2018-TIOL-NEWS-133 Part 2, Dated: Thursday, June 07, 2018

2018-TIOL-NEWS-133 Part 2| Thursday June 07, 2018

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	Legal Wrangle \| Corporate Law \| Episode 76

CASE STORIES


	ST - MIDC is a statutory body - services of garbage collection rendered to MIDC is exempted in terms of Sr.no.25 of Notfn. 25/2012-ST: CESTAT I-T - Discovery of incriminating material in course of search proceedings is sine qua non for scrutinizing concluded assessments u/s 153A: ITAT ST - Taxation of goods and that of services are mutually and explicitly conceived levies - same activity cannot be taxed as goods and as services : CESTAT

DIRECT TAX


	2018-TIOL-1076-HC-MUM-IT CIT Vs Builders Association of India Whether the registration of a charitable trust can be cancelled solely on receipts being in excess of Rs 10 lakhs earned from non-commercial activities for its members - NO: HC - Revenue's appeal dismissed: BOMBAY HIGH COURT 2018-TIOL-1075-HC-AHM-IT Pr. CIT Vs Devendra Jasraj Kothari Whether a writ petition filed by the Revenue can be entertained where the order being challenged does not have any long-term or cascading effect or does not result in any miscarriage of justice - NO: HC Whether when reducing penalty imposed, can the Tribunal ignore the final assessment order & adopt a different method to determine the amount of tax sought to be evaded by the assessee - NO: HC - Revenue's writ petition dismissed: GUJARAT HIGH COURT 2018-TIOL-808-ITAT-DEL ITO Vs Fis Global Recovery Services India Pvt Ltd Whether when there is no change in the profile of assessee company from that of the previous years, then claims of deductions allowed during such previous years should not be retained, by following the principle of consistency - YES: ITAT - Revenue's appeal dismissed: DELHI ITAT 2018-TIOL-807-ITAT-MUM ACIT Vs Grew Industries Pvt Ltd Whether lease rental earned by a developer engaged in the business of leasing out of commercial properties, has to be assessed as business income, and not income from house property - YES : ITAT Whether the I-T Authorities can take a contradictory stand that no business activities were carried out by assessee during relevant year, when they themselves have held the income of assessee "business income" - NO: ITAT Whether remuneration paid by a Company to its Directors can be declared as unreasonable, without conducting any comparison with the fair market value for rendering identical services - NO: ITAT - Revenue's appeal dismissed: MUMBAI ITAT

INDIRECT TAX

SERVICE TAX

2018-TIOL-1753-CESTAT-DEL

Afford Motors India Pvt Ltd Vs CCE

ST- The assessee is providing the "Debt Recovery Agent Service" - The Department was of the view that the Assessee provided the taxable services to various banks and financial institutions, but did not deposit the ST and did not file the ST-3 Returns - Subsequently, the assessee deposited the ST payable - The Department issued SCN seeking recovery of ST alongwith interest & penlaty - The Commr. (A) reduced the penalty to 50% of the ST demand.

Held - With regard to eligibility of cenvat credit to the assessee the matter is remanded back to the adjudicating authority for recording of specific findings - The ST liability for the disputed period has been discharged by the assessee before issuance of SCN - Therefore, whether imposition of penalty is correct is to be analyzed by the Revenue Authorities : CESTAT (Para 2, 6) - Matter Remanded: DELHI CESTAT

2018-TIOL-1752-CESTAT-DEL

Ganesh Narayan Sharma Vs CCE & ST

ST - The assessee is engaged in construction activities & paid ST under the category of construction of residential complex, commercial or industrial construction service and WCS - During the disputed period the assessee undertook housing projects - The Revenue issued SCN on ground of tax short paid & raised duty demand along with interest & penalty.

Held - No ST will be liable to be paid by the assessee in respect of composite WCS as per SC decision in Larsen & Toubro case - Hence, the demand for ST is set aside for the disputed period as well as for the period falling within the extended period of limitation - Although no tax can be charged in respect of construction work for Government departments such as residential house for police, the individual contracts are to be scrutinized before such benefit is extended - Therefore, the matter is remanded to the Revenue for fresh adjudication : CESTAT (Para 1, 6, 7, 8, 9) - Matter Remanded: DELHI CESTAT

2018-TIOL-1751-CESTAT-DEL

Avadh Enterprises Vs CCE

ST - Assessee was appointed as agent for marketing and sales promotion of products of company M/s United Spirits Limited - During disputed period, assessee has availed Cenvat credit on advertisement in electronic media i.e. through television network on payment of service tax under "BAS" - Adjudicating Authority disallowed the Cenvat credit and ordered for recovery besides interest thereon under Rule 14 of Cenvat Credit Rules readwith Section 75 of FA, 1994 - Penalty equal to the credit being denied was also ordered to be recovered - The crux of dispute is whether advertisement services used by assessee can be considered as input services for provision of output service of promotion and marketing of liquor produced by M/s United Spirits Limited - Advertisement expenditure was incurred for advertisements not for liquor but of other products of company, such as, soda - The first clause of agreement makes it clear that this is for marketing the Indian Made Foreign Liquor products manufactured by company - The clause 12 of agreement specifies that commission will be paid on a month to month basis @ Rs. 25/- per case of IMFL - It is also relevant to record that advertisement of alcohol beverages is banned in India - Consequently, such advertisement services do not come under the definition of input service within the definition of Rule 2 (l).

The only other issue for decision is whether the disallowance of Cenvat credit can be sustained for period covered by longer period of limitation under Section 73 - The advertisement for sale promotion of liquor is not legally permitted in India and, hence, advertisements undertaken by assessee, depicted other surrogate products, such as, mineral water - Such advertisements are consciously made without showing liquor, circumventing the ban on advertisement for IMFL products, but assessee have asserted that such advertisements were for promoting the sale of IMFL by company - This amounts to not only suppression of facts but even borders on fraud - Hence, demand of service tax for longer period upheld: CESTAT - Appeal rejected: DELHI CESTAT

CENTRAL EXCISE

2018-TIOL-1750-CESTAT-DEL

DCM Shriram Ltd Vs CCE & ST

CX - Assessee engaged in manufacture of cement, PVC Resin, Caustic Soda and PVC compound - They purchased various steel items for fabrication and erection of various capital goods and availed Cenvat credit in respect of such iron and steel items - As structures were intended to provide support to various capital goods installed in factory, department was of the view that assessee was not entitled to avail such cenvat credit and after issue of SCN, proceeded to deny the cenvat credit - Cenvat credit amounting of about Rs.53 lakh has been denied by adjudicating authority - Out of this, an amount of Rs.20 lakh pertain to credit availed on 535 MT of iron and steel structures - Credit for inputs used in such supporting structure has been denied by adjudicating authority on the basis of Larger Bench decision of Tribunal in case of Vandana Global Ltd. 2010-TIOL-624-CESTAT-DEL-LB - Decision of Tribunal in said case is no longer good law - It has been held by Gujarat High Court in case of Mundra Ports and Special Economic Zone Ltd. 2015-TIOL-1288-HC-AHM-ST that the amendment carried out w.e.f. 7.7.2009 in Rule 2(k) of CCR, 2004 will have only prospective effect - By following the decision in case of Singhal Enterprises Pvt. Ltd. 2016-TIOL-2451-CESTAT-DEL , cenvat credit amounting to Rs.20 lakh will be allowable to assessee - Assessee has produced the Chartered Engineer's Certificate in which the details of actual usage of the iron and steel structural items in the fabrication of supporting structure of capital goods has been given - Credit on the basis of Chartered Engineer's certificate will be allowable to assessee but not on the basis of tentative bill prepared - Since, cenvat credit on iron and steel structures used is allowable, no reason found to sustain the denial of cenvat credit of Rs. 32 lakh - Total demand of cenvat credit set aside.

As regards to appeal filed by Revenue, only reason cited by Revenue is that the adjudicating authority has not decided the issue of penalty imposable under section 11AC - No infirmity found in the view taken by adjudicating authority dropping the cenvat credit - In any case, when entire demand of cenvat credit now stands set aside, there is no justification for imposition of any penalty under section 11 AC: CESTAT - Assessee's appeal allowed: DELHI CESTAT

2018-TIOL-1749-CESTAT-MAD

Priya Hosieries Vs CCE

CX - Assessee was availing exemption as a small-scale industry in terms of Notfn 8/2003-CE, effective from 01.04.2003 - However, the notfn does not cover processed fabrics manufactured and captively used by assessee - They claimed exemption for processed fabrics captively consumed in terms of Notfn 67/1995-CE - Revenue held a view that assessee is not eligible for exemption under Notfn. 67/1995-CE as the final product, namely, knitted garments, are not discharging any duty and are exempted - In a similar situation, exemption available to cement clinker used in manufacture of cement, which was cleared without payment of duty availing area-based exemption was the subject-matter of discussion by Supreme Court in case of M/s. Ambuja Cements Ltd. 2015-TIOL-321-SC-CX - Intermediate products involving both the cases were manufactured and captively consumed by manufacturer - The final products are exempt on condition either due to location of Unit or the turnover of Unit - In both the cases, intermediate product is not eligible for exemption as applicable to the final product - Both the parties claimed exemption for intermediate products in terms of Notfn 67/1995- CE - As such, facts are pari materia in both the disputes - Supreme Court on detailed examination of legal provision to proviso clause of Notfn 67/1995 gave a finding that the said exemption to the intermediate products is available - Decision of Tribunal in M/s.Kunnath Textiles 2008-TIOL-1325-CESTAT-BANG did not deal with the proviso and legal implication of said proviso to the notification as discussed in decision of the apex court in M/s. Ambuja Cements Ltd. - Tribunal decided the applicability to Notfn 67/1995-CE to the goods not covered under Notfn 8/2003-CE, being intermediate products - Though, the exemption was held not available, issue regarding the proviso and more specifically the implication of clause (vi) of the provisio under Notfn 67/1995 was not discussed to lay down any ratio - Exemption available to intermediate products cannot be denied, following the ratio of the apex court: CESTAT - Appeals allowed: CHENNAI CESTAT

CUSTOMS

NOTIFICATION

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Amendments to Foreign Trade Policy 2015-20 - Extension to Integrated Goods and Service Tax (IGST) and compensation Cess exemption under EOU scheme till 01.10.2018

Trade Notice 17

EODC Camp in RAs during 11.6.2018 to 22.6.2018

Trade Notice 16

Benefit of Focus Product Scheme to HS Code 8481-FTP 2009-14

CASE LAW

2018-TIOL-1748-CESTAT-MUM

Shakil Patel Vs CC

Cus - Penalty imposed of Rs.5 lakhs u/s 112 of the Customs Act, 1962 - Smuggling of gold - Entire case of the Revenue is based upon the statement of co-noticee without there being any further evidence - statement of appellant could not be recorded as the appellant did not honour the summons - no efforts were made by Revenue to approach the appellant in person so as to record his statement - It is well settled that statement of the co-noticee cannot be made the sole basis for penalizing a person - in absence of any other corroborative evidence, penalty imposed is unsustainable - order set aside and appeal allowed with consequential relief: CESTAT [para 3, 4] - Appeal allowed: MUMBAI CESTAT