2018-TIOL-NEWS-252 Part 2, Dated: Monday, October 29, 2018

2018-TIOL-NEWS-252 Part 2 | Monday October 29, 2018

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CASE STORIES


	I-T - Power of revision u/s 263 is not contingent upon service of show cause notice to assessee: HC I-T - When demand is under dispute and is subject to appellate proceedings, it cannot be enforced upon assessee: HC I-T - Re-investment of capital gains in Commercial-cum-residential building is also eligible for deduction u/s 54F but only for residential portion: ITAT CX - CSR activity can be considered as Input service since included within definition of 'activities relating to business': CESTAT

DIRECT TAX


	DRAFT NOTIFICATION F No 370142/14/2018-TPL Amendment of Rules 2C, 2CA and 11 AA and Form Nos lOG, 56 and 56G of the Income-tax Rules, 1962-draff notification for inputs from the stakeholders and the general public CASE LAWS 2018-TIOL-392-SC-IT Sundaram Finance Ltd Vs DCIT Having heard the parties, the Supreme Court condoned the delay and dismisses the SLP, thus concurring with the opinion of High Court on the issue of penal consequences, where the taxpayer has concealed the material facts till its discovery opun search proceedings. - Assessee's SLP dismissed: SUPREME COURT OF INDIA 2018-TIOL-394-SC-IT CIT Vs Pragathi Gramina Bank Having heard the party, the Supreme Court condones the delay and dismisses the SLP, thus concurring with the opinion of High Court on the issue of additions of bad debts without establishing unreasonableness of provisions written back. - Revenue's SLP dismissed: SUPREME COURT OF INDIA 2018-TIOL-393-SC-IT DCIT Vs Marwadi Shares And Finance Ltd Having heard the parties, the Supreme Court condones the delay and issued notices to respective parties directing their appearances for further hearing on the issue of validity of simultaneous fresh notices of reopening issued one after another, when the former one was neither withdrawn nor concluded. - Notice issued: SUPREME COURT OF INDIA 2018-TIOL-2277-HC-MAD-IT Spic Jel Engineering Construction Co Ltd Vs ACIT Whether Section 80HHC is a beneficial legislation seeking to incentivize growth & development & so must be interpreted in a liberal manner in favor of the beneficiaries - YES: HC Whether therefore, a narrow interpretation be adopted by referring to the dictionary meaning of certain words, so as to defeat claims for deduction on technicalities - NO: HC - Assessee's appeal allowed: MADRAS HIGH COURT 2018-TIOL-1969-ITAT-DEL Maruti Suzuki India Ltd Vs ADDL CIT Whether statutory duty paid directly to custom authorities and not what has been agreed to be paid on behalf of importers under an agreement, are allowable u/s 43B - YES: ITAT Whether when royalty payment has been treated as revenue expenditure, then R&D cess which is a part & parcel of such royalty, is also allowable as revenue expenses - YES: ITAT Whether excise duty expenses can be disallowed, when the shortage of stock of raw-material and minor discrepancy was the result of accounting error due to use of large quantity of inputs procured from several suppliers - NO: ITAT Whether expenditure scientifically incurred on account of 'foreseen price index', so as to ensure uninterrupted supply of components from the manufacturers even when their cost is increased, can be construed as provisional/contingent liability - NO: ITAT Whether expenditure incurred in relation to sharing of resources and providing financial assistance to subsidiaries in order of maximize profits, are allowable business expenditure - YES: ITAT Whether nexus of CSR expenses with commercial expediency need not be doubted, merely because the profits/end results are not visible immediately - YES: ITAT Whether club expenditure incurred in the course of business without any involvement of personal benefit, merits acceptance as revenue expenditure - YES: ITAT Whether the manner of end use of funds by the enterpreneuer to liquidate his costs incurred in the expansion activity, is relevant for purpose of deciding true nature of sales tax subsidy awarded by the Government - NO: ITAT Whether subsidy given to businessman post accomplishment of the project or expansion there, without any obligation to utilize the same only for repayment of term loans undertaken by him for setting up new units/expansion of existing business, is taxable as revenue receipt - YES: ITAT Whether interest u/s 234C is required to be calculated on the basis of returned income and not on the basis of assessed income - YES: ITAT - Case remanded: DELHI ITAT 2018-TIOL-1955-ITAT-AHM Kar Agro Products LLP Vs ITO Whether it is necessary to make a reference to the DVO in order to ascertain the fair market value to work out capital gains assessable to tax - YES: ITAT - Assessee's appeal partly allowed: AHMEDABAD ITAT 2018-TIOL-1954-ITAT-JAIPUR GB Impex Vs ITO Whether when during the original assessment, despite disclosure of relevant information regarding purchases, if the AO fails to conduct a proper enquiry, then based on the subsequent information the AO cannot reopen and review its order to remove the defect, after the expiry of 4 years - YES: ITAT - Assessee's appeal allowed: JAIPUR ITAT 2018-TIOL-1953-ITAT-DEL Shree Bankey Bihari Educational Society Vs ADD CIT Whether when the source of donation received and use of donation for charitable purposes is established through evidences and confirmation letter, no addition for unexplained cash credit u/s 68 is called for - YES : ITAT - Assessee's appeal allowed: DELHI ITAT 2018-TIOL-1952-ITAT-DEL Psychotropics Leasing And Finance Pvt Ltd Vs ITO Whether addition u/s 68 made on account of unexplained share premium based on incomplete enquiries and in absence of any cogent material is not sustainable - YES : ITAT - Assessee's appeal allowed: DELHI ITAT 2018-TIOL-1951-ITAT-DEL Jyoti Engineering Works Vs ITO Whether initiation of reassessment can be held invalid as AO proceeded to make opinion on the basis of borrowed reasons - YES : ITAT - Assessee's appeal allowed: DELHI ITAT 2018-TIOL-1950-ITAT-DEL Subhash Mehta Vs DDIT Whether if FDR and accrued interest thereon is already taxed in previous year the same can't be taxed again in relevant year - YES : ITAT - Case Remanded: DELHI ITAT

INDIRECT TAX

SERVICE TAX

2018-TIOL-3264-CESTAT-HYD

Alam Printers Vs CCCE AND ST

ST - The assessee is a partnership firm and manufactured "Printed Slides" on job work basis for M/s ITC Ltd and M/s VST Ltd. - They had cleared goods on payment of duty on provisional basis because the full details required for determining assessable value were not available at the time of clearance of goods - The department noticed that assessee had not included the cost of corrugated fibre cartons (CFCs) and gum tapes which were used for packing their material, while submitting the data for finalization of assessments - A SCN was issued to assessee - For subsequent periods they have been including value of these two items as well - Had the assessee provided this data at the time of finalization of provisional assessment, the differential duty paid in excess would have been lower than what was indicated above - Therefore, there is no denial that there was short payment on this account while there was excess payment overall during the relevant period - On the question of limitation, the assessee has not disclosed full facts and had suppressed the value of these two items in the data provided to the department - However, the assessee has already paid duty in excess of proposed demand - Therefore, demand needs to be set off against the excess duty paid, as done by lower authority - As far as penalty under Sec.11AC is concerned, the net effect of the finalization of the assessment after taking into consideration the value of CFCs and gum tapes would be that the assessee had still paid duty in excess - Therefore, there is no scope for imposing penalty under Sec.11AC because the net differential duty would be negative - Consequently, the penalty is set aside - The demand is confirmed: CESTAT

- Appeal partly allowed: HYDERABAD CESTAT

2018-TIOL-3263-CESTAT-ALL

Abhitech Developers Pvt Ltd Vs CCE

ST - The assessee company provided Renting of Immovable Property Services during the period of dispute - It received Interest-free deposits from service providers & paid service tax on the rent received - The Revenue opined that the assessee enjoyed interest-free deposits & so proposed to include in assessable value the notional interest earned on such deposits - Duty demand was raised u/s 73(1) if the Finance Act 1994 with equivalent penalty.

Held: The issue at hand is no longer res integra and stands settled by the Tribunal in Murli Realtors Pvt. Ltd. vs. Commissioner of Central Excise, Pune-III wherein it was held that there is no proviso of law to decide the rate of interest that should be taken into consideration and also there is no provision of law to add notional interest on the interest free security deposit to the rent received by the service provider for the purpose of levy of service tax - Hence the demands are set aside: CESTAT (Para 2,5)

- Assessee's appeal allowed: ALLAHABAD CESTAT

CENTRAL EXCISE

2018-TIOL-3262-CESTAT-ALL

Deepak Hinges Pvt Ltd Vs CC & CE

CX - The assessee company manufactures building hardware such as butt hinges, piano hinges, cut hinges, hinges & gauge, hook & band & boards - It either exports the goods using Form H or else clears them in the domestic market after availing SSI exemption - The assessee's factory premises were searched - Later the Department recovered some private records from the premises of a third party, whereupon it alleged that the assessee clandestinely manufactured & cleared some quantity of goods so as to claim eligibility for SSI exemption - The Department also took statements from some persons and then went on to raise duty demands with interest & also imposed penalties - The Department further alleged that all the appellants herein were front companies owned by one person, and that their purpose was to bifurcate total clearances so as to avail SSI exemption.

Held: The Panchnama does not describe the documents recovered or mention who found them & where - It does not clarify whether these documents were recovered in a manner so as to belay any possibility of their being tampered with - The SCN too does not mention any pachnama proceedings - Besides, the assessee pointed out several infirmities in the statements relied on to raise the duty demanded - The assessee pointed out how some of the depositors were made to affirm documents which were far too voluminous for them to peruse - Charges of clandestine removal are very serious and must be proved using sufficient evidence - Quantification of demand cannot be dependant upon statements or be based on assumption & presumption - Besides, private records can also not be relied on, more so if their authenticity is seriously doubted - Moreover, all the appellants are entitled for SSI benefit & so there is no need to maintain statutory records - In that case, the charges of goods being found short or in excess are unsustainable - Importantly, the assessee was denied chance to cross-examine the witnesses whose statements were relied on by the Department - Hence the duty demands, interest, redemption fine & penalties must be set aside: CESTAT (Para 1-5,11-20)

- Assessees' appeals allowed: ALLAHABAD CESTAT

2018-TIOL-3261-CESTAT-MAD

Drill Jig Bushing Company Madras Pvt Ltd Vs CGST & CE

CX - Assessee was having factory premises at Industrial Estate, Ambattur in Door No. 44 - They later obtained further premises at Door No. 34 which was separated by a road within the Industrial Estate premises - They shifted certain capital goods to the second premises and informed the same to the Department - The Department has not cared to respond to this letter and only after three years, have issued a letter seeking clarification as to whether separate registration is required for Unit at Door No. 34 - The assessee has responded to this letter by explaining that the manufacturing activity that is undertaken in both these units are interconnected - They also furnished the flow chart of manufacturing activity and explained that finished products were removed from Door No. 44 by paying excise duty which is already registered - Thereafter, for almost eight years, Department has been in their bureaucratic slumber and only in 2014 the audit has raised an objection that the credit availed on capital goods shifted to the second unit, i.e. Unit No. 34, is not eligible for credit - The assessee has given a detailed reply to the audit objections - Still, no SCN was given during the normal period after audit objections - The Department has again taken two years to issue the SCN - The lower authority dropped the demand in respect of two invoices on the ground of limitation - There is no positive act or any iota of evidence brought out to show suppression of facts on the part of assessee with intention to evade payment of duty - The demand invoking extended period cannot sustain - The other issue is with regard to credit availed on Housekeeping Services and Maintenance and Repair Services availed in the unit at Door No. 34 - Housekeeping Services are availed for keeping the premises in a lean and hygienic manner - Even if premises is not registered, the credit is available - Impugned order cannot sustain, same is set aside on the ground of limitation: CESTAT

- Appeal allowed: CHENNAI CESTAT

2018-TIOL-3260-CESTAT-MAD

Emerson Process Management Ltd Vs CGST & CE

CX - Assessee is a manufacturer of Industrial valves, regulators, actuators and are availing the facility of Cenvat Credit on inputs, capital goods and input services - During verification of accounts, it was noticed that assessee had availed service tax credit for various services like Garden upkeep, Interior Decorator service, Renting of immovable property services and other services which were not eligible - Commissioner (A) disallowed the credit in respect of garden upkeep services, interior decorator services and renting of immovable property services - As per pollution control norms, assessee is required to maintain certain percentage of green area in their factory premises - The High Court of Madras in case of M/s.Rane TRW Steering System Ltd. - 2018-TIOL-414- HC-MAD-CX has considered the very same issue and held that credit is eligible - Following the same, denial of credit is unjustified and same is set aside - As regards to credit availed on interior decorator services, assessee had furnished invoices relating to the services - Interior decorator service for designing and drawing of their office and workstations does not have a nexus with manufacturing activity and therefore it is not eligible for credit - The assessee had done some minor civil work with respect to workstations used for overseeing manufacturing operations inside the factory - Credit on these services is eligible - The authorities below have disallowed the credit on renting of immovable property services in respect of branch offices - A similar issue was analysed by Tribunal in case of Carrier Airconditioning & Refrigeration Ltd. - 2016-TIOL-450-CESTAT-CHD - The Tribunal observed that the credit availed on renting of branch offices was eligible - Following the same, disallowance of credit is improper and is set aside - In the result, impugned orders are modified to the extent of allowing credit in respect of garden services, interior decorator services and renting of immovable property services of branch offices - The impugned order to the extent of confirming the demand on these services is set aside: CESTAT

- Appeal allowed: CHENNAI CESTAT

CUSTOMS

2018-TIOL-3259-CESTAT-MAD

Abhishek Exports India Pvt Ltd Vs CC

Cus - The assessee is an exporter of readymade garments and dispute relates to the export of readymade garments, namely, 100% Cotton Knitted Men's T. shirt at FOB value - For the said export, assessee had filed eight shipping Bills and based on intelligence, a SCN was issued - The assessee filed a detailed reply explaining that no interference was required with regard to the valuation; it also furnished the whole set of correspondences it had with its suppliers but the Commissioner however in the impugned order has confirmed the proposal carried in his SCN - In the impugned order, the Commissioner has mainly relied on the report of Valuation Committee i.e. hi-powered committee which was resisted by assessee during course of adjudication - This Bench of Tribunal in case of Wooden Style Plus Exports 2018-TIOL-2744-CESTAT-MAD has considered an identical issue and held in favour of assessee - Therefore, the issue has already been dealt with and hence, is no more res integra at this level - For the same reasons, impugned order set aside: CESTAT

- Appeal allowed: CHENNAI CESTAT

2018-TIOL-3258-CESTAT-AHM

Raj Traders Vs CC

Cus - Assessee is a Trader and had imported SAMSUNG Brand LED TVs - During investigation, it was found that the models imported by assessee firm do not appear to be as per BIS specifications - Also, the description of goods i.e Model Nos. declared in Bills of Entry were different from the description found on the boxes of goods imported - The goods were not covered under BIS registration, which were mentioned in the document as well as on the stickers pasted on corrugated boxes, which showed that the importer firm had mis-declared the goods and also suppressed the facts of supplier of goods, country of origin, BIS specification IPR - The imported goods were therefore placed under seizure - Only for the reason that the imported goods did not comply with the compulsory registration scheme of BIS, it cannot be said that the goods are liable for absolute confiscation - The other models of Samsung Brand are registered under BIS and are BIS Compliant - The models imported by assessee were slightly different as the manufacturing company keep on changing the model number with some minor variations - This is the reason that the goods were found to be not registered under BIS - However, it is a vital fact that the goods were manufactured and sold by M/s Samsung Electronics who is already an established manufacturer of TV sets in India on mass scale - In such circumstances, only for the reason that the models imported by assessee were not registered under BIS, absolute confiscation of goods is not correct - Further, assessee intends to re-export the goods and in such prayer being made, Tribunal do not find any reason not to permit the same - When assessee has requested for re-export of goods, the same can be granted subject to payment of redemption fine and penalty - When the goods are permitted to be re-exported, the imposition of redemption fine is not justified - The goods are not hazardous for human consumption - The absolute confiscation of goods is set aside and goods are allowed to be re-exported on payment of redemption fine of Rs. 2 lakhs - Penalty reduced to Rs. 1 lac against M/s Raj Traders - As regard penalty upon Shri Guruvinder Singh Kochhar, he is mere employee and therefore cannot be held to have done any act intentionally in order to avail undue monetary benefit - The penalty imposed upon Shri Guruvinder Singh Kochhar set aside: CESTAT

- Appeals allowed: AHMEDABAD CESTAT

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