2018-TIOL-NEWS-266 Part 2, Dated: Thursday, November 15, 2018

2018-TIOL-NEWS-266 Part 2 | Thursday November 15, 2018

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CASE STORIES


	I-T - Compensation received by actor for damage to reputation is not deemed payment for contractual obligation where it entails no benefit arising from profession: ITAT I-T - Provisions of Black Money Act, 2015 get attracted only in case of undisclosed foreign income & asset and not assets purchased outside India from a source within India: HC GST - Law, at times, can be harsh, and Courts, usually, defer to legislative wisdom: HC I-T - Revision of assessment order cannot be sought by skipping option of appeal against such order: HC CX - LIC Logo printed on diaries does not establish any connection between goods and logo, hence cannot be said to be in course of trade: CESTAT

DIRECT TAX


	BLACK MONEY ACT CASE 2018-TIOL-02-HC-MAD-BM + Case Story Srinidhi Karti Chidambaram Vs PR CCIT Whether provisions of Black Money Act, 2015 get attracted only in case of undisclosed foreign income & asset and not assets purchased outside the country from a source within the country - YES: HC Whether the foreign assets which have not been purchased from the foreign income, will not come within the scope of Section 4 and its value has to be deducted from the total income for the purpose of Black Money Act, if the assessee is able to explain its source - YES: HC Whether sanction of prosecution for a reference u/s 50 of Black Money Act, by an officer who is not authorised u/s 2(11) of Income tax Act, will render the very show cause notice for disclosure of foreign asset as invalid - YES: HC Whether the show cause notice u/s 10 of Black Money Act issued before the time period for filing of revised return u/s 139(5), can be construed only as a notice u/s 142 of Income Tax Act for further information - YES: HC Whether when an assessee has got a source of income outside the country and an foreign asset, and when the details of such asset is not furnished in his return u/s 139(1), then offence u/s 49 of the Black Money Act gets attracted - YES: HC Whether Section 50 of Black Money Act gets attracted only when information relating to an asset located outside India, has not been furnished in the return for any previous year u/s 139(5) of Income Tax Act - YES: HC Whether when assessee has offered explanation about the source of investment and had paid tax thereon, then it is the duty of AO to come to the conclusion that in his opinion the explanation offered is not satisfactory - YES: HC Whether offence u/s 50 of Black Money Act gets attracted, only after period to file revised return u/s 139(5) is over and if there is wilful failure to furnish information of foreign asset in the return - YES: HC Whether when the AO has not formed an opinion u/s 2(11) that the explanation offered by taxpayer is unsatisfactory, then the very foundation to proceed further under Black Money Act is invalid - YES: HC Whether penalty u/s 43 can be applied in respect of an asset, being one or more foreign bank accounts, having an aggregate balance not exceeding an amount equivalent to Rs.5 Lakhs, at any time during the previous year - NO: HC - Case disposed of: MADRAS HIGH COURT CASE LAWS 2018-TIOL-2137-ITAT-MUM + Case Story Sushmita Sen Vs ACIT Whether compensation received by an actor for damage to her reputation is deemed payment towards contractual obligation and is to be treated as income, where such compensation entails no benefit or perquisite arising from the assessee's profession - NO: ITAT Whether disallowance of any claims automatically invites penalty, more so when there is no concealment of income or furnishing of inaccurate particulars - NO: ITAT - Assessee's appeals allowed: MUMBAI ITAT 2018-TIOL-2125-ITAT-AMRITSAR ACIT Vs Maninder Singh Cheema Whether even if the assessee is not in the business of raising money, but of selling plots; enquiry into the creditworthiness of the ostensible buyers is the duty of the assessee and transaction of receiving earnest money for booking of flat is covered u/s 68 of Act - YES : ITAT - Revenue's appeal partly allowed: AMRITSAR ITAT 2018-TIOL-2124-ITAT-JAIPUR Jaipur Pensioners Hitkari Sahakari Samiti Ltd Vs ITO Whether additions to assessee's income simply on the basis of differences in gross receipts & Form 26AS, is not permitted, without considering amended Form 26AS Statement and reconcilliation receipts furnished by assessee - YES: ITAT - Case remanded: JAIPUR ITAT 2018-TIOL-2123-ITAT-MUM GM Bijlani Construction Pvt Ltd Vs ACIT Whether suspicion and returning of unserved notices u/s 133(6), is no basis to make additions in the absence of other incriminating evidence in the possession of AO which could substantiate that the payments in question were bogus - YES: ITAT - Assessee's appeal allowed: MUMBAI ITAT 2018-TIOL-2122-ITAT-DEL Jawahar Lal Chawla Vs ACIT Whether the deeming fiction for taking full value of sale consideration in respect of transfer of capital asset u/s 50C, is applicable only where the value is assessed by stamp valuation authority - YES: ITAT - Assessee's appeal allowed: DELHI ITAT 2018-TIOL-2121-ITAT-DEL Himanshu Kohli Vs ACIT Whether in the absence of any material or evidence to reject the basis furnished by the assessee of 0.50 paisa per kg, the addition made by adopting the higher rate of commission rate of Re. 1 per kg. is untenable - YES : ITAT Whether statements recorded during search can not be relied upon in absence of opportunity of cross examination given to assessee - YES : ITAT - Assessee's appeal allowed: DELHI ITAT 2018-TIOL-2120-ITAT-DEL Cedar Infonet Pvt Ltd Vs ACIT Whether without recording of dissatisfaction either expressly or impliedly over claim of the assessee, Revenue cannot proceed to make disallowance u/s 14A read with Rule 8D - YES: ITAT Whether CIT(A) cannot substitute the dissatisfaction, which the AO is supposed to record - YES: ITAT - Assessee's appeal partly allowed: DELHI ITAT

GST CASES


	2018-TIOL-164-HC-UKHAND-GST Kundan Singh Vs State PIL - Persons appointed by the State Government through agency of UPNL are only a camouflage - Something which cannot be done directly cannot be permitted to be done indirectly - moment the veil is lifted, it is evident that the Principal employer is State Government - Salary is the property within the meaning of Article 300-A of the Constitution of India - No GST or Service Tax can be deducted from the salary of the petitioners without any authority of law - State Government is directed to regularize the employees sponsored through UPNL in a phased manner: High Court [para 20, 21, 23, 26, 29, 31, 34] - Petition disposed of: UTTARAKHAND HIGH COURT 2018-TIOL-24-AAAR-GST Mega Flex Plastics Ltd GST - Appellant has entered into a contract with a company called, say "B Ltd." and "B Ltd." is having its unit in SEZ area (Special Economic Zone) - Supply of food is done by Appellant to the employees of "B Ltd." and the payment for the same is made by the employees of "B Ltd." to the appellant directly - Appellant had sought a ruling as to whether such supply can be considered as supply to SEZ area and hence no GST would be applicable - The Authority for Advance Ruling had held that the question cannot be answered on the ground that there is lack of clarity on the issue in absence of adequate information or details - appeal before Appellate authority. Held - From the provisions of section 16(1)(b) of the IGST Act, 2017, it is crystal clear that the supply made by the appellant to the employees of the unit located in SEZ cannot be construed as Zero-rated supply by any stretch of imagination as the employees can neither be treated as SEZ developer nor as SEZ unit - GST will, therefore, be applicable as per the classification of the services determined in terms of the scheme of classification of services as provided under Annexure ‘A' to the notification 11/2017-CTR - appellant is presuming and putting a pre-emptive notion before the Appellate authority that they are running the ‘restaurant' in the SEZ area and then asking the authority to decide upon the GST rate applicable on such activities -it is apparent that the food is being cooked at one place and being distributed to various different locations of the companies with whom they have entered into a contract - Thus, this event is not covered under the definition of ‘Restaurant service' - appellant's claim that it is running ‘Restaurant services' in the SEZ area is not tenable and hence the GST rate of 5% envisaged by appellant is not correct: AAAR - Appeal succeeds: AAAR

INDIRECT TAX

SERVICE TAX

2018-TIOL-3441-CESTAT-BANG

Bannari Amman Sugars Ltd Vs CCE, C & ST

ST - The assessee is holder of service tax registration for payment of service tax under category of 'Transport of Goods by Road' and 'Technical Inspection and Certification' services - The intelligence gathered by department revealed that assessee had received 'Erection, Commissioning or Installation' service from the foreign service provider and have paid the consideration for receipt of said services but have not discharged service tax liability under provisions of Section 66A of FA, 1994 read with Rule 2(l)(d)(iv) of STR, 1994 - Section 73(3) is very clear as it says that if tax is paid along with interest before issuance of SCN, then in that case, SCN need not be issued - It is on account of bona fide mistake that the service tax was not paid and as soon as it was pointed out by audit party, assessee paid the service tax along with interest - Further, there was no material brought on record by Revenue to establish that there was suppression on the part of assessee - Tribunal in case of Bhoruka Aluminium Ltd. 2016-TIOL-3060-CESTAT-BANG has held that when service tax along with interest is paid before issuance of SCN, then penalty under Sections 77 & 78 cannot be imposed - The issue is squarely covered in favour of assessee by various decisions and the impugned order is not sustainable in law: CESTAT

- Appeal allowed: BANGALORE CESTAT

2018-TIOL-3440-CESTAT-MAD

Bharat Sanchar Nigam Ltd (BSNL) Vs CCE & ST

ST - The assessee provides telecommunication service to the subscribers / customers who have obtained telephone connection and to public customers / callers by an arrangement of Public Call Office (PCO) - Prior to 1.6.2008, calls from PCOs were charged uniformly at the rate of Re.1 per Metered Call Unit (MCU) i.e per minute with a 60 seconds pulse - The service tax payable was thus worked out by BSNL by taking the call charge of Re.1 as cum tax value, as no service tax is separately charged and collected from the customers - Thus BSNL had paid service tax on gross call charges inclusive of the commission paid to the PCO operators - W.e.f. 1.6.2008, BSNL revised their policy and restructured the tariff of PCO business and hence BSNL charged the PCO operators at defined rates on the basis of volume of metered calls (slab basis) along with service tax and cess payable thereon, irrespective of the actual amount charged by the PCO operators from the users / callers of telecommunication services - Department however took the view that while arriving at the taxable value for discharge of service tax on the bills raised on PCO operators, BSNL should take into account the discount extended to PCO operators and since service is provided to the user/caller, that the taxable value has to be arrived by including such discount; that the non-inclusion of amount of discount given to PCO operators resulted in short payment of service tax by the BSNL - The issue per se now stands settled in their favour vide the decision of Chennai Bench of Tribunal in their own case along with others - Following the same, the impugned order confirming the demand is set aside: CESTAT

- Appeal allowed: CHENNAI CESTAT

CENTRAL EXCISE

2018-TIOL-3443-CESTAT-MAD

Alkraft Thermo Technologies Pvt Ltd Vs Commissioner of GST & CE

CX - The assessee is engaged in manufacture of radiators and parts thereof and also availing the facility of CENVAT credit of service tax paid on various input services - During audit, it was noticed that assessee had availed ineligible input service tax credit on various input services - SCN was issued proposing to disallow the credit which after adjudication allowed credit on certain service - The first issue for consideration is whether the assessee is eligible for credit availed on courier service used for sending free samples to the buyers abroad - The documents show that the services of DHL courier service were availed by assessee for sending the samples of medicines to buyers abroad - These are not outward transportation service as alleged in SCN or in the adjudication order - The said services are indirectly related to the manufacturing activity as only if the assessee sends the samples to foreign buyers, they would be able to procure orders from such foreign buyers - However, the said invoices were not produced before the adjudicating authority - Therefore, said issue remanded to the adjudicating authority who shall verify the invoices and consider the discussions made with regard to this issue.

With regard to audit fee, it is seen that the authorities below have allowed credit in respect of service tax paid on charges paid to the auditor - The assessee is contesting the service tax paid on the conveyance charges for the auditor - However, he has not furnished any document to show that the vehicle used for conveyance of the auditor was registered in the name of the service provider - For this reason, the authorities below have rightly rejected the same.

The manpower used for TDS entry is to the tune of Rs.1,823/- - Since the assessee has to do the work of deducting the tax at source, manpower have been used for such work (data entry), the disallowance of credit is unjustified and is set aside.

As regards to insurance service, assessee had availed goods transit insurance as well as employees insurance - Needless to say that the goods transit insurance is directly related to the manufacturing activity and therefore eligible for credit - With regard to employees insurance, which is in the nature of covering the risk of gratuity amount, same would not fall within the exclusion clause - The manufacturer avails such insurance to cover the financial risk that he would have to face in case of payment of gratuity to employees and therefore is directly related to manufacture - Therefore credit allowed in respect of insurance service.

The credit in respect of consultancy services have been rejected for the reason that assessee has not produced invoices - Since the said services are availed for legal advice / consultancy, same would be eligible for credit, if assessee produces the invoices - The said issue is also remanded to the adjudicating authority.

The credit in respect of manpower (shivtej) is not contested by assessee and therefore upheld - There were doubts as to whether rent-a-cab services are eligible for credit after 1.4.2011 - So also there were divergent views as to whether WCS used for repair and renovation is eligible for credit - Being interpretational in nature, penalties in respect of these services including manpower (Shivtej) is set aside: CESTAT

- Appeal partly allowed: CHENNAI CESTAT

2018-TIOL-3442-CESTAT-CHD

Ambika Overseas Vs CCE

CX - Assessee was issued a SCN, which does not mention relied upon documents - There is mention of Annexure 1 in SCN - However, Annexure 1 is a chart giving the details of number of invoices along with Central Excise duty - It is thus clear that no statements were supplied with SCN - From the correspondence which have been produced before the bench and which has not been disputed by revenue, it is evident that on 27.11.2009, assessee asked for the copy of statements of Shri Sachin Agarvanshi, Shri Inder Mohan Gupta and Shri Raj Kumar, besides copy of O-I-O - The jurisdictional Range Officer supplied three documents, namely, copy of O-I-O, copy of statement of Shri Tejinder Singh and Shri Deep Bansal - The assessee also wrote a letter to the adjudicating authority pointing out that they did not receive the copies of statements requested by them - Without providing the copies of requested statements, which were relied upon in the SCN, the adjudicating authority decided the matter ex-parte - From the sequence of events, it is evident that the adjudicating authority did not follow the principles of natural justice - The assessee was not given a chance to effectively defend their case by not providing the relied upon statements and the matter was adjudicated ex-parte even as the assessee was making repeated pleas for copies of four statements relied in the SCN to be given to them - This plea of assessee was not dealt by Commissioner (A), while deciding their appeal - Impugned order is not sustainable and is set aside - Matter remanded to the adjudicating authority with the direction that the copies of relied upon statements which have been repeatedly requested by assessee should first be provided to assessee and thereafter the matter should be adjudicated afresh by giving a fair opportunity to assessee to defend their case: CESTAT

- Matter remanded: CHANDIGARH CESTAT

CUSTOMS

NOTIFICATIONS

dgft18pn045

DGFT extends time period up to March, 2019 for installation of Radiation Portal Monitors & Container Scanner

cnt93_2018

Govt notifies Customs exchange rates for import & export of goods

CASE LAWS

2018-TIOL-3439-CESTAT-HYD

Exim Services Vs CC, CE & ST

Cus - The appellant, a CHA, facilitated the filing of a shipping bill for another entity - On instructions from the latter, the appellant filed a drawback shipping bill - The Revenue claimed that on investigation, the consignment entered for export was found to be mis-declared in terms of quality & valuation - The Revenue alleged that such exports were aimed at availing ineligible higher drawback - SCNs were issued proposing penalties on the appellant - The Revenue claimed that the appellant filed drawback shipping bill without cancellation of free shipping bill & availed ineligible benefit - Hence it was further alleged that the appellant failed to properly discharge the functions of a CHA.

Held: It is seen that the adjudicating authority did not record the exact role played by the appellant, apart from failure to cancel the first drawback shipping bill - It later filed the second shipping bill properly & intimated the officer in this regard in order to conceal the crime - However, penalty u/s 114 cannot be imposed on the appellant because it simply filed shipping bill as per documents received - There is no material suggesting that the appellant aided the other firm in availing ineligible drawback - Hence the penalty imposed on it is unwarranted & must be set aside - Regarding penalty imposed on the second appellant, it is seen that the same was imposed merely because it provided a container to aid the export - Such activity by itself does not attract penalty - Hence the penalties imposed on both appellants are set aside: CESTAT (Para 6,10,12)

- Assessees' appeals allowed: HYDERABAD CESTAT

2018-TIOL-3438-CESTAT-MAD

Rangasami Vs CC

Cus - The assessees herein were servied SCNs by officers of the DRI during the period of dispute - The assessees contest the jurisdiction of an officer of the DRI to issue SCNs in Customs matters.

Held: In view of the decision of the Delhi High Court in M/s Mangali Impex Vs union of India the issues at hand are remanded back to the adjudicating authority, to be disposed off as per the decision of the Apex Court on such issue of jurisdiction: CESTAT (Para 2,8)

- Case remanded: CHENNAI CESTAT

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