2018-TIOL-NEWS-219 Part 2, Dated: Monday, September 17, 2018

2018-TIOL-NEWS-219 Part 2 | Monday September 17, 2018

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	Legal Wrangle \| International Taxation \| Episode 81

CASE STORIES

I-T - Any disallowance if made, which is not because of any false claim but for failure to furnish necessary details due to some unavoidable circumstances, doesn't call for imposition of penalty: ITAT Third Member

I-T - Intervention by SETCOM's Chairperson in discussing matters pending disposal is dangerous trend & breaches trust reposed by litigants in Members of judicial bodies: HC

I-T - Cost incurred by firm for imparting foreign education to son of one of partners, who continues to work for firm after his return, is admissible business expenditure: HC

CX - In case of retrospective levy, whether interest for period before enactment of provision can be demanded: HC

DIRECT TAX


	2018-TIOL-1922-HC-MUM-IT + Case Story Raghuleela Builders Pvt Ltd Vs ITSC Whether intervention by the Chairperson of the SETCOM, by perusing records and discussing details involved in matters pending before the Members of the Commission, is a breach of privacy and trust which is reposed in the Members of judicial bodies by litigants - YES: HC Whether discussion of judicial orders and matters behind closed doors is a dangerous precedent which subverts the guarantee of justice which is provided by public hearings & open sittings - YES: HC Whether inspite of such uncalled for intervention by the SETCOM's chairman, can the High Court intervene in the matter at the risk of re-iterating the mistake made by the Chairperson, and acting on a presumption that such intervention will inevitably be adverse to the assessee - NO: HC - Assessees' writ petitions disposed of: BOMBAY HIGH COURT 2018-TIOL-1585-ITAT-AGRA-TM + Case Story Farrukhabad Investment India Ltd Vs DCIT Whether penalty u/s 271(1)(c) is imposable even if assessee successfully demonstrates that the addition so made was not as a result of concealment of income or furnishing of inaccurate particulars - NO: ITAT Whether in the backdrop of any disallowance of expenditure on the estimated basis, penalty u/s 271(1)(c) is imposable - NO: ITAT Whether any disallowance, which is not because of any false claim by the assessee, but for the reason of failure to furnish necessary details due to some unavoidable circumstances, calls for imposition of penalty - NO: ITAT Whether any expenditure incurred by the assessee which is an offence or prohibited by law, however, can be considered as a good case for making a disallowance, the same can also be taken as concealment of income or furnishing of inaccurate particulars of income for levy of penalty u/s 271(1)(c) - NO: ITAT - Assessee's appeal allowed: AGRA ITAT 2018-TIOL-1555-ITAT-MUM ACIT Vs Mahindra Gesco Developers Ltd Whether the AO is allowed to make additions on account to MAT income by way of passing a rectification order u/s 154 - NO: ITAT Whether in case of MAT matters, a penalty can be imposed u/s 271(1)(c) vide Circular no.25 of 2015 even if, the ITAT has set aside the rectification order passed by the AO - NO: ITAT - Revenue's appeal dismissed: MUMBAI ITAT 2018-TIOL-1554-ITAT-BANG ACIT Vs Model Diary Farm Whether it is a valid return even if it is filed on a holiday and hence can be revised when it is done within the period prescribed u/s 139(4) - YES: ITAT - Revenue's appeal dismissed: BANGALORE ITAT 2018-TIOL-1553-ITAT-KOL Rawmet Commodities Pvt Ltd Vs DCIT Whether addition for concealed consultancy fees is wrongly made by the AO without verifying the explanation of the assessee and the relevant documentary evidence submitted - YES: ITAT Whether Revenue's request for remand of the case for verification of those documents, which were, during assessment, placed before the AO, particularly when a period of more than 15 years has already lapsed without any fault of assessee - NO : ITAT - Assessee's appeal allowed: KOLKATA ITAT 2018-TIOL-1552-ITAT-DEL Rambagh Palace Hotels Pvt Ltd Vs DCIT Whether the Revenue is allowed to make additions based on suspicion merely because the assessee failed to produce vendor which are stated to be have existed - NO: ITAT Whether expenses incurred on account of repair and maintenance of the hotel to increase the sale ability then, such expenditure cannot be treated as capital in nature - YES: ITAT - Assessee's appeal allowed: DELHI ITAT 2018-TIOL-1551-ITAT-DEL Saxsons Biotech Pvt Ltd Vs DCIT Whether expenditure incurred for business promotion & neccesary trade practice, though incurred in cash over & above the prescribed limit, should not be entirely disallowed - YES: ITAT Whether disalllowance of partial expenses can be equated with concealment or furnishing of inaccurate particulars, for purpose of triggering penal provisions - NO: ITAT - Assessee's appeal allowed: DELHI ITAT

GST

CGST CIRCULAR

cgst_circular_65

Guidelines for Deductions and Deposits of TDS by the DDO under GST

CGST ORDER

Order 04/ 2018

Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 117(1A) of the Central Goods and Service Tax Rules, 2017 in certain cases

GST AAR CASES

2018-TIOL-150-AAR-GST

Nursery Men Co-Operative Society

GST - Applicant is a society, which is a wing of Horticulture Department of Government of Karnataka and is registered under the Co-operative Societies Act, 1957 - works of formation of parks and landscaping on the lands belonging to the Government and other Government Undertakings is entrusted to this society and they execute the works of de-weeding of the land, levelling of land, landscaping and formation of parks - applicant has sought advance ruling in respect of the following question - "Whether landscaping and gardening work for government departments like BBMP, KSRTC, etc, through works contract attracts GST from this society?"

Held: Service of maintenance of parks provided by the society to the State Government, Central Government or a Local Authority (including BBMP) or a Governmental Authority, not involving transfer of property in goods either as a component of a works contract or a composite supply is covered under entry no. 3 of the Notification No. 12/ 2017 Central Tax (Rate) and hence exempt -exemption is not available if there is any transfer of property in goods or if the service is made to persons other than State Government, Central Government or a local Authority or a Governmental Authority: AAR

- Application disposed of: AAR

2018-TIOL-149-AAR-GST

Coffee Day Global Ltd

GST - Applicant is in the business of running restaurants under the name and style of Café Coffee Day where non-alcoholic beverages and food items are served - Notification No.46/2017 dated 14.11.2017 provides that restaurants can pay GST @5% (CGST-2.5% and SGST-2.5%), provided they do not avail input tax credit of the tax paid on input goods and services - Notification No.11/2017- CTR dated 28.06.2017, at Sl.No.35, provides for levy of GST @18% (CGST-9% & SGST-9%) on supply of unclassified services and the suppliers are entitled to take input tax credit in the circumstances where they pay output tax - The Applicant contends that Notification No.46/2017-CTR dated 14.11.2017 applies in circumstances where the applicant does not avail input tax credit; that it does not prevent a restaurateur from paying tax at 18% (CGST - 9% and SGST - 9%) and availing input tax credit - application filed seeking a ruling on the aforesaid contention.

Held: Section 16(1) of CGST Act, 2017 - Classification of the services rendered by the applicant isclearly defined under Service Code (Tariff) 996331 - restaurant services provided by the applicant are squarely covered under serial number 7 of the Notification 11/2017-CTR - As the services provided by the applicant are covered under a specific heading and the Notification carves out a specific rate of tax for that heading, the same shall be applicable to the applicant - Serial number 35 would qualify for invocation only in respect of services that do not find classification elsewhere, therefore, the applicant is covered by serial number 7 and not 35 (which covers heading 9997) - right to avail input tax credit is not an absolute right and conditions and restrictions may be prescribed for its availment - applicant ' s contention that the right to input tax credit is unfettered does not hold good - Applicant is not entitled to pay the GST @ 18% with input tax credit as the services being offered by the Applicant are classified under a heading attracting GST @ 5%, without input tax credit: AAR

- Application disposed of: AAR

2018-TIOL-148-AAR-GST

Emerge Vocational Skills Pvt Ltd

GST - Applicant is a private limited company engaged in providing specified educational services in the field of Hotel Management - advance ruling is sought on the question 'Whether the services provided by the applicant in affiliation to specified universities and providing degree courses to students under related curriculums are exempt from Goods and Services Tax vide entry no. 66 of the Notification No. 12/ 2017 - Central Tax dated 28.06.2017'.

Held:

Applicant has submitted that he proposes to obtain an affiliation with a University in the State of Karnataka and shall thereafter be engaged in provision of education in affiliation with the said university in the State of Karnataka -Since the “Services provided by an educational institution to its students, faculty and staff” is exempt from tax under the Central Goods and Services Tax Act and the applicant qualifies as an educational institution insofar as those courses for which affiliation has been obtained from the University in the State of Karnataka and for which University Curriculum is prescribed and the qualifications recognized by the law for the time being in force is given after the conduct of examinations by such University, the applicant is exempted from Goods and Services Tax vide entry no. 66 of the Notification No. 12/ 2017 - Central Tax (Rate) dated 28.06.2017: AAR

- Application disposed of: AAR

2018-TIOL-147-AAR-GST

Maini Precision Products Ltd

GST - "Parts of Fuel Injection Pumps for diesel engines" are classifiable under Tariff Heading 8413 91 90 as per the Customs Tariff Act, 1975 and are covered under the entry no. 453 of Schedule III of Notification No.1/2017 - Integrated tax (Rate) dated 28.06.2017 and hence liable to tax at 18% under the Integrated Goods and Services Tax Act, 2017: AAR

- Application disposed of: AAR

2018-TIOL-146-AAR-GST

V PAC Cartons India Pvt Ltd

GST - Applicant, engaged in the manufacture of plywood pallets, plywood boxes, corrugated boxes, and paper packaging products and is registered under the Goods and Services Act, 2017 is desirous of knowing the GST rate applicable on the finished goods "Pallets and Box Pallets".

Held: Commodity "pallets and box pallets" are covered under HSN 4415 20 00 and covered under entry no. 97 of Schedule II of Notification No.01/2017- Central Tax (Rate) dated 28.06.2017 attracting CGST @6% & SGST @6% respectively: AAR

- Application disposed of: AAR

INDIRECT TAX

SERVICE TAX

2018-TIOL-2836-CESTAT-MUM

Shyam Mani Vs CCGST & CE

ST - Penalty - Period involved is 2008-2012 - During the disputed period, section 78A of the FA, 1994 not incorporated in the statute and the same was inserted by the Finance Act, 2013 w.e.f 10.05.2013 - therefore, for the offence committed during the impugned period, section 78A could not have been invoked for imposition of penalties on the employees for the offence committed by the company - identical issue decided by Tribunal in Data Seri Shahril Shamsuddin - 2016-TIOL-559-CESTAT-MUM by setting aside the penalty - insofar as imposition of penalty is concerned, order set aside and appeals allowed: CESTAT [para 4, 5]

- Appeals allowed: MUMBAI CESTAT

2018-TIOL-2835-CESTAT-DEL

Jaipur Exserviceman Welfare Cooperative Society Ltd Vs CCE

ST - The assessee is a co-operative society taxable under 'Security Agency Service' - Duty demand was raised for the relevant period u/s 65(105)(k) read with 65(68) and 65 (105) (w) of the Finance Act, 1994 - Upon appeal, the Tribunal had first reduced the duty demand to the normal period of one year - On further appeal, the High Court had remanded the matter back to the Tribunal to reconsider the whole issue as well as that of limitation.

Held: The findings on taxability of such service need no further consideration - Also the Tribunal had noted that the SCN was issued beyond time and so confirmed demand for normal period of one year - Hence such findings on limitation too warrant no interference: CESTAT (para 1,2,6)

- Appeal partly allowed: DELHI CESTAT

CENTRAL EXCISE

2018-TIOL-2838-CESTAT-AHM

Asahi Songwon Colors Ltd Vs CCE & ST

CX - The assessee company imported coal & availed Cenvat credit of 2% CVD levied in terms of Notfn No 12/2012-Cus - The Department claimed that as per the mandate of Rule 3(1)(i)(b) of CCR 2004, credit could not be claimed of Excise duty paid on goods in availment of benefit of exemption Notfn No 12/2012-CE - Hence such availment was denied.

Held: Considering the relevant portions of Rule 3 of CCR, it is seen that Cenvat credit cannot be availed of any duty paid in availment of exemption Notfn No 12/2012-CE - Rule 3 does not impose any restriction on duty paid under Customs notification & restriction only applies to indigenous goods on which the excise duty @ 2% was paid availing Notfn No 12/2012-CE - As this is not the case, the assessee is eligible for credit in respect of CVD paid under Notfn No 12/2012-Cus - Besides, Notfn No 12/2012-CE applies only to indigenuously produced coal and not imported coal as is the case here - Hence the issue stands settled against the Revenue: CESTAT (Para 1,4)

- Appeal allowed: AHMEDABAD CESTAT

2018-TIOL-2837-CESTAT-AHM

Maharshi Labels Pvt Ltd Vs CCE

CX - The assessee manufactured & sold Printed Paper Label and Printed Film Labels - Based on an intelligence input, the Revenue alleged that the assessee evaded payment of duty by clearing Printed Film Labels under hapter sub heading 49119990 which attracted nil rate of duty - Also, it was alleged that the goods were printed plastic stickers correctly classifiable under chapter sub heading 39199010 attracting 16% duty ad valorem with 2% Education Cess - Duty demands were raised with penalties being imposed - Such levies were upheld by the Commr.(A).

Held: The assessee claimed to be under belief that printed plastic labels were not dutiable in light of the Apex Court's decision in Johnson & Johnson Ltd Vs. Collector of Central Excise Mumbai - The assessee put forth correspondences with the Revenue, showing there to be no suppression of fact - However, the Commr.(A) apparently ignored them & did not even pass a speaking order - Hence the issue of limitation warrants re-consideration - However, issue regarding levy of duty is not open: CESTAT (Para 1,4)

- Case remanded: AHMEDABAD CESTAT

2018-TIOL-2834-CESTAT-BANG

Brindavan Threads Pvt Ltd Vs CCE

CX - Assessee is engaged in manufacture and sale of sewing threads under brand name of "MODITHREADS" belonging to the buyer i.e., M/s. KSPL by virtue of an agreement - As instructed by KSPL, assessee have been selling the sewing thread manufactured at factory gate to M/s. WDPL - The Department has issued a SCN to the assessee alleging that they simply raise the invoices in name of WDPL while goods are lifted directly by KSPL; WDPL raises invoices on KSPL at a higher rate; it was alleged that assessee and WDPL would be related persons within the meaning of erstwhile Section 4(4)(c)/4(3)(b) of CEA, 1944 - The only mention in SCN is about the assessee and WDPL being related and other than that it has not been shown as to how they are related - As rightly observed by Original adjudicating authority, mere fact of sharing common premises and services of employees do not make the two entities related in terms of Section 4(4)(c)/4(3)(b) of CEA, 1944 - No discussion or proof regarding any flow-back of funds or consideration from WDPL to the assessee has been brought forth - Mutuality of interest in one another is also not established - The allegation that WDPL have been put in place only with an intention to depress or suppress the value is not tenable - Department has not put forth any cogent reasoning nor any controvertible proof to show that the transaction value is liable for rejection in this case - Once there is no ground for rejection of transaction value, recourse to re-determination of the value in terms of Central Excise Valuation Rules, is not warranted - As regards to limitation, assessees were audited by departmental officers in 2000 and 2002 and there was no positive act of suppression shown to have been done by assessee with an intent to evade payment of duty - Therefore, department is not free to invoke extended period for issue of SCN - Therefore, issue is barred by limitation - Having found that the issue is not sustainable on merits, Tribunal do not intent to discuss issue of levy of penalty either on assessee or their Director: CESTAT

- Appeals allowed: BANGALORE CESTAT

CUSTOMS

INSTRUCTION

F.NO.390/Misc/116/2017-JC

Withdrawal of appeals pending before appellate fora - CBIC fixes Sept 30 as deadline

CASE LAW

2018-TIOL-2833-CESTAT-HYD

HBL Power Systems Ltd Vs CC

Cus - The assessee imported steel wires which at the time of examination, were found to not confirm to the standards laid down under Steel and Steel products (Quality Control) Order, 2015 issued under the BIS Act - Accordingly, the Additional Commissioner of Customs ordered confiscation of goods under Section 111(d) of Customs Act r/w BIS Act, 2016 and Steel and Steel products (Quality Control) order, 2015 - It is not in dispute that in view of general note 2(a) of Schedule-I of the import policy framed under FTDR Act, 1992, mandatory BIS standards prescribed for products manufactured in India also apply to imported goods - In other words, goods which do not meet the mandatory BIS requirements cannot be imported into India - Therefore, imported goods are liable for confiscation - As per Section 125 of Customs Act, whenever goods are confiscated the adjudicating authority has to give an option of redemption to the importer in all cases except in respect of prohibited goods where the adjudicating authority may or may not give the option of redemption - In this case, the adjudicating authority has given the option of redemption with an additional condition that the goods after redemption should be reexported - Now, the question which arises is whether after giving option of redemption, the adjudicating authority can also add an extra condition that the goods should be re-exported - Not only Section 125 but no Section of the Customs Act, 1962 gives any officer the power to compel anyone to import or export or re-export - In case of prohibited goods the adjudicating authority has only two options; to allow redemption on payment of fine; or to not allow redemption - The condition in O-I-O that the goods should be re-exported after redemption is set aside: CESTAT

- Appeal partly allowed: HYDERABAD CESTAT

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