by FAA, it is found that the Tribunal has not committed any error. Once the Books of Account were rejected and the profit was estimated @ 8% of turnover, then, the same Books of Account cannot be relied upon for the purpose of making addition under the provision of Section 40. In doing so, the Tribunal has not committed any error.

Revenue's appeal dismissed

2018-TIOL-1301-HC-DEL-IT

Income Tax - Writ - Section 281B.

Keywords: Amalgamation scheme - Bank guarantee & Impending merger.

The assessee company, had returned income for the relevant AY. For various previous AYs, the assessee's right to claim refund of Rs.655.67 crores arose on account of the amount assessed after the outcome of its appeal and rectification proceedings. The AO had issued 11 separate orders seeking attachment of various amounts as raised for AYs 2012-13 to 2014-15. Further, the assessee moved the AO u/s 281B volunteering to furnish a bank guarantee to cover the said amount, if so attached and sought the release of the amount.

Having heard the parties, the High Court held that,

Whether in case of any impending merger and amalgamation scheme, if any demand is made, the bank guarantee will be honoured not only by the company itself but also by its successor entity - YES: HC

++ the Revenue in their counter affidavit point out that the bank guarantee furnished by the assessee would expire on 28.08.2018 and that, having regard to the TP adjustments likely to be carried out for the concerned years, the guarantees must be kept alive till 31.03.2019. It is also besides that there is an impending merger and a proposed scheme of amalgamation between the assessee and Idea Cellular which is likely to result in losses for the new entity which may besides not agree to honour the bank guarantee;

++ the assessee should address the issue of validity of the bank guarantee and ensure that an appropriate substituted bank guarantee securing the amount of Rs.655.67 crores is made available to the AO, with the validity till 31.03.2019. Besides, the fresh bank guarantee or substituted bank guarantee should also very clearly spell out that not only the assessee but also its successor or any other entity which succeed to its assets and liabilities on account of any scheme of amalgamation or merger would be bound to honour the bank guarantee in the event the demand is made by the beneficiary i.e. the Revenue. In the event of such substituted bank guarantee being furnished to the Revenue/AO, the latter shall pass an appropriate order accepting the same and also release the amounts attached, within a week of receiving of such bank guarantee.

Assessee's Writ petition disposed of

2018-TIOL-1300-HC-MUM-VAT

Maharashtra VAT - actual sale price - replacement of spares - warranty scheme

The Assessee dealer preferred the present appeal challenging the action of CESTAT in holding that the credit in the "Dealers Spare Part Account" received by assessee from Maruti Udyog Ltd. amunting to Rs.30,52,192/- could be treated as actual sale price received by assessee for replacement of spares during the manufacturer's warranty scheme and therefore liable to Tax under the provisions of MVAT Act.

On appeal, the HC held that,

Whether the manner of using the credit is no criteria to judge the amount credited by the company to the dealer's account for sale of parts as replaced during the warranty period - YES: HC

++ it is found that both the Assessee in Chowgule Industries Ltd. as well as in the present case are dealers for Maruti vehicles and carry on identical activity of replacing parts of Maruti Vehicle during the warranty period from M/s. Maruti Ltd. It is noted that the Tribunal records after considering the terms of the agreement, that the assessee got the price of the parts replaced under the warranty scheme from Maruti Ltd. The distinction drawn that the amount is not received immediately but is deposited by crediting the account of assessee with Maruti Limited and the utilization of the credit was only for effecting purchases of parts from the said amount is of no consequence. These are two separate transactions, one of replacing the parts during the warranty period for M/s. Maruti Ltd. for which amounts are credited. The other is the manner in which the credit i.e. the price received for replacement of parts is to be utilised. Therefore, the manner of using the credit does not detract from the fact that the amounts credited to the account of assessee by M/s. Maruti Limited is on account of sale of parts as replaced during the warranty period. Therefore, for the reasons indicated in our order in Chowgule Industries Pvt. Ltd., the questions of law as proposed do not give rise to any substantial question of law.

Assessee's appeal dismissed

2018-TIOL-1299-HC-MUM-CX

CX - The questions proposed by Revenue stand answered against the Revenue and in favour of assessee by the authoritative pronouncement of this Court in case of Ultratech Cement Ltd. 2010-TIOL-745-HC-MUM-ST and which follows and applies the relevant and admissible tests - Revenue was objecting to the admissibility of service tax credit in respect of advertising services which are used in terms of manpower recruitment services, transport service which is used for transportation of employees and supply of food and beverage services to the extent that part of the expenditure is met by the employees themselves - Tribunal noted that the scope of admissibility of input services is now broadened to include input services used for providing output services - The definition was referred and a factual finding is recorded viz. that all input services used for modernization, renovation or repair to the office premises are also covered - Even the advertising service which was questioned was also held to be an input which would qualify as an input service and used for providing output service - The Tribunal then noted that wherever the employees have contributed to the supply of food service, to that extent, employer assessee before it has already conceded that it is not covered within the definition - Then, the Tribunal applied the test and which is purely legal test emerging from an authoritative pronouncement of this Court in the case of Ultra Tech Cement Ltd - Pertinently, Ultratech referred to the judgment of Supreme Court in case of Maruti Suzuki Ltd 2009-TIOL-94-SC-CX - With all these pronouncements, court wonder as to why Revenue brings appeals after appeals to this Court, and gets them routinely dismissed - Once on merits of the services rendered and whether they qualify for the exemption or refund, is the issue involved, then, the same is properly and rightly considered by applying the correct and relevant test - The services have been scrutinized in the backdrop of these very principles - The order under Appeal can neither be termed as vitiated in law or perverse, warranting further interference: HC

Appeals dismissed

2018-TIOL-1298-HC-MAD-ST

ST - Assessee is in appeal challenging the order in 2016-TIOL-2558-HC-MAD-ST dismissing the writ petition filed by assessee to quash the SCN alleging non-payment of service tax on charges/fees received out of the profit on sale of securitization of future receivables - The assessee is providing service under category of banking and other financial services and their primary business is providing Loans, Hire Purchase and Financial Leasing, which includes, Equipment Leasing to their customers - The assessee assigns/sells the future receivables to be received out of rural lending to banks as per the guidelines framed by the Reserve Bank of India relating to Priority Sector Lending - The proceedings under challenge in 2016-TIOL-2558-HC-MAD-ST was only a SCN - The assessee has no case that the first respondent has no jurisdiction to initiate proceedings by issuing the SCN - Assessee has taken up a contention that the proceedings are barred by limitation - The issue regarding limitation is a mixed question of fact and law - In fact, the Revenue has produced materials in support of his contention that SCN was issued within the period of limitation - It is for the adjudicating authority to decide the issue - Assessee cannot be heard to say that the explanation would not be considered by first respondent and an order on merits would not be passed - None of the ground taken by assessee in the writ petition would constitute 'sufficient grounds' to set aside the SCN - The single Judge was justified in dismissing the writ petition: HC

Appeal dismissed

2018-TIOL-1297-HC-MAD-CUS

Cus - Petitioner before High Court praying for quashing of the findings notice dated 5.1.2018, in relation to the investigation for imposition of a Safeguard Duty on import of Solar Cells whether or not assembled in Modules or panels, issued by the 2 nd respondent as illegal, arbitrary, without authority of law and in contravention of the Customs Tariff Act, 1975 [CTA] read with the Customs Tariff (Identification and Assessment of Safeguard Duty) Rules, 1997 [Safeguard Duty Rules] and also unconstitutional being inter alia in violation of the principles of natural justice :

HELD - on a reading of section 8B(1) and 8B(2) of the CTA, it is clear that the provisions does not contemplate taking of the views from any party and it is based on the subjective satisfaction of the Central Government and the preliminary findings given by the 2nd respondent will only constitute a material, based on which the provisional duty is imposed - the ratio laid down in the judgments reported in 2 000 (118) E.L.T. 305 (S.C.) [Saurashtra Chemicals Ltd. Vs. Union of India] and 2000 (118) E.L.T. 310 (S.C.) [United Phosphorous Ltd. Vs. Director General (Safeguards)] squarely applies to the present case - in both the judgments, the Apex Court held that when the order of the Designated Authority is purely recommendatory, the same cannot be interfered with by the Apex Court - the ratio laid down by the Apex Court in - 2015-TIOL-209-SC-CUS [Commissioner of Customs, Bangalore Vs. G.M.Exports and others ] is also applicable to the facts and circumstances of the present case - the scope of interference, in matters, which have huge economic impact, is very narrow - by the impugned notice dated 5.1.2018, the 2nd respondent had made certain preliminary findings and forwarded the same to the Government - further, in the impugned proceedings dated 5.1.2018, the 2nd respondent has stated that a public hearing will be held in due course before making a final determination, for which the date will be informed separately - in these circumstances, no prejudice would be caused to the petitioner for the reason that they will be given opportunity to make their submission before the Authority on the issues involved in the matter - the authorities should decide the matter on merits and in accordance with law, after considering the submissions to be made by the petitioner, at the time of making final determination - no reason found to interfere with the impugned preliminary findings notice dated 5.1.2018 - accordingly, the Writ Petition is dismissed : HIGH COURT [para 12, 14, 16, 17, 18, 19]

Writ Petition dismissed

Foreign Trade (Development and Regulation) Act, 1992 – Petitioner has challenged the decision of the Policy Relaxation Committee dated 24.10.2017 and 23.02.2016 respectively, inter alia, seeking a direction to respondent No.3 to grant redemption of 3 advance authorizations by accepting ARE-1s and 'Certificate of Receipt of Supply' and other related documents as proof of export:

HELD - in the light of the judgment of the High Court of Bombay in the case of Larsen & Toubro Ltd. - 2017-TIOL-2291-HC-MUM-CUS as well as the earlier decision of the Policy Relaxation Committee, the consumption certificate placed on record by the petitioner before the RA as well as the Policy Relaxation Committee has not been properly appreciated – in the circumstances of the case where substantial material was placed on record to establish the factum of the export as contemplated under the Act and Rules or in other words, complying with the requirement contemplated under the Act and Rules, supplying the goods from the domestic tariff area to SEZ, considered to be equivalent to an export of goods physically from this country to abroad, requires consideration - the impugned orders of the Policy Relaxation Committee cannot be held to be sustainable - writ petitions are allowed - proceedings are remanded to respondent No.3 to examine the 'Certificate of Receipt of Supply' - RA may accept other documents in lieu of bill of export provided there is a corroborative evidence/co-relation to the ARE-1/Excise attested invoice bearing the details of advance authorization/file number under which the goods were removed for discharge of export obligation - respondent No.3 shall check and ensure that the drawback has not been claimed either by supplier or recipient against such supply - on such corroborative evidence placed on record by way of 'Certificate of Receipt of Supply', the same shall be accepted by respondent No.3 - requirement of bill of export for discharge of export obligation against advanced authorization albeit such advanced authorization number not reflected in ARE-1 shall be condoned : HIGH COURT [para 10, 11]

Writ Petitions allowed

Foreign Trade (Development and Regulation) Act, 1992 - Interpretation of Notification No.43(RE-2013)/2009-2014 dated 25.9.2013 - Whether clause (i) incorporated in paragraph 3.14.5.(c) of Chapter 3 to the Foreign Trade Policy 2009-2014 poses an upper limit of benefit under the Incremental Export Incentivisation Scheme for the year 2013-14 or in view of clause (ii), and on interpretation of paragraph 3.14.5.(c), claims in excess to this value would be subjected to greater scrutiny by the Regional Authority - stand of the petitioners is that amount of Rs.1 crore specified in clause (i) was not the upper limit but the amount was specified for greater scrutiny by the Regional Authority - respondents submit to the contrary:

HELD - Public Notice No.28/2009-2014(RE-2013) dated 25.9.2013 settles the position beyond any doubt and debate - this public notice clarifies that amendment in form of clauses (i) and (ii) to paragraph 3.14.5.(c) of the Foreign Trade Policy were to ensure that annual claims in excess of Rs.1 crore should be subjected to greater scrutiny by the Regional Authority - in other words, the two newly inserted clauses had to be read harmoniously - clauses (i) and (ii) were not introduced and inserted as clauses, but as a part of sub-paragraph (c) to paragraph 3.14 - clause (i) did not put or prescribe an upper limit - to interpret it differently would make clause (ii) otiose and redundant - following the decision in J.S.W. Steel Ltd. - 2016-TIOL-157-HC-MUM-CUS , in Writ Petition No. 2157/2016, Welspun Global Brand Limited and others versus Union of India and Others, decided on 12th June, 2017, the Bombay High Court had held that the amount of Rs.1 crore mentioned in clause (i) to paragraph 3.14.5.(c) of the Foreign Trade Policy did not prescribe or fix an upper limit of Rs. 1 crore for grant of export incentive payable on annual basis for financial year 2013-2014 - the writ petitions are allowed with a direction to the Regional Authority to examine the case of the petitioner for grant of export incentive and pass a reasoned and speaking order - the application would not be rejected on the ground that total amount being claimed exceeded Rs.1 crore during the financial year 2013-14 - however, the greater scrutiny in terms of clause (ii) of paragraph 3.15.5 (c) read with paragraph 3.8.3 (e) (ii) would be undertaken : HIGH COURT [para 6, 11, 12]

Writ Petitions allowed

2018-TIOL-1286-HC-KERALA-VAT + Case Story

Kerala Value Added Tax - Writ - Sections 7(1)(a) & 8(b); Rule 11(1) & 11(2)(i)

Keywords - Compounding of tax - Withdrawal of application

THE assessee company opted for compounding during the relevant AY. In this regard, quarterly compounding tax was paid. However, during the same AY, the assessee found itself unable to carry on its business and so its applied for withdrawal of the compounding application. Such application was rejected. When the assessee first approached this court, the Single Judge opined that the compounding process was a contract between the assessee & the department and so its withdrawal was impermissible.

Also, the issue decided by the Single Judge was whether the assessee could be absolved from the liability arising from the contract on grounds of the obligation being impossible of performance u/s 56 of the Indian Contract Act, 1872. In this regard, the Single Judge held that the factual & legal position would indicate that there is subsequent supervening circumstance, which created an impossibility in performing the obligations under the contract and therefore such a contention does not merit consideration. It was also held that at best the obligation under the scheme which the assessee voluntary opted is onerous. The Single Judge relied on the decision of the Apex Court in Naihati Jute Mills Ltd. v. Khyaliram Jagannath, wherein it was held that courts cannot absolve parties from the performance of his part of the contract merely for the reason that the performance has become onerous on account of an unforeseen turn of events and the Court cannot modify the terms of the contract. Hence the present appeals.

In writ, the High Court held that,

Whether a compounding application filed under the VAT Act concerned can be sought for & then withdrawn in the same AY, when no sanction had been issued during that AY - YES: HC

Whether if withdrawal of such compounding application is permitted, can the assessee seek refund of amount paid as compounded tax - NO: HC

++ considering the various cases relied on by the assessee and by the Department, we are concerned with cases in which during the assessment year itself, the assessees have sought for withdrawing from the option exercised by them on the ground that the request for compounding had not been sanctioned;

++ it is true that the assessees had submitted compounding application and they had remitted quarterly tax as well. But before passing an order in terms of R.11(2) of the KVAT Rules, they sought to withdraw from the scheme of compounding. In such circumstance, the question would be whether the Department is bound to permit withdrawal from the compounding. The Single Judge in the judgment dated 9/3/2017 in WP(C) No.39547/2016 proceeded on the basis that there was in fact an order of compounding sanctioned by the Department;

++ the only contention urged is that in so far as there is no production, compounded tax is not payable and the assessee cannot be compelled to remit tax for the quarter where there is no sale or production at all. However, during the course of argument, counsel submitted that he had sought for exemption during the currency of the assessment year itself and therefore he should be given exemption from payment of compounded tax;

++ it is true that the contention now urged has not been urged before the Single Judge. But specific pleading had been raised in that regard and even in the memorandum of appeal, a specific ground to that extent had been raised. Hence, in the interest of justice, it is only fair that the matter is decided rather than relegating the parties to seek for a review;

++ taking into consideration the factual aspects involved in the matter and also on an evaluation of the legal aspects involved, we are of the view that the assessee ought to have been given an opportunity to withdraw the compounding application especially when no sanction had been issued during the assessment year. However, we take this view only on account of the fact that the request had been made during the AY;

++ the appeals are only to be allowed and an opportunity should be given to the assessee to file regular return for the respective AYs. However, we make it clear that the assessee shall not be entitled for refund of any amount paid towards compounded tax.

Assessee's Writ Petition Allowed

2018-TIOL-1285-HC-ALL-CUS

Cus - the assessee was traded in imported & indigenous Multimedia Speakers and Computer Peripherals - The assessee imported them under Chapter 18582900 - Under the new policy, the Multimedia Speakers with USB card reader or FM facility were classified under Chapter 85198990 attracting CVD based on Reserved Sale Price of the goods - Pursuant to search operation, the assessee was served an SCN u/s 124, to which it sent is replies - Subsequently, the assessee claimed to have received a phone call informing that some penalty had been levied on it - While it made several attempts to get clarification on the matter, it got no replies - It later traspired that an order had been passed against the assessee raising some duty demand - The assessee claimed that despite repeated attempts, it was not provided a certified copy of the order, due to which it was unable to file appeal & the limitation period also expired.

Held - Although there is a presumption of service upon the assessee but the same is rebuttable - In case it had received the order, it would not have been prevented from filing appeal - It is seen that the assessee attempted to obtain a copy of the order upon coming to know of it - This proves that the order was not received by it - Hence the interests of justice call for providig a fresh opportunity to contest the matter on merits - Hence certified copy of the order be provided to the assessee on application: HC

Writ petition allowed

2018-TIOL-1284-HC-KAR-CX

CX - An amount of fine as well as penalty were imposed on the assessee-company - It filed an appeal before the Tribunal, which was subsequently dismissed on account of a 725-day delay in filing such appeal - The Tribunal found the assessee to be unable to explain the delay - Hence the present appeal.

Held - the assessee claimed that due to recession in the software business, its was unable to fulfil its export obligation consequent to importing plant & machinery and availing exemption from customs duty - On such grounds the assessee sought to explain the delay of over two years in filing appeal - Such submissions do not hold water - The assessee could instead have sought waiver of penalty & fine: HC (Para 1,2,4,5)

Appeal dismissed

2018-TIOL-2106-CESTAT-AHM

UMIYA WOOD WORKS PVT LTD Vs CC : AHMEDABAD CESTAT (Dated: March 27, 2018)

Cus - The applicants herein sought refund of 4% SAD under Notification No 102/2007-CUS - However, the Department insisted on the applicant's furnishing a bank guarantee of 50% of the refund amount as condition for releasing the refund - The present applications were filed seeking implementation of an order passed by the Tribunal.

Held - Following the decision of the Andhra Pradesh High Court in CC vs Gayatri Timbers Pvt Ltd there is no justification in the Department insisting of bank gurantee of 50% of the refund amount where neither appeal is filed against a higher forum not any application is filed against the order - Hence Department directed to release refund claim within 30 days: CESTAT (Para 2,6)

Applications allowed

2018-TIOL-2105-CESTAT-MAD

UT STARCOM INC Vs CC : CHENNAI CESTAT (Dated: March 16, 2018)

Cus - the assessee imported certain models of ADSL Modems - While the Revenue sought to determine CVD by making assessment based on MRP, the assessee contested the same on grounds that the goods were supplied to the BSNL which rented them out - It claimed that the goods were not for sale - The Revenue opined that the goods were ultimately supplied to individual consumers & that they could not be called institutional consumers - Hence duty demand for CVD was raised, calculated on MRP basis.

Held - Since the BSNL procures modems in bulk from the assessee, it becomes an institutional consumers on whom the provisions of Section 4A of the CEA 1944 are inapplicable - Hence CVD cannot be charged based on MRP assessment u/s 4A - The duty demands are unsustainable: CESTAT (Para 1,6,7)

Appeal allowed

2018-TIOL-92-AAR-GST

Applicant United Breweries Ltd. seeks a ruling on -

(a) Whether beer bearing brand/s owned by M/s United Breweries Limited (Brand Owner/UBL) manufactured by Contract Brewing Units (CBUs) out of the raw materials, packaging materials and other input materials procured by it and accounted by it and thereafter selling such beer to various parties under its invoicing would be considered as supply of services and whether GST is payable by the CBUs on the profit earned out of such manufacturing activity?

(b) Whether GST is payable by the Brand owner on the “ Surplus Profit” transferred by the CBU to the Brand Owner out of such manufacturing activity?

Held:

Question No. 1: The CBUs are not engaged in supply of service to the applicant and, therefore, there does not arise any liability to pay GST on the amount retained by the CBUs as their profit.

Question No. 2: Yes, GST is payable by the Brand owner (UBL) on “ Surplus Profit ” transferred by the CBU to brand owner out of the manufacturing activity and the supply of service to the CBUs is classified under Service Code (Tariff) 999799 and liable to pay GST at 18% (CGST- 9%, SGST-9%) on the amount received from the CBUs.

 

Application disposed of

2018-TIOL-91-AAR-GST

GST - the applicant company manufactures F ludeoxyglucose F 18, also commonly called FDG, radiopharmaceutical used in the medical imaging modality positron emission tomography (PET) - The applicant seeks to know whether Fludeoxyglucose' or 'FDG' is classifiable under Chapter 3006 3000 of the Central Excise Tariff Act, 1985 - The applicant also seeks to know whether chemicals used as pharmaceuticals that are inorganic or organic nature shall merit classification only under Chapter 28 & 29 and not under Chapter 30 which has been specifically carved out for chemical pharmaceuticals by makers of law.

Held - the product Fludeoxyglucose F 18 is not classifiable under Chapter 3006 3000 of the Central Excise Tariff Act, 1985 - Moreover, the other question raised cannot be entertained u/s 98 of the CGST Act: AAR

Application Disposed Of

2018-TIOL-90-AAR-GST

OdishaMadhyamikShiksha Mission (OMSM), Govt. of Odisha, had mandated the Odisha Knowledge Corporation Ltd. (OKCL) to implement ICT Project in 4000 government and government aided higher secondary schools across State of Odisha – a tender was floated by OKCLfor supply, installation, maintenance and commissioning of projection system, interactive white board, computer hardware, connected accessories, installation of software and other allied accessories, site preparation, maintenance of equipment and provision of computer training services for 5 years in 4000 schools divided in 6 zones on BOOT Model basis - applicant was the successful bidder and awarded the tender- Applicant seeks a ruling on whether the services provided are covered under the scope of entry no. 72 of notification 12/2017-CT(R).

Held:

+ Odisha Knowledge Corporation Ltd. (OKCL) is a body corporate and cannot be regarded as government.

+ Supply undertaken by the applicant is in the nature of composite supply. It includes supply of goods and services which are not naturally bundled. Each of the components of the composite supply are distinctly identifiable both in terms of quantity and value. The service provided or to be provided is not exclusively in the nature of training programme.

+ Though the source of funding for the service is the State government and Central government, yet, as per the contract, the payment responsibility is vested on OKCL.

++ Therefore, the activities of the applicant by way of supply of goods and services under the ICT project are not covered under Entry 72 of the notification 12/2017 dated 28.06.2017 so as to be entitled to the benefit of exemption from GST.

Application disposed of

2018-TIOL-1064-ITAT-INDORE

Income Tax - Sections 142(2), 143(2), 234A, 234B, 234C & 234D

Keywords - CBDT Instruction no. 13/2006 - Scrutiny assessment

THE assessee-company, engaged in manufacturing umbrellas, filed returns for the relevant AY, declaring a loss. On assessment, the AO made additions to the assessee's income on account of low gross profit. The AO made a further addition of expenses incurred. On appeal, the CIT(A) deleted the addition made on account of expenses incurred. The CIT(A) also reduced the gross profit rate from 15.34% to 15.03% and confirmed the addition made on account of low gross profit, although the quantum of such addition was reduced. Hence the present appeal by the assessee on grounds that the notice issued u/s 143(2) is barred by limitation and thus illegal.

On appeal, the Tribunal held that,

Whether scrutiny assessment made by the AO is sustainable, where based on a misinterpretation of directions given by CIT(A), wherein the AO was directed to only determine eligibility for refund depending on applicability of relevant CBDT Instruction - NO: ITAT

++ now the issue is required to be adjudicated as to whether the notice issued u/s 143(2) by the AO is barred by time. Before adverting to the rival submissions, for the sake of clarity, undisputed facts are that the original return was filed on 30.10.2000. The fact is that return was revised on 09.04.2001 to claim refund of TDS amounting to Rs. 1,75,815/-. The assessee filed an application u/s 199(2)(b) of the Income-tax Act, 1961. The said application came to be decided on 17.01.2008. While disposing of that application, the CIT(A) directed the AO to determine the refund after scrutinizing the case by issue of notice u/s 143 of the Act, as per para 7 of Instruction no. 13/2006 dated 22.12.2006 issued by the Board. In pursuance of that order, a notice u/s 143(2) was issued to the assessee on 16.05.2008. The contention of the assessee is that the AO could not have issued the notice u/s 143(2) of the Act;

++ there is no ambiguity under the law that the scrutiny assessment is to be framed as per the provisions of Section 143 of the Income-tax Act, 1961. The Instruction no. 13/2006 would not override these provisions. From a bare reading of the instructions, it is evident that the Instruction is related to condonation of delay in respect of refund due. This instruction is issued with an objective to mitigate the hardship to the assessee. Para 7 of the Instruction is limited to the extent of ascertaining the claim of the assessee. This does not empower the AO to make scrutiny of the entire case, which goes against the spirit of the law. In the case in hand, the AO was required to ascertain that the tax has been deducted at source and on the returned income, such refund is available to the assessee or not. Thus, the AO has misconstrued direction of the Commissioner of Income-tax and assessed the income by making scrutiny assessment. It is also noticed that there is an inordinate delay in disposing the application by the Commissioner of Income-tax. Under these facts, we are constrained to hold that the assessment order as framed by the AO is contrary to the provisions of law and beyond the jurisdiction of the AO. Accordingly, the assessment is quashed. Ground no.2 of the assessee's appeal is allowed.

Assessee's Appeal Partly Allowed