2020-TIOL-NEWS-064, Dated: Tuesday, March 17, 2020

2020-TIOL-NEWS-064 | Tuesday March 17, 2020

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DIRECT TAX


	2020-TIOL-574-HC-KOL-IT Datex Ohmeda India Pvt Ltd Vs ITO On appeal, the High Court finds that the Tribunal erred in not remanding the matter to the CIT(A) to decide the issue upon complying with the formalities u/r 46A(2) and Rule 46A(3). Hence the matter is remanded to the Tribunal to be further remanded to the CIT(A). - Case remanded: CALCUTTA HIGH COURT 2020-TIOL-356-ITAT-AHM Mahadev Enterprise Vs DCIT Whether in the absence of sufficient documentary evidence about nature of interest expenses claimed to be paid on borrowed fund used for purpose of business can be allowed - NO : ITAT - Assessee's appeal partly allowed: AHMEDABAD ITAT 2020-TIOL-355-ITAT-MUM Advance Enzyme Technologies Pvt Ltd Vs ACIT Whether once the initial approval of DSIR in Form 3CM is granted to an R&D facility, then there is no cut off date for approval of such facility & the assessee will be entitled for weighted deduction u/s 35(2AB) as long as the recognition is in force - YES: ITAT Whether just because the deduction claimed by the assessee is not accepted by the AO, cannot lead to a conclusion that the assessee has furnished inaccurate particulars of income which warrants levy of penalty u/s 271(1)(c) - YES: ITAT - Assessee's appeal allowed: MUMBAI ITAT 2020-TIOL-354-ITAT-MUM Standard Chartered Investments And Loans India Ltd Vs DCIT Whether expenditure incurred on refurbishment of leasehold properties will continue to be allowed as revenue expenditure if similar expenses were not disallowed as capital expenses in the preceding AY - YES: ITAT Whether a NBFC is entitled to value its investments in debentures on the principle of cost or market value whichever is lower & claim the difference as deduction due to depreciation under the head of investment & not stock in trade - YES: ITAT - Assessee's appeal allowed: MUMBAI ITAT 2020-TIOL-353-ITAT-KOL New Pooja Jewellers Vs ITO Whether merely because there are problems of time and manpower to conduct verification of records submitted by assessee to prove genuineness of its claim, addition cannot be made by rejecting claim - YES : ITAT - Assessee's appeal allowed: KOLKATA ITAT 2020-TIOL-352-ITAT-BANG Greenpiece Landscapes India Pvt Ltd Vs ITO Whether penalty notice issued u/s 274 is defective if it does not specify as to whether the assessee concealed particulars of income or furnished inaccurate particulars thereof - YES: ITAT - Assessee's appeal allowed: BANGALORE ITAT

GST CASE

2020-TIOL-16-NAA-GST

Director General Of Anti-Profiteering Vs Patanjali Ayurveda Ltd

GST - Anti-Profiteering - s.171 of the CGST Act, 2017 - Period 15.11.2017 to 31.03.2019 - GST on goods manufactured by respondent was reduced from 28% to 18% and 18% to 12% w.e.f 15.11.2017 - DGAP in its report dated 13.12.2018 had stated that the respondent had not passed on the benefit of reduction in the tax rates to its recipients by way of commensurate reduction in prices and thus contravened the provisions of s.171 of the Act - Authority, after considering the submissions of the respondents had found discrepancies in the report of the DGAP and had, therefore, vide its order dated 14.03.2019 directed the DGAP to again conduct a detailed investigation into the matter after consideration of the submissions made by the respondent - DGAP has submitted a report on 13.09.2019 and concluded therein that the respondent had profiteered by an amount of Rs.1,03,20,08,903/- by comparing the actual invoice-wise based prices of impacted products sold during the period 15.11.2017 to 31.03.2019 - the respondent inter alia submitted that the DGAP had an incorrect understanding of the provisions of s.171 of the Act and had followed an incorrect approach to calculate the alleged profiteering - they also pin-pointed the instances where the profiteered amount was wrongly calculated by the DGAP - this submission of the respondent was also forwarded to the DGAP for its report and another report dated 06.01.2020 was submitted by the DGAP correcting the arithmetical mistakes etc. and arriving at the revised profiteered amount figure as Rs.75,08,64,019/- - respondent also made their submissions on this revised computation on 10.02.2020.

Held: Allegations made by the respondent regarding the unconstitutionality of the Authority inasmuch as there being no Judicial Member on the Bench is wrong as the Authority has been constituted u/s 171(2) of the CGST Act, 2017 - The Parliament, State Legislatures, the Central and State Governments and the GST Council in their wisdom have not thought it fit to provide for a Judicial Member in this Authority and such a Member has also not been provided in the other Authorities such as the TRAI or the Authorities on Advance Rulings on the CEX and the GST, hence allegations made by respondent regarding the unconstitutionality of the Authority are wrong - Computation of the commensurate reduction in prices is purely a mathematical exercise which is based on certain parameters and hence it would vary from SKU to SKU or unit to unit and hence no fixed methodology can be prescribed to determine the amount of benefit which a supplier is required to pass on to a recipient or for computation of the profiteered amount - respondent was not legally 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 recipients by charging excess GST - any benefit of tax rate reduction passed on to a particular recipient or customer cannot be appropriated or adjusted against the benefit of tax rate reduction due to another recipient or customer, hence the methodology of ‘netting off' cannot be applied in the present case as customers have to be considered as individual beneficiaries and cannot be compared with dumped goods and netted off - contention of the respondent that the profiteered amount should not be credited to the Consumer Welfare Fund but should be given back to his customers is not sustainable as in the instant case, it is not possible to trace each and every consumer of the product which is manufactured by the respondent, therefore, to prove the legislative intent of the law the profiteered amount must be used for the welfare of the consumers and must be deposited in the Consumer Welfare Fund in the absence of passing on the benefit to the actual consumers of the products - respondent cannot claim protection under Article 14 when he has violated the above Article himself by denying the benefit of tax reduction to millions of customers - contention of the respondent that the investigation is violative of Article 19(1)(g) of the Constitution is also untenable as the Authority or the DGAP has not acted in any way as a price controller or regulator as they do not have the mandate to regulate the same - Authority has only been mandated to ensure that both the benefit of tax reduction and ITC which are sacrifices of precious tax revenue made from the kitty of the Central and State Governments are passed on to the end consumers who bear the burden of tax - intent of this provision is the welfare of the consumers who are voiceless, unorganised and vulnerable and the Authority is entrusted with the responsibility of ensuring that both the above benefits are passed on to the general public as per the provisions of s.171 read with rule 127 and 133 of the Rules - Authority has nowhere interfered with the business decisions of the respondent and, therefore, there is no violation of Article 19(1)(g) of the Constitution - based on the above facts, the profiteered amount is determined as Rs.75,08,64,019/- as per the provisions of rule 133(1) of the Rules as computed vide the revised report dated 06.01.2020 - respondent is directed to deposit the said amount in the Consumer Welfare Fund of the Central and State Governments concerned as the recipients are not identifiable, as per the provisions of rule 133(3)(c) of the Rules along with 18% interest within a period of three months - on account of the above contravention, the respondent is liable to be imposed with penalty in terms of s.171(3A) of the Act and in which regard a show cause notice is required to be issued - Commissioners of CGST/SGST are directed, in terms of rule 136 of the Rules, to monitor this order under supervision of the DGAP and ensure that the profiteered amount is deposited in the CWFs as directed and a compliance report is to be submitted within four months: NAA

- Application disposed of: NAA

INDIRECT TAX

SERVICE TAX

2020-TIOL-585-HC-MAD-ST

Indriya Construction Company Vs Additional Commissioner

ST - The petitioner has challenged a SCN dated 23.10.2019 on the point that the procedure set out for adjudication/assessment has not been followed, insofar as there is no pre-consultative process that has been followed in this case.

Held: As per the order passed on 16.12.2019 by this Court at the time of admission, the petitioner appeared before the second respondent on 02.01.2020 and after hearing the petitioner, a pre-adjudication consultation has been afforded and a pre-consultative order was passed by the Assessing Officer on 9.1.2020 - he has finally come to the conclusion that there could be no amicable resolution of the matter inter se the parties - evidently, the pre-adjudication/consultation envisaged is with the Assessing Officer and not with the Audit Commissioner and this error has been rectified by order dated 9.1.2020 - to this extent, paragraph 11 of the impugned SCN is set aside - with the regularization of the procedure, proceedings under the impugned SCN will continue - the petitioner is at liberty to file objections to the SCN within two weeks and proceedings will be completed by the Assessing Officer after hearing the petitioner in person - this writ petition is disposed in the aforesaid terms: High Court [para 3, 5, 6, 7]

- Writ Petition disposed of: MADRAS HIGH COURT

2020-TIOL-462-CESTAT-MUM

Bhaurao Chavan Ssk Ltd Vs CCE & ST

ST - Issue involved is whether the appellants are liable to pay Service Tax on the rent received by them for allowing the harvesting contractors to use the Appellant's bullock carts with tyres without any bullocks or driver for transporting the sugarcane to the sugar factories?

Held: Undoubtedly the Appellants have supplied the Tyre Bullock Carts without bullocks or driver to the recipient of service i.e. farmers - The farmers have to engage their own bullocks and drivers for utilising the bullock carts - If the bullocks are of the farms and the drivers are also appointed by them then the right of possession and effective control cannot be said to be rest with the Appellants - Merely because in the agreement some route has been suggested by the Appellants which the farmers have to follow or that if during the temporary stoppage of work in the sugar factory, the employee or the labourer of the contractor/farmer are not permitted to engage in any other work or are not paid remuneration for that day, does not make them under the effective control of the Appellants - it is clear that the appellant has delivered the effective possession and control of the Tyre Bullock carts to the farmers/contractors - A plain reading of Section 66D(d)(iv) ibid would make it clear that the services relating to agricultural or agricultural produce by way of renting or leasing of agro machinery is outside the purview of Service Tax - Undoubtedly sugarcane is an agricultural produce and as per various dictionary meanings tyre bullock cart very well falls within the definition of agro or agricultural machinery - Tribunal has in the matter of Mukteshwar Sugar Mills Ltd. - 2018-TIOL-3158-CESTAT-MUM held that 'Renting of Bullock Carts' during harvesting seasons for procuring sugarcane from fields does not come within the purview of 'Supply of Tangible Goods for use Service' - Tyre Bullock Carts without bullocks and driver, provided by the appellant on rent for the purposes relating to agriculture/agricultural produce without having any right of possession or effective control of the Appellants over them, falls under negative list as discussed above and is not liable to Service Tax under the category of Supply of Tangible Goods Service - appeal allowed with consequential relief: CESTAT [para 5, 6]

- Appeal allowed: MUMBAI CESTAT

2020-TIOL-461-CESTAT-MAD

Nilja Shipping Pvt Ltd Vs CCE

ST - The assessee-company is engaged as freight forwarders and provide worldwide containerised and conventional cargo transportation and logistics services - Upon audit, it was noticed that besides collecting various charges such as documentation charges, examination charges, freight charges, appellants also collected amount towards purchasing of cargo space from shipping lines - The Revenue opined that such activity was classifiable as Business Support Service and so attracted service tax - SCN was issued raising demand with interest under such heading along with penalty - On adjudication, the demands were confirmed - Hence the present appeal.

Held: From the facts at hand, it is seen that the activity in quesion is purchase and sale of cargo space - The amount received for such activity is a profit earned for purchase and sale of cargo space - Besides, the Tribunal in Surya Shipping Vs CCE & ST Rajkot held that sale and purchase of space is not a service - If not a service, then there is no question of considering it to be an input service so as to incude the charges in the taxable income - The amount received is nothing but profit from sale - Hence the activity not being a service cannot be subjected to levy of service tax: CESTAT

- Assessee's appeal allowed: CHENNAI CESTAT

CENTRAL EXCISE

2020-TIOL-577-HC-MUM-CX

PR CCGST Vs Patodia Filaments Pvt Ltd

CX - The assessee-company is engaged in manufacturing Polyester Texturised Yarn and Grey Fabrics - It availed Cenvat credit for the inputs used in the manufacture of final products - The assessee also took benefit of the Notfn dated 9.7.2004 & after 01.03.2007, the assessee reversed balance cenvat credit - The assessee paid duty on finished goods, reversal of credit on stocks and clearance of wastage and capital goods, from the CENVAT account - An SCN was issued to the assessee, alleging failure to reverse credit as per Rule 11(3) - On adjudication, such demands were confirmed with penalty - Later the Tribunal settled the issue in favor of the assessee - Hence the Revenue's appeal.

Held: Perusal of Rule 11(3) shows that stipulation of lapsing is included in Clause (ii) and not in Clause (i) - Both clauses are separated by hyphen and use of the word 'or' - Secondly in the Rule 11(3) (i) it is the option given to the manufacturer or producer for obtaining exemption - In category (ii) there is no such option but a reference is made for final product which has been exempted absolutely under Section 5A of the Act - Therefore, these two categories being distinct, the placement of stipulation cannot be considered as a mere draftsman's error - Hence no substantial question of law arises for consderation: HC

- Revenue's appeal dismissed: BOMBAY HIGH COURT

2020-TIOL-460-CESTAT-HYD

ONGC Ltd Vs CCT

CX - The appellants, manufacturers of petroleum products, were liable to pay CE duty @Rs.1.46/Ltr which was enhanced by CE notification no.22/2014-CE dated 12.11.2014 to Rs.2.96/Ltr - it was further enhanced to Rs.3.96/Ltr by notification no.24/2014 dated 2.12.2014 - the appellants paid the duty at the enhanced rate w.e.f. the date of issue of the notifications - thereafter, they realized that in terms of section 5A of the CEA, they are required to pay duty as per the notification only when it comes into force -they filed applications seeking refund of the excise duty paid which was sanctioned by the original authority -on appeal by the revenue, the first appellate authority set aside the order of the lower authority and allowed the department's appeal following the ratio of the judgment of the Apex Court in the case of Ganesh Das Bhojraj -2002-TIOL-233-SC-CUS-LB holding that the exemption notification comes into force from the date of the notification itself - appeal before CESTAT.

Held: Both the conditions mentioned in section 5A(5) of the CEA have to be fulfilled for any notification to come into force - in this case, the second condition was not fulfilled during the relevant period and, therefore, the exemption notifications had not come into force - consequently, the appellants were not required to pay duty at the enhanced rate during the relevant periods and, therefore, any excess duty which they paid was refundable - accordingly, the order of the lower authority sanctioning the refunds was correct and it was incorrectly set aside by the first appellate authority - accordingly, the appeals are allowed and the impugned orders are set aside : CESTAT [para 4, 5]

- Appeals allowed: HYDERABAD CESTAT

2020-TIOL-459-CESTAT-MAD

Honda Cars India Ltd Vs CCE

CX - Issue is whether the activities of opening the imported stock, inspection of the same, quality checks and repacking with affixation of sticker amounts to 'manufacture' within the meaning of Section 2(f)(iii) of the Central Excise Act, 1944? - Bench had decided the very same issue in the appellant's own case for a different period [Final order no. 41472 to 41476 of 2018 dated 17.05.2018] and held that the activity undertaken by the appellant amounts to "manufacture" in terms of s.2(f)(iii) of CEA, 1944 and, therefore, availment of CENVAT credit and payment of central excise duty by valuing the packed goods in terms of s.4A of the CEA, 1944 was legal and proper - Since there is no change with regard to facts or law and therefore, the above ruling applies to the current appeals as well, on all fours - impugned order denying the CENVAT credit is set aside and the appeals are allowed with consequential benefits: CESTAT [para 7, 8]

- Appeals allowed: CHENNAI CESTAT

CUSTOMS

2020-TIOL-586-HC-MAD-CUS

Master Cargo Services Vs CC

Customs Broker Licensing Regulations [CBLR] - Suspension/revocation of the broker licence - this intra Court appeal has been preferred against the order passed by the Writ Court in W.P.No.30765 of 2014 by a common order dated 19.01.2015 along with yet another writ petition in W.P.31096 of 2014 - vide impugned order, the Writ Court disposed of the writ petitions directing the respondents/authority concerned to consider the case of the petitioner with regard to grant of licence on the application dated 17.10.2014 which is pending before them and pass orders within a period of three weeks - the petitioner was directed to co-operate with the enquiry on the notice dated 17.11.2014.

Held: The said direction does not require or warrant any interference from this Court, as the appellant licensee has to necessarily appear before the authorities concerned and whatever ground he wants to urge, can be put forth before the authorities concerned, which should be considered and decided by the Revenue and, accordingly, a decision can be made whether the Customs Broker license to the appellant afresh can be given or not - in that view of the matter, this Court is not inclined to interfere with the order passed by the Writ Court - therefore, this Writ Appeal deserves to be rejected - however, since it had not been made clear before this Court as to whether the enquiry has been conducted pursuant to the notice issued in this regard by the Revenue, this Court is inclined to give an opportunity to the appellant licensee to appear before the authorities concerned and, accordingly, the appellant licensee shall appear before the authorities concerned on 10.3.2020 - it is further directed that once the appellant appears before the revenue / authorities concerned, the case to be put forward by the appellant shall be considered on its own merits and in accordance with law and a reasoned order shall be passed by the Revenue within a period of two weeks thereafter - the Writ Appeal is disposed of, accordingly: High Court [para 8, 9, 10]

- Writ Appeal disposed of: MADRAS HIGH COURT

2020-TIOL-576-HC-DEL-CUS

Suppainah Thiruselvam Vs ADDL CC

Cus - The petitioner was apprehended at the airport during the relevant period, whereupon some grams of Gold were recovered from his possession - The present writ was filed by the petitioner contesting dismissal of its appeal by the Commr.(A) on grounds that the petitioner had not made the mandatory pre-deposit of 7.5% of the penalty imposed, when filing appeal u/s 129E of the Customs Act.

Held: As per the amended provisions of Section 129E of the Customs Act, the petitioner was required to pre-deposit 7.5% of the penalty amount - The petitioner through his counsel, expressed willingness to pay the same within two days' time - In light of the same, the order passed by the Commr.(A) merits being set aside - The petitioner is directed to deposit 7.5% of the penalty amount within one week from the date of this order - The same is to be accepted by the Commissioner - Hence the appeal filed by the petitioner is revived with its original number: HC

- Writ petition disposed of: DELHI HIGH COURT

2020-TIOL-575-HC-DEL-CUS

Narendra Kumar Jain Vs JCC

Cus - The present writ petition was filed in respect of an O-i-O passed against the assessee.

Held: Considering that the subject order is an appealable order the petition is disposed off as not pressed at this stage - The issue of cross examination of the relevant persons is not pressed at this stage, considering that the same can be raised before the appellate authority - The appellate authority concerned is to appreciate the time consumed from filing the writ petition till the date of this order, while adjudicating the application for condonation of delay: HC

- Writ petition disposed of: DELHI HIGH COURT

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