2018-TIOL-NEWS-168, Dated: Wednesday, July 18, 2018

2018-TIOL-NEWS-168 | Wednesday July 18, 2018

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CASE STORIES


	GST - When a delivery challan is issued u/r 55, it is a mandate under sub-rule (3) that there should be a declaration u/r 138 - fact that there was no such declaration raises a reasonable presumption of attempt to evade tax - s.129 definitely operates: HC I-T - Delayed deposit of TDS in govt A/c can be forgiven, if such default was backed by severe financial crises: ITAT

DIRECT TAX


	2018-TIOL-1367-HC-DEL-IT Pr.CIT Vs Hindustan Clean Energy Ltd Whether disallowance u/s 14A r/w Rule 8D invoked by AO without recording his satisfaction on books of account prepared by assessee, is defiance of statutory provision and hence invalid - YES: HC - Revenue's appeal dismissed: BOMBAY HIGH COURT 2018-TIOL-1366-HC-DEL-IT CIT Vs Gursharan Singh Chhabra Whether additions can be made to income pursuent to search proceedings, if assessment was already completed on the date of search and no incriminating material was unearthed during search - NO: HC - Case disposed of: DELHI HIGH COURT 2018-TIOL-1365-HC-AHM-IT Pr.CIT Vs Ferromatic Milacron India Ltd Whether provision for warranty being an ascertained liability, merits consideration while computing book profit u/s 115JB - YES: HC - Case deferred: GUJARAT HIGH COURT 2018-TIOL-1089-ITAT-DEL + Case Story JCL Infra Ltd Vs Addl.CIT Whether delayed deposit of TDS to Government's A/c can be forgiven, if such default was backed by severe financial crises - YES: ITAT - Assessee's appeal allowed: DELHI ITAT 2018-TIOL-1088-ITAT-MUM Feerari Investments and Trading Company Pvt Ltd Vs ITO Whether evasion of interest income by claiming reduced rate of interest receipts from sister concern during relevant year, merits addition of differential interest - YES: ITAT - Assessee's appeal partly allowed: MUMBAI ITAT 2018-TIOL-1087-ITAT-DEL DCIT Vs G R Goenka Education Society Whether exemption granted u/s 11(1) during previous years needs not be taken back in subsequent years, in the absence of any change in factual circumstances - YES: ITAT - Revenue's appeal dismissed: DELHI ITAT 2018-TIOL-1086-ITAT-MUM Kokan Mercantile Coop Bank Ltd Vs DCIT Whether expenditure incurred in relation to earning of exempt income, merits disallowance u/s 14A r/w Rule 8D - YES: ITAT Whether claim of deductions filed before Appellate authority, needs to examined first by the AO, for ascertaining the allowability of such deductions - YES: ITAT - Case remanded: MUMBAI ITAT

INDIRECT TAX

SERVICE TAX

2018-TIOL-2189-CESTAT-MUM

IPCA Laboratories Ltd Vs CCE & ST

ST - Reverse charge - Appellant engaged in manufacture of P&P medicaments and have availed the services of distributors in various countries where the goods are exported and sold - distributors appointed sales representatives and their salaries were reimbursed by appellant - Demand of service tax confirmed under the heads viz. BAS, Scientific and Technical Consultancy Services, OIDAR Services and Management Consultancy Service - appeal to CESTAT.

Held: Demand under BAS is raised in respect of amount paid to distributors - appellants claim that these amounts are spent by the distributor for promotion of their own products and, therefore, they are not covered by BAS - in view of Tribunal decision in Genom Biotech Pvt. Ltd . - 2016-TIOL-529-CESTAT-MUM no service tax can be demanded on the said service, demand under BAS set aside: CESTAT [para 4]

ST - Regulatory services obtained for getting service of their product registered/approved by authorities abroad cannot be classifiable under the head ‘Scientific and Technical Consultancy Services' - Tribunal decision in Administrative Staff College of India - 2008-TIOL-2007-CESTAT-BANG as approved by Supreme Court relied upon - demand is, therefore, set aside: CESTAT [para 4.1]

ST - OIDAR - Appellant are using the service of M/s Dialogue Corporation, USA for the purpose of data storage; that the said service provider does not provide ‘online' services and there is no ‘online' service provider - in absence of online database access, no service tax can be demanded under the head OIDAR - demand under the said head is set aside: CESTAT [para 4.2]

ST - Management Consultancy Service - Services provided by technical assistance and consultancy in identifying avenue and product promotion fall under Management Consultancy Service, therefore, demand on this count is upheld: CESTAT [para 4.3]

ST - Penalty - Revenue neutrality - Data submitted shows that part of the final products are exempted and, therefore, the situation is not fully revenue neutrality - however, section 80 can be invoked in the facts of the case, therefore, penalty imposed u/ss 76 and 78 are set aside: CESTAT [para 4.4] - Appeal partly allowed: MUMBAI CESTAT

2018-TIOL-2188-CESTAT-MAD

Apollo Computer Education Ltd Vs CGST & CE

ST - Assessee is engaged in providing training in software and systems - Department took the view that these services would attract levy of service tax under category of Commercial Training and Coaching (CTC) and Franchisee Service - SCN was issued for demanding service tax along with interest and for imposition of penalties - Assessee did not contest the tax liability of CTC as well as Franchisee Service - However, they sought abatement to the extent of cost / value of books supplied as study materials by them to the students - The demand proposed in SCN has been based on the data provided by assessee themselves - So also it is seen that SCN proposes demand based on the details furnished by assessee vide their letter dated 14.8.2009 - As indicated from annexure to SCN and based on these letters, there is no break-up of cost of books sold by assessee - At the same time, assessee has provided copies of profit and loss account at the stage of adjudication and have also annexed them appeal book which separately indicates the cost of books and materials - In the circumstances, ratio of Cerebral Learning Solutions Pvt. Ltd. 2013-TIOL-834-CESTAT-DEL will have to be applied to the present appeal and that notwithstanding Board's Circular dated 20.6.2003, the cost of books supplied by assessee will have to be deducted for purposes of arriving at the net tax liability - However, neither of the SCN have given any separate break-up of such cost of books - The matter is remanded to adjudicating authority to cause verification from the balance sheets and other data that may be provided to work out such cost and to arrive at net tax liability - Coming to the matter of penalty, since in their own case, for an earlier period, Tribunal has already set aside the penalty - Following the same ratio and hold that there cannot be any penalty imposed: CESTAT - Appeal allowed: CHENNAI CESTAT

2018-TIOL-2187-CESTAT-MAD

ABT Ltd Vs CCE

ST - M/s. Sree Saradhambal Automobiles Pvt. Ltd. as well as M/s. ABT Ltd. are authorized dealers for M/s. Maruti Suzuki India Ltd - M/s. Chandra Automobiles India P. Ltd. is the dealer for M/s. Hyundai Motor India Pvt. Ltd. - These authorized dealers carry out the work of authorized service station on behalf of manufacturers during the warranty period - Department issued SCN and confirmed demand of service tax on amounts received by dealers from manufacturers of motor vehicles towards the cost of spares used in replacement during warranty and extended warranty service - After a perusal of some of sample invoices raised for such work, it is found that the spare parts have in fact been sold on payment of VAT - Consequently, cost of spare parts cannot be included for purposes of levy of service tax - Such demand of service tax is not justified and hence are set aside - In respect of amounts recovered by way of extended warranty premium, there is no justification to consider such amounts as reimbursements of cost of spares by manufacturers of motor vehicles - The extended warranty premium amounts are liable to payment of service tax under appropriate category of service but it stands submitted that service tax demand thereon has been paid by manufacturers of motor vehicles to whom such premium has been transferred - Consequently, no justification found for demand of service tax of such amounts - Impugned orders set aside: CESTAT - Appeals allowed: CHENNAI CESTAT

CENTRAL EXCISE

2018-TIOL-2186-CESTAT-MAD

Kone Elevators India Pvt Ltd Vs CCE

CX- The assessee are engaged in manufacture, supply, installation and commissioning of elevators and escalators - As the cost of production of the components that go into lifts and escalators cannot be accurately determined since some of them are manufactured by the assessee & some by third parties - The provisional assessment was done & during finalization, differential duty demand was raised with interest - The Commr. (A) upheld the assessment order in respect of demand against computer processing charges, consultance and professional as well as power & diesel - Hence, the present appeal.

Held - The assessee placed extensive materials consisting of their CAs certificate & supporting documents before the Revenue - Moreover, they have contended that the report furnished by the Cost Accountant appointed by the Department is erroneous and working is incorrect - However, on three issues no detailed analysis has been done, these are enumerated herein - It has been held that earlier 50% but now 25% of the expenditure was charged to factory and the balance charged to office w.r.t computer processing charges - However, this Tribunal agrees with the contention of the assessee that apart from the factory they have other call centres - Therefore, it would be incorrect to allocate a portion of entire proportion of factory expenses to production - Secondly, the Revenue opined that charges relating to technical consultance has to be charged to production & this becomes production overhead item - Added to this the legal consultancy charges also have relevance to production - However, this Tribunal is in consonance with the assessee that as per CAS 4, only those administrative heads relating to production activity alone could get benefit in the cost of production and that the consultancy and professional charges are such that they have no relevance with the actual production process - Lastly, the demand has been confirmed by Revenue on power (factory ) & diesel (factory) on the basis of explanation furnished by the Cost Accountant that 100% of the power is required to be allocated to the factory & there is a common meter for power consumption - However, this Tribunal agrees with the assessee that only 30% of power consumption is required for production and evidence has been produced by them during the audit verification by the Revenue - In addition, the entire power cost towards production activity is against costing principles - Hence, the case is remanded to the Revenue for de novo adjudication : CESTAT (Para 1, 5, 6) - Matter remanded: CHENNAI CESTAT

2018-TIOL-2185-CESTAT-AHM

CCE Vs Manglam Alloys Ltd

CX- The assessee is engaged in the manufacture of S.S. Bright Bars, S.S. Flats & the principal raw materials used are S.S. scraps, M.S. scrap and Ferro Alloys - On audit of business premises, it was observed that few of the dealers issued invoice without receipt of inputs - The Revenue opined that assessee ought to reverse the ineligible credit - On adjudication, the demand was confirmed with interest and equal amount of penalty was imposed - The Commr. (A) rejected the appeal of assessee & imposed personal penalty - Hence, the present appeal.

Held - The issue at hand is whether the assessee correctly availed the CENVAT credit against the input invoices issued by dealers during the period in dispute - While cross-examination, the assessee could not give a reasonable reason for discrepancy in the invoices - The requirement of the Rules framed for allowing credit is that not only duty must have been paid against respective invoices, but also the inputs mentioned in the invoices must have been received in the factory and utilized by the assessee in the manufacture of finished goods - As the onus is on assessee to establish the discrepancy in invoices - In the present case it can be concluded that the quantity of inputs mentioned in the 12 invoices had not been received in the factory and the credit was availed only on the input invoices - With respect to allegation of the Revenue that the vehicles mentioned in the respective invoices were not Auto Rickshaws, Chakdas etc., but in the statements of respective owners of the vehicles, it has been stated that they had never visited the route used for transferring/transporting the inputs from the premises of the dealers to the factory or the vehicles were not in good condition - No evidence has been substantiated by the Revenue - Inaddition, the weighment slips attached to few of the invoices were handwritten which was one of the grounds for denial of credit - There is no other corroborative evidence on record produced by the Revenue to establish that the goods have not been received except the contradictory oral evidence of the proprietor of the weigh Bridge - Also, t he personal penalty is reduced - Hence, the demand raised in order-in-appeal on the basis of credit availed without actually receiving the inputs is upheld and others are set aside : CESTAT (Para 2, 13, 14, 15) - Appeal dismissed: AHMEDABAD CESTAT

2018-TIOL-2184-CESTAT-MUM

Indoworth (India) Ltd Vs CCE

CX - Appellant had sought de-bonding of part of their unit and the Dy. Commr. had by order dated 11.12.2006 quantified the amount of duty to be paid as Rs.59,25,058/- and also prescribed certain conditions - when the appellant fulfilled the said parameters, a fresh order dated 05.04.2007 was passed wherein they were asked to deposit an amount of Rs.14,30,874/- in respect of goods under partial de-bonding - Revenue appealed against this order and the Commissioner(A) allowed the appeal by setting aside the order 05.04.2007 on the ground that appellant had not challenged the earlier order dated 11.12.2006; that the said order had become final and Dy. Commr. had no authority to review his own order - appeal to CESTAT.

Held: FTP, para 6.18(e) prescribes that at the time of de-bonding the appellant would be entitled to claim depreciation up to the date of de-bonding, therefore, the exact quantification would depend on the date of de-bonding - Any assessment or quantification done prior to that date would only be a provisional assessment - therefore, there is no merit in the order of the Commissioner(A) that the second order of the Dy. Commissioner amounts to review of this own first order - impugned order set aside and appeal allowed with consequential relief: CESTAT [para 4, 5] - Appeal allowed: MUMBAI CESTAT

CUSTOMS

2018-TIOL-1377-HC-MAD-CUS

CC Vs Mahi Enterprises

Cus - the assessee company imported a vast consignment of goods which were later held by the Department - The assessee filed a writ for their release upon payment of proportionate amount of duty - The High Court directed the assessee to apply for re-export of the goods - Upon receipt of such application, the Department was to release them as they prima facie did not appear to be prohibited for import - Hence the Department's appeal.

Held - as the Department undertakes to expedite the adjudication proceedings, the authority concerned is directed to complete the adjudication & pass appropriate orders regarding release of the detained goods: HC (Para 1,2,10) - Writ Appeal Disposed Of : MADRAS HIGH COURT

2018-TIOL-2183-CESTAT-MUM

UFO Movies India Ltd Vs CC

Cus - Issue is whether the imported Digital Video Projectors and Decoders given on lease to Theatre Owners for using the same in display of the movie is liable for CVD on the basis of valuation u/s 4A of the CEA, 1944.

Held: Digital video set can be used only for displaying the movie in the theatre and the same is not sold in the retail market - appellant has an arrangement of providing Digital Video Projectors to the theatre owners under lease agreement and the lease rental is charged under the agreement - an identical fact involved in case of Bharti Telemedia Ltd. - 2015-TIOL-1863-CESTAT-MUM wherein the definition of ‘sale' in the Legal Metrology (Packaged Commodities) Act, 2011 (earlier SWAM Act, 1976) has been considered and it is held in that case that the Set Top boxes (STB) imported are not leviable to CVD on RSP/MSP basis in terms of section 4A of the CEA, 1944 except for the STBs actually sold - following judicial discipline, impugned order does not sustain, hence same is set aside and appeal is allowed: CESTAT [para 5, 6] - Appeal allowed: MUMBAI CESTAT

2018-TIOL-2182-CESTAT-DEL

PP Electronics Vs CC

Cus - Assessee has imported Colour Picture Tubes and bill of entry has been filed through CHA, M/s Nipun Impex - The Invoice Number was also been annexed but nowhere the description of goods imported was declared as old and used - However, while conducting examination of goods, the goods were found to be old and used whereafter the consignment was put on hold and was not allowed clearance - Since the department has sufficient evidences to hold that picture tubes are made old and used in the form of chartered engineer's Report and confirmation thereof from the Commissioner itself, it was the burden on assessee to falsify the same - Though he produced a letter purportedly received from his supplier, intimating that old stock of tubes were inadvertently loaded, but the Customs Authority, have rightly observed it to be a strategy to cover up the actual conditions of goods and to escape the liability of misdeclaration which, otherwise, is a mandate - The assessee could not produce on record about any act of his supplier to do away the said inadvertence, nor he could bring on record as to what purpose the imported old and used picture tubes will serve other than being dumped as waste - Picture tubes being the Cathode Ray Tubes can well be categorized as hazardous waste - The assessee importer could not produce any such compliance or permission, nor could produce any license for the import of the subject goods - The goods have been opined by MoEF as hazardous e-waste, and such goods have rightly been held as prohibited goods under Section 110 of Customs Act, and as such, there seems no infirmity or illegality in ordering the absolute confiscation of said goods - Support drawn from the case of Dilip Malhotra 2017-TIOL-3235-CESTAT-MUM - As regards to penalty imposed upon assessee, fines and penalties imposed by original authorities, unless and until there is any aberrant reason to observe element of unreasonableness or arbitrariness may not be inferred with - Rather, Commissioner (A) has reduced the penalty imposed upon assessee to a great extent - There is no statutory restriction also that the penalty should not be reduced by appellate authority - No infirmity or illegality found in order of Commissioner (A), same is upheld: CESTAT - Appeal dismissed: DELHI CESTAT

MISC CASE

2018-TIOL-67-HC-KERALA-GST + Case Story

Assistant State Tax Officer Vs Indus Towers Ltd

GST - In interpreting a provision, High Court would and should be averse to speculation on facts, nonetheless, considering the ramifications of its decision, in a fledgeling statute, it is constrained to do so - When a delivery challan is issued under Rule 55, it is a mandate under sub-rule (3) of Rule 55 that there should be a declaration as specified in Rule 138 of Kerala Goods and Services Tax Rules, 2017 - fact that there was no such declaration uploaded in the site as an intimation to the Department of the transport of such goods raises a reasonable presumption of attempt to evade tax - If the conditions under the Act and Rules are not complied with, definitely Section 129 operates and confiscation would be attracted - respondents are entitled to an adjudication, but they would have to prove that, in fact, there was a declaration made under Rule 138 before the transport commenced - If they do prove that aspect, they would be absolved of the liability; otherwise, they would definitely be required to satisfy the tax and penalty as available under Section 129 of CGST Act, 2017/Kerala SGST Act, 2017 - judgment of the Single Judge vacated and the Writ appeals by the department are allowed - vehicle and the goods having been already released unconditionally, further notice shall be issued and the adjudication under sub-section (3) completed; upon which if penalty is imposed, definitely the respondents would have to satisfy the same – Writ Appeals allowed: High Court [para 20, 21, 22, 25] -Writ Appeals allowed : KERALA HIGH COURT

2018-TIOL-1378-HC-KERALA-VAT

State of Kerala Vs Pan Pacific Engineering Services (P) Ltd

Whether consideration of total contract receipts, including deduction made by works contract service recipient for supply of goods & which service provider treats as sale, is tantamount to estimation or best of judgment assessment - NO: HC

Whether a works contract service provider can claim input tax credit of tax originally paid by the service receiver at the time of purchase of goods used in the works contract service - YES: HC -Revenue's revision petition dismissed : KERALA HIGH COURT

2018-TIOL-1364-HC-MAD-VAT

Adyar Ananda Bhavan Sweets India Pvt Ltd Vs Additional Chief Secretary

Whether when assessment framed by Commercial tax Department imposing higher rate of tax & penalty on dealers stands revised/cancelled by themselves, then demand orders issued by them will also cease to exist - YES: HC - Assessee's petition allowed: MADRAS HIGH COURT

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