2019-TIOL-NEWS-30, Dated: Tuesday, February 05, 2019

2019-TIOL-NEWS-030| Tuesday February 05, 2019

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	INTERIM BUDGET 2019 \| simply inTAXicating

CASE STORIES

ST - Attachment of bank accounts lifted provided monies are utilised entirely for petitioner's catering business and not diverted to any personal account: High Court

I-T - Merely by showing receipt of cheque or statement of bank account of share subscriber, creditworthiness and genuineness of transaction is not proved if circumstances require some more evidence to show that share subscription is genuine investment: HC

ST - Giving a finding on merits is indicative of fact that Commr(A) had 'subconsciously' accepted compliance of pre-deposit: CESTAT

DIRECT TAX

2019-TIOL-290-HC-AHM-IT

Pr.CIT Vs Dilip Avtar Construction Pvt Ltd

Whether subsequent quashing of the search action u/s 132 also makes the resultant assessment u/s 153C invalid, if the search operation has unearthed sufficient information to satisfy issuing of notice u/s 153C - NO: HC Whether in absence of any express statutory prohibition, bar on any evidence procured as a result of an illegal search is unsound - YES: HC - Revenue's Appeals Allowed : GUJARAT HIGH COURT

2019-TIOL-289-HC-MUM-IT

Bhanumati Malraj Kabali Vs ITO

Whether in case of assessment which is completed without scrutiny, the AO has wider latitude to issue reopening notice on the basis of unsupported & wrong information - NO: HC - Assessee's Petition Allowed : BOMBAY HIGH COURT

2019-TIOL-288-HC-MUM-IT

Frigerio Conserva Allana Pvt Ltd Vs ACIT

Whether new element of non-disclosure of income is imperative to the validity of notice of reopening issued beyond 4 years from the end of the relevant AY- YES: HC

- Assessee's Petition Allowed : BOMBAY HIGH COURT

2019-TIOL-271-HC-RAJ-IT + Case Story

Shreenath Heritage Liquor Pvt Ltd Vs PR CIT

Whether in case of private companies, Revenue should follow strict approach for satisfying burden of proof of source of share subscription in comparison to public companies - YES: HC

Whether merely by showing receipt of a cheque or statement of bank account of share subscriber, creditworthiness and genuineness of the transaction is not proved if circumstances requires some more evidence to show that the share subscription is genuine investment - YES : HC

- Assessee's appeal dismissed: RAJASTHAN HIGH COURT

2019-TIOL-270-HC-MUM-IT

PR CIT Vs Radha Madhav Investments Ltd

Whether once taxpayer had made a suo motu disallownace of expenditure incurred to earn exempt income, then the AO cannot proceed to work out disallowance under Rule 8D, without recording his dissatisfaction regarding such claim - YES: HC

- Revenue's appeal dismissed: BOMBAY HIGH COURT

2019-TIOL-269-HC-MUM-IT

PR CIT Vs Huntsman International India Pvt Ltd

Whether when the taxpayer has not earned any tax-free income during the relevant year, then corresponding expenditure incurred for such earning cannot be taken into consideration for disallowance u/s 14A r/w Rule 8D - YES: HC

- Case deferred: BOMBAY HIGH COURT

2019-TIOL-268-HC-MUM-IT

Aurum Renewable Energy Pvt Ltd Vs ACIT

Whether without any suggestion in the reopening notice that income has escaped assessment, the notice automatically becomes invaild - YES: HC

Whether pulling an issue for re-examination in the absence of any tangible material already covered during scrutiny assessment, suggests change of AO's opinion - YES: HC

- Assessee's Petition Allowed: BOMBAY HIGH COURT

2019-TIOL-267-HC-MUM-IT

Asset Reconstruction Company India Pvt Ltd Vs DCIT

Whether when there is no new element of income in the reasons for reopening, it is possible for the Revenue to bring such element by way of oral arguments and affidavits - NO: HC

- Assessee's Petition Allowed: BOMBAY HIGH COURT

2019-TIOL-264-HC-KERALA-IT

Muthoot Bankers And Financiers Vs CIT

Whether a question regarding duplication in so far as the addition made by the AO is concerned, the same merits re-adjudication by the AO himself only being essentially a question of fact - YES: HC

- Case remanded: KERALA HIGH COURT

GST CASE


	2019-TIOL-04-NAA-GST Jubilant Food Work Ltd GST - Section 171 of the CGST Act, 2017 - Anti-Profiteering - Applicant stating that he had purchased 1 SGB Stuffed GB(Garlic Bread) and 1Med NHT Veg Extrava (Medium Veg Pizza) after paying Rs.129/- and Rs.440/- per item respectively vide invoice dated 20.10.2017 from the restaurant being run by the respondent in Bengaluru - applicant further states that he had purchased the two items again on 19.11.2017 by paying an amount of Rs.139/- and Rs.485/- respectively; that although the GST on restaurant services was reduced from 18% to 5% w.e.f 15.11.2017, the respondent had increased the base prices of the above food items and charged the same base price which he was charging before the rate of tax was reduced and had he maintained the same base prices which he was charging before the tax reduction, the consumers would have been benefited but in this case it did not; that, therefore, the respondent had profiteered and accordingly action should be taken against him. Held: It is apparent from the record that the respondent had during the period from 15.11.2017 to 31.05.2018 had increased the base prices by more than 5.59% i.e by more than what was required to offset the impact of denial of ITC in respect of 170 items from 5.75% to as high as 84.55% out of a total of 393 items sold during the same period and, therefore, in respect of these items the commensurate benefit of reduction in rate of tax from 18% to 5% had not been passed on to the customers by the respondent - it is also established after analysis of the impact of denial of ITC and the details of the outward supplies that the amount of net higher sale realization due to increase in the base prices of the services, despite reduction in the GST rate from 18% to 5% with denial of ITC or in other words the profiteered amount was Rs.41,42,97,635/- as per the meticulous calculations made by DGAP and which amount is inclusive of the amount of Rs.5.65 which had been profiteered by the respondent from applicant no. 1 - As regards respondents allegation that no methodology has been prescribed for determination and calculation of profiteering, it needs mention that the Authority has already notified the same vide its notification dated 28.03.2018 under rule 126 of CGST Rules, 2017 and is available on its website - no fixed method can be prescribed as various parameters are required to be taken into account while making such computation and the same varies from industry to industry and from one product to another - provisions of s.171 are very explicit and state that the recipient has to be given the benefits of tax reduction and the ITC on every supply commensurate with such reduction - it was the duty of the Respondent to ascertain on which of his products the rate of tax had been reduced and after taking into account the impact of denial of ITC to what extent the prices should have been increased - whole exercise needs no directions from the Authority as it involves simple mathematical calculation - mere charging of tax @5% after the tax reduction cannot be taken to mean that they have passed on the benefit of such reduction when the respondent had increased the base prices to negate the impact of tax reduction - all claims made by respondent of having suffered losses due to denial of ITC are not supported by financial statements and hence are completely unworthy of reliance - claim of the respondent that he was entitled to increase the prices by 7% instead of 5.59% due to denial of ITC is completely exaggerated and cannot be accepted -Respondent is labouring under the utterly wrong impression that the central focus of section 171 of the Act was he and his products whereas the central focus is the recipient or the customer who is required to be given both the above benefits commensurately when he buys even a single product - denial of these benefits would be hit by Article 14 of the Constitution if the customer is not given the benefit on the ground that the respondent had passed on the benefit on a particular product in place of another product which he may not buy - Each and every customer is entitled to receive both the benefits without discrimination - provisions of anti-profiteering have, therefore, to be applied at each and every product/Stock Keeping Unit (SKU) level and the respondent has no unfettered discretion to allow them selectively or as per his own whims and fancies - Respondent should remember that the benefit of tax reduction and ITC has been granted by the Central and State governments to the public out of their own revenue and he is not required to pay it from his own account and, therefore, he cannot pocket it on one or the other pretext - Respondent is quite ignorant of the fact that on the one hand he is claiming that the anti-profiteering provisions made u/s 171 amount to price regulation and on the other hand he is supporting the ‘Price Control Anti-Profiteering (Mechanism to Determine Unreasonably High Profit) (Net Profit Margin) Regulations, 2014 promulgated by the Malaysian Government and the ‘Net Dollar Margin Rule' of the Australian Government, both of which regulate prices whereas the section 171 of the CGST Act, 2017 does not provide for such regulations and its only aim is to pass on the benefit of tax reduction and ITC without going into the issues of price and profit fixation -the respondent had not only forced the recipients to pay more price over the permissible limit but has also compelled them to pay additional GST on this amount and had he not done so the recipients would have paid less price - as the customers have paid additional GST which they were not required to pay, it amounts to denial of passing on of the benefit to them - Respondent must remember that section 171 requires passing of tax reduction to the recipients or the customers and does not authorise the respondent to collect additional GST illegally thus negating the benefit which has been given by the Government - DGAP has rightly concluded that any excess amount of GST collected from the recipients amounts to profiteering which must be returned to the recipients and in case the recipients are not identifiable, the same should be deposited in the Consumer Welfare Fund - contention of the respondent that the profiteered amount should be calculated by considering him as an entity and not on each Stock Keeping Unit (SKU) is irrational and against the basic provisions of s.171 of the Act which require him to pass on the benefit of rate reduction to every recipient on every supply - benefit due to a customer cannot be denied to him on the claim that the same has been passed on to another customer on another product - Even if each restaurant owned by the respondent was assessed separately for profiteering, the conclusion would have been the same as the respondent was charging the same prices in each of his outlets and was also centrally fixing the prices - hence he has been rightly assessed for profiteering collectivley - there is also no justification for ‘netting off' the increases and the decreases in the prices of the various products as the benefit is required to be passed on each SKU and profiteering is required to be computed only in respect of those SKUs where prices have been increased by more than 5.59% - any scrutiny of price increase made by the respondent which is not commensurate with the denial of ITC certainly falls in the ambit of profiteering and it cannot be termed as price control or price regulation and hence it does not violate the provisions of article 19(1)(g) of the Constitution - there is no restriction on the respondent to fix his prices keeping in view the various factors but such an exercise should not violate the provisions of s.171 of the Act - respondent has been duly put to notice and full opportunity of being heard and defend himself has been repeatedly granted to him as and when it was requested by him and he has also filed detailed submissions along with the oral arguments, hence he cannot claim that there has been violation of the principle of audi alteram partem - in the present case, the benefit of ITC works out to be 5.59% and the Respondent could have increased his prices to the extent of 5.59% but as is evident from the report of the DGAP the prices of the products have been increased from 5.75% to 84.55% - DGAP has considered only those products on which there has been increase of more than 5.59% - accordingly, 170 products have been impacted and the profiteered amount on these products during the period 15.11.2017 to 31.05.2018 has been rightly computed as Rs.41,42,97,635/- as per rule 133(1) of the Rules, 2017 - Respondent is directed to reduce his prices by way of commensurate reduction keeping in view the reduced rate of tax and the benefit of ITC denied - respondent is directed to refund to the applicant an amount of Rs.5.65 along with interest @18% from the date of charging the above amount till its refund - Respondent is directed to deposit the balance amount of Rs.41,42,97,629.35 in the ratio of 50:50 in the Central and State CWFs (of 31 States/UTs) along with interest @18% till the same is deposited, within a period of 3 months -Respondent has committed an offence u/s 122(1)(i) of the CGST Act, 2017 hence SCN is to be issued proposing imposition of penalty - For the period post 31.05.2018, DGAP to investigate whether the benefit of tax reduction has been passed and to report findings to the authority: National Anti-Profiteering Authority Application disposed of : NAA

MISC CASE


	2019-TIOL-266-HC-MAD-VAT SGS Home Needs Vs Assistant Commissioner Whether dealer's registration can be cancelled on ground of belated filing of monthly returns, if those returns were furnished within the extended time period granted by the Appellate authority - NO: HC - Case disposed of: MADRAS HIGH COURT

INDIRECT TAX


	SERVICE TAX 2019-TIOL-286-HC-MUM-ST + Case Story Arambhan Hospitality Services Ltd Vs UoI ST - Attachment of bank accounts ordered to be lifted provided the proceeds thereof are utilised entirely during the ordinary and regular course of the petitioner's catering business and its dealings and transactions as hospitality service provider - Ordered that petitioner will also not transfer any of the amounts to the accounts maintained in the name of its sole proprietor or any sole proprietary concern of the petitioner; that the amount would not be diverted to any personal account - Commissioner, CGST, Mumbai West Commissionerate, Mumbai, to hear the petitioner and pass a reasoned order expeditiously, and in any event, by 10th March, 2019- Till the order, as directed above, is passed by the authority, the garnishee notices issued by the respondents are to be held in abeyance - Petitioner also submitting section 87 cannot be resorted to unless the determination of the disputed issues takes place; that merely because there is a self assessment done does not mean that the petitioner can be saddled with such recovery notices High Court clarifies that no opinion expressed on the submissions made and the same to be decided upon by the Commissioner, GST: Petition disposed of: High Court [para 14, 17-20] - Petition disposed of: BOMBAY HIGH COURT 2019-TIOL-378-CESTAT-MUM Idea Cellular Ltd Vs CCE ST - ROM application filed by appellant for correction of apparent mistakes in Order dated 07.12.2017 - 2018-TIOL-194-CESTAT-MUM - Tribunal had in paragraph 6 held that the demands of service tax on sale of SIM cards raised by invoking extended period and penalty to that extent is not sustainable against the Appellant and, therefore, the said demand of service tax and corresponding penalty and interest is set aside; however, in the operative portion of the order in paragraph 6.4 it is mentioned that appellant is liable to pay penalty u/s 78 to the extent of service tax amount confirmed - since there is a mistake apparent on record, paragraph 6.4 is modified to omit reference to penalty held imposable u/s 78 of FA, 1994 - other submissions about granting cum-tax benefit and treating the VAT paid as service tax since not discussed in the impugned order, therefore, same cannot be discussed at this juncture - application disposed of: CESTAT [para 5, 6] - Application disposed of: MUMBAI CESTAT 2019-TIOL-377-CESTAT-MUM ITC Ltd Vs CC, CE & ST ST - Valuation - Section 67 of FA, 1994 - Jurisdictional authorities were of the opinion that other remittances from client that was claimed to be reimbursement of various other expenses incurred by appellant on behalf of client should also have been included in the taxable value. Held: Consideration agreed upon as recompense for a particular service is taxable - Any other receipt has to be evidenced as additional consideration for the said service to be subject to tax - Bench has no hesitation in holding that the demand of tax under the head of ‘Business Auxiliary Service' should be restricted to such amount as was being discharged by the appellant on the contracted amount: CESTAT [para 6] Valuation - Section 67 of the Finance Act, 1994 and the Service Tax Valuation Rules, 2006 are intended for determination of taxable value when such value is not ascertainable - absence of consideration is not the same as unascertainable consideration and the Rules cannot be invoked in the present instance - Hence, except in circumstances of allegation, supported by evidence, of non-monetary consideration having been received for inclusion of money value of such consideration, addition of any amount to the contracted price does not have the authority of law- impugned order set aside and appeal allowed: CESTAT [para 8, 9] - Appeal allowed: MUMBAI CESTAT 2019-TIOL-376-CESTAT-MUM Fertin Pharma Research And Development Vs CCGST ST - Rule 5 of CCR, 2004 - Appellant is engaged in activity of research and development of pharmaceutical products - results of such testing were communicated to their parent company, M/s Fertin Pharma, Denmark through e-mail - goods on which research and development activity was carried out were purchased from parent company for valid consideration and after payment of appropriate customs duty - such service were exported against convertible foreign exchange - Refund claim of CENVAT accumulated pursuant to provision of service was rejected on the ground that technical testing and analysis services provided by the appellant cannot be termed as export of services -appeal before CESTAT. Held: In appellant's own case on similar facts, for the period April 2013 to June 2013, Tribunal has vide order dated 05.07.2017 - *2017-TIOL-2919-CESTAT-MUM* held that the appellant fulfils the conditions mentioned under rule 6A of the STR, 1994; that the subject services are export of services and appeal was allowed with consequential relief; that for the subsequent period January 2014 to December 2015, Tribunal by another order dated 28.09.2018 - *2018-TIOL-3281-CESTAT-MUM* decided the issue in favour of appellant - relying upon the said decisions, held that appellants are entitled for the refund claim of unutilized CENVAT credit - impugned order set aside and appeal allowed with consequential relief: CESTAT [para 3, 4] - Appeal allowed: MUMBAI CESTAT 2019-TIOL-373-CESTAT-MUM + Case Story Fire Arcor Infrastructure Pvt Ltd Vs CCE & ST ST - Appeal rejected on the ground of non-compliance of pre-deposit provisions - Considering that the Commissioner(A) had also given a finding on the merits of the case is indicative of the fact that he had subconsciously accepted compliance of pre-deposit required u/s 35F of the CEA, 1944 - it cannot be said that only because CAG audit party had found some credit availed as inadmissible, suppression of fact is made out - nothing has been established to indicate that appellant had any malafide intention to suppress its tax liability from the department - impugned order set aside and appeal allowed: CESTAT [para 5 to 8] - Appeal allowed: MUMBAI CESTAT CENTRAL EXCISE 2019-TIOL-375-CESTAT-MUM Chand Fruits Company P Ltd Vs CCE CX - Exemption from duties of central excise are available, notwithstanding any policy statement of the Central Government, only through a valid notification issued u/s 5A of the CEA, 1944 - It is clear beyond all doubt that the notifications 136/94-CX and 22/2003-CX did not envisage exemptions for ‘trading units' - That this was a deliberate omission is apparent from the addition to the exemption notification 22/2003-CX in 2004 by notification 01/2004-CX in the context of a policy decision that has been elaborated upon by the Circular 6/2004-Cus dated 27.01.2004 - Even if the said Circular did not emphasise the prospective nature of the amendment, it is well-settled in law that exemption notifications should be interpreted by the letter of law - conscious act of excluding ‘trading' from the scheme was revisited merely to confer on those investments a fresh lease of life - liability to make good the duty foregone, in the event of ineligibility for procurement without payment of duty, is conclusive - appellant has bound itself through the letter of undertaking - provisions of s.11A of CEA, 1944 are not the sole source of recovery - considering the circumstances of ineligibility and the commitment under bond, demand of duty of Rs.18,47,929/- must be upheld - however, as there is no demonstrated malafide in the actions of the appellant, invoking of s.11AC does not appear to be appropriate - penalty set aside while upholding demand of duty: CESTAT [para 7, 10, 11, 12] - Appeal partly allowed: MUMBAI CESTAT 2019-TIOL-374-CESTAT-ALL Tin Manufacturing Company Of India Vs CCE CX - The assessee has filed an application for ROM in order of Tribunal passed on their R.O.M. - It stands pleaded in said application that the miscellaneous order passed by Tribunal show that the contentions raised by assessee were not dealt with in the manner it was contended and as such, fresh order should be passed after considering the grounds raised in appeal memorandum as also in R.O.M. application - Even if the date of order is not taken as relevant date for purposes of limitation, the R.O.M. application stands filed by assessee after a gap of around 17 years - The earlier R.O.M. application was heard by bench in presence of assessee and the order was passed on 04.01.2001 - The assessee have not bothered to find out the outcome of decision of R.O.M. for a period of 17 years and have subsequently procured a copy of the same in the year 2017 though no specific date stands provided by them - There are admitted latches on the part of assessee to sleepover the matter for a long period of 17 years and to make no efforts to find out the decision on the ROM - As such, no justifiable reasons found to entertain the present ROM - Inasmuch as present application prays for recall of earlier miscellaneous order passed on earlier ROM application, by following the decisions in M/s Berger Paints India Ltd. - *2002-TIOL-300-CESTAT-DEL-SB* and M/s Krishna Trading Co. - *2015-TIOL-1594-CESTAT-MUM, the same is not maintainable - The quantum of redemption fine and penalty imposed upon assessee is in accordance with the decision taken by Tribunal, while disposing of their appeal - Review of the order cannot be sought under the garb of ROM - As such even on merits, no reasons found to interfere in the earlier order of Tribunal - The ROM application is rejected on the ground of non-maintainability as also on merits: CESTAT - Application rejected: ALLAHABAD CESTAT CUSTOMS* 2019-TIOL-372-CESTAT-MAD Shethimpex Vivo Solutions Pvt Ltd Vs CC Cus - This appeal is filed by assessee claiming refund of excess amount paid - This is the case of assessee that imported medical equipments for which it paid out by mistake without claiming concessional rate of duty; that even though the original authority was satisfied and sanctioned the refund, yet the same was credited to Consumer Welfare Fund - The certificate of Chartered Accountant is directed to be considered, forms the essential document per se - The other document namely the certificate from the statutory auditor as required by Commissioner (A) could only be considered at best a supporting evidence only if there was any iota of doubt on the primary evidence namely the Certificate of Chartered Accountant referred to and accepted by High Court - Therefore, the certificate of statutory auditor as not furnished, could not be treated as a primary document itself, to deny any benefit in the nature of refund - The scope of amounts sought to be deposited in Consumer Welfare Fund is very limited and specific - The authorities cannot invoke this provision on mere assumptions or surmises without satisfying the conditions laid down - In the case on hand, the first certificate of Chartered Accountant accepted by High Court itself contained a specific plea that assessee has not passed on the duty incidence to its customers, which fact has not at all been disputed by authorities below - This itself carves the case of assessee out of mischief of Section 11B and the scope of ‘unjust enrichment’ - The rejection of refund by the revenue authorities is contrary to law and unsustainable: CESTAT - Appeal allowed: CHENNAI CESTAT 2019-TIOL-371-CESTAT-DEL World Fashions Vs CC, ICD Cus - The assessee exported readymade garments to two companies in which the six consignments were exported under the claim of duty drawback - Investigation by the DRI revealed that the price of the goods declared by the assessee had been grossly over-valued & that the actual value was considerably less - Hence SCNs were issued, proposing to deny drawback & imposing penalty u/s 114 of the Customs Act 1962 - Such SCNs culminated into an order. Held - It is seen that there are no statements of confession or other corroborative evidence to establish the alleged over-valuation - It is also undisputed that the goods had been cleared by the Customs Department after proper examination - The only document relied upon by the Revenue is a photocopy of an invoice presented by one overseas buyer, showing that the value of the goods is extremely low - It is settled law that such a document received from overseas importer is insufficient to sustain charges of mis-declaration by the Indian exporter, more so if not corroborated with material particulars - Hence the O-i-O is set aside: CESTAT (Para 2,4,6,7) - Assessee's appeal allowed: DELHI CESTAT

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