2020-TIOL-NEWS-002, Dated: Thursday, January 02, 2020

2020-TIOL-NEWS-002 | Thursday January 02, 2020

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Legal Wrangle | Direct Tax | Episode 122

DIRECT TAX


	2020-TIOL-06-HC-P&H-IT PR CIT Vs Vardhman Yarns And Threads Ltd Whether if the conversion of yarn into thread cannot be utilized for any other purpose but for making of garment, it is a manufacturing activity which comes within the sweep of allowable deduction u/s 80IC - YES: HC - Revenue's appeal dismissed: PUNJAB AND HARYANA HIGH COURT 2020-TIOL-05-HC-AHM-IT PR CIT Vs NTT Data Global Delivery Services Ltd On hearing the matter, the High Court holds that it is not vested with the jurisdiction to hear the appeal against the order passed by the Delhi bench of the ITAT. It directs the Revenue to file fresh appeal before the jurisdictional High Court within 8 weeks' time. - Revenue's appeal dismissed: GUJARAT HIGH COURT 2020-TIOL-09-ITAT-MUM Loreal India Pvt Ltd Vs CIT Whether items that possess saleable value in the regular course of business cannot be written off as unsaleable due to failure in import - YES: ITAT Whether when an abandoned project incurs part capital and part revenue loss, it is entitled to claim both such losses- YES: ITAT Whether sum debited as doubtful debts under the financial statements cannot be written off as bad debts- YES: ITAT Whether effective reducing of inventory under obsolescence, when written off does not attract section 115JB(2)- YES: ITAT - Assessee's Appeals partly allowed: MUMBAI ITAT 2020-TIOL-08-ITAT-MAD DCIT Vs Eih Associated Hotels Ltd Whether in the absence of exempted income, the question of addition/disallowance is not warranted -YES: ITAT Whether assessee can write-off an amount due to the Government as irrecoverable - NO: ITAT - Assessee's Appeal Dismissed: CHENNAI ITAT 2020-TIOL-07-ITAT-KOL Cheviot Agro Industries Pvt Ltd Vs DCIT Whether when AO prima facie calculated wrong book profit by deducting less amount of exempt agriculture income, it is justified to direct him to calculate the same afresh by considering the correct amount - YES: ITAT - Assessee’s appeal allowed: KOLKATA ITAT 2020-TIOL-06-ITAT-AHM State Bank Of India Vs ITO Whether the assessee is under obligation to deduct TDS on reimbursement of expenditure incurred on LTC/LFC during foreign travels - YES: ITAT - Assessee's Appeals is allowed: AHMEDABAD ITAT

MISC CASE


	2020-TIOL-09-HC-MAD-CT Golden Spinning Mills Pvt Ltd Vs UoI Whether if the facts regarding concession on inter-state sale of cotton yarn has been allowed by the AO by following the clarification of the Commissioner, subsequent re-assessment to recall the benefit amounts to hierarchical indiscipline & is not permissible - YES: HC - Assessee's writ petition allowed : MADRAS HIGH COURT

GST CASE


	2020-TIOL-02-AAR-GST Sree Varalakshmi Mahaal LLP GST - Applicant is in the leasing business viz. leasing of the building (Marriage Hall) with all amenities for short term periods - applicant seeks to know as to whether the Input Tax credit is available on materials/services used for construction of building and whether the same can be utilised to nullify the cascading effect of taxation. Held: The legislative scheme is amply clear - the Input tax credit paid on goods/services received for construction of an immovable property ‘on one's own account is unavailable' - such restriction is provided in the Act which is passed by legislature - section 16(1) read with section 17(5)(d) of the CGST Act, 2017 refers - insofar as reliance placed on the Orissa High Court decision in Safari Retreats P Ltd. [ 2019-TIOL-1088-HC-ORISSA-GST ] is concerned, it is clear that the High Court has granted credit on a case to case basis and moreover, the High Court has also held that section 17(5)(d) of the CGST Act, 2017 cannot be held to be ultra vires - inasmuch as since the said section is found to be valid by the High Court, Authority does not find any reason to go beyond the statutory provisions - Held that no Input Tax credit is available against any goods or services received by the applicant for construction of the Marriage Hall on his own account even if used in the course or furtherance of his business of renting the place: AAR - Application disposed of : AUTHORITY FOR ADVANCE RULING 2020-TIOL-01-AAR-GST RB Shah Enterprises India Pvt Ltd GST - Applicant is engaged as a Consultant and is guiding the importers and exporters for various services related to Customs, JDGFT, CLA etc. - They organise/use duty credit scrips while rendering consultancy services - Duty credit scrips are exempted and the applicant seeks to know the appropriate rate of GST for the services rendered. Held: Various services supplied by the applicant fall under SAC 998216/998312/998415/998434/998466/998595 etc. and all are taxable @18% GST vide notification 11/2017-CTR as amended - therefore, as per section 8 of the CGST Act, the rate of tax of this mixed supply which is billed at a single price is the highest rate applicable to the various services: AAR - Application disposed of : AUTHORITY FOR ADVANCE RULING

INDIRECT TAX

SERVICE TAX

2020-TIOL-10-HC-RAJ-ST

Bhanwar Lal Gurjar Vs Commissioner of CGST and Service Tax

ST - Manpower Services - Valuation - s.67 of the Finance Act, 1994 - Service tax was demanded from the appellant with regard to the contribution towards Provident Fund and ESI of the labour provided by the appellant to his clients - in appeal against the confirmed demand, CESTAT upheld the demand for the normal period by concluding that the extended period of limitation cannot be invoked - appellant has filed an appeal before the High Court.

Held: Service provider (appellant) was liable to be charged service tax qua service rendered by him and the valuation of taxable service could not be anything more or less than the consideration paid for rendering such a service - in view the decision of the Supreme Court in Union of India Vs. Intercontinental Consultants and Technocrats Pvt. Ltd . ( 2018-TIOL-76-SC-ST ), this appeal is allowed: High Court [para 10 to 12]

- Appeal allowed : RAJASTHAN HIGH COURT

2020-TIOL-07-CESTAT-MUM

CST Vs Abbott Healthcare Pvt Ltd

ST - Respondents were trading in nutritional products in India - In order to increase its market share they had incurred certain operating expenses like advertisement for products traded by it and hiring marketing executives to manage its existing sales However, they incurred losses as the price at which they had imported the goods from M/s Abbott Logistics B V Netherland (ALOG) and the operating expenses incurred by them was higher than the price at which the goods were sold by them - The said recoveries were made by them from ALOG in accordance with and to comply with Indian Transfer Pricing Code and OECD Transfer Pricing Guidelines for the respective years - These amounts were not received by them against provision of any service/ supply/ grant of right or any other arrangement between them and their foreign subsidiary Revenue alleged that, on the amounts received, service tax is payable and accordingly issued demand notice for recovery of service tax of Rs. 28,92,48,439 for the period 2009 10 to 2012-13 - Commissioner of Service Tax-VII, Mumbai dropped the proceedings and hence the department has filed an appeal in CESTAT Revenue contends that there could have been no reason for ALOG to compensate the respondents for the losses incurred by them; that since these amounts were received as consideration for the services provided to ALOG in respect of sale of goods in India, the same was leviable to service tax at applicable rates.

Held: Very basis on which the appeal has been filed by the revenue is by establishing the case for export of service on the basis of some analogy drawn by them in respect of export of goods - Further they have referred to Article 286(1)(b) to define the exports - They have also submitted that the issues in hand should have been decided by the Commissioner on the basis of these and not on the basis of Export of Services Rules, 2005 - There cannot be argument as repugnant as this and that too from the revenue, seeking to deviate from the rules framed by them to levy tax on some activities - Even with the wildest imagination Bench cannot figure out how this Article of Constitution helps it in resolving the controversy in hand and how the same can be applied for determining the case for export of services - Revenue has in appeal sought to compare the un-comparables i.e. goods with services or tangibles with intangibles - Reliance placed by the revenue on the decision in case of Moti Laminates - 2002-TIOL-24-SC-CX-LB -LB is not only misplaced but is out of context as the issue under consideration in that case was vis-à-vis the marketability as the test for manufacture and leviability to Central Excise Duty - respondents have claimed that these amounts were received by them is respect of operating expenses incurred by them in order to manage the existing sales of the products imported and not for provision of service - This arrangement was for a limited purpose of maintaining arms' length margin from a transfer pricing perspective - There is no dispute about the fact that the respondents were procuring the goods from ALOG and selling the same in Indian market - The relationship between ALOG and respondent as far as the goods are concerned was that of Buyer and seller - For selling the products in India, respondents were required to explore and develop the market for the said goods in India - To develop and expand the market for these products in India, respondents incurred certain expenses and it is these operating expenses which were sought to be reimbursed by the ALOG to respondents - It is settled law that such reimbursable expenses incurred cannot be included in the taxable value of services rendered [Supreme Court decision in Intercontinental Consultants and Technocrats Pvt Ltd - 2018-TIOL-76-SC-ST relied upon] - Revenue has in their appeal admitted that Commissioner was correct in classifying the services under the category of "Business Auxiliary Services" - There cannot be any dispute about the fact that these services fall in the category III services covered by Rule 3(1)(iii) of the Export of Service Rules, 2005 - Taking into account the amendments made from time to time, he Commissioner has considered the period of demand i.e. from 2009-10 to 2013-14 into three periods viz (i) prior to 26.02.2010 (ii) 27.02.2010 to 30.06.2012 & (iii) 30.06.2012 onwards Board Circular 111/05/2009 dated 24.02.2009 very clearly lays down that during the material time, for determination whether the Category III service is exported or otherwise the relevant factor is the location of the service receiver and not the place of performance - Commissioner has thus correctly applied the said circular to hold that the services prior 27.02.2010 were exported as the recipient of service provider was outside India - From 27.02.2010, the condition in respect of provision of service in India and usage outside India was omitted from the Export of Service Rules, 2005 in respect of category III services Therefore, for determining whether a service provided which falls in Category III is Export of Service or not the relevant conditions to be satisfied were that the services should be provided in relation to business or commerce to a recipient located outside India; and payment for such services should be received by the service provider in convertible foreign exchange - Commissioner has in the impugned order found that both these conditions were satisfied in respect of the transactions under question and has accordingly held that the services provided by the appellant are export of services, therefore, there is no infirmity in the order of Commissioner for this period too For the period post 01.07.2012, Revenue has not shown as to how the respondent has acted as intermediary in the manner as defined by Rule 2(f) of Place of Provision of Services Rules, 2012 between the two persons namely service provider and service receiver of the main service - Commissioner has, therefore, correctly determined the place of provision of service by application of Rule 3 as the location of the service recipient no merits in the appeal filed by the Revenue, hence same is dismissed: CESTAT [para 5.2, 5.4, 5.6, 5.7, 5.8, 5.9, 6.1]

- Appeal dismissed: BANGALORE CESTAT

2020-TIOL-06-CESTAT-BANG

Purvanakar Projects Ltd Vs CCE

ST - The assessee, a developer and builder is engaged in construction of residential complex and selling the same to the customers since 1986 - In year 2005, when service tax was brought in for construction service, assessee applied for registration under 'Commercial or Industrial Construction Service' and 'Construction of Complex Service' and have since been paying service tax w.e.f. 16.6.2005 on the considerations received from customers - The said business of construction and selling of residential apartments are undertaken by assessee on the land owned by them and also on the land owned by others - In both the cases, assessee initially enter into an agreement with prospective buyer for sale of undivided share in the immovable property - A SCN was issued proposing to levy service tax under various heads - The SCN also proposed to demand service tax on the ground that the assessee provided both the taxable and exempted services without maintaining separate accounts with respect to input and input services and therefore, the credit utilization cannot be in excess of 20% - It is not in dispute that the entire activity of assessee is construction of residential apartments and such activity is in the nature of indivisible works contract involving transfer of property in goods along with provision of service - Assessee is paying VAT under State Government by treating the said transaction as works contract - It is settled law that indivisible works contract is taxable only w.e.f. 1.6.2007 with the introduction of separate taxable service of works contract under Section 65(105)(zzzza) - The Supreme Court in case of Larsen & Toubro Ltd. 2015-TIOL-187-SC-ST had held that prior to 1.6.2007, there was no charging section to specifically levy service tax on works contract service and in the present case, the entire period is prior to 1.6.2007, therefore, the assessees is not liable to pay service tax on the entire activity of raising the construction and providing the various category of services viz., Health and Fitness Centre Service, Maintenance or Repair Service or Real Estate Agent Service - Assessee is not rendering those services viz., Health and Fitness Service because they do not fit into the definition of Health and Fitness Service as provided under the Finance Act - Similarly, they also do not fit into the Real Estate Agent service as provided under the Act - Further, assessee is also not rendering any maintenance or repair service rather they are charging for maintenance service to create a fund which will be transferred to Resident Association on completion of the project - No service tax is to be charged on this 'Maintenance or Repair Service' - Further, Rule 6 is not applicable in the present case - The contention of Department in demanding excess of 20% is that the assessee is providing both taxable as well as exempted service and therefore, hit by Rule 6(3)(c) of CCR, 2004 - The assessee give full constructed apartment to the owner of land and this by no stretch of imagination can be seen as a service provided by assessee to the land owners - Co-developers do not provide any service to each other and this has further been clarified by CBEC in Circular 108/02/2009 - The impugned order is not sustainable in law: CESTAT

- Appeal allowed: BANGALORE CESTAT

CENTRAL EXCISE

2020-TIOL-05-CESTAT-MUM

Gharda Chemicals Ltd Vs CCE

CX - The assessee is engaged in manufacture of excisable goods - During the disputed period, the Central Excise Officers searched the records/documents maintained by assessee in its two plants located at Lote Parshuram and Dombivali - On detailed investigation into the matter, the officers found that the assessee had evaded payment of central excise duty on account of mis-declaration and by suppressing the proper assessable value on stock transfer of goods from one plant to the other - Accordingly, show cause proceedings were initiated against assessee, which culminated into the adjudication order, wherein central excise duty demand was confirmed along with interest and also equal amount of penalty was imposed on assessee - The issue arising out of the present dispute is no more res integra, in view of the order dated 13.04.2018 passed by this Tribunal in case of assessee, for the earlier period - By placing reliance upon the Larger Bench judgment in case of Ispat Industries Ltd. - 2007-TIOL-245-CESTAT-MUM-LB, this Bench of the Tribunal has held that the method of valuation adopted by assessee is correct - In view of the settled position of law, no merits found in the impugned order passed by Commissioner (A): CESTAT

- Appeal allowed: MUMBAI CESTAT

2020-TIOL-04-CESTAT-ALL

Agrimas Chemicals Ltd Vs ACCGST

CX - CENVAT - Since the unused packing material is lying in the factory and has not been removed from the factory nor it is written off in the Books of Account, credit cannot be denied: CESTAT [para 2]

CX - CENVAT - Allegation that the appellant had issued debit notes amounting to around Rs.1.70 crores to the suppliers of inputs and, therefore, credit involved therein of around Rs.21 lakhs should be reversed is untenable as it was the responsibility of the Revenue to justify the demand by stating the quantities of inputs not received or returned by the appellant - demand is unsustainable, hence impugned order set aside and appeal allowed: CESTAT [para 2, 3]

- Appeal allowed: ALLAHABAD CESTAT

CUSTOMS

2020-TIOL-08-HC-PATNA-CUS

JK Traders Vs UoI

Cus - During the period of the dispute, a consignment of goods described as 'Full dried Areca Nuts (round in shape and light brown in colour)' & weighing 23660 Kgs were seized along with the vehicle carrying them - The goods had been seized by the Customs Department for violation of the provisions of Notfn No 9/96-Cus (NT) issued u/s 11 of the Customs Act r/w Section 3(2) of the Foreign Trade (Development and Regulation) Act, 1992 - The records revealed that the goods in question were owned by the petitioners here and that the petitioners' application for release of the goods had been rejected on grounds that the prescribed authority had tested samples of the goods and had found them to be unsafe for consumption.

Held - The issue at hand involves seizure of imported betel nuts which are prohibited for import in India and as such liable to be confiscated u/s 111 of the Customs Act - However, it is a necessary pre-requisite is the belief of the officer seizing the goods of forming an opinion in terms of the statutory expression reason to believe of such goods being liable for confiscation - Besides, the consignor and consignee have been identified and the goods were not seized at any notified Customs zone or area - Save and except for what is recorded in the seizure memo, there is no other material available on record - When a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of an affidavit or otherwise, for a bad order, with the passage of time, and supplementing the reasons would become good, which is not how the authorities are required to function, more so, in a case of confiscatory legislation - A general practice in trade cannot be, ipso facto, applied and adopted to the instant case, for unless it is shown that the act and the conduct of the petitioner makes him to be a part and parcel of the trading community, based in the area or dealing with the illegal activities of such like nature - Besides, there is no track record of past history of the petitioners - Moreover, the actions taken by the Customs Department in this matter are unwarranted where the goods in question are yet in raw form and are unfinished products, meant to be transported to another State for processing and packaging whereafter only, it is eventually sold in the open market - Besides, if the goods are actually unsafe for consumption, then the provisions of the Customs Act are not be invoked in such circumstances - Hence the order of confiscation merits being quashed: HC

- Writ petition allowed: PATNA HIGH COURT

2020-TIOL-07-HC-PATNA-CUS

Ramesh Kumar Baid And Sons Huf Vs UoI

Cus - During the period of the dispute, a consignment of goods described as 'Full dried Areca Nuts (round in shape and light brown in colour)' & weighing 20,650 Kgs were seized along with the vehicle carrying them - The goods had been seized by the Customs Department for violation of the provisions of Notfn No 9/96-Cus (NT) issued u/s 11 of the Customs Act r/w Section 3(2) of the Foreign Trade (Development and Regulation) Act, 1992 - The records revealed that the goods in question were owned by the petitioners here and that the petitioners' application for release of the goods had been rejected on grounds that the prescribed authority had tested samples of the goods and had found them to be unsafe for consumption.

- Writ petition allowed: PATNA HIGH COURT

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