2018-TIOL-NEWS-271, Dated: Wednesday, November 21, 2018

2018-TIOL-NEWS-271| Wednesday November 21, 2018

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CASE STORIES


	ST - When value has been fixed as per Rule 6(7) of STR, 1994, can Incentive be subjected to service tax as 'Commission' under BAS - matter referred to LB: CESTAT I-T - Section 80IC benefit cannot be denied if revised return is filed within stipulated period as per Sec 139(5): ITAT

DIRECT TAX


	2018-TIOL-2442-HC-DEL-IT Pr.CIT Vs Rajesh Kumar Whether failure to seek remand report from the AO, who had in the next year examined the same issue and had on verification accepted genuineness of expenditure, warrants any writ interference - NO: HC - Revenue's appeal dismissed : DELHI HIGH COURT 2018-TIOL-2441-HC-MAD-IT Kalyani Santhanam Vs ITO Whether the AO can deny deduction u/s 10(10C) to retired employees of the RBI, when such deduction is permitted to them by a letter issued by the CBDT - NO: HC - Assessee's appeal allowed : MADRAS HIGH COURT 2018-TIOL-2175-ITAT-DEL + Case Story Himalya International Ltd Vs ITO Whether it is mandatory that claim for deduction u/s 80IC has to be made in the return of income filed u/s 139(1) and if the claim is made in revised return filed within stipuated time u/s 139(5) of Act the same cannot be allowed - NO: ITAT - Assessee's appeal allowed: DELHI ITAT 2018-TIOL-2174-ITAT-DEL ACIT Vs Leasemen Fin Vest India Pvt Ltd Whether if the amount has already been added by the assessee in its computation of total income or in the course of assessment proceedings and is already taxed, the AO is required to reduce the disallowance amount - YES: HC - Revenue's appeal partly allowed: DELHI ITAT 2018-TIOL-2173-ITAT-DEL Techno Blast Pvt Ltd Vs JCIT Whether disallowance of commission/incentive is sustainable where based on surmises & considering that an identical issue during a previous AY, involving the same assessee & its sister unit were settled in their favor - NO: ITAT - Assessee's appeal allowed: DELHI ITAT 2018-TIOL-2172-ITAT-MAD Fathima Fahima Vs ITO Whether if cost of construction can be disallowed & indexation of property denied to an assessee, where similar evidence furnished by the assessee's sibling in respect of the same property, is accepted by the Revenue - NO: ITAT - Assessee's appeals allowed: CHENNAI ITAT 2018-TIOL-2171-ITAT-CHD Nitin Chauhan Vs ITO Whether if the bonafide viewpoint is not proved by the assessee and the Revenue could bring about a clear case of concealment of income, imposition of penalty does not warrant interference - YES: ITAT - Assessee's appeal dismissed: CHANDIGARH ITAT 2018-TIOL-2170-ITAT-BANG Apple India Pvt Ltd Vs DCIT Whether arguments made by the assessee by way of Miscellaneous Petitions, which are clearly an attempt to re-argue the matter afresh on different grounds is not sustainable, as not permissible by virtue of section 254 - YES: ITAT - Assessee's miscellaneous petitions dismissed: BANGALORE ITAT

INDIRECT TAX

SERVICE TAX

2018-TIOL-3504-CESTAT-DEL + Case Story

Kafila Hospitality and Travels Pvt Ltd Vs CST

ST - When value of service has been fixed as per Rule 6(7) of the Service Tax Rules, 1994, can Incentive be subjected to service tax as - Commission under BAS - Whether a demand can be confirmed without specifying the sub-clause of BAS under which the activities are covered - Whether demand of service tax can be confirmed under the taxable category of BAS in absence of three parties - service provider, service receiver and targeted audience - Whether in cases where value of service is fixed under an option provided under the Rules, such option having been exercised and not withdrawn, is it open for the authorities to demand service tax on other consideration or incentive received, be taxed under another category - Can service tax liability be fastened without specifying the consideration for service as provided under section 67 of the Chapter V of Finance Act, 1994 as amended up to date - Can service tax liability be fastened in absence of the relationship of service provider and service receiver - order in case of D.Paul's - 2017-TIOL-908-CESTAT-DEL has been passed without considering and discussing any of the judgments pronounced by various Benches on non-taxability of incentives, without specifying the sub clause of BAS and the targeted audience before whom the services of Galileo India, Amadeus India and Calleo Distribution were promoted - question, therefore, referred to LB: CESTAT [para 22, 23]

ST - Co-ordinate Bench of CESTAT could not have taken a view contrary to the settled judicial precedents and in case of any difference of opinion, the matter should have been referred to Larger Bench: CESTAT [para 21]

- Reference to LB : MUMBAI CESTAT

2018-TIOL-3497-CESTAT-MAD

Tamil Nadu State Transport Corpn Ltd Vs Commissioner of GST & CE

ST - The assessee is State-owned Transport Corporation operating stage-carriage public transport buses, providing various services - On intelligence gathered that assessee have not discharged service tax on various services, on which investigations were conducted - During said investigations, assessee discharged service tax as pointed out by department - SCN was thereafter issued for the period 01.11.2010 to 31.03.2012 - It has to be borne in mind that assessee have discharged service tax liability as and when pointed out by department - This was done much before the issuance of SCN - The interest was paid after issuance of SCN but before passing of adjudication order - Being a Public Sector Undertaking, the view taken by adjudicating authority that there is no malafide intention for non-payment of service tax, does not call for interference - On such grounds, penalties imposed under section 77 as well as section 78 are unjustified and unwarranted, same is set aside - The impugned order is modified to the extent of setting aside the penalties imposed under section 77(1) and (2) as well as section 78 of FA, 1994: CESTAT

- Appeal allowed: CHENNAI CESTAT

2018-TIOL-3496-CESTAT-HYD

State Bank of Hyderabad Vs CCT

ST - The assessee is a public bank - It has centralized registration & is registered for providing merchant banking services - On investigation, the DGCEI noted that the assessee provided services & received remuneration for collecting taxes on behalf of Central & State governments, sale of Government of India Bonds, sale of SBI Mutual Fund units & sale of SBI credit cards - The adjudicating authority raised duty demand under Business Auxiliary Service (BAS), with interest u/s 75 of the Finance Act 1994 & penalties u/s 76, 77 & 78 of the Act - The assessee claimed that the SCN issued to the assessee's Head Office lacked jurisdiction since the Head Office provided no services.

Held - Having opted for centralized registration, the assessee now cannot claim that the head office provided no services & so could not be served SCN - Service tax has not been paid on the alleged four taxable services - The branch offices are not registered separately for providing such services - Moreover, sale of Govt of India Bonds is not a taxable service - Sale of mutual funds is exempted vide Notfn No 13/2003-ST & commission received on sale of goods is exempted - Mutual funds, being movable property, are covered under scope of 'goods' - Regarding collection of taxes on behalf of the Central & State Governments, the assessee receives a commission for services rendered - But such services are neither sale of goods nor provision of services - It is compulsory collection of taxes in which it is assisting the Central & State governments - Hence such activity does not classify as BAS & cannot be taxed under this heading - Next, the activity of promoting & selling credit cards issued by the parent entity being SBI, is taxable under ‘Credit card, debit card, charge card or other payment card services' & prior to introduction of such heading, under 'Banking & other financial services' - In any case, demand raised under BAS is not sustainable - As the demands are unsustainable on merits, the interest & penalties merit being scrapped as well: CESTAT (Para 1,2,7,8,9)

- Assessee's appeal allowed: HYDERABAD CESTAT

2018-TIOL-3495-CESTAT-BANG

Sobha Developers Ltd Vs CCE & ST

ST - Assessee is builder and constructing residential or commercial complex and offering the same for sale during or after completion of product - They are paying VAT to Government of Karnataka and service tax in a ratio of 70:30 on the value of sale - Department contended that the material used is consumed in discharge of service but was never sold or offered for sale in course of discharge of the service and that assessee do not provide any documentary proof of sale of material separately so as to be eligible for the exemption in terms of Notfn 12/2003 - Basically what the assessee is executing are nothing but 'Works Contract' and as such their case is squarely covered by Supreme Court judgment in case of M/s. Larson & Toubro 2015-TIOL-187-SC-ST - Going by the ratio of this case, both demands in the case of assessee as far as they pertain to a period prior 01.06.2007 are liable to be set aside - Coming to the demands for month of June 2007, the Larger Bench in case of assessee themselves has held that mutual exclusivity of service tax and sales tax and the powers to tax assigned by the Constitution to the States and Centre respectively on sales and services was highlighted by the Apex Court in Gujarat Ambuja Cements Ltd. case - The taxing powers of Centre and States assigned in the Constitution have been restated by Apex Court in Sobha Developers Ltd. 2009-TIOL-2258-CESTAT-BANG - The different Governments viz. Centre and States cannot intrude on the jurisdiction of each other - The impugned demand of differential duty relating to value of materials supplied in the course of provision of construction of commercial or industrial buildings and construction of residential complex services is not sustainable - As the appeals succeed on merits, there is no issue of fine and penalty: CESTAT

- Appeals allowed: BANGALORE CESTAT

CENTRAL EXCISE

2018-TIOL-3494-CESTAT-CHD

Sterling Tools Ltd Vs CCE

CX - The assessee company is engaged in manufacturing Nuts, Bolts & Screws - Such goods attarct duty under Notfn No 11/2006-CE.(N.T.) - The automobile components & accessories are taxable based on assessable value determined u/s 4A of CEA 1944 - The dispute arose over goods sold to wholesale dealer in boxes of 100 pieces each - Duty was paid on transaction value u/s 4 - The Department claimed that duty was payable u/s 4A & issued SCNs after invoking extended limitation - Duty demands were raised with interest & imposition of penalties.

Held - An identical issue was settled in the assessee's own case for a previous AY, wherein it was held that valuation u/s 4A was unwarranted since the guidelines for valuation u/s 4A as laid down by the Apex Court in Jayanti Food Processing (P) Ltd. Vs. CCE had not been satisfied - Considering such findings, the duty in the present case was correctly discharged u/s 4 of the Act: CESTAT (Para 3,4,7)

- Assessees' appeals allowed: CHANDIGARH CESTAT

2018-TIOL-3493-CESTAT-MAD

Tejas Networks Ltd Vs CCE

CX - The assessee is engaged in manufacture of multiplexers and parts thereof and are availing facility of CENVAT credit on inputs and capital goods - On investigation, it was found that they were availing credit on inputs like PCB assembly cards, cable assembly and chassis - It was noticed that they availed input credit in MS Excel Worksheet; the value of each input invoice document was entered manually and the eligible credit was worked out from the assessable value by a formula incorporated in the column of Excel sheet - The assessee is confining the contest to demand of interest and penalties imposed - It is not disputed that assessee has reversed the credit before utilization - The jurisdictional High Court in Strategic Engineering (P) Ltd. 2014-TIOL-466-HC-MAD-CX has analyzed the very same issue and held that the demand of interest and the penalties cannot sustain - Following the same, demand of interest and penalty cannot legally sustained: CESTAT

- Appeal allowed: CHENNAI CESTAT

2018-TIOL-3492-CESTAT-DEL

Teva Api India Ltd Vs CGST CE & CC

CX - The assessee-company manufactures pharmaceutical ingredients which classify as Organic Chemicals - The assessee claimed refund of duty on grounds that it destroyed rejected inputs & expired manufactured goods outside its EoU premises & under the supervision of the state pollution control body - The assessee claimed to have paid duty on such goods whilst not knowing that they were not liable to pay the same as per mandate of Notfn No 30/2015-CE & 34/2015-CE - However, the Department denied the refund on grounds that the destruction had not been carried out in the presence of a Central Excise officer & that permission was not taken prior to destruction of the goods.

Held - As the assessee is an EoU, it is not required to pay duty on the goods - The assessee paid the duty on the final & expired goods & the raw materials too, prior to their destruction - The same is proved by invoices while removing the goods for destruction - It is also not the case of the Department that the assessee cleared any remains, remnants or scrap to DTA after the destruction of such goods - Hence question of levying duty on these goods does not arise - It is also seen that intimation of such destruction had been given to the Customs authorities - As the assessee already paid duty, the prior permission from or presence of the Customs officer becomes immaterial & a mere procedural lapse - Hence the denial of refund is erroneous, more so when the assessee was unaware of the Notfn No 30/2015-CE: CESTAT (Para 2,6,7,9)

- Assessee's appeal allowed: DELHI CESTAT

CUSTOMS

2018-TIOL-3491-CESTAT-BANG

Shivam International Vs CC

Cus - The appellants filed bill of entry for clearance of goods declared as old & used Digital Multifunction Printers/Devices with accessories & attachment, though its CHA - The assessee also presented a certificate from the Ministry of Environment & Forests which cleared such goods - The invoice did not contain details such as year, country of manufacture or re-conditioned or refurbished - Hence the Department contested the genuineness of the value declared & got the goods tested by a Chartered Engineer - The Department alleged that the imported goods contravened the provisions of the FTP & that the assessee had undervalued the goods - Hence the goods were confiscated with option of redemption fine being given - Penalties were also imposed on the appellants.

Held - Considering the amendment made in the FTP, mandating that the items in question can be imported only after obtaining a license, it is seen that the appellants did not obtain license to import such goods - Hence the import is in violation of the provisions of the FTP - In such case, the confiscation, redemption fine & penalties are sustainable: CESTAT (Para 2,3,6)

- Assessees' appeals dismissed: BANGALORE CESTAT