2020-TIOL-NEWS-044 Part 2, Dated: Friday, February 21, 2020

2020-TIOL-NEWS-044 Part 2 | Friday February 21, 2020

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DIRECT TAX


	2020-TIOL-421-HC-MUM-IT PR CIT Vs Aegon Life Insurance Company Ltd Having heard the parties, the High Court admitted the appeal on the substantial question of law and directed the Registry to communicate the copy of the order to the Tribunal. - Direction issued: BOMBAY HIGH COURT 2020-TIOL-282-ITAT-DEL Waves Data Management Pvt Ltd Vs ITO Whether assessee cannot be expected to prove source of source to explain credit entries of creditor - YES : ITAT - Assessee's appeal allowed: DELHI ITAT 2020-TIOL-281-ITAT-DEL ITO Vs Chetan Constructions Pvt Ltd Whether addition made u/s 68 for advances received can be upheld if Revenue has not brought any tangible material on record to support same - NO : ITAT - Revenue's appeal dismissed: DELHI ITAT 2020-TIOL-280-ITAT-MUM Kiran Promoters And Developers Vs DCIT Whether AO is justified in computing ALV of unsold units and bringing same under head "Income from house property" for assessee engaged in real estate business - NO: ITAT - Assessee's appeal allowed: MUMBAI ITAT 2020-TIOL-279-ITAT-MAD Classic Linens International Pvt Ltd Vs DCIT Whether sec 10AA is applicable to existing SEZ units under old regime which have not exhausted deduction for ten consecutive AYs and shall be entitled for deduction for further period of 5 years beyond period of ten consecutive AYs - YES : ITAT - Case Remanded: CHENNAI ITAT 2020-TIOL-278-ITAT-AGRA Arvind Gautam Vs ITO Whether agricultural income if accepted as the source of income in the previous years, the same must be considered for computation of income in the subsequent AY - YES: ITAT - Assessee's appeal partly allowed: AGRA ITAT

GST CASE


	2020-TIOL-04-NAA-GST Director General Of Anti-Profiteering Vs Ramaprastha Promoter And Developer Pvt Ltd GST - Anti-Profiteering - s.171 of the CGST Act, 2017 - Applicant alleges profiteering by the respondent in respect of purchase of flat in the respondent's project "Edge Towers", Haryana - Applicant contends that the respondent did not pass on the benefit of Input Tax Credit to him by way of commensurate reduction in the price. Held: Contention of the respondent that the State level Screening Committee as well as the Standing Committee had not recorded any satisfaction/reasons which could reflect that he (respondent) had acted in contravention of s.171 of the Act and Rules thereunder and, therefore, the same was in violation of the principles of natural justice, is untenable because in terms of rule 128 of the Rules, 2017, the Standing Committee and the Screening Committee is required to only prima facie examine the allegations of profiteering which are to be investigated in detail by the DGAP u/r 129(1) of the Rules - Methodology and Procedure has been notified by the Authority vide notification dated 28.03.2018 u/r 126 - on the issue of reduction in the tax rate, it is apparent from the DGAP report that there has not been any reduction in the tax rate in the post GST period hence the only issue to be examined is whether there was any net benefit of ITC with the introduction of GST - it is revealed from the report of the DGAP that the ITC as a percentage of the turnover that was available to the respondent during the pre-GST period (April 2016 to June 2017) was 1.72% and during the post-GST period (July 2017 to December 2018) it was 2.64% and which confirms that post-GST, the respondent has benefited from additional ITC to the tune of 0.92% of his turnover and the same is required to be passed on to the applicant and other flat buyers - DGAP has calculated the amount of ITC benefit to be passed on to all the flat buyers as Rs.35,28,744/- and which the respondent has himself admitted as correct - above amount that has been profiteered shall be refunded along with interest @18% - Applicant has, along with his written submissions, enclosed sample credit notes and cheques as evidence to establish his claim of having passed on the benefit amounting to Rs.35,28,744/- along with interest thereon amounting to Rs.7,32,220/- to the 397 homebuyers - DGAP is directed to verify the above Passing of ITC benefit and submit a report within three months - For contravention of the provisions of s.171(1) of the Act, Penalty is imposable u/s 171(3A) of the Act read with rule 133(3)(d) of the Rules and accordingly a SCN is required to be issued to the respondent - in terms of rule 136 of the CGST Rules, the Authority directs the jurisdictional Commissioners of CGST/SGST, Haryana to monitor the order under the supervision of DGAP by ensuring that the amount profiteered is passed on to all the eligible buyers - compliance report to be submitted within four months - in line with the provisions of s.171(2) of the Act and as per the amended rule 133(5)(a), Authority directs the DGAP to further examine all the other projects of the respondent for possible violations of the provisions of s.171 of the Act and to submit his report as per rule 133(5)(b) of the Rules since there are adequate reasons to believe that the respondent may not have passed on the benefit of ITC to his recipients in terms of s.171(1) of the Act in the same manner as in the present project "Edge Towers" - Application allowed: NAA - Application allowed: NAA

INDIRECT TAX

SERVICE TAX

2020-TIOL-329-CESTAT-DEL

Pooja Construction Vs CCGST, CE & C

ST - The assessee-company is engaged in construction services and also providing manpower recruitment agency services - An audit was conducted for the relevant period, whereupon, it was pointed out that the assessee has short paid the service tax on these services - On being pointed out by the audit, the assessee paid the service tax - Later, an SCN was issued to the assessee and before adjudication also, the assessee paid the interest for the intervening period - The adjudicating authority dropped the proceedings against the assessee but on appeal by the Revenue the Commissioner (Appeals) imposed penalty u/s 76 of the Finance Act, 1994 - Hence the present appeal, contesting the penalty.

Held: The assessee paid service tax at the time of audit and during the relevant period, there were different rates of service tax payable by the assessee on the services provided - For such reason, the assessee could not pay service tax correctly and as pointed out by the audit, the assessee paid service tax and later on interest was also paid - In these circumstances, the penalty under Section 76 of the Finance Act, 1994 is not sustainable against the assessee & merits being dropped: CESTAT

- Assessee's appeal allowed: DELHI CESTAT

CENTRAL EXCISE

2020-TIOL-328-CESTAT-AHM

Sanghi Industries Ltd Vs CCE & ST

CX - The assessee is a clinker unit - During the relevant period, the Revenue opined that the assessee was ineligible to avail credit of input services as invoices were billed in name of grinding unit and that it availed credit to maximise the refund of Excise duty as per Notfn No 39/2001-CE - It was also held that cenvat credit of port service is not available as the assessee did not explain as to whether such service was in respect of ship or goods - It was also seen that credit was availed on Misc services and nature thereof was not known - Cenvat credit on manpower service in respect of jetty was disallowed since no nexus with manufacture of final product was established - Credit on telephone & mobile services was disallowed as it was not shown how the same were used in manufacture activities by the clinker unit - Credit on repair and maintenance services received was held to be inadmissible - Similarly, cenvat credit was disallowed on GTA service received, dredging service, manpower services in respect of power plant.

Held: The analogy that credit is not available since the goods were cleared as per Notfn No 39/2001-CE in the relevant period, is incorrect - Once exemption is surrendered by the assessee, it is eligible to benefits available to it - Even otherwise there is no bar to avail cenvat credit on inputs and input services if the goods are cleared under exemption - Such exemption is only to the extent of refund of duty paid in cash - Hence such goods cannot be labelled as exempted goods - The units availing the exemption in question are eligible to avail credit - However, once exemption os surrendered ab initio, the unit becomes eligible for credit - In such case, input credit is available to be distributed u/r 7 of the CCR 2004 which did not provide for distribution of credit on pro rata basis - The credit can be distributed to any of the units of the manufacturer and there is no bar on distribution - Moreover, regarding the issue that the assessee during the relevant period, was not registered as an ISD, the registration requirement was only procedural and could not form grounds to deny credit distribution - Cenvat credit on the various input services merits being allowed in light of the various decisions in this regard - Moreover, in respect of Jetty in the factory premises, the same was used for transportation as well as import and export of goods - Since the services are related to the assessee's business, it is eligible to avail credit of the same - Regarding denial of credit on excess tax charges by service provider, the assessment at its end has not been challenged - In such circumstances, credit cannot be denied: CESTAT

- Assessee's appeal allowed: AHMEDABAD CESTAT

CUSTOMS

2020-TIOL-422-HC-AHM-CUS

Prince Spintex Pvt Ltd Vs UoI

Cus - Petitioner has challenged Notification No.26/2017-Customs dated 29.6.2017 to the extent it amends Notification No.16/2015-Customs dated 1.4.2015 - Petitioner further challenges Trade Notice No.11/2018 dated 30.6.2017 issued by the second respondent Director General of Foreign Trade to the extent it is stated therein under Chapter 5 that importers would need to pay Integrated Goods and Services tax (IGST) - The petitioner has also challenged the order-in-original dated 29.9.2018 with consequential relief and seeks refund of Rs.2,38,83,203/- with interest at the rate of 24% thereon - In terms of section 7(2) of the IGST Act , import of goods is deemed to be inter-State supply of goods - Under sub-section (1) of section 5 the IGST Act , IGST is payable on import of goods into India. Accordingly, section 3 of the Customs Tariff Act was also amended with effect from 1.7.2017 and IGST became payable under sub-section (7) of section 3 of the Customs Tariff Act on import of goods into India - Simultaneously, Notification No.16/2015-Cus also came to be amended with effect from 1.7.2017 by Notification No.26/2017-Cus dated 29.6.2017, whereby in the opening paragraph in clause (ii) for the words and figures "under section 3", the words, figures and brackets "under sub-sections (1), (3) and (5) of section 3" came to be substituted. The second respondent - DGFT issued a Trade Notice bearing No.11/2018 dated 30.6.2017 wherein it was stated that the importers would need to pay IGST and take input tax credit as applicable under the GST rules - Due to such amendment in Notification No.16/2015-Cus with effect from 1.7.2017, IGST payable under sub-section (7) of section 3 of the Customs Tariff Act was left out from exemption - It is the case of the petitioner that though sub-section (7) of section 3 of the Customs Tariff Act is excluded from exemption of additional customs duty granted under Notification No.16/2015, in the present case, the petitioner had already opened 100% irrevocable letter of credit before such restriction came to be imposed vide Notification No.26/2017-Cus and the goods were imported during the validity period of an irrevocable letter of credit -Further, on the basis of the exemption granted under Notification No.16/2015-Cus, the petitioner expanded its business and thus, vested rights had also accrued in favour of the petitioner before Notification No.26/2017 came into force with effect from 1.7.2017 - The Directorate General of Foreign Trade (DGFT) had granted EPCG authorisation dated 31.3.2017 to the petitioner, whereby it got entitlement to save duty value of Rs.2,95,74,408/- against import of capital goods in view of Foreign Trade Policy 2015-20 read with Notification No.16/2015-Cus - Since the petitioner held EPCG authorisation, it was not required to pay any customs duty, including additional duty of customs on import of such goods into India in view of the above Notification No.16/2015-Cus - The exporter M/s. Itema had issued commercial invoice dated 16.5.2017 to the petitioner with respect to the above referred proforma invoice - On 3.8.2017, the petitioner filed Bill of Entry dated 3.8.2017 to clear the goods for home consumption wherein it claimed exemption from basic customs duty and IGST on the basis of the EPCG authorisation issued to it by the DGFT - Although the Deputy Commissioner of Customs allowed exemption from payment of basic customs duty on the basis of the EPCG authorisation, he did not allow the petitioner to clear the goods without payment of IGST of Rs.2,38,83,203/- at the rate of 18% of the total value of Rs.13,26,84,462/- - As the petitioner was not allowed to clear the capital goods without payment of IGST, it had no option but to pay Rs.2,38,83,203/- as IGST Under Protest and such amount was reflected by it as IGST credit in its electronic credit ledger - It is the case of the petitioner that it has not utilised any amount till date and it is shown as receivable in its books of account - Pursuant to the amendment in the Foreign Trade Policy 2015-20, the original Notification No.16/2015-Cus came to be amended vide Notification No.79/2017-Cus dated 13.10.2017 making corresponding amendments - Thus, with effect from 13.10.2017, EPCG authorisation holders were allowed to claim exemption from the whole of IGST payable under sub-section (7) of section 3 of the Customs Tariff Act on the import of goods - However, the importers who cleared the capital goods during the period 1.7.2017 to 12.10.2017 were not granted exemption from additional duty of customs though they were holding valid EPCG authorisation - petitioner filed a refund application dated 28.4.2018 before the Assistant Commissioner (Customs), ICD, Ahmedabad on 8.6.2018 and claimed that the import was planned under EPCG licence on the premise that no duty of customs whatsoever would be payable upon undertaking export obligation as stipulated in Foreign Trade Policy and sudden levy of huge amount of IGST resulted in blocking of huge working capital funds because in project financing this was not anticipated and hence, was not considered on project cost based on which project finance was tied up - The refund claim was rejected by the Deputy Commissioner on the ground that no notification granting exemption from payment of IGST was in force and, therefore, such IGST was chargeable on the said imported goods and it was correctly paid by the petitioner - Against this order, the present Writ application has been filed.

Held: While granting exemption from payment of customs duty, a corresponding obligation has been cast on the importer to fulfill export obligation as provided under the EPCG scheme - Thus, exemption from payment of customs duty under the EPCG Scheme is not an exemption simpliciter, but is an exemption with a corresponding obligation on the authorisation holder to export goods equivalent to six times the duty saved on import of such capital goods - on conjoint reading of the Chapter 5 of the Foreign Trade Policy and Notification No.16/2015-Cus dated 1st April, 2015, it is evident that though the notification is a statutory notification issued in exercise of powers under section 25 of the Customs Act, it is not an exemption notification simpliciter, but an exemption notification issued to give effect to the EPCG Scheme floated under the Foreign Trade Policy which is an incentive scheme - Thus, in the opinion of the court, Notification No.16/2015-Cus dated 1st April, 2015 and the amending notifications cannot be equated with statutory notifications ordinarily issued under section 25 of the Customs Act, granting exemption from payment of customs duty - Considering the nature of the EPCG Scheme, it is evident that it is an incentive scheme whereby a promise has been held out that the importer would be charged zero customs duty on the goods imported by it, provided it exports goods equivalent to six times the duty saved on capital goods - By virtue of Notification No.33/2015-2020, dated 13th October, 2017, issued in exercise of powers conferred by section 5 of Foreign Trade (Development and Regulation) Act, 1992, read with paragraph 1.02 of the Foreign Trade Policy, 2015-20, as amended from time to time, the Central Government made amendments in the Foreign Trade Policy 2015-2020 and consequently the words "Capital goods imported under EPCG scheme for physical exports are also exempt from whole of the Integrated Tax and Compensation Cess leviable under sub-section (7) and subsection (9) respectively, of section 3 of the Customs Act, 1975 as may be provided in the notification issued under Department of Revenue." came to be inserted in para 5.01- Correspondingly, vide Notification No.79/2017-Customs, dated 13th October, 2017, Notification No.16/2015-Cus dated 1st April, 2015, came to be amended and with effect from 13th October, 2017, import of capital goods covered by a valid authorisation under the EPCG Scheme was exempted from payment of integrated tax under sub-section (7) of section 3 of the Customs Tariff Act and goods and services tax compensation cess under sub-section (9) of section 3 of the said Act - Therefore, it is only for the short period from 1st July, 2017, when the IGST Act came into force till 13th October, 2017, when the above notification came to be issued, that there was no express provision exempting import of goods under the EPCG Scheme from payment of integrated tax - Examining the facts of the present case in the light of the principles enunciated in the decision in State of Bihar v. Suprabhat Steel Ltd. (1999) 1 SCC 31 , Chapter 5 of the Foreign Trade Policy, 2015-2020 makes provision for the EPCG Scheme, which is an incentive scheme - The incentive given is that the importer holding a valid authorisation for capital goods covered under the EPCG Scheme would be exempted from payment of customs duty and additional duty under section 3 of the Customs Tariff Act, and correspondingly, the importer would be obliged to fulfill export obligation to the extent provided in the Scheme - Since exemption from payment of customs duty and additional duty can only be granted under section 25 of the Customs Act, to give effect to the promise held out in Foreign Trade Policy 2015-2020, Notification No.16/2015-Customs dated 1st April, 2015 came to be issued exempting import of goods covered by a valid authorisation issued under the EPCG Scheme in terms of Chapter 5 of the Foreign Trade Policy, from the whole of the customs duty leviable under the First Schedule to the Customs Tariff Act and the whole of the additional duty leviable under section 3 of the Customs Tariff Act - Accordingly, when the authorisation under the EPCG Scheme was issued in favour of the petitioner, and when the exporter issued commercial invoice in favour of the petitioner on 16.5.2017, the petitioner had reason to believe that it would not be required to discharge any liability in respect of customs duty leviable under the First Schedule to the Customs Tariff Act or any additional duty under section 3 of the said Act, inasmuch as, a promise was held out to the petitioner that it will not be liable to pay any additional duty under section 3 of the Customs Tariff Act on the import of such capital goods subject to fulfilling the export obligation - Thus, Notification No.26/2017-Cus dated 29th June, 2017, to the extent it limited the exemption from payment of additional duty under section 3 of the Customs Tariff Act to subsections (1), (3) and (5) thereof, is repugnant to the policy declared by the Central Government under Chapter 5 of the Foreign Trade Policy 2015-2020 - though the exemption notification has been issued under section 25 of the Customs Act, it has been issued for the purpose of implementing the EPCG Scheme which holds out a promise that import of capital goods under the scheme would be exempt from payment of additional duty under section 3 of the Customs Tariff Act, therefore, the notification has to be read in the context of the EPCG policy keeping in mind the object envisaged by the policy and not in the strict sense as in the case of a general exemption under section 25 of the Customs Act - In the facts of the present case, import of capital goods under a valid authorisation under the EPCG Scheme was wholly exempt from payment of any additional duty under section 3 of the Customs Tariff Act -The intention of the Central Government while framing the EPCG Scheme was to permit export at zero customs duty - Accordingly, by Notification No.16/2015-Cus dated 1st April, 2015, goods covered by a valid authorisation issued under the EPCG Scheme in terms of Chapter 5 of the Foreign Trade Policy were inter alia exempted from the whole of the additional duty leviable under section 3 of the Customs Tariff Act - However, when the GST regime came into force, while section 3 of the Customs Tariff Act came to be amended by inserting sub-sections (7) and (9) providing for levy of integrated tax and goods and service compensation cess, in the corresponding amendment made in Notification No.16/2015-Cus vide Notification No.26/2017-Cus dated 29th June, 2017, sub-section (7) and sub-section (9) of section 3 were left out - However, within a short time thereafter, vide notification dated 13th October, 2017, Notification No.16/2015- Cus came to be further amended and the imports under EPCG Scheme were exempted from additional duty under subsection (7) and sub-section (9) of the Customs Tariff Act - It is therefore, apparent that it was on account of inadvertence or oversight that while amending notification No.16/2015-Cus dated 1st April, 2015 by Notification No.26/2017-Cus, the words, figures and brackets "sub-section (7) and sub-section (9)" were not inserted and that it was always the intention of the Central Government to exempt imports of capital goods under the EPCG Scheme from payment of additional duty under section 3 of the Customs Tariff Act - Notification No.79/2017 dated 13th October, 2017, therefore, has to be read as clarificatory or curative in nature, inasmuch as, otherwise it would leave a whole class of importers who had imported capital goods, uncovered during the period 1.7.2017 to 13.10.2017, allowing the department to levy additional duty under sub-sections (7) and (9) of the Customs Tariff Act on such imports, despite the fact that the Foreign Trade Policy 2015-2020 envisages imports under the EPCG Scheme at zero customs duty - Under the circumstances, the action of the respondents in levying integrated tax and compensation cess on the import of capital goods by the petitioner under a valid authorisation under the EPCG Scheme, not being in consonance with the Foreign Trade Policy 2015-2020 cannot be sustained - For the same reasons, Trade Notice 11/2018 dated 30.6.2017, to the extent it is stated therein that under Chapter 5 importers would need to pay IGST, is also rendered unsustainable - Consequently, subject to fulfilment of the conditions contained in the Foreign Trade Policy, 2015-2020 and the exemption Notification No.16/2015-Cus dated 1st April 2015 as amended from time to time, the petitioner would continue to enjoy exemption from payment of additional duty under sub-section (7) and sub-section (9) of section 3 of the Customs Tariff Act even during the period 1.7.2017 to 13.10.2017 and is, therefore, entitled to refund of the additional duty paid by it under sub-sections (7) and (9) of section 3 of the Customs Tariff Act - Petition allowed: High Court [para 10, 13, 14, 23, 24, 25, 26, 30, 31, 34, 38]

Conclusion: Amendment of Notification No.16/2015-Cus vide Serial No.1 of Notification No.79/2017 dated 13th October, 2017, would also apply to imports made during the period 1.7.2017 to 13.10.2017 - Trade Notice 11/2018 dated 30.6.2017 to the extent it is stated therein that under Chapter 5 importers would need to pay IGST is hereby quashed and set aside - The impugned order-in-original dated 29.9.2018 is hereby quashed and set aside and it is held that the petitioner is entitled to refund of the amount of Rs.2,38,83,203/- paid by it towards IGST with interest at the statutory rate: High Court [para 42]

- Petition allowed: GUJARAT HIGH COURT

2020-TIOL-330-CESTAT-MUM

Nirmal Agarwal Vs CC

Cus - Bombay High Court in case of Sunil Gupta - 2014-TIOL-1949-HC-MUM-CUS [SLP filed has been dismissed] held that DRI Officers have the jurisdiction to issue the Show Cause Notice - Appellant, C/437/2012, in the matter of appeal filed in the year 2012, has since then never been represented at the time of hearing thereafter despite the notice - Appellant in Appeal No C/438/2012 also has not been appearing during the hearing of appeal on appointed and notified date - Hence Appeals are dismissed for non prosecution in terms of Rule 20 of CESTAT Procedure Rules, 1982: CESTAT [para 4.1, 4.2, 5.1]

Cus - It is quite evident that neither in Show Cause Notice nor adjudication a finding has been recorded that these persons [Appeals C/454, 459/2012] were in knowledge of the export fraud being committed by the other co-noticees - Without bringing on record any evidence to show that these persons have acted beyond their normal business requirements or had the knowledge of the fraud being committed, they cannot be held liable for aiding or abetting the fraud - penalty imposed under Section 114(i) and 114(iii) is not maintainable: CESTAT [para 4.6, 5.1]

- Appeals disposed of: MUMBAI CESTAT

HIGHLIGHTS (SISTER PORTAL)

TII

TP - Extended credit on trade receivables constitutes international transaction u/s 92: ITAT

TP - TPO not to suggest TP adjustment by charging interest on interest-free loan, when such loan been converted into share application money: ITAT

TIOL CORPLAWS

Arbitration - Juridical seat of arbitration is designated at New Delhi in deed, then New Delhi Court will have jurisdiction to entertain petition, even though cause of action has arisen in Ghaziabad: HC

FEMA - Penalty order due to contravention of FERA relating to restriction on payments is not sustainable solely on basis of retracted statement: HC

Companies Act - No civil suit is maintainable before Courts on question of share transfer agreement where CLB has already passed interim directions to maintain status quo of shareholding pattern of company: NCLAT