2018-TIOL-NEWS-220, Dated: Tuesday, September 18, 2018

2018-TIOL-NEWS-220| Tuesday September 18, 2018

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	Legal Wrangle \| International Taxation \| Episode 81

CASE STORIES

I-T - Allotment of shares of company which succeeds to business of partnership firm has to be complied before end of relevant previous year in which succession of business took place: HC

Cus - Rule is to prefer an appeal and entertaining a writ is only an exception: High Court

DIRECT TAX


	2018-TIOL-1921-HC-KAR-IT + Case Story CIT Vs Prakash Electric Company Whether the provisions of Section 47(xiii)(b) envisage reasonable time limit for allotment of shares in exchange of capital accounts balances of the partners of firm on or before the date of succession of partnership firm by the limited company - YES: HC Whether non-suitable increase in authorised share capital of company is no excuse to delay such process of allotment of shares of the company in favour of the erstwhile partners to an unreasonably long period of more than three years - YES: HC - Revenue's appeal allowed: KARNATAKA HIGH COURT 2018-TIOL-1920-HC-MAD-IT International Institute of Bio Technology and Toxicology Vs ACIT Whether in view of ITAT's decision in favour of the assessee in a different case regarding entitlement towards exemption u/s 10(21), pre-condition imposed by the AO for payment of 20% of disputed demand for granting stay during the pendency of appeal is justified - NO: HC Whether even though the Revenue has decided to challenge such an order of the ITAT in the High Court, the same will remain in force and the assessee is entitled for seeking relief by relying that decision - YES: HC - Assessee's writ petition allowed: MADRAS HIGH COURT 2018-TIOL-1560-ITAT-MUM Lodha Builders Pvt Ltd Vs ACIT Whether in the absence of exempt income in the relevant year, no disallowance u/s 14A is warranted - YES : ITAT Whether when on interest paid by the assessee, the payee has already paid the tax due, no disallowance for non-deduction of TDS is to be made by the AO in view of the second proviso to section 40(a)(ia) of Act - YES : ITAT - Case Remanded: MUMBAI ITAT 2018-TIOL-1559-ITAT-MUM UB Ostan India Pvt Ltd Vs ITO Whether the person who is the Director of a company on the date of filing of return, is only eligible to sign & verify the return on behalf of a company - YES: ITAT Whether defiance of the provision of Section 140 r/w Rule 45(2) while preferring appeal before the appropriate forum, renders the very appeal as not maintenable - YES: ITAT - Assessee's appeal dismissed: MUMBAI ITAT 2018-TIOL-1558-ITAT-MAD Thriveni Earthmovers Pvt Ltd Vs ACIT Whether allowance granted by the AO to the assessee without properly verifying his claim during earlier years, will render the very assessment order as erroneous - YES: ITAT Whether the Tribunal although having inherent powers to grant stay of proceedings pursuant to revisional order u/s 263, should restrict themselves from using such power sparingly - YES: ITAT - Assessee's stay petition dismissed: CHENNAI ITAT 2018-TIOL-1557-ITAT-HYD Giri Polisetty Vs ITO Whether non-disclosure of business transactions in the original return, is sufficient reason for attracting proviso to Section 147, and hence calls for reassessment - YES: ITAT Whether information furnished before the Appellate authority without undergoing verification through AO, merits readjudication - YES: ITAT - Case remanded: HYDERABAD ITAT 2018-TIOL-1556-ITAT-CHD Raj Industries Vs DCIT Whether a unit established in the specified States, after incorporation under Sec. 80IC, is entitled to claim 100% deduction for 10 AYs, even without carrying out substantial expansion - YES: ITAT - Assessee's appeal allowed: CHANDIGARH ITAT

GST CASE

2018-TIOL-122-HC-MAD-GST

V Vasanthakumar Vs UoI

GST - The petitioner is challenging the provisions of Section 109 & 110 of the CGST Act & the TNGST Act - Such provisions constitute the Appellate Tribunal and also lay down the qualifications, conditions of appointment & service conditions of the members - The petitioner alleged that such provisions contravened the doctrine of separation of powers and ran contrary to the independence of the judiciary - The petitioner was particularly aggrieved by the fact that the Technical members in the Tribunals outnumbered the Judicial members - The petitioner claimed that members of quasi-judicial bodies must have judicial expertise & legal training - The petitioner also claimed that Technical Members only played supporting roles and could not assume judicial functions - The petitioner also claimed that the eligibility to be a Judicial Member excluded advocates - He claimed that such provision was highly unfair as advocates by training were inculcated with the requisite qualities to discharge functions of Judicial members.

Held - It prima facie appears that the constitution of the Appellate Tribunal runs contrary to the decision in Union of India vs. R.Gandhi - Hence notice be issued to the parties - As the vires of Sections 109 & 110 of the CGST & TNGST Act have been challenged, notice be also issued to the Attorney General of India: HC (Para 1,2,3,7,8,12,13,14)

- Notice issued : MADRAS HIGH COURT

INDIRECT TAX

SERVICE TAX

2018-TIOL-2845-CESTAT-MAD

Sakthi Sugars Ltd Vs CC & ST

ST - The assessee is engaged in the manufacture of Sugar and molasses are also registered with Department under GTA Services - On audit, it was noticed that assessee did not discharge the service tax under GTA service on the freight paid and this entry has not been disclosed in the returns for relevant AY - The Revenue took a view that assessee suppressed the taxable value with an intent to evade payment of service tax - Duty demand was raised - The original authority confirmed the demand along with interest & penalties which was upheld by Commr. (A) - Hence, the present appeal.

Held: The assessee was under bona fide belief that exemption of the notification would be available if the gross amount charged on consignments transported in a goods carriage does not exceed Rs. 1,500/- - Moreover, no intention to evade payment of duty has been proven against the assessee, therefore, the penalty is deleted - Hence, the order challenged is modified : CESTAT (para 1, 5, 6)

- Appeal Allowed: CHENNAI CESTAT

2018-TIOL-2844-CESTAT-DEL

HPCL Mittal Energy Ltd Vs CCE

ST - The assessee was registered under central excise department since 2003 and under service tax since 2008 and was filing returns regularly - The assessee also incorporated a subsidiary HPCL Mittal Pipeline Ltd. in January, 2008 to set up the pipeline for transporting crude oil to the refinery - They availed extra commercial borrowing through State Bank of India, London and imported various technical engineering services through overseas service providers for which the payments were made in foreign exchange - The assessee also incurred various expenses for its subsidiary which were required by subsidiary during laying of pipelines and claimed reimbursement of same without any mark up - On the basis of scrutiny of balance sheet, assessee was asked to make payment of service tax on imported services under reverse charge mechanism on expenses reimbursed from the subsidiary and further to reverse the credit taken by assessee in certain cases - The assessee reversed the credit and deposited the service tax alongwith interest on imported services under reverse charge mechanism and service tax along with interest on expenses reimbursed from the subsidiary and intimated the same to the department and requested not to initiate any penal action - Thereafter a SCN was issued under proviso to section 73(1) of FA, 1994 alleging suppression of facts with intent to evade payment of service tax - The assessee is contesting only penalty imposed on them under section 78 of FA, 1994 - Expenditure cost cannot be considered the amount charged by service provider for the services provided by them, therefore, on the amount reimbursed expenses from the subsidiary is not taxable - Moreover, whatever amount has to be paid by assessee under reverse charge mechanism on import of services is available as input service credit to the assessee, therefore, it is revenue neutrality situation - To allege suppression with intent to evade payment of service tax, there should be positive act on the part of assesse with intent to evade payment of service tax - The Revenue has not given any positive evidence to evade payment of service tax - This is a situation of revenue neutrality and the service tax is not payable on reimbursement of expenses - Therefore, penalty is not imposable on assessee under section 78 of FA, 1994 when the proceedings come to an end in section 73(3) of FA, 1994 - Impugned order quo imposing penalty on assessee set aside: CESTAT

- Appeal allowed: DELHI CESTAT

CENTRAL EXCISE

2018-TIOL-2843-CESTAT-DEL

Mangal Electrical Industries Pvt Ltd Vs CCE & ST

CX - The assessee company is engaged in manufacture of Transformer Tank & it availed Cenvat credit on inputs including an input called MS Bar - Such availment was challenged on allegations that such goods were not utilized in the manufacture of final products - Duty demands were raised for recovery with interest & imposition of penalties.

Held: From the dimension of the products procured as inputs by the assessee, MS Bars fit into the classification CETH 7214 -Besides, the invoices accompanying the inputs describe the product under MS Bars & the CETH indicated is 7214 - The Revenue denied the credit only on the presumption that 'MS Bars' cannot be used in the manufacture without any documentary evidence - Hence the credit cannot be denied and the demands are set aside: CESTAT (Para 1,7,8)

- Appeal allowed: DELHI CESTAT

2018-TIOL-2842-CESTAT-DEL

H And R Johnson India Vs CCE

CX - The assessee is engaged in manufacture of Ceramic Tiles - The Head Office of assessee at Mumbai is registered with department as an ISD - Assessee availed Cenvat credit on input services and they had considerable turnover and income in trading activities - It is also admitted that the services on which credit have been availed are partly relatable to trading activities also - They should not have availed any credit on input services when such services are attributable to an activity which is not at all taxable and hence, not covered by the scope of CCR, 2004 - A deemed fiction is apparently created by naming 'trading' as an exempted service by way of explanation in Rule 2 of Cenvat Credit Rule w.e.f. 1.4.2011 - Prior 1.4.2011, there was no scope at all even to consider the trading activity to be covered under credit scheme - After explanation, the position has become more clear to the effect that the trading activity can be considered as an exempted service for the operation of scheme under Cenvat Credit Rules - Accordingly, assessee should not have availed credit for common input services which are used for taxable output service as well as trading activity - The credit availed on services which are directly attributable to trading activity is ineligible to be availed as input service credit under Rule 2(l) of CCR, 2004 - Commissioner (A) is justified in holding that this explanation is clarificatory in nature and has retrospective applicability and therefore the explanation inserted vide Notfn 3/2011 has retrospective effect - Impugned order upheld on this point also - On the question of extended period of limitation, there is a clear finding that assessee had not disclosed the availment of input service credit on commission in respect of trading activities and it came to the knowledge of Department only on verification of documents and therefore the plea of limitation was rightly rejected by Authorities below - No justifiable reason found to interfere with impugned order: CESTAT

- Appeal dismissed: DELHI CESTAT

2018-TIOL-2841-CESTAT-CHD

Maruti Suzuki India Ltd Vs CCE

CX - Assessee is manufacturer of Motor Vehicles - Two SCNs were issued to them for availment of inadmissible Cenvat Credit on Mandap Keeper Service and Rent-a-cab service at their Manesar and Gurgaon plants - Demand confirmed along with interest - Equivalent penalties were also imposed on assessee under Section 11AC of CEA, 1944 - In assessee's own case 2016-TIOL-3221-HC-P&H-CX , the issue came up before High Court of Punjab and Haryana, wherein High Court has held in favour of assessee - Period in SCN dated 18.04.12 is mentioned as April 2011 to March 2012 - An amendment was made in definition of input service in year 2011 which was effective from 01.04.2011 - By way of, the said amendment, Rent-a-cab service has been excluded from the definition of input services - Assessee has placed on record some of the invoices to show that Rent-a-Cab services were provided to them before 01.04.2011 - Revenue has neither rebutted nor has been able to show anything contrary to categorical submission made by assessee that the provision of Rent-a-Cab services in SCN was completed before 01.04.2011 - Since the entire demand of credit in SCN in respect of Rent-a-cab service is for the service received by them before 01.04.2011, the credit is available to assessee - In view of the said judgment in assessee's own case, order of the adjudicating authority is not sustainable and is accordingly set aside: CESTAT

- Appeals allowed: CHANDIGARH CESTAT

2018-TIOL-2840-CESTAT-MAD

Pepsico India Holding Pvt Ltd Vs CCE & ST

CX - The assessee is a manufacturer of Aerated Water, Beverages and Fruit pulp or Fruit juice based drinks - As regards to denial of Cenvat credit for the reason that the original invoices are not produced, a s submitted assessee that he will furnish all the original invoices to the satisfaction of lower authority, matter on this issue is required to be re-adjudicated by adjudicating authority and hence, the appeal is remanded for verification of balance invoices, to his satisfaction - The second issue agitated by assessee is that the Cenvat credit in some cases have been denied on the basis that some of the invoices did not contain Service tax Registration number of the service provider - Assessee submitted that he was not put on notice i.e., this point was never alleged in SCN and, therefore, the impugned order has travelled beyond the scope of SCN - The denial is thus not as per law and the Cenvat credit needs to be allowed in favour of assessee - The denial therefore is set aside - With regard to the credit availed on civil works and rent a cab service, assessee submits that they had already reversed the credit suo moto and has also paid the interest which fact was not disputed by revenue - It is argued that the said services pertain to general repair and maintenance carried out in a plant premises which did not involve civil works - However, this factual aspect requires verification and therefore for this limited issue of verification, this ground is remanded back to the file of adjudicating authority - There is no deliberate breach of law and that it was a bonafide act because of some inadvertent mistakes - Therefore, no interest and penalty could be levied on assessee: CESTAT

- Appeals partly allowed: CHENNAI CESTAT

CUSTOMS

NOTIFICATIONS/CIRCULAR

dgft18not033

Import Policy of Long Pepper revised from 'Prohibited' to 'Free' - MIP is not applicable on Long Pepper

ctariff18_062

Implementation of retaliatory duties against US imports further delayed till November 2, 2018

cuscir32-2018

Export to Nepal or Bangladesh - transshipment of consignments sealed under ECTS at ICDs/CFSs - facility expanded to more locations

CASE LAWS

2018-TIOL-1923-HC-MAD-CUS + Case Story

AK Paper Products Pvt Ltd Vs Chairman

Cus - Rule is to prefer an appeal and entertaining a writ is only an exception - Court cannot entertain the writ petitions in a routine manner by waiving the remedy of appeal provided under the statute -Petition disposed of while granting liberty to the petitioner to approach the Appellate Tribunal u/s 129A of the Customs Act, 1962 for the purpose of redressing his grievances in the manner known to law: High Court [para 7 to 15]

- Petition disposed of : MADRAS HIGH COURT

2018-TIOL-2839-CESTAT-AHM

Saurashtra Cement Ltd Vs CC

Cus - Assessee had imported total 49874.000 MTs of 'Steam (Non-Coking) Coal' out of which 46933.950 MTs were cleared availing duty exemption under DFIA Scheme - There is a shortage of 997.340 MT of coal - The assessee claimed the exemption Notification with the condition that the entire goods imported shall be used in manufacture of final product in terms of Notfn 40/2006-Cus - The only defense of assessee is that though there is shortage of being a small quantity which is due to transit loss the exemption in respect of such shortage could not be denied - The Notfn prescribes various condition unlike in the Notfn 13/1997-Cus - As per conditions, the importer is duty bound to execute a bond binding himself to use the imported materials in his factory and not only that, he has to submit a Certificate of jurisdictional Excise Officer regarding enduse of the goods - Since the assessee could not use quantity of 997.340 MTs, the Jurisdictional Officer also did not issue enduse Certificate - All these conditions are mandatory in case of Notfn 40/2006-Cus - In failure to comply with this substantive condition, assessee is not eligible for exemption Notfn - Therefore, there is a clear violation of the condition of the Notfn 40/2006-Cus, therefore, the assessee is not entitled for the benefit of said Notfn - Accordingly, the demand confirmed in respect of the short receipt quantity is sustainable: CESTAT

- Appeals dismissed: AHMEDABAD CESTAT

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