2018-TIOL-NEWS-230, Dated: Monday, October 01, 2018

2018-TIOL-NEWS-230 | Monday October 01, 2018

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	Legal Wrangle \| Corporate Law \| Episode 83

CASE STORIES


	Cus - Provisional release - Non-cooperative attitude of assessee is also to be borne in mind: High Court CT - Order suffers from malice-in-facts as well as malice-in-law - exemplary costs imposed on officer for passing whimsical order: HC I-T - If rental advance is adjusted against lock-in period liabilities, such loss is to be treated as business loss.: ITAT

DIRECT TAX


	2018-TIOL-2031-HC-AHM-IT Hitech Outsourcing Services Vs CIT Whether reopening of assessment by the AO u/s 147, where principal claim of the assessee was accepted upon exercising detailed scrutiny, is mere change of opinion and thus, unsustainable - YES: HC - Assessee's writ petition allowed: GUJARAT HIGH COURT 2018-TIOL-2030-HC-AHM-IT CIT Vs AD Infracon Pvt Ltd Whether the revisionary jurisdiction of the CIT can cover the issues which are subject matter of appeal before the Appellate Authority, which are duly discussed and decided - NO: HC Whether in case of certain statutory payments which may not be allowed without actual deposit with the Revenue, the CIT is justified in invoking revisionary jurisdiction u/s 263, by merely referring to some possibility of default without collecting proof of payment - NO: HC - Revenue's appeal dismissed: GUJARAT HIGH COURT 2018-TIOL-1673-ITAT-HYD + Case Story Apollo Munich Health Insurance Company Ltd Vs DCIT Whether if rental advance is adjusted against the lock-in period liabilities, such loss is to be treated as business loss - YES: ITAT - Assessee's appeal allowed: HYDERABAD ITAT 2018-TIOL-1672-ITAT-COCHIN ACIT Vs Ooty Gate Hotel Whether if the sale transaction of a going concern involves transfer of land, building and also licences issued by local authorities, merely because the sale deed refers only to land and building for the total consideration received it cannot escape the rigour of the provisions of Sec 50B relating to 'slump sale' - YES: ITAT - Revenue’s appeal dismissed: COCHIN ITAT 2018-TIOL-1671-ITAT-MAD ACIT Vs Tractors And Farm Equipments Pvt Ltd Whether expenditure incurred towards earning dividend income which is exempt from tax, can be claimed as deduction from the taxable profit of the company - NO: ITAT - Case remanded: CHENNAI ITAT 2018-TIOL-1670-ITAT-MUM Trent Ltd Vs ADDL CIT Whether non-compete fees paid is intangible asset on which depreciation can be claimed - YES : ITAT Whether expenses incurred in connection with Employee Stock Options Scheme as per SEBI guidelines, can be claimed as revenue expenditure - YES : ITAT - Assessee's appeal allowed: MUMBAI ITAT

INDIRECT TAX

SERVICE TAX

2018-TIOL-2980-CESTAT-MAD

Precot Meridian Ltd Vs CCE & ST

ST - Assessee is engaged in manufacture of textile products - They had obtained commercial loans referred to as "External Commercial Borrowings (ECB) - From the investigations, it emerged that assessee had effected payments towards processing charges / upfront fee to certain banks for facilitating ECB - Department took the view that assessee was liable to pay service tax on said upfront fee paid by them on reverse charge basis under category of 'Banking and Other Financial Services' (BOFS) - Disputed tax liability was paid up during investigation on 14.09.2007 - However, SCN was issued only on 12.05.2008 - During this very period, the issue of taxability on such payment made to foreign service provider was mired in litigation - This confusion was finally sorted out only after the judgment of High Court of Bombay in India National Ship Owners Association 2008-TIOL-633-HC-MUM-ST on 11.12.2008 and its subsequent affirmation by Apex Court in 2009-TIOL-129-SC-ST on 14.12.2009 - In response to the query from DGCEI, assessee, as early as in June 2007 and August 2007 and thereafter, have consistently argued that upfront fee collected is not for any taxable service provided by the foreign service provider; that the service is not "Banking and Other Financial Service" under Section 65 (12) of the Act and that upfront fee is also not "interest on loans" - Viewed in this context, assessee cannot be charged with having suppressed information or having indulged in misstatement or fraud with intent to evade payment of tax liability - On the other hand, even during investigation stage and before issue of SCN, assessee have paid up the tax liability on 28.11.2007 - Extended period of limitation cannot be invoked - The ingredients required for invoking extended period of limitation are not present - Assessee succeeds on the plea of limitation: CESTAT

- Appeal allowed: CHENNAI CESTAT

2018-TIOL-2979-CESTAT-AHM

Ultra Tech Transmission Vs CCE & ST

ST - Whether the assessee is entitled for CENVAT Credit in respect of inputs used for construction of factory shed, building or lying of foundation or making of structures for support of capital goods used for providing outward service of Erection, Commissioning and Installation - The entire controversy revolves around the Notfn 16/2009-CE(NT) whereby in the definition of inputs under explanation to the goods such as Cement, M S Angles, Channels, TMT bars and TMT Rods used for construction of factory shed building or laying of foundation or making of structures for support of capital goods were excluded - It is clear that explanation is exclusively in respect of manufacturer for the reason that explanation was provided in respect of the goods such as Cement, Angles, MS Channels, TMT Bars & Rods etc only when it is used for construction of factory shed, building or laying of foundation or making of structure for support of capital goods - The use of factory shed is very clear that it is meant for manufacturer and not for service provider - Therefore, by taking inference form the aforesaid explanation credit in respect of the inputs which is undisputedly used for providing output service namely, Erection Commissioning Installation Credit cannot be denied - Accordingly, the exclusion made under explanation to definition of input service provided under Rule 2 (k) of CCR, 2004 does not help to the Revenue - Impugned order is set aside: CESTAT

- Appeal allowed: GUJARAT HIGH COURT

2018-TIOL-2978-CESTAT-DEL

CCE Vs Simplex Infrastructure Ltd

ST - The assessee is engaged in construction activities - It entered into agreement with another entity for construction of a cement plant - This entity supplied some raw materials to the assessee for construction of factory shed, building or laying of foundation or making of structures for support of capital goods, - The assessee included the value of free supply materials in the assessable value for computing the value of services for payment of Service - The Department took a view that assessee availed ineligible Cenvat credit in respect of inputs used in providing output services - Duty demand was raised - However, during proceedings an amendment to Rule 2(k) of CCR came to be inserted, wherein the subject inputs were excluded from the scope of inputs vide above mentioned Notification No. 16/2009 CE(NT) - The Authority held that the Notification is prospective in nature and cannot be given retrospective effect and dropped the demand - Hence, the present appeal by Revenue.

Held - Going by the ratio laid down by various HC in the case of Mundra Ports & SEZ Ltd vs. CCE, Sangam Spinners Ltd vs. UOI and others it can be concluded that amendment to Rule 2(k) vide Notification No. 16/2009CE(NT) is only prospective and same cannot be made retrospective - Hence, the order under challenge is upheld : CESTAT (para 1, 2, 6)

- Revenue’s appeal dismissed: DELHI CESTAT

CENTRAL EXCISE

2018-TIOL-2977-CESTAT-DEL

CGST & CE Vs Continental Engines Ltd

CX - The assessee is a 100% EoU engaged in manufacture & export of Automotive components - It procured 'Casting Articles' from a sister concern which is a DTA unit - It paid Excise duty on such articles & availed credit of such duty paid - It later claimed refund of Cenvat credit u/r 5 of CCR 2004 in respect of goods exported - Such claim was rejected on grounds that the assessee was not obliged to pay Excise duty on goods procured from DTA unit - Hence no credit could be availed of Excise duty paid on inputs or capital goods on which exemption is available under Notfn No 22/2003 - It was also held by the Department that the provisions of Section 51(1A) of the CEA 1944 were applicable to the case & that they prevailed over the provisions of Circular No 799/32/2004-CX dated 23.09.2004 - The Commr.(A) reversed such findings.

Held - The issue stands settled in the assessee's favor in the assessee's own case, wherein the High Court held that the 100% EoU is entitled to take cenvat credit on goods/inputs procured in the industry - Also when they were not in a position to utilise the same, they are entitled for benefit of refund u/r 5 of CCR 2004 - Hence the O-i-A in question warrants no interference: CESTAT (Para 2,6,7,8)

- Appeal dismissed: DELHI CESTAT

2018-TIOL-2976-CESTAT-DEL

Ultra Tech Cement Ltd Unit Aditya Cement Works Vs CE AND ST

CX - A case of undervaluation was booked against M/s. SECL for non-inclusion of Royalty charges/Stowing Excise duty, Paryavaran Upkar, Vikas upkar, forest fee, entry tax etc. and demand was confirmed (Royalty charge) under the erstwhile Sections 11A and 11A(5) of CEA, 1944 - Although M/s. SECL paid the differential duty but passed on the Cenvat Credit by issuing supplementary invoices - The assessee availed and utilized the Cenvat Credit during the period September, 2013 on the strength of supplementary invoices issued by M/s SECL - Since the same falls under the exclusion clause of Rule 9(1)(b) of CCR, 2004, therefore, for its recovery the department issued SCN - It is an admitted position that demand raised by department against M/s. SECL is under challenge before the Supreme Court and therefore the Cenvat credit can be availed by manufacturer on the strength of supplementary invoice since such amount of duty cannot be said to be paid on account of any non-levy or short levy by reason of fraud, collusion or any willful mis-statement or suppression of facts or contravention of any provision of the Central Excise Act/Rules with intent to evade payment of duty and a similar view has been taken by Tribunal on this issue consistently in favour of assessee in a number of decisions - In two cases of assessee, in identical set of facts involving the same coal company i.e. M/s. SECL, this Tribunal has allowed the Cenvat Credit holding that there cannot be suppression of fact when the issue of liability of payment of Excise duty at the end of the coal companies was a debatable issue which is pending adjudication before the Supreme Court - Therefore, assessee is entitled to take Cenvat Credit on the supplementary invoices in question: CESTAT

- Appeal allowed: DELHI CESTAT

2018-TIOL-2975-CESTAT-MUM

CCE Vs Thermax Ltd

CX - Respondent had procured certain goods and the same were cleared along with other manufactured goods - allegation of Revenue is that the same amounts to trading and being an exempt service, rule 6 of the CCR, 2004 is required to be followed and appropriate amounts are required to be discharged - appeal to CESTAT.

Held: Respondent had procured duty paid inputs and after availing CENVAT credit had cleared the same on a sale value which was higher than the purchase price - CCR, 2004 provides for clearance of inputs as such subject to debit of duty that was availed as credit at the time of receipt of goods - there is no scope for fastening additional liability on the assessee as the CCR, 2004 does not bar such clearances at a price higher than the purchase cost as long as credit taken initially does not continue in the books - Appeal of Revenue dismissed: CESTAT [para 4, 5]

- Appeal dismissed: MUMBAI CESTAT

CUSTOMS

2018-TIOL-2038-HC-MAD-CUS + Case Story

CC Vs Novel Impex

Cus - Provisional release - Non-cooperative attitude of the assessee is also to be borne in mind so that ultimately when the adjudication is completed, the amount of duty if determined, should not become irrecoverable - Conditions for provisional release altered - Revenue appeal partly allowed: High Court [para 34, 36]

- Appeal partly allowed : MADRAS HIGH COURT

2018-TIOL-2974-CESTAT-AHM

Reliance Industries Ltd Vs CC

Cus - The first appellant chartered a vessel, with the second appellant being agent for the vessel and the third appellant is the captain of the vessel - The first appellant had directed the third appellant to proceed to Bahrain after completing discharge at Hazira port - Certificate was sought from the Customs Department to reverse such vessel to foreign run from coastal - Later, the first appellant directed that the vessel be brought to Sikka - The second appellant approached the officer concerned and sought requested conversion of vessel from foreign run to coastal run - It received duty free bunker supplied by an SEZ unit - Upon inventory by the Preventive Unit, a bill of entry was filed in respect of bunkers which were used during the voyage from Hazira to Sikka and duty, provisionally assessed, was paid - Thereafter, the Department alleged that the assessee was not entitled to receive such duty free bunker - Hence duty demands were raised with interest & penalties were imposed on the three appellants.

Held - Considering the decision of the Gujarat High Court in Jaisu Shipping Company wherein it was noted that the status of the vessel whether coastal or foreign run is irrelevant at the time when the duty free goods are received - It is only required that the duty free goods be consumed when the foreign vessel is on foreign run - In the present case there is no evidence showing that such bunker was used while the vessel was on coastal run - Hence no contravention of the provisions of Sections 86 & 87 is made out - Hence the demands and penalties are set aside: CESTAT (Para 2,2.1,6)

- Appeals allowed: AHMEDABAD CESTAT

2018-TIOL-2973-CESTAT-BANG

East India Packaging Pvt Ltd Vs CC

Cus - Assessee is engaged in manufacture of Expandable Polystyrene Foam products and Wooden Pallets of various dimensions/sizes and products are used as packing materials and are mainly cleared by them to Electronic Hardware Technology Unit (EHTP) and the goods cleared to EHTP in terms of provisions of Chapter 8 of FTP 2004-09/2009-14 - A SCN was issued to assessee on the ground that they have not fulfilled export obligation against Advance Authorization issued by JDGFT, Bangalore - Assessee has completed the export obligation which has been certified in letter issued by DGFT - The only ground on which demand was confirmed was non-submission of EODC and the same has now been submitted by assessee - In view of redemption letter, impugned order is not sustainable in law and therefore the same is set aside: CESTAT

- Appeal allowed: BANGALORE CESTAT

MISC CASE

2018-TIOL-2037-HC-KAR-CT + Case Story

Kalyani Motors Pvt Ltd Vs DCCT

Whether reassessment done by the Commercial tax Department on the basis of records seized by the Enforcement Wing, without furnishing copies of such record to the dealer to file his objections, merits rejection - YES: HC

- Petition allowed : KARNATAKA HIGH COURT

2018-TIOL-2036-HC-MAD-CT

Mohan Chemical Industries Vs Assistant Commissioner (CT)-I(FAC)

- Case remanded : MADRAS HIGH COURT

2018-TIOL-2035-HC-MAD-VAT

Karur Kcp Packagings Ltd Vs Assistant Commissioner (CT)

Whether apparatus or accessories, which is utilised in manufacturing process, would fall under the definition of 'capital goods' and therefore, will be eligible for claiming benefit of Input Tax Credit available u/s 19(3)(a) - YES: HC

- Assessee's writ petition allowed : MADRAS HIGH COURT

2018-TIOL-2032-HC-CHHATTISGARH-CT

Parle Agro Pvt Ltd Vs CTO

Whether when "frooti" is already classified as non-alcoholic drink and beverage within Entry 14 of Schedule II of the Chhattisgarh Entry Tax Act, 1976, which is to be taxed at the rate of 2%, the same cannot be fall under residual entry as product of fruit - YES: HC

- Assessee's writ petition dismissed: CHATTISGARH HIGH COURT

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