2019-TIOL-NEWS-303 Part 2, Dated: Thursday, December 26, 2019

2019-TIOL-NEWS-303 Part 2 | Thursday December 26, 2019

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DIRECT TAX


	2019-TIOL-2949-HC-DEL-IT Fiitjee Ltd Vs PR CIT Whether when genuineness of transactions undertaken in relation to web advertisement development and purchase of customized software has not been proved by the assessee, the claim for related expenses is not allowable - YES : HC - Assessee's appeal dismissed: DELHI HIGH COURT 2019-TIOL-2543-ITAT-DEL Simpson Unitech Wireless Pvt Ltd Vs ITO Whether acquisition of shares as an investment from public limited company at face value, can be construed as accrual of any benefit/perquisite to investor company in terms of Section 28(iv) - NO: ITAT Whether receipts from holding shares as as investment without any trait of business, are not taxable as business profits u/s 28(iv), if income is not in the nature of cash or money - YES: ITAT Whether simply because a foreign company had acquired shares of telecom companies by paying a premium, that does not mean the premium amount become taxable in the form of benefit - YES: ITAT - Assessee's appeal allowed: DELHI ITAT 2019-TIOL-2533-ITAT-DEL Abodh Borar Vs ITO Whether to avail deduction under Section 54, the amount utilized by the assessee in the acquisition of land should be construed as an amount invested in purchase or construction of residential property, when the reason for delay in construction was beyond the assessee's control - YES: ITAT - Assessee's Appeal allowed: DELHI ITAT 2019-TIOL-2532-ITAT-DEL Geetika Sachdev Vs ITO Whether if the difference between the sale consideration shown by the assessee and the fair market value adopted by the DVO is only marginal or less than 10%, addition of capital gain is not warranted u/s 56(2)(vii)(b) - YES: ITAT - Assessee's appeal partly allowed: DELHI ITAT 2019-TIOL-2531-ITAT-MUM Ordnance Factories Employees Cooperative Consumers Stores Ltd Vs ACIT Whether if the essence of mutuality & objects of the co-operative consumers store to provide best possible consumer goods to its members only is established, exemption in respect of the income cannot be denied - YES: ITAT Whether where the nature of Co-operative Consumer Stores has been established, the AO cannot make a partial disallowance of interest income if the whole income is already allowed as deduction u/s 80P(2)(d) - YES: ITAT - Appeals of assessee allowed: MUMBAI ITAT 2019-TIOL-2530-ITAT-BANG Auro Veda Trust Vs CIT Whether merely on the basis of a general objective clause & existence of some photographs, a trust existing for the advancement of objects of general public utility can take the classification of an educational trust u/s 12AA - NO: ITAT - Assessee's appeal dismissed: BANGALORE ITAT 2019-TIOL-2529-ITAT-AHM Shivacid India Pvt Ltd Vs ITO Whether additions u/s 41(1) can be sustained even if the liability in the accounts has been written off - NO: ITAT - Assessee's appeal partly allowed: AHMEDABAD ITAT

GST CASE


	2019-TIOL-2950-HC-AHM-GST Synergy Fertichem Pvt Ltd Vs State of Gujarat GST - The present writ petitions were filed seeking release of goods and the vehicle ferrying them, which had been detained by the Revenue in exercise of powers u/s 129 and 130 of the CGST Act - The petitions also sought that directions be issued to quash the detention notices and the orders passed pursuantly - The petitioners also claimed that the Revenue authorities sought to confiscate the goods and the vehicle as per Section 130, whuch was entirely arbitrary and not involving application of mind. Held: Although both Section 129 and Section 130 begin with a non obstante clause, yet a harmonious reading of both, keeping in mind the object and purpose behind their enactment, indicates that they are independent of each other - Section 130 which provides for confiscation of goods or conveyance is not in any manner, dependent or subject to Section 129 - Both provisions are mutually exclusive - Moreover, in Section 130, the phrase with an intent to evade the payment of tax is of importance - When the law requires an intention to evade payment of tax, then it is not mere failure to pay tax and it has to be something more - The term evade in the context means defeating the provisions of law of paying tax - It is made more stringent by the use of the term intent - The assessee must deliberately avoid payment of tax which is payable as per law - However, the element of mens rea cannot be read into Section 130 - Besides, for issuing confiscation notice u/s 30 at the threshold, the case has to be of such a nature that on the face of the entire transaction, the authority concerned should be convinced that the contravention was with definitee intent to evade payment of tax - The action should be in good faith and not a mere pretence - In plain terms, the Revenue has to make a very strong case and mere suspicion is not enough to invoke Section 130 straightaway - Even if the goods or conveyance is released on payment of tax and penalty u/s 129, later if the authorities find something incriminating against the owner of the goods in the course of the inquiry, if any, then it is permissible to initiate the confiscation proceedings u/s 130 of the Act - For purposes of Section 129(6) of the Act, it is not necessary for the Revenue to establish intent to evade payment of tax - If the tax and penalty as determined u/s 129 is not deposited within the statutory time period, then the goods and conveyance would be liable to be auctioned - It is seen that all the petitions are at the stage of notice for the purpose of confiscation - In all cases, the court directed interim release of the goods as well as the conveyance - Such release is subject to the final outcome of the confiscation proceedings - The court has not delved into individual petitions for finding out whether the notice for confiscation u/s 130 is justified - Only general principles have been laid down regarding the application of Section 129 and Section 130 of the Act - The issue of as to whether or not the confiscation notice merits being quashed may be notified before the court taking up tax matters: HC Held: The foremost task of a court in interpreting a statute is to ascertain the legislative intent, actual or implied - It then must strive to interpret the statute so as to promote and advance the object and purpose of the enactments - If two constructions are possible upon the language of the statute, the court must choose the one which is consistent with good sense and fairness and avoid the other which makes its operation unduly oppressive, unjust or unreasonable or which would lead to strange or inconsistent results or induce an element of bewildering uncertainty and practical inconvenience in the working of the statute - Where necessary, the court may even depart from the Rule that plain words be interpreted as per their plain meaning - To avoid patent injustice, anomaly or asburdity, the Court would well be justified in departing from the so-called golden rule of construction so as to give effect to the object and purpose of the enactment by supplementing the written word if necessary - Hence the legislature should examine the provisions of Section 129 and Section 130 to amend them and remove certain inconsistencies: HC - Writ petitions disposed of: GUJARAT HIGH COURT 2019-TIOL-2948-HC-KOL-GST Arvind Kumar Munka Vs UoI GST - The petitioner is a Chartered Accountant - He claimed to have been falsely arraigned as an accused on the allegation that he connived with other accused persons for issuing GST invoices without actual supply of goods to the buyers - It was alleged that such activities caused a loss of about Rs 98 crores - The petitioner was subsequently arrested and was produced before the jurisdictional CJM, before whom the petitioner filed an application for bail - However, the same was rejected - Thereafter, the petitioner filed for bail before the jurisdictional Sessions Judge, but its application was rejected again, on account of the nature and magnanimity of the unlawful acts done by the accused including the petitioner, as emerging from the final report of the investigating agency - It was also found that there were possiblities of attempts to influence witnesses or destroy the evidence or evade further investigation and trial - The present petition was filed seeking bail - It was claimed that both courts erred in not granting bail on the 61st day in terms of Section 167 of the CrPC, that the offence u/s 132 of the CGST Act is bailable and that without previous sanction by the Commissioner for filing charge sheet, the entire proceeding had been rendered otiose. Held - Considering the decision of the Apex Court in Uday Mohanlal Acharya in respect of indefeasible right for being released on bail upon default in filing challan/chargesheet within the prescribed time frame, the same is not applicable to the facts and circumstances of the present case as the petitioner was remanded in custody and bail application was filed on the same day of submission of final report - Ergo, the indefeasible right under proviso to Section 167(2) of the CrPC for release of the petitioner in default in filing challan within the prescribed time does not arise in view of the Apex Court's decision to the effect that the indefeasible right accruing to the accused in such a situation is only prior to the filing of the challan and does not survive or remain enforceable on the challan beiong filed, if already not availed of - Moreover, the legislative intent stemming from the provision of Section 132 is clear and leaves nothing to supposition except that the authority empowered to interfere with the liberty of a person by issuing an order of arrest on reasonable belief about necessity of arrest u/s 69(1) of the CGST Act, is also statutorily obligated to decide, albeit on logical assessment of facts, that the person concerned is to be prosecuted - Such requirement of sanction must be evident from the records and must be backed by reasons which are prima facie intelligently acceptable - In the present case, the loss caused to the Govt exchequer amounts to about Rs 141.76 crores - Therefore considering such huge economic offence, the petitioner should not be enlarged on bail - Moreover, the decision of this court in Sanjay Kumar Bhuwalka vs Union of India is also distinguishable from the facts and circumstances of the instant case - Hence the petitioner is not entitled to be released on bail - Nonetheless, the petitioner is entitled to seek compounding of offence u/s 138 of the CGST Act: HC - Bail petition dismissed/In favor of Revenue: CALCUTTA HIGH COURT 2019-TIOL-498-AAR-GST Infobase Services Pvt Ltd GST - The applicant had been engaged by the Tollygunge Club Ltd for supplying service of printing Directory of Members 2020 - It also entered into an agreement for marketing of advertisement space for the directory - The applicant would have to finance the project cost of printing the Directory from the proceeds from sale of space for advertisements - If it exceeds the final project cost for printing, the applicant will gain 75% of the differential amount - If it does not cover the cost of such printing, the applicant would have to bear losses to such extent - The applicant approached the AAR seeking to know if procurement of advertisements for the directory is classifiable as selling of space for advertisement in Print media and whether Sr No 21(i) of Notfn No 11/2017-CT(R) as amended, is applicable. Held - The applicant is making a mixed supply to the Tollygunge Club of printing service (SAC 998912) and intermediary service for selling space for advertisement on behalf of the club (SAC 998362) - The same shall be treated as supply of such intermediary service taxable @ 18% under Sr No 21(ii) of Notfn No 11/2017-CT(R) as amended: AAR - Application disposed of: AAR 2019-TIOL-497-AAR-GST Ambo Agritec Pvt Ltd GST - The applicant is a manufacturer of vanaspati, refined oil and biscuits - The applicant also manufactures non-edible intermediary product for confectionary industry, prepared from dough of wheat flour, sugar, food grade sodium bicarbonate and water, cut into tiny Kaju shaped pellets - The applicant approached the AAR seeking to know the classification of the intermediary product. Held - The applicant is supplying a mixture and dough of wheat flour, sugar and water, cut into a specific shape, which is dried and hardened by heating - Hence the same is classifiable under tariff item 1901 20 00: AAR - Application disposed of: AAR 2019-TIOL-78-NAA-GST Director General of Anti-profiteering Vs Caroa Properties LLP GST - Anti Profiteering - The applicant filed an application before the Standing Committee on Anti Profiteering u/r 128(1) of the CGST Rules 2017, claiming to have purchased a flat in a project being developed by the respondent - The applicant alleged that the respondent had not passed on the benefit of input tax credit by way of commesurate reduction in price of flat as per Section 171 of the CGST Act - Subsequently, the matter was referred to the DGAP - Considering the evidence put forth by the respondent, the DGAP held that the respondent had benefitted from additional ITC to the tune of about Rs 4.25% of the total turnover - Accordingly, the DGAP computed the profiteered amount at about Rs 9.03 crores. Held: It is seen that the computation of profiteered amount is in respect of 473 home buyers whereas the respondent booked 493 units till 31.12.2018 - 20 customers who also booked flats and also paid the booking amounts in the pre-GST period have not paid any amount during the post GST period, i.e., the period under investigation - Hence the benefit of ITC in respect of these 20 units is to be calculated when the consideration is received from such buyers taking into account the proportionate ITC in respect of such units - Hence the respondent is directed to commensurately reduce the prices of its units as per provisions of Rule 133(3)(a) - Moreover, it is evident from facts that ratio of ITC as a percentage of turnover that was available to the respondent during the pre-GST period from April 2014 to March 2016 was 1.54% and during the post GST period from July 2017 to December 2018, the same was 5.79% and therefore during the post GST period, the respondent benefited from additional ITC to the extent of 4.25% of the turnover - As per mandate of Section 171(1) of the CGST Act, the respondent is required to pass on benefit of such additional ITC to the recipients - The respondent claimed that those customers who booked flats between 01.07.2017 to 01.02.2018 were passed on GST benefit of 6% which was factored in the proces which was duly recorded in the cost sheets itself which was part of builder buyer agreement - Such claim of the respondent is incorrect since the applicant clearly stated that all other buyers and the applicant itself were not passed on benefit of ITC rate reduction - The respondent also claimed that the DGAP incorrectly computed the profiteered amount as it should have taken the relevant period vis a vis the recalibrated base price excluding the GST amount - Such claim also is not tenable since the respondent not only charged extra amount from buyers which otherwise should not have been charged due to commensurate reduction in prices as the respondent availed benefit of additional ITC by recalibrating the prices but also illegally charged GST on this extra amount - The customers would have paid less had the respondent not charged additional GST - Since the respondent denied benefit of ITC by charging additional tax, it was rightly included in the profiteered amount - Moreover, as the respondent discharges GST liability every month through returns filed, from the ITC available, the respondent is also legally bound to pass on benefit of ITC to customers every month - The respondent cannot employ two yardsticks while using ITC benefit itself and when extending benefit to buyers - In case the respondent proposes to pass on ITC benefit after completion of project, the respondent should also avail the same after completion of the project - Therefore, such benefit be passed on periodically as per Section 171(1) of the CGST Act and the provisions of Rule 5 of CCR have no application - The respondent is directed to reduce prices of its units commensurate to reduction in tax rates as per Rule 133(3)(a) and is directed to pass on ITC benefit of about Rs 9.03 crores to the 473 recipients - SCN be issued proposing to impose penalty u/r 133(3)(d) r/w Section 171(3A) for contravening provisions of Section 171(1) of the Act: NAA - Application disposed of: NAA UTGST RULE NOTIFICATION 06/2019 Vishnu Pandit, Addl Commissioner, Vadodara Zone appointed as Member for AAR

INDIRECT TAX

SERVICE TAX

2019-TIOL-3630-CESTAT-ALL

PR CCT & CGST Vs MLM Infra Pvt Ltd

ST - Government of Andhra Pradesh awarded a contract to the main contractor for canal work - The main contractor further sub contracted part of the work to the assessee who rendered the services and did not pay any service tax by writing on invoices that service tax is exempted as per Notfn 25/2012-ST - Entertaining a view that the assessee was providing services to the main contractor and not to Government of India, proceedings were initiated against them by way of SCN proposing confirmation of service tax along with interest and imposition of penalty - The services provided by the assessee were part of the main contract awarded by State Government to the principal contractor - Further Commissioner (A) has relied upon the instructions issued by board itself laying down that in such a scenario, no tax liability would fall upon the sub- contractor - As such, no infirmity found in the order of Commissioner (A) and accordingly the same is rejected: CESTAT

- Appeal rejected: ALLAHABAD CESTAT

CENTRAL EXCISE

2019-TIOL-2941-HC-DEL-CX

PR CCT Vs Jain And Company

CX - Whether statements of noticees recorded u/ s 14 of CEA, 1944 were admissible in evidence since the same did not bear the signatures of officials who recorded the statements despite the fact that the same noticees had confirmed their statements in their subsequent statements also recorded under Section 14 of CEA, 1944 - The Tribunal, while passing the impugned order has placed reliance on the order passed by ACMM, while dealing with the bail application of accused in bail proceedings of Shri. Pawan Kumar Jain, wherein the ACMM examined the file and noticed that several statements did not bear the signatures of Officer who recorded the same - The fact that certain statements did not bear the signatures of Officer who recorded the same is not in dispute - The Tribunal should have undertaken a more thorough scrutiny of statements of parties and other witnesses recorded by officers of appellant - The Tribunal being the last fact finding authority could have called upon the appellant to disclose as to which of the Officers has recorded the statements under Section 14 and to ascertain, as to whether or not, they were authorised to record such statements - The Tribunal should have also appreciated the reasoning given by Adjudicating Authority that the earlier statements–though not bearing the signatures of the Officer who recorded the same, stood incorporated in the subsequent statement made by same person when he affirmed the fact that his statements was so recorded - Accordingly, appeal allowed by answering the questions in favour of the appellant and remand the matter back to the Tribunal for re-appreciation of the evidence on the aforesaid aspect: HC

- Appeal allowed: DELHI HIGH COURT

2019-TIOL-3632-CESTAT-MAD

SV Elastomers Vs CGST & CE

CX - Appellant has filed a declaration under the SVLDRS, 2019 and as per the Scheme, on filing the declaration, it is deemed that the appeal is withdrawn – Appeal is, therefore, dismissed as withdrawn with liberty to the appellant to approach the Tribunal for restoration of appeal in case discharge certificate is not issued: CESTAT

- Appeal dismissed: CHENNAI CESTAT

2019-TIOL-3631-CESTAT-MUM

Royal Brushes Pvt Ltd Vs CCE

CX - The appellant-companies manufacture and sell tooth brushes - During the relevant period, the original adjudicating authority held that duty on 'tooth brushes' was to be levied in accordance with 'retail selling price' prescribed under section 4A of CEA, 1942 with effect from 01.03.2006 - Besides, tooth brushes were brought within the ambit of the Third Schedule to the CETA 1985 from 01.03.2007 thereby deeming labelling or re-labelling and packing or re-packing to be manufacture - Apart from this, the Revenue also found the assessee to be ineligible for exemption as per Notfn No 8/2003-CE as applicable to SSI units and so crystalised duty liability - The SSI benefit was denied on account of cross-utilisation of brand names belonging to the appellants - Further, upon fnding that the imported tooth brushes were affixed with labels and packed, the value of such goods was clubbed for determining eligibility for exemption.

Held - It is seen from the O-i-O as well as the O-i-A that despite acknowledgement of the timelines of dutiability, which impacted the quantity and valuation u/s 4A of the CEA and specific submission that the imported goods were sold as such, there is absence of any suggestion to segregate the value for determination of liability - Hence it is not ascertainable from record if the imported goods had been segregated in terms of the assessee's claim that 90% of the goods were branded and that only 10% remained unbranded or of denial of exmeption notification extended to the entire clearance instead of being restricted to goods on which ineligible brand names were affixed - It is not clear without appreciation of facts w.r.t. panchnama of seizure adverting to such inference or is tenable - It is also seen that the Commr.(A) merely referred to a portion of Notfn No 8/2003-CE to exclude entitlement for benefit without ascertaining the extent to which the brands were used on products of the other - Hence the order merits being quashed: CESTAT

- Assessees' appeals allowed: MUMBAI CESTAT

CUSTOMS

2019-TIOL-2942-HC-P&H-CUS

SS Overseas Vs UoI

Cus - The petitioner, a partnership firm is engaged in import of "Dry Dates" from Pakistan for sale in domestic market - It's one of such consignments of goods from Pakistan had entered the territory of India and the bill of entry with prescribed rate of duty was electronically generated before notification enhancing the duty @ 200% was issued in late evening on the same date - The prayer in this petition is for release of imported goods upon payment of rate of duty assigned in bill of entry instead of subsequently enhanced duty @ 200% in view of judgment passed by this Court in M/s Rasrasna Food Pvt. Ltd. 2019-TIOL-1950-HC-P&H-CUS - The court is not inclined to accept the hyper-technical objections raised on behalf of respondents - The petitioner would be entitled to same relief as in case of M/s Rasrasna Food Pvt. Ltd. as also in view of the interpretation of provision of Section 15 of Customs Act, 1962 - Accordingly, the Respondents are directed to forthwith release the goods as directed by Tribunal - It is further ordered that the Custom department would immediately issue detention memo so as to facilitate early release of the goods: HC

- Writ petition allowed: PUNJAB AND HARYANA HIGH COURT