2019-TIOL-NEWS-172, Dated: Monday, July 22, 2019

2019-TIOL-NEWS-172| Monday July 22, 2019

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Legal Wrangle | Corporate Law | Episode 107

DIRECT TAX


	2019-TIOL-1376-ITAT-MUM Mahindra Engineering Services Ltd Vs DCIT Whether difference between par value of equity share and the exercise price per equity share pursuant to the option granted by the company to its employees under ESOP Scheme can be allowed as expense u/s 37 of Act - NO : ITAT - Assessee's appeal dismissed: MUMBAI ITAT 2019-TIOL-1375-ITAT-MUM ACIT Vs Tata Power Company Ltd Whether expenses incurred for the projects which are closely connected with the business activities of the company and projects have either not taken off or are shelved, can be held as business expenses - YES : ITAT - Revenue's appeal partly allowed: MUMBAI ITAT 2019-TIOL-1374-ITAT-KOL ACIT Vs Balmer Lawrie And Company Ltd Whether while computing business income amortization of lease premium over the effective life of lease can be allowed - YES : ITAT - Revenue's appeal dismissed: KOLKATA ITAT 2019-TIOL-1373-ITAT-KOL DCIT Vs Orbis Power Venture Pvt Ltd Whether interest paid on loan taken for acquiring controlling stakes in businesses similar to that of the assessee is for business purpose and allowable as deduction u/s 36(1)(iii) - YES: ITAT - Revenue's appeal dismissed: KOLKATA ITAT 2019-TIOL-1372-ITAT-MAD Chennai Petroleum Corporation Ltd Vs ACIT Whether provision for leave encashment created under LIC group leave encashment scheme can be disallowed under clause (f) of s. 43B of Act as same can be claimed in the year of payment only - YES : ITAT - Assessee's appeal dismissed: CHENNAI ITAT 2019-TIOL-1371-ITAT-MAD ACIT Vs G R Thangamaligai And Sons Whether acceptance of sale and purchase transaction by tallying the quantitative details by the first appellate authority makes the whole transaction genuine and no addition is then warranted in absence of incriminating material - YES: ITAT - Revenue's appeal dismissed: CHENNAI ITAT 2019-TIOL-1370-ITAT-JAIPUR Vinod Singh Vs ITO Whether penalty proceedings u/s 271(1)(c) can be initiated on account of unexplained investments if the assessee fails to disclose such transactions in his return - YES: ITAT - Assessee's appeal dismissed: JAIPUR ITAT

GST CASE


	2019-TIOL-226-AAR-GST TVH Lumbini Square Owners Association GST - Applicant, a resident welfare Association registered under the Societies Act has sought a ruling on the question as to whether ‘if the monthly charges payable by a Member of the Association exceeds Rs.7500/- per month, in the context of exemption as per Sl. no. 77 of 12/2017-CTR, the applicant is liable to pay GST only on the amount in excess of Rs.7500/- (effective 25.01.2018)(previously Rs.5000/-) or on the entire amount' - Applicant has also sought to place reliance on the FAQ GST Flyer on Co-operative Societies wherein it is clarified that - "Further, the question would then arise that if the monthly bill is say Rs. 6,000/- (and the same is on account of services for common use of its members), will GST be applicable on Rs. 6,000/- or Rs.1,000/-. In such cases, exemption is available up to an amount of Rs. 5,000/ and GST would be applicable on the amount in excess of Rs.5,000/-". Held: There is no such clarification in the letter of TRU F.No.332/04/2017 dated 05.09.2017; further, this is an incorrect way of reading the notification - Only services which match the description given in the introduction to 12/2017-CTR are covered under Sl. no. 77(c) of the notification - in the instant case, the exemption is applicable only if the service by the applicant, resident welfare association/housing society to its members by way of reimbursement of charges or share of contribution for sourcing of goods or services from a third person for the common use of its members is up to an amount of Rs.7500 per month per member - In the event, the charges or share of contribution goes above Rs.7500 per month per member, such service will not fit the above description and, hence, such service is not exempt - such services are fully chargeable to GST at the applicable rate - There is no option to the taxpayer to pick and choose from the description of the services mentioned in column (3) to make any service partly applicable to the notification and partly chargeable - Any service either falls within the scope of the description in column (3) or it does not - Therefore, if a service by the applicant to its members by way of reimbursement of charges or share of contribution for sourcing of goods or services from a third person for the common use of its members is such that it is above 7500 rupees per month (earlier Rs.5000 up to 24.01.2018), it squarely falls outside the description of Sl. no. 77(c) of 12/2017-CTR and GST at appropriate rates are to be charged on the full amount of reimbursement of charges or share of contribution: AAR - Application disposed of :AUTHORITY FOR ADVANCE RULING

INDIRECT TAX

SERVICE TAX

2019-TIOL-2066-CESTAT-MUM

Sargam Retails Pvt Ltd Vs CCE

ST - Appellant had arrangement with some dealers to market the product on their behalf and collect the sale proceeds for them for which an amount of Rs.505/- for bulk pack of 1500 Badshah Khaini pouches and Rs.1000/- for bulk pack of 3000 Badshah Khaini pouches was charged by them – alleging that the activity rendered fell under the scope of 'Support Service of Business or Commerce', service tax was demanded and confirmed along with penalty and interest – appeal to CESTAT - defense put up by the appellant is that the amount collected by them from M/s Rajendra Trading Company as well as from other dealers of Badshah Khaini are in the nature of fees relating to discourage of competition in promoting the sales of the said dealers/retailers.

Held: Tribunal in Jamna Auto Industries' case - 2017-TIOL-2923-CESTAT-DEL has considered the issue in similar circumstance and in that case observed that the appellant's action and activity of 'entering into non-compete agreement with JSSL' is nothing but a service covered by 'support service of business and commerce' as defined under Section 65(104c) read with Section 65(105) of Finance Act, 1994 and therefore, the consideration received for the said services is accordingly taxable – no reason to deviate from the aforesaid findings of the Tribunal - Appellant has not rebutted the finding of the Commissioner given in paragraph 25 of the impugned order, therefore, order is upheld and the appeal is dismissed: CESTAT [para 7 to 9]

- Appeal dismissed: MUMBAI CESTAT

2019-TIOL-2065-CESTAT-DEL

Ruchi Soya Industries Ltd Vs CCE & CGST

ST - The assessee is recipient of taxable service namely "Transport of Goods by Road Service" - During scrutiny of ST-3 return filed by assessee for the period October, 2012 to March, 2013, it was observed that they had short paid service tax - Accordingly, a SCN was issued to them for demand of service tax under Section 73(1) alongwith interest under Section 75 of FA, 1994 - Penalty under Section 76 of FA, 1994 was also proposed to be imposed - The SCN has been issued admittedly beyond the stipulated period of eighteen months - Admittedly, no allegation of suppression has been invoked against assessee in SCN - Meaning thereby that the notice has been issued without there being any justification for invoking the extended period of limitation - It seems that in this matter the extended period of limitation has been invoked in a mechanical manner without adducing any proof/evidence to establish that provision of Section 73 ibid are attracted - Mere failure to pay duty or disclose a transaction or a mere misstatement is not sufficient for invocation of extended period of limitation unless it is due to any fraud, collusion or wilful misstatement or suppression of fact or contravention of any provision - There has to be a positive, conscious, and deliberate action intended to evade tax - The assessee has not suppressed any facts from the department and the impugned SCN itself states that it has been issued on the basis of ST-3 returns submitted by assessee - No suppression found on the part of assessee as would entitle the revenue to invoke extended period of limitation - Otherwise also, it is settled legal position that mere failure to disclose does not amount to suppression of fact - The invocation of the extended period of limitation is erroneous and the SCN is itself illegal and the same is set aside on this ground itself without going into any other issues in the matter: CESTAT

- Appeal allowed: DELHI CESTAT

2019-TIOL-2064-CESTAT-MAD

V Stephen Vs Commissioner of GST & CE

ST - Service tax was sought to be recovered by Revenue vide SCN alleging that the assessee claiming to be covered under Notfn 17/2011-ST did not furnish declaration in Form A-1 for claiming the benefit of exemption in terms of the Notification - The issue of providing service and the service being consumed at SEZ is not in dispute and it is also undisputed that the service recipient viz. M/s. Perlos closed down its business and hence, Form A1 could never be obtained and hence non-furnishing of Form A1 is not deliberate, which was beyond the control of assessee - The Supreme Court in case of Mangalore Chemicals & Fertilizers Ltd. - 2002-TIOL-234-SC-CX has clearly laid down that procedural infraction of notifications and circulars are condonable and would not coming in the way of extending substantial benefit, if otherwise found eligible - Similarly in the case on hand, it is not that the assessee had not rendered the service which was consumed in SEZ, rather the denial is made for non-compliance with a procedural requirement which is not correct in the light of the decision of Apex Court - The demand cannot sustain, for which reason the impugned order and the demand are set aside: CESTAT

- Appeal allowed: CHENNAI CESTAT

CENTRAL EXCISE

2019-TIOL-1552-HC-MAD-CX

Dr Kamakshi Memorial Hospitals Private Limited Vs Addl.CCE

CX - The assessee, a hospital, imported Cyclotron machine, primarily used for developing radio pharmaceuticals - On assessment, the issue arose as to whether it was classifiable under CETA heading 28444000 attracting duty at a higher rate, or else under heading 30063000 as 'diagnostic re-agent' attracting lower rate of duty - The assessee was issued SCN proposing to apply the higher rate of duty & proposing duty demand with interest - On adjudication, the adjudicating authority proposed classification under CETH 30063000 attracting lower rate of duty - The assessee then approached the Commr.(A), on grounds that the adjudicating authority could not have demanded duty different from the one proposed in the SCN - The Commr.(A) however held that the higher rate of duty was applicable and that the machine was classifiable under CETH 28444000 as 'radio active elements' - Hence the proposals in the O-i-A were confirmed - The assessee then approached the High Court, which proceeded to remand the matter - Thus the present writ appeal by the assessee.

Held - Where a regular remedy in the form of appeal to the Tribunal is available to the assessee, there is no reason for the assessee to directly approach the writ court against an order passed by the Commr.(A) - Section 35G of the CEA enables one to appeal to the Tribunal against an order passed by the Commr.(A) - There is no error or miscarriage of justice in the order of the Single Judge in remanding the matter to the adjudicating authority - The assessee itself created confusion by contending that though the adjudicating authority settled the classification issue in favor of the assessee, the favorable part of the O-i-O was annulled - Hence the Single Judge of the High Court justifiably restored the matter for re-adjudication - Further, the directions of the Single Judge do not result in issuing of a fresh SCN and fresh initiation of proceedings - Hence there is no question of any fresh Show Cause Notice to be issued by the Adjudicating Authority which may be hit by the provisions of limitation u/s 11A of the Act, as contended by the assessee - Hence there is no merit in the present appeal: HC

- Assessee's writ appeal dismissed : MADRAS HIGH COURT

2019-TIOL-1542-HC-MAD-CX

CCE Vs Kone Elevators India Pvt Ltd

CX - Both the parties at the Bar submitted that the controversy involved in this case is covered by a recent judgment passed by a Coordinate Bench of this Court in case of S.P.Fabricators Pvt Ltd. and Others in which it is held that the substitution of Rule 6(6)(i) of CCR, 2004 by Notfn 50/2008-C.E.(N.T.) is clarificatory in nature and has to be given retrospective effect and therefore, the excise duty exemption is not only available to SEZ Units but also to the Developers of SEZ - The appeal filed by Revenue is without any merit and is dismissed: HC

- Appeal dismissed: MADRAS HIGH COURT

2019-TIOL-2063-CESTAT-CHD

Nuvoco Vistas Corporation Ltd Vs CCE & ST

CX - Whether the assessee is entitled to avail Cenvat Credit on the services, namely, change of land use, topographical survey and consultancy of environmental issue which were used for setting up of a factory after amendment in Rule 2(l) of CCR, 2004 w.e.f. 01.04.2011 - Although the services of setting up of a new factory has been excluded from inclusive part of definition and particularly excluded the service portion of execution of works contract and construction services which includes A construction execution of works construction building for civil construction or lying the foundation or making the structure for support of capital goods - It does not mean that the other services used for setting up for a new factory, the credit is not available - In fact, the input service is defining two parts A is means part and B is inclusive part - In the mean part, it is mentioned that any service used by a manufacturer in relation to manufacture of final product and clearance thereof, whether it is directly or indirectly - The service in question has been used by assessee for setting up of a factory and without setting up of the factory the assessee is not able to manufacture their final product - In that circumstances, the services used by assessee are the part of means part of the definition of input service - Moreover these services have not been excluded from the definition of input service specifically - The said observation of Tribunal have taken support from the decision of Punjab & Haryana High Court in case of M/s Bellsonica auto components India P. Ltd. - Assessee is entitled to avail Cenvat credit for the services namely change of land use, topographical survey and consultancy of environment services: CESTAT

- Appeal allowed: CHANDIGARH CESTAT

2019-TIOL-2062-CESTAT-AHM

Safex Electromech Pvt Ltd Vs CCE

CX - Upon objection by Audit, appellant reversed credit along with interest and paid 25% penalty - subsequently, within a year of payment they filed a claim for refund but the same was rejected on the ground that the appellant have paid the amount in terms of s.11A(6), 11A(7) of CEA, 1944 without any protest and, therefore, the payment attained finality - appeal to CESTAT.

Held: On plain reading of the provisions of sub-section 6 & 7 of section 11A, it is apparent that not only the payment of amount, interest and 25% penalty but the appellant needs to give an intimation to the department accepting their liability which the appellant had not given - in such case, if at all the Revenue is of the view that the amount is legally payable, it was incumbent on the Revenue to issue a SCN which they failed to do so - Therefore, the appellant is rightly entitled for refund of the amount of CENVAT Credit, interest and penalty paid by them - impugned order set aside and appeal allowed - adjudicating authority to process the refund in accordance with law: CESTAT [para 5]

- Appeal allowed: AHMEDABAD CESTAT

CUSTOMS

2019-TIOL-1541-HC-MAD-CUS

Kalra Exim Pvt Ltd Vs CC

Cus - The assessee has filed the present appeal aggrieved by order 2013-TIOL-1896-CESTAT-MAD , whereby the Tribunal set aside the order of Commissioner (A) and restored the order of the adjudicating authority and extended the time limit for assessee to re-export the goods in question till 31.10.2013, if the goods were still available with the Customs Department - The Tribunal was justified in applying the ratio laid down by Division Bench of this Court in case of M/s.Avenue Impex and holding that since the labeling defects which were of non-rectifiable character like 'best before date', were not being mentioned and also the ingredients of imported items being alcoholic beverages were also not mentioned, the relaxation as claimed under the Regulations notified on 05.08.2011 issued by FSSAI, New Delhi could not be extended to the assessee, even though the Regulation itself became enforceable after the date of import in question - Therefore, assessee could not claim applicability of same to the import in question on a prior date as a matter of right, even if the principles of adhoc guidelines dated 20.05.2011 was to be applied - The Tribunal was justified in finding that the defects in labeling, as pointed out by adjudicating authority, were of non-rectifiable character and therefore, the goods in question could not be allowed to be imported into India and therefore re-export was directed - Despite there being no interim order in the present appeal, which is pending since 2013, the directions of Tribunal to re-export the goods in question before 31.10.2013, have not been complied with by assessee - Assessee submitted that the goods in question are still lying in the custody of Customs Department - By the lapse of time, uselessness and devaluation of these goods in terms of labeling requirements, might have further gone up and therefore, the direction of re-export does not call for any interference in the present appeal filed by assessee - The appeal is devoid of any merit and the same is dismissed: HC

- Petition dismissed: MADRAS HIGH COURT

2019-TIOL-1540-HC-KAR-CUS

Rafeek Nassar Vs JCIT

Cus - The petitioners have challenged the order passed by revenue mainly on the ground that no opportunity of personal hearing was provided as per Section 122-A of Customs Act, 1962 - The petitioners are held liable to pay penalty under Sections 112, 114AA of Customs Act, 1962 for their acts of omissions and commissions regarding aiding and abetting the smuggling of goods namely 8 Gold bars of 1 Kg each and 4 Gold biscuits of 100 grams each in terms of the order impugned herein - It is discernible that no acknowledgment has been placed on record in support of the claim that the request of petitioners for providing an opportunity of hearing was received by revenue - The receipt of SCN is not disputed by petitioners - Except seeking for personal hearing, no further objections have been filed by the petitioners - It is ex-facie apparent that the petitioners have failed to avail the opportunity provided by revenue to contest the matter - As such, no writ petition is maintainable without exhausting the alternative statutory remedy available under the Act - Accordingly, the writ petitions stand disposed of: HC

- Writ petition disposed of: KARNATAKA HIGH COURT

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