2018-TIOL-NEWS-020, Dated: Tuesday, January 23, 2018

2018-TIOL-NEWS-020 | Tuesday January 23, 2018

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DIRECT TAX


	2018-TIOL-24-SC-IT PR CIT Vs Surya Vinayak Industries Ltd Having heard the parties, the Supreme Court condones the delay and grants leave to the Revenue Department to defend their case on the issue of 'consequences of second visit of search parties, upon period for completion of assessment with reference to sub clause (a) of clause 2 of Section 153B'. - Leave granted: SUPREME COURT OF INDIA 2018-TIOL-23-SC-IT PR CIT Vs Indian Railway Construction Company Ltd Having heard the parties, the Supreme Court condones the delay and dismisses the SLP, thus concurring with the opinion of High Court on the issue of quantum of deduction u/s 80HH. - Revenue's SLP dismissed: SUPREME COURT OF INDIA 2018-TIOL-22-SC-IT Lifo International Vs CIT Having heard the parties, the Supreme Court condones the delay and dismisses the SLP, thus concurring with the opinion of High Court, on both the issues relating to 'valuation of unsalable stock' and 'rental income'. - Assessee's SLP dismissed: SUPREME COURT OF INDIA 2018-TIOL-135-HC-MUM-IT CIT Vs Grasim Industries Ltd Whether when an appeal is preferred challenging on four issues, the High Court can admit such based on substantial question of law and rest can be rejected as does not give rise to any substantial question of law - YES : HC - Order passed partly in favour of Revenue: BOMBAY HIGH COURT 2018-TIOL-134-HC-MUM-IT Pr.CIT Vs Reliance Petro Marketing Ltd Whether amount raised by issuing debentures would still be considered as used for business purpose even if the full amount raised is advanced to sister concern which is indulged n same line of business and have business connection with assessee - YES : HC - Revenue's appeal dismissed:BOMBAY HIGH COURT 2018-TIOL-136-ITAT-JAIPUR + Story Vinita Ranka Vs ITO Whether failure to maintain books of account in case of turnover exceeding minimum limit provided u/s 44AA, will attract penalty u/s 271A - YES: ITAT Whether 'bank account' details can be a substitute for the 'books of accounts' to be maintained by the assessee, for purpose of compliance of Section 44AA - NO: ITAT - Assessee's appeal dismissed: JAIPUR ITAT 2018-TIOL-132-ITAT-DEL DCIT Vs Inter Ocean Shipping India Pvt Ltd Whether in absence of AO's record for dissatisfaction in respect of concelament of income, no adhoc addition can be made for expenses incurred on behalf of foreign ship owners - NO: ITAT Whether in absence of any assured evidence of the AO indicating an 'inaccurate filing of particulars', penalty u/s 271(1)(c) can not be imposed on this ground - YES: ITAT - Revenue's appeal dismissed: DELHI ITAT 2018-TIOL-131-ITAT-MUM ITO Vs Gas and Power Investment Co Ltd Whether interest expenses incurred on restructured loans can be allowed u/s 43B, in absence of existence of seperate interest liability - NO: ITAT - Revenue's appeal partly allowed: MUMBAI ITAT 2018-TIOL-130-ITAT-MUM L and T Finance Ltd Vs DCIT Whether leased assets are equally eligible for depreciation - YES: ITAT Whether a single income offered by assessee in its return should not be taxed twice - YES: ITAT Whether no disallowance of expenses u/s 14A should be made for earning exempt dividend income, if investment in shares is less than the total owned interest free funds of assessee - YES: ITAT - Assessee's appeal allowed: MUMBAI ITAT 2018-TIOL-129-ITAT-VIZAG Pioneer Finance Vs Pr.CIT Whether when Assessee has filed Forms 15G/15H obtained from payees and assessment is completed after considering the same, then revisional jurisdiction cannot be exercised by terming such assessment as 'erroneous', solely on ground that assessee has not deducted TDS on the said payments - YES: ITAT - Assessee's appeal allowed: VISAKHAPATNAM ITAT

INDIRECT TAX

SERVICE TAX SECTION

2018-TIOL-136-HC-MAD-ST + Story

Sunmac Enterprises Vs CCE

ST - Inability to pay the mandatory pre-deposit cannot be a ground to entertain a writ petition - grounds cited by the petitioner cannot be a reason for bypassing the appeal remedy available under the Statute - Writ petition not maintainable, hence dismissed - it is open to the petitioner to file an appeal before the Tribunal: High Court [para 4] - Petition dismissed: MADRAS HIGH COURT

2018-TIOL-292-CESTAT-DEL

Beekay Engineering Corporation Vs CCE

ST - the assessee-company manufactured engineering equipments, components, spares etc., and also provided "Commercial or Industrial Construction Service" and "Erection Installation or Commissioning Service etc." - The assessee claimed 67% abatement under Notfn. No. 01/2006-ST - The Revenue held that the assessee was ineligible to avail abatement since the assessee had availed Cenvat credit on several input services - Notably, the Notfn. mandates that abatement can be claimed only when no credit had been availed - Demand was raised for payment of differential duty along with penalties u/s 76, 77 & 78 of the Finance Act, 1994 -

Held - Although the assessee is prima facie ineligible to avail credit, subsequent reversal of credit would be tantamount to non-availment, as was laid down in Chandrapur Magnet Wires (P) Ltd. , Hello Minerals Water Pvt. Ltd. and Dilip Chabaria Design Pvt. Ltd. - Considering such reversal of credit on Commercial or Industrial Construction service, the assessee would be eligible for abatement - Also considered decisions in Ashima Dyecot Ltd. and Rashtriya Ispat Nigam Ltd. vs. CCE, Vishakhapatnam-I - From these, it is clear that subsequent reversal of credit even to a proportionate extent attributable to a particular output service, would satisfy the condition of Notfn. for availing abatement - Hence duty demands & penalties set aside: CESTAT (Para 3,7-11) - Appeal Allowed: DELHI CESTAT

2018-TIOL-291-CESTAT-MUM

CST Vs GC Chemie Pharmie Ltd

ST - Respondent is registered with the department under the category of clearing and forwarding agent - during the course of audit, it was noticed that they had not discharged the service tax liability on an amount received as commission for procuring the orders and direct supplies from manufacturers to clients – Commissioner(A) after scrutinizing the agreement entered by the respondent with various parties came to conclusion that the amount of commission received by the respondent would not fall under the category of clearing and forwarding agent services and coming to such a conclusion, set aside the order-in-original – Revenue in appeal before CESTAT.

Held: On perusal of the agreements entered by the respondent with their customers, Bench finds that the said agreement only talks about the responsibility of the respondent to procuring the orders on the prices fixed by the manufacturer and nothing more than this - said agreement does not indicate that the respondent is required to store the goods and dispatch the same to the purchasers – in view of the judicial pronouncement - 2008-TIOL-262-HC-P&H-ST on the issue, impugned order is correct and legal and does not suffer from any infirmity – Revenue appeal rejected: CESTAT [para 6 to 9] - Appeal rejected: MUMBAI CESTAT

CENTRAL EXCISE SECTION

2018-TIOL-300-CESTAT-MUM + Story

JSW Steel Coated Products Ltd Vs CCE

CX - CENVAT - Input Service - Rule 2(l) of CCR, 2004 - Exclusion clause (A) - As expression used is "insofar as they are used for", the said exclusion clause read with section 66E of FA, 1994 makes it very clear that the exclusion does not stand restricted only to works contract service or construction services, but the same relates to the services which are used for execution of a civil construction - Service Tax paid on the consulting engineering services received by the appellant in relation to structural design and drawing of cellar foundation is not admissible as CENVAT credit since excluded from the definition - if such consulting engineer services are used for said purposes of repair or renovation they would not get excluded, inasmuch as the exclusion would only be limited to such services used for the works contract or construction services - Since it is not the appellant's case that such consulting engineer services were used for renovation or repairs, but admittedly used for construction purposes, credit has been rightly denied by lower authorities - as the issue is a bona fide dispute of legal interpretation of the newly introduced provisions, and inasmuch as the credit was availed by reflecting the same in the Cenvat accounts, no malafide can be attributed to the assessee so as to call for imposition of any penalty - demand along with interest upheld but penalty set aside - Appeal disposed of: CESTAT [para 2, 3] - Appeal disposed of: MUMBAI CESTAT

2018-TIOL-133-HC-MUM-CX

Pr.CCE Vs Trans Engineers India Pvt Ltd

CX - It is undisputed that SCN invoked the extended period - The tribunal found from the factual matters that there were not one, but two audits and the second one was for overlapping period - If during both, Revenue could not trace out anything, which was held back by assessee or was unable to unearth from records the necessary materials to allege suppression, then, invocation of extended period was impermissible - Once there is no perversity in order under appeal nor the same is vitiated by any error of law apparent on the face of record, then, court is not obliged to entertain this appeal: HC - Appeal dismissed: BOMBAY HIGH COURT

2018-TIOL-290-CESTAT-MUM

Crompton Greaves Ltd Vs CCE

CX - Paper waste arising during the course of manufacture of transformer – Appellant suomotu paying duty and interest and seeking waiver of penalty imposed u/s 11AC of the CEA, 1944.

Held: As per the judgment of the Supreme Court - 2006-TIOL-186-SC-CX and subsequent judgment of the Tribunal - 2008-TIOL-2769-CESTAT-DEL it was held that in respect of the paper waste generated during the course of manufacture of final product viz. empty match boxes, duty is not payable - issue was, therefore, not free of doubt and involved interpretation of law -malafide intention cannot be attributed to the appellant – penalty imposed u/s 11AC of CEA, 1944 is set aside – appeal is disposed of: CESTAT [para 4, 5] - Appeal disposed of: MUMBAI CESTAT

2018-TIOL-289-CESTAT-MUM

Furnace and Foundry Equipment Co Vs CCE

CX - Appellant were availing CENVAT credit on some services which were not exclusively used for manufacture of excisable goods - appellant were maintaining separate accounts insofar as common inputs were concerned but not in respect of common input services - department asking them to reverse/pay 5% of the value of the exempted goods cleared in terms of Rule 6(3)(i) of the CCR whereas the appellant wished to reverse the amount in terms of Rule 6(3)(iii) - Revenue contending that since no option was exercised by appellant before clearance of the exempted goods, therefore, they cannot choose any option of their choice appeal before CESTAT.

Held: In view of the Tribunal decision in Mercedes Benz India (P) Ltd. - 2015-TIOL-1550-CESTAT-MUM , Revenue cannot enforce any option on the appellant - Accordingly, the option exercised by the appellant cannot be discarded even if the same has been made after clearance of the goods - impugned order set aside and appeal allowed: CESTAT [para 5, 6] - Appeal allowed: MUMBAI CESTAT

2018-TIOL-288-CESTAT-MUM

Godrej and Boyce Mfg Co Ltd Vs CCE

CX - Whether the goods manufactured and cleared by the appellant is machinery falling under chapter heading 841900 or parts thereof and consequently whether the same is eligible for exemption notification no. 56/95-C.E - Also whether non-mention of sub-clause of rule 173Q of CER, 1944 while imposing penalty is justified.

Held: As regards the merit of the case whether the appellant is liable to pay duty @ 10% or 15% under the notification no. 56/95-CE, the Tribunal in the appellants own case has decided the matter against the appellantin the order dated 28.02.2006, therefore, demand of duty and interest is sustainable - Merely by not mentioning the sub-clause the penalty cannot be avoided - appellant was very much aware about legality of the issue and, therefore, they have represented to the government via CII to make uniform rate of machine and parts i.e. 10%, therefore, appellant knowingly claimed the wrong exemption - as against the duty demand of Rs.96,40,472/-, penalty of Rs.25 lakhs was imposed u/r 173Q and which is found to be reasonable – impugned order upheld and appeal dismissed: CESTAT [para 5, 6] - Appeal dismissed: MUMBAI CESTAT

2018-TIOL-287-CESTAT-MUM

CCE Vs Hindustan Petroleum Corporation Ltd

CX - CENVAT - Audit team notice that the respondent is not eligible to avail cenvat credit of Rs.35,01,878/- and issued an audit memo - Respondent assessee, a Government of India undertaking reversed the credit - adjudicating authority confirming demand and imposing penalty u/s 11AC of CEA, 1944 r/w rule 15(2) of CCR but dropping interest - In appeal by assessee, Commissioner(A) setting aside penalty - Revenue in appeal before CESTAT.

Held: From the facts of the case and as recorded by the adjudicating authority in paragraphs 35 and 36 that there was always sufficient excess balance in the CENVAT credit account, therefore, there cannot be any malafide intention attributable to the respondent for availment of credit twice or in one case, thrice - impugned order is correct and legal and does not require interference - Revenue appeal rejected: CESTAT [para 7, 8] - Appeal rejected: MUMBAI CESTAT

CUSTOMS SECTION

2018-TIOL-132-HC-MAD-CUS

Pranav Exports Vs Deputy Director

Cus - Petitioner had availed drawback claim as early as 2013 and foreign remittances have not come to petitioner's bank account within the time permissible under the scheme - On 12.12.2017, petitioner sent a representation to Reserve Bank of India seeking extension of time for realization of export sale proceeds - It is stated that said representation is pending before Reserve Bank of India for consideration - Though, as on date, petitioner is not eligible to avail drawback claim, which had been availed in year 2013, same is in the stage of investigation as regards quantum of drawback eligible apart from the fact of non remittance of foreign exchange within the time permitted - In any event, there should have been a demand raised to the petitioner, which appears to have been not issued till date - Therefore, while permitting DRI to continue investigation, petitioner should be permitted to operate their bank account by simultaneously protecting the interests of Revenue - Petitioner is directed to furnish bank guarantee for 25% of drawback claim availed by petitioner to the satisfaction of third respondent or any other appropriate authority of Customs Department and execute a bond in proper format for differential amount to the satisfaction of appropriate officer: HC - Writ petition disposed of: MADRAS HIGH COURT

2018-TIOL-286-CESTAT-MAD

Coromandel Granite Company Ltd Vs CCE

Cus - Assessee obtained Letter of Permission (LOP) from Development Commissioner for setting up EOU for production and export of polished Granite Slabs, Tiles and Monuments - Matter has come up before this forum for the second time - On the earlier occasion, Tribunal in 2008-TIOL-1466-CESTAT-MAD had remanded the matter with directions to supply copies of relevant documents to assessee and as against quantification of duty, Tribunal had directed the Commissioner to consider the assessee's plea based on the terms of the relevant notifications - In terms of LOP, assessee have to achieve a minimum export obligation of NFEP of 40% for a period of 10 years - Only because this obligation was not achieved, Development Commissioner on 23.02.2005, imposed penalty and finally on 29.05.2005 had cancelled the LOP - Assessee having failed to achieve value addition or export obligation or both, they will become liable to pay duties on the capital goods/spares/consumables, imported or indigenously procured by them availing the exemption in terms of relevant Notfns 13/81-Cus., 53/97-Cus., 123/81-CE and 1/95-CE - One argument of assessee which was raised before Tribunal on last occasion also, is that depreciation has not been extended to capital goods/tools for the purpose of arriving at dutiable value - When the capital goods or tools have been obtained and used by assessee right from 1988, till permanent closure of factory in July 2002, and, subsequent cancellation of LOP on 02.09.2005, it would be unjust and unfair to deny depreciation for period of four years' exposure to natural elements as also for wear and tear that would have resulted due to their extensive use - For the purposes of determining duty liability in respect of both imported and indigenously procured goods, depreciation for period from their import/procurement, upto the date of cancellation of LOP and duty liability should be calculated accordingly - Matter is therefore once again remanded, however only for the limited purpose of requantifying the duty liability after grant of depreciation as per guidelines issued and followed by the department for calculation of depreciation - Adjudicating authority has imposed penalty of Rs.90,00,000/- under Section 112 (ii) of Customs Act, 1962 - However considering that travails faced by assessee, in particular, the fact that while having not fulfilled export obligation in toto, they have however achieved NFEP of 82.69% and 96.21% for the relevant periods, as also the fact that the dispute has resulted in protracted legal proceedings, penalty should be reduced to Rs.25,00,000/-: CESTAT - Assessee's appeal partly allowed: CHENNAI CESTAT

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