2020-TIOL-NEWS-060 Part 2, Dated: Thursday, March 12, 2020

2020-TIOL-NEWS-060 Part 2 | Thursday March 12, 2020

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DIRECT TAX


	2020-TIOL-555-HC-DEL-IT Ericsson India Pvt Ltd Vs Addl.CIT Whether denial of refund claim by an assessee can be sustained, where no cogent reasons are recorded to justify withholding of the same, more so where such refund is otherwise due to the claimant - NO: HC - Assessee's writ petitions allowed: DELHI HIGH COURT 2020-TIOL-337-ITAT-DEL ACIT Vs NS Software Whether in absence of satisfaction note assessment u/s 153C in concluding that the AO of the searched person is satisfied that the seized documents belong to a person other than the searched person, assessment u/s 143(3) is void ab initio - YES: ITAT - Revenue's appeal dismissed: DELHI ITAT 2020-TIOL-336-ITAT-DEL ITO Vs Superior Films Pvt Ltd Whether assessee enjoys statutory protection if reassessment proceedings are initiated after expiry of four years from end of relevant AY and Revenue fails to establish that income escaped assessment due to failure of assessee to fully ad truly disclose material facts necessary for assessment - YES : ITAT - Revenue's appeal dismissed: DELHI ITAT 2020-TIOL-553-HC-AHM-IT PR CIT Vs Akshat Shah Whether if assessee has agreed for addition to settle matter, no interference in order passed by Settlement Commission is called for - YES : HC - Revenue's petition dismissed: GUJARAT HIGH COURT 2020-TIOL-552-HC-MUM-IT PR CIT Vs Jakharia Fabric Pvt Ltd Whether disallowance for bogus purchases should be reduced to extent of profit element embedded in these purchase - YES: HC -Appeal dismissed: BOMBAY HIGH COURT

GST CASES

2020-TIOL-554-HC-KERALA-GST

Phoenix Rubbers Vs CTO

GST - 4th respondent had issued notice dated 13.1.2019 to the petitioner proposing to cancel the registration under Sec. 29(2)(c) of the CGST Act on account of the alleged non filing of the returns for a continuous six months' period - Thereafter, the 4th respondent has passed the impugned order ordering the cancellation of registration of the petitioner firm under Sec. 29(2) (c) of the CGST Act – Petitioner submits that there was only 5 months' continuous default and not the mandatory six months' continuous default in filing the returns as envisaged in Sec. 29(2)(c) of the CGST Act and, therefore, the impugned order is illegal and ultra vires and is liable to be interdicted by this Court; that order directing cancellation of the registration of the petitioner was rendered on 10.12.2019 and that on 10.12.2019, the petitioner had filed returns for the month of May, 2019.

Held : Court would certainly say that the 4th respondent cannot be faulted for having passed an order in the nature of Ext.P-3 on 10.12.2019, because he was totally unaware that the petitioner would indeed file return for the month of May, 2019 on 10.12.2019, etc. - Sec. 29(2)(c) mandates power for the cancellation of registration in a case where there is continuous six months' default on the part of the assessee in filing the returns - Since the competent official is obliged to issue a notice in the nature of Ext.P-1 before he passes final orders, it goes without saying that the requirement of 6 months' continuous period should be fulfilled both at the time of issuance of the abovesaid notice in terms of the proviso to Sec. 29(2) of the CGST Act read with Rule 22 of the CGST Act, but also at the stage of passing the final order cancelling the registration as per Sec. 29(2)(c) - In the instant case, the jurisdictional fact regarding the six months' continuous default on the part of the assessee is certainly fulfilled at the time of issuance of Ext.P-1 show cause notice dated 13.11.2019 - Whereas, the said vital requirement of jurisdictional fact is non-existent as on the date of issuance of the impugned Ext.P-3 cancellation order dated 10.12.2019 - If that be so, it is only to be held that the impugned order as per Ext.P-3 is illegal and ultra vires and is liable to be interdicted by this Court - Accordingly, it is ordered that the impugned Ext.P-3 order will stand quashed - Writ Petition (Civil) stands disposed of: High Court [para 9, 11, 12]

- Petition disposed of: KERALA HIGH COURT

2020-TIOL-13-NAA-GST

Director General Of Anti-Profiteering Vs Mcnroe Consumer Products Pvt Ltd

GST - Anti-Profiteering - s.171 of the CGST Act, 2017 - Applicant has alleged profiteering by the respondent in respect of supply of Deodorant 'Wild Stone Deo Chrome BX 120ml' - applicant alleges that the respondent had not passed on the benefit of reduction in GST rate from 28% to 18% w.e.f 15.11.2017 (41/2017-CTR) inasmuch as they had increased the base price of the said deodorant to maintain the same MRP of Rs.250/- - DGAP had in its first report computed the profiteered amount as Rs.21,94,96,828/- but in their supplementary report dated 27.02.2020 revised the same to Rs.21,84,79,790/- after re-examining some of the contentions of the respondent.

Held: DGAP has not acted as a price regulator but only computed the profiteered amount, the benefit of which the respondent has not passed on to his customers - DGAP has neither examined the process of price fixation adopted by the respondent nor asked him to fix his prices as per his directions and hence there has been no infringement of fundamental right of the respondent to decide his selling price - respondent has full freedom to fix his prices, however, he cannot appropriate the benefit of tax reduction or refuse to pass on the benefit of tax reduction - uncanny increase by the respondent of the base prices on the intervening night of 14/15.11.2017 was made with the sole intention of denying the benefit of tax reduction to the buyers - loss making concerns are also legally bound to pass on the benefit of tax reduction and they cannot appropriate the same against their losses - objective of the anti-profiteering provisions is to protect the interest of the customers, therefore, it is the responsibility of the anti-profiteering mechanism to ensure that the benefits of tax reduction and ITC are passed on to the unorganised, voiceless and vulnerable customers and the suppliers are not allowed to misappropriate them - respondent cannot deny the benefit of tax reduction by taking shelter of Article 19(1)(g) of the Constitution as DGAP has not interfered with the right of the respondent to fix the prices of his products - Mere charging of GST @18% post rate reduction does not amount to passing on the benefit of rate reduction when the base price has been increased to offset the benefit - comparison of the base prices made by the DGAP is correct - investigation shows that the respondent had increased his base prices and, therefore, any reduction in the MRPs which was not commensurate with the rate reduction does not amount to passing on of the benefit of such reduction - realignment of margins cannot be compared with the discounts as no dealer was bound to offer discounts from his margins - no netting off can be applied in the cases of profiteering as the benefit has to be passed on to each customer which has to be computed on each SKU - since the respondent has not reduced his prices commensurately even once after the rate reduction was announced on 15.11.2017, sales made by the respondent till the date of 15.03.2019 have been rightly considered by the DGAP for computing the profiteered amount - respondent was legally not required to collect the excess GST and, therefore, he has not only violated the provisions of the CGST Act but has also acted in contravention of the provisions of s.171(1) of the Act as he has denied the benefit of tax reduction to his customers by charging excess GST and had he not charged the excess GST the customers would have paid less price while purchasing goods from the respondent and hence the above amount has been rightly included in the profiteered amount - DGAP has excluded the sales returns of various products and has revised the profiteered amount quantum, therefore, no grievance of respondent remains - In conclusion, the profiteered amount is determined as Rs.21,84,79,790/- as computed by the DGAP - Authority orders the respondent to reduce his prices commensurately in terms of rule 133(3(a) of the Rules and also directs the respondent to deposit the amount of Rs.21,84,79,790/- in the Consumer Welfare Fund of the Central and the State government concerned as the recipients are not identifiable, as per the provisions of rule 133(3)(c) of the Rules along with interest @18% within a period of three months - penalty is imposable in terms of s.171(3A) of the CGST Act, 2017 for the above contravention and SCN in this regard is required to be issued - Commissioners of CGST/SGST are directed in terms of rule 136 of the Rules to monitor this order and submit report within four months: NAA

- Application disposed of: NAA

2020-TIOL-11-NAA-GST

Director General of Anti-Profiteering Vs Bajaj Electricals Ltd

GST - Anti-Profiteering - s.171 of the CGST Act, 2017 - Applicant alleges profiteering by the respondent in the supply of 'Bajaj Majesty MX20 Steam Iron' inasmuch as it is contended that the respondent increased the MRP of the product from Rs.1099/- to Rs.1405/- or Rs.1520/- when the GST rate was reduced from 28% to 18% w.e.f 27.07.2018 by notification 18/2018-CTR; that since the respondent had not passed on the benefit of reduction in the GST rate, the respondent had profiteered - screen shots captured on the website 'shop.bajajelectricals.com and Amazon were also submitted - Respondent in their reply to the DGAP submitted that the applicant had only taken screenshots from the website and there was no other evidence like tax invoice to substantiate the applicant's claim; that notwithstanding the screenshot that showed MRP as Rs.1099/- it is fact that the MRP of the impugned product had changed from Rs.1099/- from June 2015 itself; that some old stock of the product carrying MRP of Rs.1099/- was lying unsold; that once the old stock was liquidated the MRP of Rs.1520/- was updated on their website; that the MRP on the website sometimes took time to be updated as majority of the sale was done through distributors and website sale was negligible - DGAP in its report has observed that the respondent had not increased the base prices of the product when the GST rate was reduced from 28% to 18% w.e.f 27.07.2018, however, the respondent had increased the base price of the product from Rs.676/- to Rs.696/- in the month of October 2018 as was the respondent's business practice of revising base price of the product twice a year, once at the start of the year and the second generally near October - November being the festival season; that, therefore, since there was no profiteering in the complained product, the allegation of profiteering by applicant was not sustainable.

Held: Authority has perused the invoices of the product dated 06.07.2018 and 03.08.2018 and it is observed that the base price of the product was kept unchanged by the respondents despite the reduction in the rate of tax - Authority does not find the present case to be a case of profiteering as had been alleged by the applicant - applicant has also agreed with the DGAP's conclusion recorded in their report dated 06.09.2019 as evident from his email dated 30.09.2019 - Application is, therefore, dismissed: NAA

- Application dismissed: NAA

2020-TIOL-16-AAAR-GST

Konkan Lng Pvt Ltd

GST - AAR had noted that s ection 17(5)(d) of the CGST Act laid down that ITC shall not be available 'when goods or services or both are received by a taxable person for construction of an immovable property (other than plant or machinery)'; that since “breakwater wall" is an immovable property, a fact accepted by applicant and, therefore, cannot be considered as a 'plant' in view of Explanation to s.17(6) of the Act; that to qualify for inclusion in the term 'plant', it must be established that it is impossible for the re-gasification plant to function without the "breakwater wall" - however, the re-gasification plant is already functioning without complete "breakwater wall" in place; that since the "Breakwater wall" is a civil structure and is not going to be used for rendering outward supply of goods or services or both, AAR held that ITC is not admissible in respect of supplies received of goods/services in relation to the construction of breakwater wall - Appeal filed against this ruling.

Held: Term 'plant and machinery' should be interpreted to mean a place where certain commercial/manufacturing activities/processes of production are carried out with the help of inputs - In the present case the 'breakwater wall' or the Accropodes that are an essential part of it certainly does not qualify as 'plant and machinery' since as per explanation to s.17(5)(d) of the Act the term 'plant and machinery' covers apparatus, equipment and machinery - Breakwater wall constructed on the sea to protect the ship from high waves can hardly be called machinery or apparatus or equipment, therefore, since the 'breakwater wall' does not come under the definition of plant and machinery, there seems to be no purpose in examining whether it is used for making outward supplies - from the scope of the work documents it is evident that 'breakwater wall' not only comprises piling of Accropodes on top of each other but involves extensive civil work and foundation laying in order to build the breakwater wall and the accropodes is only a part of it and, therefore, it is an immovable structure though not plant and machinery - Therefore, even assuming that the structure is a plant and machinery (which it is not) it will be excluded by virtue of it being a civil structure - the terminology itself says that it is a wall - Therefore, the order passed by AAR is confirmed: AAAR

- Appeal dismissed: AAAR

INDIRECT TAX

SERVICE TAX

2020-TIOL-556-HC-DEL-ST

Indian Institute of Planning Management Vs CST

ST - Commercial Training or Coaching - CESTAT, while allowing the Revenue appeal had held that only those activities which are excluded by a specific and legislated exclusionary clause would alone be outside the fold of the taxable activity; that there is no scope to exclude "Academic Courses" conducted by respondent IIPM from the purview of Service tax levy; that the Larger Bench in Great Lakes Institute of Management Ltd. - 2013-TIOL-1480-CESTAT-DEL-LB had settled the matter; that even though the tax on Commercial Training or Coaching Centre was levied w.e.f. 01/07/2003, since the respondent IIPM had failed to obtain registration or file returns or even intimate the Department of the activities undertaken, the Department is fully justified in issuing show cause notice to demand of Service Tax along with interest by invoking the extended period of time - ROM application was filed aggrieved by the observation in paragraph 14 of the CESTAT in its final order dated 20th March, 2018 that the plea against invoking the extension of time period had not be taken by IIPM either before the adjudicating authority or the CESTAT, however, the said application was dismissed - Appeal filed against this order by IIPM before the High Court.

Held: In light of the apex court decision in Bharat Bijlee Ltd. - 2006-TIOL-67-SC-CX , it is amply clear that the failure to consider material evidence on record, would amount to mistake apparent on the face of record, and hence, the failure of the CESTAT to take into consideration the plea of the appellant regarding extended time period, at numerous instances, amounts to mistake apparent on the face of record - In such a circumstance, Bench cannot uphold the impugned order - Order is set aside and the matter is remanded to CESTAT for fresh consideration of the application seeking rectification of mistake - Appeal is allowed and disposed of: High Court [para 17 to 20]

- Matter remanded: DELHI HIGH COURT

2020-TIOL-437-CESTAT-AHM

Shree Hindustan Fabricators Vs CCE & ST

ST - Appellant is engaged in provision of service under the category of Works Contract Service, Commercial and Industrial Construction Service and Business Auxiliary Service - Appellants were issued Show Cause Notice demanding Service Tax under the Erection, Commissioning or Installation Service (ECIS) in respect of services provided by them to local authorities for laying of pipelines - as demands were confirmed, appeal filed before CESTAT - Primary defense of the appellant is that the activity undertaken by them does not fall under the category of ECIS; that since the demand has been made under ECIS only, no demand under any other classification such as Commercial or Industrial Works Construction Service or Works Contract Service can be sustained.

Held: In view of the decision in INDIAN HUME PIPE CO. LTD. - 2008-TIOL-1665-CESTAT-MAD upheld by Madras High Court - 2015-TIOL-2049-HC-MAD-ST the service provided by the appellant is not covered under ECIS - other arguments of revenue regarding classification of services under Works Contract Service or Commercial or Industrial Construction Service become irrelevant as no demand under the said head has been raised by revenue - insofar as dispute relating to service tax under the category of Business Auxiliary Service, the appellant submits that the specific sub-clause of the Business Auxiliary Service under which tax is sought to be demanded has not been identified - Bench finds that in paragraph 6.1 of the SCN specific clarity of charge has been made to levy Service Tax under the category of Business Auxiliary Service and no prejudice is caused to the appellant - on account of this the demand under the head of Business Auxiliary Service is confirmed - interest and penalty in respect of Business Auxiliary Service is also upheld - The demand of duty, interest and penalties in respect of demand under ECIS category is set aside - Appeals partly allowed: CESTAT [para 5.3, 5.4, 6, 6.1, 7]

- Appeals partly allowed: AHMEDABAD CESTAT

CENTRAL EXCISE

2020-TIOL-557-HC-MAD-CX

CGST & CE Vs Glovis India Pvt Ltd

CX - Assessee is engaged in export of parts / components of motor vehicles and for the purpose of export of goods they procured inputs as well as input services and availed facility of CENVAT credit on such inputs and input services - Assessee also claimed rebate under Rule 18 of CER, 2002 in respect of duties paid on goods exported by them - A SCN was issued alleging that activity undertaken by assessee does not amount to manufacture in terms of Section 2(f)(iii) of CEA, 1944 and, therefore, CENVAT credit availed is irregular and liable to be recovered along with imposition of penalty and interest - Commissioner confirmed the demand of of Rs.9,24,74,806/- and also imposed equivalent penalty and interest - In appeal, the CESTAT held that parts / components and assemblies of vehicles exported by assessee fall under Chapter Heading 8712, 8713, 8715 and 8716 and are covered under Third Schedule of CETA, 1985 and, therefore, the activities undertaken by the assessee would amount to manufacture within the meaning of s.2(f)(iii) of CEA, 1944 and, therefore, the CENVAT credit availed and rebate claimed is proper and moreover invoking the extended period of limitation was untenable - Aggrieved, Revenue is in appeal before the High Court.

Held: It is quite obvious that clause (iii) was inserted in the definition of "manufacture" in Section 2(f) of the Act by Finance Act, 2003 with effect from 01.03.2003 which clearly, by a deeming fiction, included in III Schedule the activities which only involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers etc. - In view of such extended definition now incorporated in the Statute itself, Bench does not find any justification for the Revenue to raise a question on this as to whether the activity carried out by the Assessee will amount to manufacture or not - since the question of excisability under Central Excise Act and dutiability under the Customs Act are the basic questions at the root of the matter, before deciding the questions of rate of duty and valuation of goods, which as per expanded scope of 35L of the Act, should naturally now lie before the Supreme Court of India - under these circumstances, Bench upholds the objection of the Respondent/Assessee raised in the present case and with a liberty to the Appellant/Revenue to file an Appeal before the Supreme Court of India raising such questions of law - Appeals filed by Revenue are dismissed as not maintainable: High Court [para 12, 13, 17, 19, 20]

- Appeal dismissed: MADRAS HIGH COURT

2020-TIOL-438-CESTAT-HYD

Hindustan Petroleum Corporation Ltd Vs CCT

CX - HSD is stored in a single tank whether it is manufactured in the appellant's own refinery or has been bought from others, therefore, physical separation is impossible - The only separation is a notional separation in the ERP system - Appellant claimed refund of duty paid at the refinery on the ground that HSD was supplied to M/s Transtroy India Ltd (TIL) who is eligible for a partial exemption of duty under Notification No.108/1995-CE as per which the basic excise duty is fully exempted but the additional duty of excise has to be paid - The original authority has rejected the refund claim because the documents which were supplied along with the refund application did not substantiate the claim of the appellant that duty of refund sought had been paid - The original authority cannot be faulted for finding so nor can the first appellate authority for upholding the rejection on this ground - The claim of refund in the application was not of duty paid by M/s Reliance Petroleum Ltd (RPL) - A plain reading of the exemption notification shows that the goods which are supplied to the specified agencies are exempted from the payment of basic excise duty subject to some conditions mentioned in the exemption notification - There is nothing in the notification to say that a trader who bought goods on payment of duty from another manufacturer and in turn supplies to one of the eligible parties will also be eligible for refund under the exemption notification - In view of the principle of strict construction of the exemption notification as laid down by the Apex Court in the case of Dilip Kumar & Co. - 2018-TIOL-302-SC-CUS-CB, Bench finds that there is no explicit exemption to the goods which have been bought by the appellant and in turn supplied to an eligible party - At any rate, the application was not seeking refund of duty paid by M/s RPL but of duty paid by their refinery - Such HSD having not been supplied to M/s TIL, the question of refund does not arise - if the claim is for the duty paid by M/s RPL and borne by the appellant, the assessment of duty by M/s RPL forms the basis for the refund and if that assessment was done wrongly without considering that the goods will be subsequently be supplied to an organisation eligible for exemption notification, then such assessment must first be challenged before the refund can be sanctioned as laid down by the Larger Bench of the Apex Court in the case of ITC Ltd - 2019-TIOL-418-SC-CUS-LB impugned order is upheld and appeal is rejected: CESTAT [para 11 to 13]

- Appeal rejected: HYDERABAD CESTAT

CUSTOMS

2020-TIOL-436-CESTAT-AHM

Hans Industries Ltd Vs CC

Cus - Appellant had claimed exemption Notification No. 21/2002-Cus under serial No. 200, which extends the benefit of nil rate of duty for Melting scrap of iron and steel falling under Custom CH. 7204 - case of the department is that as per Customs Tariff, "HR Side Cut Trimmings" are classifiable under CTH 7204 4100 which specifically applies to "Trimmings, Savings, Clips, Milling Waste, Saw Dust, Filing, Trimmings and Stampings whether or not in Bundles" and such goods are chargeable to BCD @ 5% - It was also alleged that due to mis-declaration the value was also wrongly declared, therefore, the transaction value for the subject goods is also liable for rejection - Accordingly, it was proposed that mis-declared goods be confiscated, the value of imported goods should be taken as USD 475 CIF PMT as against declared value of @ US. $ 270/-PMT, on the basis of contemporaneous import price of "HR Side Trimmings" - adjudicating authority confirmed the charges proposed in the SCN and imposed a fine of Rs. 4 lakhs, penalty of Rs. 2 Lakhs and ordered for reassessment @ 475 USD PMT - except reducing the fine and penalty, the Commissioner(A) upheld the order of the adjudicating authority and, therefore, importer is in appeal before CESTAT.

Held: Bench observes that the appellant is a manufacturing unit and using the imported material for melting thereof and use in the manufacture of ingots, therefore, there is no doubt that the goods is melting scrap - Even though there can be a dispute as to whether it is falling under CTH 7204 4100 or 7204 4900 but as per the entry No. 200, for the purpose of exemption under notification No. 21/2002-CUS all waste and scrap of 7204, if it is a melting scrap are exempted, therefore, CSH of the goods is not very significant - Even though it is in the nature of "HR Side Cutting" but the same has no other use except for melting and all the melting scrap is covered under exemption notification No. 21/2002-CUS under serial No. 200 - It is not the case of the department that the goods so imported is not scrap but classifiable as HR Coil or Sheet - benefit of exemption is available and since the goods are exempted, there is no implication of valuation or requiring its confiscation and imposition of fine and penalty - impugned order is set aside and appeal is allowed: CESTAT [para 5]

- Appeal allowed : AHMEDABAD CESTAT

HIGH LIGHTS (SISTER PORTAL)

TII

I-T - It is fit case for remand where AO/DRP hold that assessee had a PE in India, without recording independent findings & without considering contention that assessee's employees provided services in India for period less than 90 days: ITAT

I-T - Doctrine of res judicata is inapplicable in income tax matters, Tribunal is even then obliged to allow certain relief to assessee merely because AO permitted same in respect of a different AY, more so where relief allowed is otherwise inadmissible in law: ITAT

TIOL CORPLAWS

Competition - Failure to determine relevant market & dominant position can hold a party in contravention to Section 4: CCI

Companies Act - Absence of any record and non-existence of assets of company, justify order for winding up of company: NCLAT

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