TMI Tax Updates - e-Newsletter
January 10, 2015

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax

TMI SMS

• TDS u/s 194C - expenses incurred for convening meeting - section 194C is not applicable for payments made by the customer to the hotel - Tri

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Articles

• NON RESIDENT INDIAN GIFT FROM A STRANGER – NEITHER GENUINE NOR VALID
• Time spent in pursuing remedy before wrong forum is excludible in determining period of limitation

News

• TDS u/s 194C - expenses incurred for convening meeting in the hotel - section 194C is not applicable for payments made by the customer to the hotel

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• Dual Use of Non-Processing Area of Sezs by SEZ Entities as Well as DTA Entities Allowed

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• New Draft of Twelve Income Computation and Disclosure Standards (ICDS) has been Uploaded on the Finance Ministry and Income-Tax Department Website for Seeking Comments from Stakeholders and General Public by 8th February, 2015

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• RBI Reference Rate for US $

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• FM: Benefits of Demographic Dividend will flow only if our Population is Healthy, Educated and Properly Skilled; Meets Representatives of Social Infrastructure, Human Capital and Development Groups as Part of his Pre Budget Consultative Meeting

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Notifications

Customs

• 07/2015 - dated 8-1-2015 - Cus (NT)
  Appointment of the Joint/Additional Commissioner of Customs, Custom House, Kandla

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• 06/2015 - dated 8-1-2015 - Cus (NT)
  Appointment of the Joint or Additional Commissioner of Customs in the office of Principal Commissioner of Customs (General), Mumbai Zone-I, New Custom House, Ballard Estate, Mumbai

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• 05/2015 - dated 8-1-2015 - Cus (NT)
  Appointment of Principal Commissioner of Customs, Nhava Sheva-I, Mumbai Zone-II, Jawaharlal Nehru Custom House, Nhava Sheva, Uran, Raigad

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• 04/2015 - dated 8-1-2015 - Cus (NT)
  Appointment of Principal Commissioner of Customs (III), (Air Cargo Complex-Import), Sahar, Mumbai

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• 03/2015 - dated 8-1-2015 - Cus (NT)
  Appointment of Principal Commissioner of Customs, Tughlakabad (Import), Inland Container Depot , Tughlakabad, New Delhi

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• 02/2015 - dated 8-1-2015 - Cus (NT)
  Appointment of Commissioner of Customs, Jawaharlal Nehru Customs House, Nhava Sheva-IV, Taluka Uran, District Raigad, Mumbai

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SEZ

• C.1/2/2014-SEZ - GSR 5 (E) - dated 2-1-2015 - SEZ
  Special Economic-Zones (Amendment) Rules, 2014

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Circulars / Instructions / Orders

DGFT

• 81 (RE-2013)/2009-2014 - dated 9-1-2015
  Amendment in Appendix – 30 A relating to Export Obligation Period under Advance Authorization/DFIA Schemes.
• 12/2014 - dated 8-1-2015
  Allocation of quantity of Rough Marble and Travertine Blocks for import for Financial Year 2014-15.

Highlights / Catch Notes

Income Tax

• AO cannot out rightly deny the benefit of exemption claimed under section 10(23B) of the Act if KVIC certificate is filed before him, unless he reports the matter to the Commissioner, KVIC for cancellation or withdrawal of certificate, if he notice that the activities of the assessee are in contravention of the provisions of section 10(23B) - AT
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• ESOP expenses disallowed – deduction of the discounted premium is to be allowed during the years of vesting on a straight line basis - AT
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• Nature or sale of shares – Capital gains or business income - if a share is held for more than two or three months and then sold, the transaction cannot be properly classified as trading in shares - AT
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• Revision u/s 263 - AO has initially aggregated the business income declared by the assessee and also the ALP adjustment and thereafter has allowed deduction u/s 10A - this is in clear violation of the provisions of sec.92C(4) of the Act and hence, the order of the AO is erroneous and prejudicial to the interests of the Revenue - AT
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• TPA - Violation of principles of natural justice – t any rate 4 working days is insufficient to produce the voluminous documents necessary for answering the queries raised by the TPO along with supporting documents - - AT
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• TDS u/s 195 - on receiving advance payment, one may compensate the maker of advance payment by way of allowing interest or the same benefit can be given the name of discount but merely because a different nomenclature has been given, it does not change its character - TDS was deductible u/s 195 - AT
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• TDS u/s 194C – expenses incurred for convening meeting of dealers - section 194C is not applicable for payments made by the customer to the hotel - the facilities/amenities made available to its customers do not constitute 'work' within the meaning of section 194C of the Act - AT
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• Disallowance out of travelling expenditure - the involvement of personal expenditure could not be to the magnitude of 50% - The disallowance, even if made on estimate basis, it should be a fair and justifiable - AT
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• TDS u/s 194H - Commission or discount - It is just providing a discount to the purchaser and not paying any commission for any services taken from such customers - Not liable to TDS - No disallowance - AT
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Customs

• It is not as if every act of putting white ink is an act of manipulation or forgery, if the white ink is put to correct a mistake and is done by the author of the document or by a person duly authorized by that person, the same can only be construed as a ‘correction’ and not as a ‘manipulation’ or ‘forgery’ - AT
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• Classification of imported coal containing a calorific value limit on moist more than 5833 Kcal/kg - Steam Coal or not - matter referred to Larger Bench - AT
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Central Excise

• There is no material available to show that waste weak HCL acid is marketable and therefore it cannot be treated as an excisable commodity - demand set aside - AT
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• Whether the goods are maize starch classifiable under Tariff heading 11.03 or it is modified maize starch classifiable under Tariff heading 35.05 - there is no basis whatsoever to conclude that the impugned product was ‘modified starch classifiable’ under chapter 35 of Central Excise Tariff. - AT
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• Suppression of production - Clandestine clearance of goods - Entry not recorded in RG-1 Register - Parallel invoices - It may be stated that without human intervention, no artificial jurisdiction person shall cause evasion. There is always human element involved in committing evasions. - personal penalty confirmed - AT
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• Wrong payment of duty mentioning the registration code of sister concern - PAO did not accept the appellant’s request for transfer of the amount - duty was paid again - this is not a case of non payment of duty - penalty waived - AT
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VAT

• When there was no movement of goods and it was only billing activities, the input credit claimed on such transactions is rightly disallowed - HC
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Case Laws:

• Income Tax

• 2015 (1) TMI 365
  Benefit of exemption u/s 10(23B) – existence for development of khadi or village industries or both, and not for purposes of profit, - Whether the certificate issued by the Khadi & Village Industries Commission is in complete violation of rule 46A of the Income-tax Rules – Held that:- The certificate issued by the KVIC was not filed before the AO, as it was not available with the assessee - It was obtained during the course of appellate proceedings and it was filed before the CIT(A) - When new evidence was filed before the CIT(A), the CIT(A) ought to have called a remand report from the AO in this regard, but the CIT(A), instead of calling for a remand report, has allowed exemption under section 10(23B) of the Act having relied upon the certificate issued by the KVIC - the AO has not applied his mind with regard to the exemption claimed u/s 10(23B) of the Act in the light of the KVIC certificate, as it was not filed before him - the claim of exemption of the assessee should be examined in the light of the certificate issued by the KVCI, by the AO. Jurisdiction of AO for denial of benefit u/s 10(23B) – Held that:- The AO cannot out rightly deny the benefit of exemption claimed under section 10(23B) of the Act if KVIC certificate is filed before him, unless he reports the matter to the Commissioner, KVIC for cancellation or withdrawal of certificate, if he notice that the activities of the assessee are in contravention of the provisions of section 10(23B) of the Act - But it does not mean that the Assessing Officer is debarred from making necessary enquiries with regard to the activities of the assessee while allowing exemption under section 10(23B) of the Act if KVIC certificate is filed before him - Since KVIC certificate was filed for the first time before the CIT(A), the AO has not applied his mind to the activities of the assessee, therefore, the matter may be restored back to the file of the AO with a direction to re-adjudicate the issue of exemption claimed u/s 10(23B)of the Act in the light of certificate issued by the KVIC – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for re-adjudication – Decided in favour of revenue.

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• 2015 (1) TMI 364
  ESOP expenses disallowed – Facts properly appreciated or not - Whether the CIT(A) erred in confirming the action of AO in making an addition by disallowing the expenditure debited to P&L account on account of amount amortized under the Employees Stock Option Scheme (ESOP) without appreciating the facts of the case – Held that:- Following the decision in M/s. Biocon Limited and others Versus The Dy. Commissioner of Income-tax (LTU) and others [2013 (8) TMI 629 - ITAT BANGALORE] discount on shares under the ESOP is an allowable deduction – the AO is directed to allow the deduction for discount on shares under the ESOP. Computation of quantum of deduction – Held that:- An employee becomes entitled to the shares at a discounted premium over the vesting period depending upon the length of service provided by him to the company - In all such schemes, it is at the end of the vesting period that option is exercisable albeit the proportionate right to option is acquired by rendering service at the end of each year - the company incurs liability to issue shares at the discounted premium only during the vesting period - The liability is neither incurred at the stage of the grant of options nor when such options are exercised - the liability to pay the discounted premium is incurred during the vesting period and the amount of such deduction is to be found out as per the terms of the ESOP scheme by considering the period and percentage of vesting during such period - deduction of the discounted premium is to be allowed during the years of vesting on a straight line basis – Decided in favour of assessee.

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• 2015 (1) TMI 363
  Nature or sale of shares – Capital gains or business income - Whether the short term gains from sale of shares should be treated as capital gains (as treated by the assessee) or a business gain – Held that:- FAA has not considered the fact that the assessee's investment was amounting to ₹ 55.64 lakhs, whereas the turnover in purchase and sale of shares was ₹ 31,72,15,256/- Such huge turnovers definitely gives an indication that the assessee has done trading in shares - the assessee was well equipped being an employee of a stock broking firm, having the entire infrastructure readily available for him, having knowledge, information and acumen for carrying on share trading - by no stretch of imagination an investor holding an investment of approximately ₹ 56 lakhs would have a trading volume of approximately ₹ 31 crores. The assessee has not filed any paper book, to come to a factual finding as to the number of transactions and the values, where the assessee has purchased and sold shares on the same day or within two or three days - FAA has not given any facts or figures to controvert this finding of the AO - merely because the assessee also is an investor in shares, it does not mean that he would not have done trading in shares this year - if the assessee had an intention of holding the shares as investment, then purchase and sale of shares in such volumes and at such high frequency is contradictory to such intention - Classification in the Balance Sheet is an indication but not a conclusive proof that the assessee is only an investor - The figures that are available does demonstrate that the assessee has traded in shares, in addition to him being an investor in shares - if a share is held for more than two or three months and then sold, the transaction cannot be properly classified as trading in shares - This segregation of profits between short term capital gain and business income requires a further analysis of the transactions – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of revenue.

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• 2015 (1) TMI 362
  Validity of reassessment u/s 147 and 148 – Understatement of income filed in the return or not – Held that:- In assessee’s husband’s case the matter has been decided as the valuation of cost of construction was referred to the DVO u/s 142A(1), whose report was received on 21.11.2006 - In the report cost of construction has been fixed as shown by the assessee - The investment declared by the assessee and estimated by the DV - the difference in investment declared by the assessee and the cost of investment estimated by the Valuation Officer has been added u/s 69 to the income as income from undisclosed sources of the assessee – the AO without referring to any material which could justify his conclusion that the income of the assessee escaped assessment, instantiated the proceedings u/s. 147 of the Act, the action was not justified because the action appears to be on suspicion and for making roving enquiries. The basis of the reasons recorded by the AO is that the assessee along with her husband Shri Chunni Lal Prajapati was making huge investment in construction of property - the reopening was not justified because the action was on suspicion and for making roving enquiries - When the investment in house property alleged by the Department is in the joint name of the assessee and her husband, it was held by the Tribunal that the reopening is not valid because the same is on suspicion and for making roving enquiries - it cannot be said that the reopening is valid – Decided in favour of assessee.

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• 2015 (1) TMI 361
  Addition of unexplained investment in bank account u/s 69 - Held that:- Following the decision in Smt. Premilaben A. Jariwala, (Prop. Vigneshwar Fabrics) Versus Asstt. Commissioner of Income, Central Circle-4, Surat [2014 (12) TMI 837 - ITAT AHMEDABAD] wherein it has been rightly held that the contentions of the assessee is correct that these deposits were made in the bank account during the AY 2005-06 and therefore addition cannot be made for unexplained investment – thus, the addition of ₹ 15,73,515/- in the case of Shri Amit N. Kapadia and ₹ 20,55,587/- in the case of Smt. Geetaben N. Kapadia is set aside by holding that the deposits were made in the bank accounts during the AY 2005-06 and therefore addition cannot be made during the year under appeal for unexplained investment - in the case of Smt. Geetaben N. Kapadia, the Authorized Representative of the assessee has made absolutely no submissions for the additions made in the following bank account No. 0041-093100-001, thus, the order of the CIT(A) in respect of the addition of ₹ 2,02,067/- is upheld – Decided in favour of assessee, Shri Amit N. Kapadia and partly in favour of other assessee.

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• 2015 (1) TMI 360
  Revision u/s 263 - Restriction of deduction u/s 10A – Amount representing the profits and gains from business – Held that:- It cannot be said that there is approval of the DRP with regard to the computation of deduction - assessee’s contention that the DRP having approved the computation part of the draft assessment order cannot again be revised by the CIT u/s 263 is not sustainable - the role of DRP cannot be equated with the role of the CIT u/s 158BC - every assessment order passed u/s 158BC requires mandatory approval of the CIT, whereas every assessment order involving transfer pricing issue does not require the prior approval of the DRP - it can be seen that only where variations are made to the returned ‘income of the assessee’, that the AO has to forward the draft assessment order to the assessee and the assessee shall accept the variations or file objections with the DRP and the DRP may confirm, reduce or enhance the variations - Thus, the approval of the DRP is not to the entire draft assessment order but is only to the variations proposed by the AO, unlike the mandatory approval of the CIT of every order passed u/s 158BC. Jurisdiction of CIT u/s 263 - Erroneous and prejudicial to the interests of the Revenue – Held that:- U/s 92C(4) of the Act, it is clearly provided by the first proviso thereto that no deduction u/s 10A or u/s 10AA or section 10B or under chapter VIA shall be allowed in respect of the amount of income by which the total income of the assessee is enhanced after computation of income under sub-section (4) of 92C - the AO has initially aggregated the business income declared by the assessee and also the ALP adjustment and thereafter has allowed deduction u/s 10A - this is in clear violation of the provisions of sec.92C(4) of the Act and hence, the order of the AO is erroneous and prejudicial to the interests of the Revenue - the AO ought to have allowed deduction u/s 10A of the Act before aggregating ALP adjustment and thereafter should have added the ALP adjustment and computed the taxable income - If computation is to be made, then the claim of deduction u/s 10A would have to be restricted to the income from business available before deduction u/s 10A as rightly observed by the CIT – the order of the CIT(A) u/s 263 is upheld – Decided against assessee.

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• 2015 (1) TMI 359
  Deletion of addition – Rejection of books of accounts u/s 145(3) – Violation of provisions of section 40A(3) or not – Held that:- The assessee was engaged in an exclusive dedicated transport services to M/s. Gujarat Ambuja Cements Ltd. and an agreement dated 31.03.2002 was entered into - The transportation was being done of cement, clinker etc. etc. to various destinations from the factory premises at Rabriyawas, Rajasthan - CIT(A) rightly admitted additional evidences and forwarded the same to the AO for examination - These evidences were confirmations from the transporters - CIT(A) has also considered these confirmations and has also test checked the accounts of the transporters to verify the claim that cash payments for individual truck loads does not exceed ₹ 20,000/- per day - revenue has failed to controvert the factual finding of CIT (A) - assessee contended that because of fall in the gross profit on account of increased competition in the market - due to inability to make adequate profits from the business, the assessee has shut down the transport business w.e.f. 31.01.2010 – relying upon Vinod Kumar Pramod Kumar vs. ITO [1999 (12) TMI 117 - ITAT JODHPUR] wherein it has been held that minor variation in the gross profit declared in the year under consideration as compared to previous years by itself cannot justify any addition - CIT (A) has rightly deleted the addition – Decided against revenue. Addition on claim of exemption u/s 54 deleted – Sale of residential house and investment in new residential house - Held that:- The payments for the purchase of new residential unit were during the period 24.01.2006 to 26.11.2009 - assessee has received possession of the new house on 26.11.2009 - The original asset was sold on 04.06.2007 - Thus, the investment in the new residential house was made during the allowable period of three years from the date of transfer of the long term capital asset - The reliance was also placed on the CBDT’s Circular No.672 dated 16.12.1993 – thus, the order of the CIT(A) is upheld – Decided against revenue.

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• 2015 (1) TMI 358
  Deletion on bogus sundry creditors – transaction unexplained expenses or not – relief granted without proper justification - Held that:- Revenue contended that the CIT(A) has granted relief to the assessee without proper justification - the AO has made his findings and it is also apparent from examination of records that the assessee has not conducted any business activity during the year - There was no purchase and sales during the year under consideration - some transactions are there in respect of sundry creditors and sundry debtors - the AO has made examination and found that they are not genuine - The ledgers in the name of M/s. Shilpashree Saree and M/s. S.S Textiles in the books of the assessee company revealed that some payments were given by cheques - The Bank Manager was requested to furnish the copies of the cheques issued to M/s. Shilpashree Saree and M/s. S.S Textiles - The copies of the cheques as collected from the Bank ascertained that the assessee did not issued cheques to M/s. Shilpa Shree Saree and M/s. S.S Textiles, but issued to M/s. Kalna Machines Pvt. Ltd and Vikash Chowdhury, one of the directors of the assessee company. CIT(A) has found that the AO was being asked to enquire the transactions - the powers of the CIT(A) are coterminus with that of the AO - If the AO has failed to perform the necessary examination, then it was incumbent on the CIT(A) to make necessary verification and satisfy himself - CIT(A) has drawn adverse inference by finding that the AO has not made proper examination - CIT(A) has observed that even if the business is held to be a sham affair and the receipts are held to be bogus, it is beyond the stretch of imagination that the other parts of the trading account/profit and loss from other sources - this not a proper finding – in Kapurchand Shrimal Vs. CIT [1981 (8) TMI 2 - SUPREME Court] it has been held that it is the duty of the appellate authority to correct the lacuna in the proceedings of the authorities below and also to remit the matter, if required - this is not correct as the CIT(A) has not given proper findings after due examination – the matter is to be remitted back to the AO for verification – Decided in favour of revenue.

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• 2015 (1) TMI 357
  TPA - Violation of principles of natural justice – Opportunity of being heard not provided to assessee – Very few time of only 4 days provided to assessee to prepare and submit the respose - Held that:- Though the assessment proceedings began in November, 2009, TPO issued show-cause notice to the assessee only in September 2010 directing it to submit details and supporting documents, which are voluminous and requires reasonable time for collecting and producing the same - the TPO issued the show cause notice on 20th September 2010, directing the assessee to submit the entire documents asked by him before 27th September 2010, by which the assessee only got 4 working days to comply the same - Since it was practically impossible to submit the entire documents, the assessee submitted whatever it could before the TPO who passed orders without considering the documents which ought to have been looked into by him provided sufficient time was granted to the assessee - the assessee filed all the relevant documents asked by the TPO before the DRP. The DRP has not considered the aforesaid evidences including the cost benefit analysis, the details of the service rendered by Canada HO, benefits derived, allocation keys and actual cost-allocation work wide to AE’s and other documents relevant to adjudicate the issues before it – thus, assessee rightly contended that sufficient opportunity was not given to the assessee to furnish the requisite details and documents to answer the queries raised by the TPO - At any rate 4 working days is insufficient to produce the voluminous documents necessary for answering the queries raised by the TPO along with supporting documents - the TPO’s order was vitiated for violation of natural justice and the DRP has also not gone into the evidence filed before it by the assessee – thus, the order is set aside and the matter is remitted back to the AO/TPO for fresh adjudication – Decided in favour of assessee.

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• 2015 (1) TMI 356
  TDS u/s 195 - Discount allowed on sales in the nature of payment of interest or not – Invocation of section 195 r.w section 40(a)(ia) or not – payment to non-residents towards advance payment – Held that:- As per purchase contract dated 16th May, 2006, it has been specified that the seller shall cause the issuance of a banker's guarantee or SBLC by Punjab National Bank, Kanpur (seller's bank) for an amount equal to the provisional price plus interest in the form acceptable to buyer that will be informed in separate message - within two business days from the date buyer's bank receives the guarantee in format acceptable to buyer's bank, buyer shall pay to seller the prepayment amount - The provisional price as per this contract has been fixed at (JPY)24,200 lac - there is no mention in the agreement i.e. the purchase contract that any prepayment discount will be allowed by the assessee. The payment was to be made by the buyer to the tune of provisional price as per the agreement after furnishing of bank guarantee by the assessee seller but as per the invoice, it is seen that in all these invoices, pre-payment discount were allowed by the assessee and these invoices are of the current year i.e. April, 2007 and the assessee asked the buyer to make payment of the balance amount against the invoiced price after adjusting the advance received by the assessee and pre-payment discount - Asking the buyer to pay lesser amount after adjusting discount or making payment of discount to the buyer is equivalent because in both the cases, the buyer receives the benefit - the benefit allowed by the assessee to its buyers under the name of discount is in fact in the nature of interest because the same is in consideration of receiving advance payment - on receiving advance payment, one may compensate the maker of advance payment by way of allowing interest or the same benefit can be given the name of discount but merely because a different nomenclature has been given, it does not change its character - TDS was deductible u/s 195 of the Act and therefore, the disallowance made by the AO is justified – thus, the order of the CIT(A) is set aside – Decided in favour of revenue.

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• 2015 (1) TMI 355
  Determination of income u/s 44BB - mobilization revenue proportionate to the voyage undertaken by the rig outside Indian territorial waters to be included in gross receipts or not – Nature of mobilization/demobilization activities - Held that:- Following the decision in WesternGeco Interational Ltd Gurgaon. Versus ADIT International Taxation, Dehradun [2014 (10) TMI 735 - ITAT DELHI] - the entire payment in question was made for the purpose of execution of the contract in India - Mobilisation is a stage payment, as part of the total consideration for execution of the contract - The assessee would be moving its machinery from one place of work to another place of work - Mobilisation is paid as an advance for such movement and is generally adjusted against running bills - Mobilisation is an incidental activity to the main activity of carrying out the contract in India – Decided against assessee. Determination of income u/s 44BB - Reimbursement of expenses to be included in the gross receipts for the purpose of determining income or not – Held that:- Following the decision in M/s Sedco Forex International Drilling Inc C/o Nangia & Company Versus Assistant Director of Income Tax, International Taxation [2014 (1) TMI 1322 - ITAT DELHI] - The amount had been received by the assessee - Therefore, the Assessing Officer added the said amount which was received by the non-resident company rendering services under the provisions of section 44BB and imposed the income tax – Decided against Assessee. Determination of income u/s 44BB - Receipts against the service tax to be included in the gross receipts for the purpose of determining income or not - Held that:- Following the decision in M/s Sedco Forex International Drilling Inc., C/o Nangia & Co., Versus Additional DIT, International Taxation, Dehradun [2012 (7) TMI 250 - ITAT, DELHI] - The service tax is a statutory liability like custom duty - service tax being a statutory liability, would not involve any element of profit and accordingly, it could not be included in the total receipts for determining the presumptive income - service tax paid by the assessee could not form part of amount for the purpose of deemed profits u/s 44BB unlike the other amounts received towards reimbursement – Decided in favour of Assessee.

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• 2015 (1) TMI 354
  Disallowance out of travelling expenditure - Whether thes visits were exclusively for the purpose of business or they were pleasure trips – Held that:- In order to claim any expenditure incurred for the purpose of the business, an assessee has to demonstrate that the expenses were laid down wholly and exclusively for the purpose of the business only - The expression "wholly" denotes the quantum of expenditure, whereas "exclusively" denotes the purpose - Both these conditions should be fulfilled before claiming the expenditure - import of machinery was not disputed by the Assessing Officer - The visits of the Directors were also not disputed - possibility of involvement of personal expenditure in the traveling expenses cannot be ruled out - However, the involvement of personal expenditure could not be to the magnitude of 50% - The disallowance, even if made on estimate basis, it should be a fair and justifiable estimate considering the surrounding circumstances – the disallowance is restricted to the extent of 25% of the total expenditure. TDS u/s 194C – expenses incurred for convening meeting of dealers – Held that:- The assessee has not hired services of any event organizer - It simply booked the hotel for boarding - The hotel did not work on behalf of the assessee as a contractor - Otherwise every guest whosoever stay in a hotel ought to have deducted TDS while making booking or staying in it – following the decision in The East India Hotels Ltd. & Jaswant Singh Bhatia Versus CBDT and UOI [2009 (3) TMI 8 - BOMBAY HIGH COURT] - section 194 C is not applicable for payments made by the customer to the hotel - the facilities/amenities made available to its customers do not constitute 'work' within the meaning of section 194C of the Act - the circular No.681 dated 8/3/1994 to the extent it holds that the services made available by a hotel to its customers are covered under section 194C of the Act must be held to be bad in law – Decided partly in favour of assessee.

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• 2015 (1) TMI 353
  Non-speaking order by DRP - Determination of income u/s 44BB - Income from supervisory services - AO was of the view that the supply of the BTG equipment and supervisory services in respect of erection and commissioning of such equipment was a composite work contract and it cannot be divided and held one as contract for sale of equipment and another as contract for rendering of supervisory services - Held that:- The order of the DRP is cryptic and non-speaking without considering any submissions and arguments of the assessee - assessee's objection to the DRP is of more than 60 pages in which the assessee has not only dealt with the factual aspect but has also referred to the various decisions of the ITAT – DRP simply sustained the addition holding that the AO has taken the stand after detailed analysis of terms and contract entered into by the assessee - the order of the DRP needs to be set aside being cryptic and non-speaking – thus, the matter is to be remitted back to the AO – Decided in favour of assessee.

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• 2015 (1) TMI 352
  TDS u/s 194H - Commission or discount - Marketing expenses inclusive of incentive and discounts disallowed – Held that:- following the decision in Deputy Commissioner of Income-tax Circle-9(1), New Delhi Versus Surendra Buildtech (P.) Ltd. [2011 (5) TMI 512 - ITAT, DELHI] - The expression “commission or brokerage” has been explained in the explanation appended to this section - According to the meaning provided in the explanation, the commission would be considered, if any person received it directly or indirectly on behalf of another person for the services rendered, and such services should not be professional services - admittedly the person to whom discount was granted by the assessee were not acting as an agent for the assessee, rather they are the purchaser of the property - They have not provided any type of services to the assessee - They have just booked the flat through the assessee. In fact, assessee is an agent between the builder and the ultimate purchaser of the flats - The assessee has parted with some part of the commission received from the builder from alluring the purchaser so that it can earn more commission - It is just providing a discount to the purchaser and not paying any commission for any services taken from such customers – the order of the CIT(A) is upheld – Decided against revenue. Commission paid to Shri Gaurav Mukhija disallowed u/s 40A(2)(b) – Held that:- The assessee had opened the office on various locations and for the purpose either the assessee had to manage there or it had to be managed by engaging some other persons - The assessee allowed remuneration to such persons on commission basis, on the basis of their performance by way of bookings - Shri Gaurav Mukhija controlled and managed the Gurgaon office of the company and the commission was allowed to him on the basis of procurement of the pre launched bookings wherein the Gurgaon office was instrumental - Shri Gaurav Mukhija’s mobile number was also flashed in the advertisement issued by the assessee in news papers for general public at large informing the bookings, which clearly showed that Shri Gaurav Mukhija was closely associated as a responsible person and was instrumental in booking the properties by satisfying customers at large – the order of the CIT(A) is upheld – Decided against revenue. Reduction of disallowance to 10% as against 20% on advertisement expenses – Held that:- following the decision in Deputy Commissioner of Income-tax Circle-9(1), New Delhi Versus Surendra Buildtech (P.) Ltd. [2011 (5) TMI 512 - ITAT, DELHI] M/s Surnder Properties is in the existence of the real estate business even before the assessee came into existence. The name of Surnder Mukhija in a way enhanced the business of assessee - there is no evidence available on record to this effect. The assessee has placed on record copy of the asstt. Order passed in the case of Shri Surender Mukhija - Shri Surender Mukhija had incurred a sum towards advertisement and the name of assessee has been appearing in his advertisement - assessee has been fairly compensated, the expenses incurred by both the concerns mutually give benefit to each other mutually - it cannot be termed that assessee has extended undue benefit to third concern by giving its name in the advertisement of the assessee. Otherwise expenses have not been doubted by the AO - the expenses were incurred exclusively for the business purpose and no disallowance deserves to be made – Decided in favour of assessee.

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• 2015 (1) TMI 351
  Validity of initiation of proceedings u/s 147 r.w. 148 – Confirmation of loan not made – Information regarding purchase of new truck made to AO or not -Opportunity of being heard – Validity of assessment proceedings made by AO - Held that:- The assessment order that notice u/s 142(1) dated 19/08/2009 has been issued to the assessee fixing the case on 09/09/2009 - on this date, advocate appeared and requested for adjournment - He was asked to furnish Vakalatnama and the source of investment of loan of ₹ 10 lac given to Shri Satya Prakash Jaiswal along with the documentary evidence and show cause why the amount may not be treated as undisclosed investment and added to the total income of the assessee. The case was adjourned to 30/09/2009 - AO also noted that in the reply, the assessee has mentioned that he has not given any loan to Shri Satya Prakash Jaiswal in AY 2004-05 - The case was adjourned to 18/11/2009 but on this date, neither anybody appeared nor any application for adjournment was received - sufficient opportunity was provided by the AO but the same were not availed by the assessee and hence, the assessment proceedings completed by the AO is valid. Material for reopening present or not – Held that:- An information was received from Income Tax Officer, Basti that the assessee has given loan of ₹ 10 lac to Shri Satya Prakash Jaiswal during the AY 2004-05, which is not recorded in the books of account filed with the return of income and on this basis, the AO has stated that he has reason to believe that the assessee has given loan to Shri Satya Prakash Jaiswal out of undisclosed income which escaped the assessment and therefore, he issued notice u/s 148 of the Act - the reopening was valid because the AO had reason to believe regarding escapement of income - none of the judgments cited by the assessee is rendering any help to the assessee and the assessee could not give any explanation regarding the investments for which addition was made by the AO on the basis that the additions are not disclosed – the order of the CIT(A) is upheld – Decided against assessee.

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• Customs

• 2015 (1) TMI 368
  100% EOU - export obligation - validity of show cause notice - clandestine clearance plastic granules imported duty free to the sister and other concerns - manipulation of statutory production reveals so as to show excess production and excess export - violation of conditions of Notification No. 53/97-Cus. dated 6.3.1997 - Penalty u/s 114A, 112/117 and u/s 11AC - Held that:- On a plain reading of 3rd proviso to Section 28(1) of the Customs Act, 1962, as it stood during the relevant time, we find that it is mandatory that where the amount of demand of duty is more than Rs. One crore, no notice under this sub-section shall be served except with the prior approval of the Chief Commissioner of Customs. In the present case the demand of customs duty of ₹ 16,13,10,303/- under Section 28(1) of the said Act vide show-cause notice dated 20.6.2002 shall be served with the prior approval of the Chief Commissioner of Customs. - There is no indication that the approval was also accorded under 3rd proviso to Section 28(1) of the Customs Act, 1962. - the submission of the learned Special Counsel that the Superintendent of Central Excise was delegated power to issue the show-cause notice vide Office Order dated 18.7.2001 is not acceptable. - The action of Superintendent to issue notice demanding duty under Section 28(1) of the Act, 1962 vide Notice dated 26.3.2002 is contrary to the provisions of law. The adjudicating authority dropped the Show Cause Notices on merit. Taking into account of the overall facts and circumstances of this peculiar case, in our considered view, the show-cause notice cannot be dropped only on the jurisdiction point, when the assessee contested the demand on merit as well as availed the opportunity of cross-examination of various persons as prayed for. We make it clear that this order would not become a precedent that the Show Cause Notice issued beyond jurisdiction, would be held valid by the appellate authorities. Regarding the demand of Central Excise duty, it has further been alleged that the Assessee cleared carry bags sold to DTA without accounting and payment of central excise duty of ₹ 4,61,692/- and it is based on out-passes of the Assessee to its sister unit. This was supported by the statement dated 15.6.2001 of Shri Arun Thangam, Director of M/s. Seven Seas Polymers (P) Ltd. The Assessee in their reply to show-cause notice stated that they have not sold plastic bags, but waste and rejects to M/s. Priya, who tried to segregate the good one and on test basis effected a few sales as seconds, which was not find good market and the idea was dropped. - The evidence relied upon by the Revenue would show clearances of ‘carry bags seconds’. Apparently, the statement of Shri Arun Thangam is not corroborating with evidence. - the allegation of clearance of plastic carry bags is on the basis of statement and the demand of central excise duty is not sustainable. The percentages of Waste and Rejects appear to be excessive should be examined - Revenue contended in their appeal that the Assessee had obtained permission for the first time for clearance of 216.250 MTs of rejects and 230.050 MTs of waste from the jurisdictional Assistant Commissioner only on 14.2.2000 and they effected sale of rejects to DTA much before the date of permission from the Assistant Commissioner. It is also stated that the Assessee had obtained approval from the Development Commissioner, MEPZ, increasing the percentage of waste only after the investigation of the Preventive Unit on 12.1.2001. The Assessee in their reply stated that they were averaging the waste around 17% and hence the matter was referred to MEPZ. So, this issue is required to be examined as per EXIM Policy. We, therefore, set aside the impugned order and remand the matter to the Commissioner for de novo adjudication of this matter after ascertaining from the Development Commissioner/Board of Approval about their decision with regard to the question of fulfilment of the export obligation and achieving NFEP. The show cause notice issued to the appellant is to be adjudicated only after the Development Commissioner/Board of Approval gives the findings on the issue of meeting the export obligation and achieving the NFEP. The appeals are disposed of in the above terms. - Matter remanded back.

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• 2015 (1) TMI 367
  Misdeclaration of goods - Import of goods under advance license - Import of Acid Oil - Revenue alleges that appellant had actually imported Palm Fatty Acid Distillate (PFAD) which attracts duty and is not covered under the licences granted to the appellant - Manipulation of document by putting white ink - Denial of benefit of exemption Notification No.93/2004-Cus - violation of the conditions of Notification No.93/2004 - Admission of additional evidence - Confiscation of goods - Held that:- It is stated in the application that 2000 metric tonnes of PFAD was declared as arrived through vessel MT Chemrod, and in the said arrival report the description was corrected by hand and instead PAO was mentioned therein. While this change in description could only have been explained by the Shipping Agents, it is very likely that an incorrect description of the product had been corrected by the shipping agent, by applying white ink and writing the description PAO in hand. The fact that such a change was done by the Shipping Agent is not disputed. It is also not in dispute that J M Baxi., was the authorized agents for the shipping line and were therefore entitled to make corrections. We fail to see how an inference of ‘forgery’ or manipulation of document can be reached when undisputedly the corrections were made by the shipping agency itself and not by the importer or any unauthorized third party. It is not as if every act of putting white ink is an act of manipulation or forgery, if the white ink is put to correct a mistake and is done by the author of the document or by a person duly authorized by that person, the same can only be construed as a ‘correction’ and not as a ‘manipulation’ or ‘forgery’. - application for additional evidence cannot be entertained in terms of the provisions of Rule 23 of the CESTAT Procedure Rules and that even otherwise the additional evidence does not further the case of the Revenue. Appellant had declared the imported goods as ‘Acid Oil’ while according to the Revenue the same were PFAD. In support of its contention the Revenue has primarily placed reliance on the test report of the Chemical Examiner, Visakhapatnam; his technical opinion; report of the Chemical Examiner, Kandla; as also statements of some of the Appellant’s employees. - The entire evidence which has been relied upon in the notice in the form of the test results of the Chemical Examiner and the opinion of the Chemical Examiner, Visakhapatnam proceed on the presumption that the goods were declared by the Appellant as Palm Acid Oil and that they were required to examine as to whether what was imported was Palm Acid Oil or not. None of the Chemical Examiners have in their test reports examined and opined on the issue whether what had been imported was ‘Acid Oil’ or not. As such the test results and the opinion of the Chemical Examiner are totally irrelevant to the dispute in hand as the same have been issued on the mistaken presumption that what was required to be examined was whether the goods imported were ‘Palm Acid Oil’ or not. The adjudicating authority has in the impugned order refused to take cognizance of this error on the ground that the Appellant had raised the said contention only in the course of adjudication and not during investigation. We find this reason to be totally unacceptable as the Commissioner of Customs., Kandla while adjudicating the case was not acting as an Appellalte authority but as an adjudicating authority. A defense set up by a noticee cannot be rejected or brushed aside merely for a reason that the same was not put forth before the investigating agency. The stage of investigation is not a stage for making submissions. The stage of adjudication is the first stage where a noticee is called upon to make his submissions and to produce evidence in support of his submissions. The adjudicating authority is under an obligation to take on record the submissions made by the noticee as also the evidence produced by him and then come to a conclusion after examination in entirety along with evidence on record. The adjudicating authority cannot shut out or reject a defense merely because the investigating agency was not appraised of such a defense. On this short ground alone the order of the Commissioner needs to be set aside as there is, in effect no answer to be found to the appellants defense that the evidence on record does not dispute that the goods imported answer the description ‘Acid Oil’, as declared in the Bill of Entry. Finding of adjudicating authority is baseless and incorrect in as much as from the technical literature produced, it is very clear that FFA content in oil is measured in terms of ‘Palmetic’ or ‘Steeric’. The technical literature produced do not state that the measurement of FFA in terms of ‘Palmetic’ is confirmatory of the oil being palm based. The show cause notice in the very first paragraph records and accepts that PFA and Acid oil fall under the same tariff classification and attract then same rate of duty. This being the accepted position, the conclusion in the opinion of the chemical examiner that the goods in question were ‘other than palm acid oil’ and that they had the characteristic of PFAD are both irrelevant and both insufficient for drawing an inference that the goods were other than ‘Acid oil’ as declared on the bill of entry and as covered by the advance licence. The finding of mis-declaration and the further finding that the goods imported were not covered by the description of the licence are therefore unsustainable. Merchant exporter who gets his goods manufactured from a supporting manufacturer is barred from using the duty free material for purposes other than discharge of the export obligation while for a manufacturer-exporter there is no such stipulation. The only stipulation qua a manufacturer-exporter is that the said license and materials should not be transferred or sold. It is not the Revenue s case that this condition has been violated. - Central Government has been for the last at least 15 years been issuing three separate sets of exemption notification for advance licence/authorization holders, who obtain the licence for effecting physical exports; deemed exports and in respect of advance licence for annual requirement. Each of these notifications have separate set of conditions and stipulations with regard to utilisation of the duty free imported raw material. It is settled law as laid down by the Apex Court in the case of Commissioner of Trade Tax vs Kajaria Ceramics Ltd [2005 (7) TMI 351 - SUPREME COURT OF INDIA] that were Notification are issued under the same section and for the same purpose and are a part of a chain of progress without there being any overlap, then for the purpose of resolving the ambiguity the contents of the previous or subsequent notification can be looked into. The ratio laid down by the Apex Court applies in all fours to the facts of the present case as the Advance Licence Notifications are also a part of a chain of notification issued from time to time without any overlap, and accordingly the difference in the language of the Notification over a period of time has to be taken note of and given effect to. Benefit of duty exemption under Notification No.93/2004 was wrongly denied to the subject goods and the finding that there was a contravention of condition No.(vii) of the said Notification is totally incorrect. - goods imported by the Appellant were covered by the description of the licence produced by the Appellant and there was no contravention of condition (vii) of the Notification No.93/2004-Cus in using the goods for domestic production. - contentions of the Appellant that the material was imported as replenishment material in respect of another license held by it where under it had already fulfilled the export obligation is not being examined as the Appellants are entitled to succeed on its first entitlement itself as also on various issues. - demand for duty, interest and penalties as also the order of confiscation are consequently set aside. - Decided in favour of assesse.

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• 2015 (1) TMI 366
  Waiver of pre deposit - classification - imported coal containing a calorific value limit on moist more than 5833 Kcal/kg - Steam Coal or not - Benefit of exemption under Serial No.123 of Table appended to Notification No.12/2012-Cus. dt. 17.3.2012 - Held that:- decision of Bangalore Bench of the Tribunal in the case of Maheswari Brothers & Others and M/s.Coastal Energy Pvt. Ltd. [2015 (1) TMI 208 - CESTAT BANGALORE] are contrary to the decision of the Chennai Bench of the Tribunal in the case of TNPL [2009 (8) TMI 656 - CESTAT, CHENNAI]. In such cases, the Hon'ble Supreme Court in the case of Union of India Vs Paras Laminates (P) Ltd. [1990 (8) TMI 140 - SUPREME COURT OF INDIA] observed that on identical question when there is a contrary view of the Co-ordinate benches it should be referred to the Hon'ble President for decision to constitute a Larger Bench Both the Ld. Senior Advocates and other Ld. Advocate submitted that the instant issue has an impact on the entire industry all over the country. We have also expressed our prima facie view in favour of the decision of the Tribunal of Chennai Bench in the case of Tamil Nadu Newsprint & Papers Ltd. [2009 (8) TMI 656 - CESTAT, CHENNAI]. Since we are referring these matters to the Hon'ble President for constitution of Larger Bench, we waive the predeposit of duty along with interest and penalty till disposal of the appeals. - Stay granted.

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• Service Tax

• 2015 (1) TMI 388
  Classification of service - Scientific or technical consultancy service or Survey and exploration of mineral - penalties under Sections 76, 77 and 78 - Held that:- keeping in mind the activities undertaken by the appellant, the service is classifiable under the Survey and Exploration of Mineral Service - The definition of this taxable service is a service provided by a Scientist or a Technocrat or any Scientific or Technical Institution or Organization. It is clear that the appellants are not a Scientific & Technical Institution or Organization. If we were to accept otherwise, every company which undertakes technical consultancy as many companies do will fall under this definition, which is obviously not correct. Therefore, we hold that the activity undertaken by the appellant is covered under the Survey and Exploration of Mineral services for the entire period. Whether any service has been provided by the appellant for consideration - Held that:- when the activity is undertaken by them on the basis of 100% grant received from the Government and the grant is totally expended on the expenses involved under various activities as reflected in the balance sheet, it cannot be said that any service has been provided. For any service, there has to be a service provider, a service receiver and consideration. In the present case, the records show that no consideration has been paid by the Government to the appellant for undertaking the work of Survey and Exploration of Mineral and preparation of the detailed reports thereof. What has been received from the Government is only the reimbursement of the actual expenses involved. - there has been no service provided by the appellant to the Ministry of Mines. - Decided in favour of assessee.

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• 2015 (1) TMI 387
  Air Travel Agent Service - Receipt of commission on air fare - Invoices issued on the name of other office's address which is not mentioned in registration - Commissioner upheld service tax demand but set aside cenvat credit demand - Penalty u/s 77 & 78 - Held that:- The appellant as IATA Agent have two options to discharge service tax liability. The first option is to pay service tax on the gross amount of commission received. However, Rule 6(7) provides another option to them to pay service tax @ 0.6% of the basic fare in respect of domestic bookings and @ 1.2% of the basic fare in respect of the international booking. The word, ‘basic fare’ is defined in the sub-rule as the part of the airfare on which the commission is normally paid to the Air Travel Agent by the Airlines. The explanation to Rule 6(7) defining the term ‘basic fare’ clearly indicates that the basic fare for the purpose of this sub-rule is not the gross fare but is the part of the gross airfare charged from the passengers on which the Airlines normally pay commission to the Air Travel Agent. The expression ‘air fare on which the commission is normally paid’ means the portion of air fare, whether 100% or a lesser percentage; on which most of the Airlines pay the commission ignoring the stray cases in which commission is paid on a different part of air fare. The appellant s plea is that they have discharged service tax liability under Rule 6(7), only on that part of the gross airfare on which the commission was paid to them by the Airlines and most of the Airlines pay commission only on that portion of fare. Term ‘basic fare’, in terms of its definition in Rule 6(7), is not the gross fare including fuel surcharge, but is that part of the gross airfare on which the concerned Airlines normally pay the commission to the Air Travel Agent. Therefore, what is relevant for the purpose of Section 6(7) is as to on which part of the airfare, the commission was being normally paid by the Airlines to the Air Travel Agent’s. According to the appellant, the have evidence to prove that they have discharged the service tax liability under Rule 6(7) only on that part of the fare on which the commission was being paid, but this plea has not been considered by the Commissioner. In view of this, the impugned order is set aside and the matter is remanded to the Commissioner for de novo decision after considering the Appellant’s plea and also our observations in this order. Misc. application for additional evidence is also allowed. In course of de novo proceedings, the Commissioner shall consider the documents produced by the appellant in support of their plea that they have paid service tax on that part of the airfare on which the commission is normally paid by the Airlines. - Decided in favour of assessee.

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• 2015 (1) TMI 386
  Waiver of pre deposit - construction of residential complexes - Invocation of extended period of limitation - Held that:- Since the amounts were paid during the course of construction and were not collected on actual basis, it cannot be said that it is not part of the construction activity. Moreover provision of electricity, water and advocate fee for verifying documents etc are essential requirements to be fulfilled before the building is handed over. It was also agreed that such payments were made to BWSSB, KEB etc. before the occupancy certificate was issued. The payments to BWSSB etc. as well as the payments by the buyer were made during the construction period. Therefore it is difficult to accept the view that it is not part of the construction cost. Once it is part of the construction cost, it becomes liable to tax. Therefore prima facie we do not find any merit in the appellant’s case. Extended period of limitation - Held that:- extended period cannot be applied and further prior to 01.07.2010, tax could not have been demanded. This is because the amendment to the definition which resulted in transaction within the individual buyer/builder/developer also becomes liable to service tax only after 01.07.2010. Further we also consider that the issue is a debatable one and subject to different interpretations and therefore extended period may not be invokable. However since we have taken a view that appellant is liable to pay service tax on these elements of cost, we consider that appellant should deposit the entire amount of tax demanded and payable with interest for hearing the appeal for normal period. - Partial stay granted.

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• 2015 (1) TMI 385
  Waiver of penalty u/s 80 - Imposition of penalty u/s 76, 77 & 78 - Goods Transport Agency - reverse charge mechanism - Held that:- Firstly, the non-payment of service tax was detected from the books of accounts maintained by the appellant. This indicates that they could not have any mala fide intention to evade payment of service tax. The second mitigating factor is that the adjudicating authority waived penalty under Section 76 by taking cover of Section 80. The reason stated by the adjudicating authority for waiving the penalty under Section 76 is that the tax had been paid prior to issue of show cause notice and that the unit is registered under BIFR. Section 80(1) of the Finance Act states "Notwithstanding anything contained in the provisions of Section 76, Section 77 or [first proviso to sub-section (1) of Section 78], no penalty shall be imposable on the assesee for any failure referred to in the said provisions, if the assessee proves that there was reasonable cause for the said failure". Therefore it is apparent that the adjudicating authority found reasonable cause for waiving penalty under Section 76. Having found reasonable cause for waiving penalty under Section 76. I see no justification for imposing penalty under Section 78 of the Act. Reliance is also placed on the CESTAT judgment in the case of Ramanasekar Steels Ltd. Vs. Commissioner of C.Ex., Chennai [2007 (10) TMI 28 - CESTAT, CHENNAI] affirmed by the Mad. High Court [2015 (1) TMI 38 - MADRAS HIGH COURT]. The High Court upheld the decision that declaration of a unit as sick company under Sick Industrial Companies Act, 1985, is a 'reasonable cause' for waving penalty under Section 80 of the Act. In these circumstances, the order for imposition of penalties is set aside. - Decided in favour of assesse.

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• 2015 (1) TMI 384
  Demand of differential duty - Inclusion of value of sensitized photographic paper and other chemicals used in the course of rendering service of developing film and printing of photographs - Held that:- Since the issue is no longer res integra and covered by the precedent decisions [2011 (8) TMI 651 - CESTAT, DELHI], [2013 (11) TMI 1410 - CESTAT CHENNAI (LB)] and [2013 (5) TMI 426 - CESTAT NEW DELHI] and also in view of the fact that such non-inclusion is correct or not; had resulted in different views being taken in favour as well as against the appellant. Subsequent to this period also, we consider that appellant has made out a case in their favour. No purpose will be served in keeping this issue pending since on limitation itself the demand is not sustainable - Decided in favour of assesse.

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• 2015 (1) TMI 383
  Valuation - computation of taxable value of import of services - Demand of differential tax - Evasion of tax - Intention to evade - Invocation of extended period of limitation - Imposition of interest and penalty - Held that:- Section 67 of the Act clearly states about the concept of “gross amount charged” which in reverse charge mechanism also means the gross amount charged by the service provider or gross amount paid to the service provider. Thus, the amount which was paid to the overseas service provider has to be taken as the taxable value. Thus, it is clear that the amount booked initially was ₹ 25,26,67,577/- on which the appellants paid service tax, whereas the actual amount paid later on by the appellants, to the service provider, was ₹ 25,52,53,374/- in foreign currency, resulting into short payment of service tax of ₹ 2,66,337/-. Further, the appellants have contended that legal proposition laid down by explanation (c) supra would apply to transaction between unrelated parties also, I find that when law is amply clear that the explanation supra is meant for associated enterprise, there is no need to read between the lines. This fact is also strengthened by the rule of literal constriction which states that one of the fundamental principles of interpretation of statue is to interpret a statute from language used in it without adding any words to or subtracting any words from the statute, unless there are adequate grounds to justify the inference that the legislature intended something which it omitted to express and a corollary to this principle would be that an interpretation which renders some word or words in a statute redundant, must be avoided. Therefore, I hold that the reliance placed by the appellants are not sustainable and the service tax demand has been rightly upheld by the adjudicating authority. Validity of issue of SCN where service tax with interest have been deposited earlier - Extended period of limitation - Held that:- as provided under Section 73(4) of the Act, once the extended period has rightly been invoked, the appellants had been rightly issued with the show cause notice, even if they had deposited the differential service tax alongwith interest before issuance of show cause notice. Levy of penalty u/s 78 - Held that:- once the service tax demand is held to be sustainable and it has also been held that extended period had been rightly invoked, the appellants cannot escape the penalty as prescribed under Section 78 of the Act. Thus, I hold that adjudicating authority had rightly imposed the penalty under Section 78 - Decided against the assessee.

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• 2015 (1) TMI 382
  Waiver of pre deposit - CENVAT Credit - construction services - Held that:- Lower authorities in the second round of litigation have denied the appellant Cenvat credit on Service Tax paid on the construction services. While remanding the matter in the second round of litigation, we had indicated that the appellant could be eligible for the Cenvat credit. Ld. counsel brings to our notice the stay order passed by this Bench in appeal No. ST/549/11 wherein we had granted unconditional waiver and remanded the matter back to the lower authorities. He would also rely upon the decision of this Bench in stay order of Navratan S.G. Highway Properties P. Ltd. - [2012 (9) TMI 452 - CESTAT, AHMEDABAD] of the same proposition. - appellant is rendering an output service of renting out of immovable property and the property which has been developed by construction is in his possession and he is owner of the said property. If that be so, in our view appellant has made out a prima facie case for the availment of Cenvat credit of the Service Tax paid on the construction services. Accordingly, we allow the application for waiver of the pre-deposit of the amounts involved and stay the recovery thereof till the disposal of appeal. - Stay granted.

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• 2015 (1) TMI 381
  Waiver of pre-deposit of Service Tax - activity of making ‘Garments on Hangers’ - Held that:- prima facie the activity undertaken by the applicant does not cover under ‘Business Auxiliary Service’. In this view of the discussion, the applicant has made out a case for waiver of pre-deposit. We, therefore, waive the requirement of pre-deposit of Service Tax, interest and penalty imposed under the Finance Act, 1994 and stay demand thereof during pendency of the appeal - Stay granted.

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• Central Excise

• 2015 (1) TMI 378
  Finalization of provisional assessment - Short payment of excise duty and some excess payment of excise duty - Adjustment of excess payment to short payment of duty - Difference of opinion - Matter referred to President for referring the matter to Third Member with following question of law:- Whether the appeal is to be rejected by denying the appellant's request for adjustment of excess paid duties with the short paid duty during the financial year 2006-2007, as held by Member (Technical) or such adjustments have to be allowed as held by Member (Judicial).

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• 2015 (1) TMI 377
  Levy of duty on Waste Weak HCL acid - Marketability - Revenue contends that the waste weak HCL acid is lower in strength and would be covered under Heading 2806.10 and the appellant is liable to pay duty - Held that:- Appellant took a definite stand before the lower authorities that the waste weak HCL acid is not marketable. The concentration of HCL is 10 - 15% and fetched a price of ₹ 25/-. But the concentrated HCL acid of 30 % to 33% marketed a price of minimum of ₹ 1,100/- to ₹ 1,200/- per MT. Revenue contended that waste weak HCL acid is processed by them. - merely the goods are sold in the market would not render goods marketable - Revenue has failed to place any material to show that the goods are sold and used in the further manufacture of any item - there is no material available to show that waste weak HCL acid is marketable and therefore it cannot be treated as an excisable commodity. Accordingly, the impugned orders are set aside - Decided in favour of assesse.

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• 2015 (1) TMI 376
  Classification of goods - Whether the impugned goods are maize starch classifiable under Tariff heading 11.03 or it is modified maize starch classifiable under Tariff heading 35.05 - Held that:- Adjudicating authority’s observation that any physical change like change in brightness/whiteness will result in ‘modified starch’ covered under Ch. Heading 35.05 is devoid of any basis. Further mere conjecture (on the part of the adjudicating authority) ‘that potassium permanganate may have resulted in the oxidation of starch’ cannot be the basis of concluding that such oxidation actually happened specially when there is no evidence thereof and the appellants have convincingly contended that no such oxidation was allowed to happen nor it actually happened. It is also clear from the explanatory notes to chapter heading 35.05 that whether product would qualify for coverage under heading 35.05 can be determined on the basis of changes in properties of the product. Thus, as a corollary, unless the product is tested to ascertain if such changes actually happened, it is not possible to infer whether the product is modified starch warranting classification under 35.05 - Further, following the CESTAT judgment in the case of Ridhi Sidhi Gluco Boile (2011 (4) TMI 970 - CESTAT, BANGALORE), CESTAT in case of CCE Ahmadabad Vs. Gujrat Ambuja Exports [2013 (11) TMI 779 - CESTAT AHMEDABAD] and in the case of CCE Ahmadabad Vs. Maize Products [2013 (11) TMI 783 - CESTAT AHMEDABAD] upheld the classification of such goods under ch. 11 of Central Excise Tariff. - It is evident from the foregoing discussion that there is no basis whatsoever to conclude that the impugned product was ‘modified starch classifiable’ under chapter 35 of Central Excise Tariff. Consequently, we do not find the impugned order sustainable and set aside the same. - Decided in favour of assesse.

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• 2015 (1) TMI 375
  Suppression of production - Clandestine clearance of goods - Entry not recorded in RG-1 Register - Parallel invoices - Penalty under Rule 25 read with section 11AC - Held that:- So far as recovery of parallel invoices are concerned, that was undisputed to be belonging to the appellant. The pulpable plea of different hand-writing over the documents was not proved. When hand-writing experts known to law opined against the appellant, there was no necessity to rely upon any other expert, who was not recognised by law. Therefore, appellant’s plea of hand-writing experts opinion was not considered has no relevance when the concerned employees in their statement admitted to have knowledge about such incriminating evidence against the appellant. The parallel invoices not being found to be irrelevant and not liable to be discarded, exhibiting quantum of clearance mentioning the value thereon unaccounted, ld. adjudicating authority made correct evaluation of such evidence as unaccounted transactions on the relevant date and raised the demand thereon. - Adjudicating authority has worked out very clearly the loss of revenue with precision taking the aggregate value of 23 parallel invoices in the adjudication order. He has categorically recorded that the invoices were recovered from the factory and were prepared by employees of the appellant company, which was confirmed by them to have prepared the same. The appellant could not rule out unaccounted transactions exhibited by such invoices. The settled position of law being that possession follows the title, clandestine clearance of goods made through the invoices not finding place in statutory record were bound to be contributory to the evasion of duty of the aforesaid amount. Therefore, the demand relating to parallel invoices is confirmed. Slips recorded production made by appellant on different dates. Such fact was not rebutted showing irrelevancy thereof in evidence leading any evidence to the contrary. The appellant could not repel the allegation of Revenue that such slips resulted in evasion of duty to the above extent. Nothing could be either proved to demonstrate that those slips were not recovered from the factory nor there was absence of live link between the slips and the appellant. Also, contents of the slips showing the nature of goods manufactured by the appellants could not be ruled out. Investigation found that the slips were intimately connected with the activities of appellant and contents thereof demonstrating the clearances of excisable goods not finding place in the production register of appellant could not be ruled out by appellant. It was plain and simple case of deliberate omission of production figures appearing in the slips unrecorded in the statutory record resulting in evasion of duty. Appellant’s plea that those were not related to appellant failed to succeed when author of the slips confirmed that the goods appearing therein were being manufactured by appellant and duty thereon not paid. So far as penalty of ₹ 47,47,307/- imposed on the appellant M/s. Agmotex Ltd. is concerned, looking into the evasion caused making clearances unaccounted through parallel invoices, penalty of ₹ 18,17,159/- is confirmed and penalty of ₹ 29,30,148/- related to unaccounted clearance as was established by incriminating slips is also confirmed for no evidence came to record to prove irrelevancy thereof. Accordingly, aggregate penalty of ₹ 47,47,307/- is confirmed. - Decided against assesse. In adjudication, Shri Shishir Agarwal, Director and Rajiv Sharma, Manager have faced penalty of ₹ 3,00,000/- and ₹ 1,00,000/- respectively under Rule 26 of Central Excise Rules, 2002. It may be stated that without human intervention, no artificial jurisdiction person shall cause evasion. There is always human element involved in committing evasions. Therefore, both the appellants are liable to penalty for their involvement and intimate connection with the loss of Revenue caused. However, considering the quantum of penalty imposed on them as disproportionate and penalty of ₹ 47,47,307/- imposed on the appellant company is confirmed, penalty imposed on these persons is reduced. Accordingly, there shall be penalty of ₹ 1,00,000/- and ₹ 50,000/- on Shri Shishir Agarwal, Director and Rajiv Sharma, Manager respectively. - Decided partly in favour of appellants.

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• 2015 (1) TMI 374
  Denial of CENVAT Credit - appellate authority held that inasmuch as the supplier has paid the duty on the goods supplied and the respondent has borne the incidence of the said duty, he is entitled for the credit of the same under the Cenvat Credit Rules - whether the credit can be denied even if the duty has been paid wrongly by the supplier of inputs - Held that:- In the case of Technoweld Industries (2003 (3) TMI 123 - SUPREME COURT OF INDIA), the Hon’ble Apex Court had held that the process of drawing wires from wire rods not amount to manufacture. The issue dealt in the said decision is only whether the process of drawing wire from wire rod amounts to manufacture or not. The said decision did not deal with the case relating to availment of credit of duty paid wrongly. Therefore, the ratio of the said decision has no application to the facts before me in the present case. - excise authorities having jurisdiction over the recipient of inputs cannot reopen the classification adopted by the officer having jurisdiction over the input supplier. In the present case, it is not the case of the Revenue that the excise authorities having jurisdiction over the input supplier has questioned the classification and held that the payment of duty was incorrect. If that be so, the authorities at the receiver’s end cannot question the classification or payment of duty and deny the Cenvat credit in respect of the duty paid by the supplier of the goods and borne by the receiver. - Decided against Revenue.

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• 2015 (1) TMI 373
  Waiver of pre deposit - Confiscation of goods - Redemption fine - Held that:- On perusal of the said Notification No. 55(RE-2008)/2004-2009, dated 5-11-2008 and amended Notification No. 57/2009-14, dated 17-8-2010 issued by Manufacturer of Commercial Goods, we find that the notification talks about the goods which are to be exported as Basmati rice should meet specification of having length as more than 6.61 mm and ratio of length to breadth of the grain shall be more than 3.5. It is seen from the records that in all these cases the said requirement of Notification No. 57/2009-14 stands complied. We also find that in an identical issue, the co-ordinate Bench of the Tribunal in the case of Global Agro Impex v. Commissioner of Customs, India [2013 (9) TMI 851 - CESTAT NEW DELHI] has taken a view that if condition of Notification 57/2009-2014 is complied, then exporter cannot be penalised or redemption fine be imposed. Prima facie we are convinced that the appellant have made out a case for complete waiver of the pre-deposit of the amounts involved. - Stay granted.

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• 2015 (1) TMI 372
  Levy of penalty - Wrong payment of duty mentioning the registration code of sister concern - reversal of credit to original unit denied - Held that:- The appellant unit is located at 14/5, Mathura Road, Amar Nagar, Faridabad and another unit of the same appellant is located in an adjoining premises at 13/6, Mathura Road, Amar Nagar, Faridabad. From the correspondence of the appellant with the department, it is clear that the duty for the month of August, 2009 by mistake was paid by the appellant in the account of their sister unit due to wrong mention of the assessee code and when the PAO did not accept the appellant’s request for transfer of the amount paid in the name of second unit to the appellant’s unit account, they have paid the duty again. In the circumstances of the case, I do not see how any provisions of Central Excise Rules warranting the imposition of penalty under Rule 25, has been contravened. In view of this, the impugned order upholding the penalty on the appellant is not sustainable. The same is set aside - Decided in favour of assesse.

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• 2015 (1) TMI 371
  Denial of refund claim - Unjust enrichment - Held that:- lower adjudicating authority recorded that the appellant produced a Certificate from the Chartered Account certifying that as per Book of Accounts the duty incidence has not been passed on to any third party and after recording that this certificate has not been supported by any corroborative evidence rejected the refund claim as unsubstantiated. Learned Commissioner (Appeals) also similarly rejected the refund claim. We wish to record here that ground of unjust enrichment cannot be a ground for rejecting a refund claim. The question of unjust enrichment comes into play only after when it is decided whether refund is sanctionable or otherwise. We find that both the lower authorities have not given findings whether the refund is sanctionable or otherwise and straightway rejected the refund claim on the ground of unjust enrichment. It is pertinent that after finding whether the refund is sanctionable or not the authorities have to either refund the amount to the appellant or they have to credit the amount to the Fund. In these circumstances the case is remanded to the lower adjudicating authority to decide the refund on its merits - Decided in favour of assesse.

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• 2015 (1) TMI 370
  Waiver of pre deposit - Failure to comply with pre deposit condition - Violation of Section 35F - Held that:- Despite the leave granted by the High Court, the appellant has neither applied for extension period for deposit nor he has complied with the order. Only plea raised before us is that the appellant is not in a position to deposit the amount of ₹ 25 lakhs because of financial constraint. Section 35F of the Central Excise Act, 1944 provides that no appeal against the decision or order relating to the duty demand shall be heard unless the person desirous of filing appeal pending such appeal, deposit the duty demand or penalty levied. Only exception to this rule is that the Tribunal may dispense with such deposit subject to such condition as he or it may deem fit. In the instant case, the Tribunal after hearing parties directed the appellant to deposit ₹ 25 lakhs within the directed period as a condition for waiver of pre-deposit of remaining amount of duty, interest and penalty. Since the appellant has failed to comply with the order of deposit passed by the Tribunal, his appeal cannot be heard. Therefore, the appeal is dismissed for violation of Section 35F of the Central Excise Act, 1944. - Decided against Assessee.

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• 2015 (1) TMI 369
  Denial of refund claim - Bar of limitation - Unjust enrichment - exemption under Notification No. 5/1999, S. No. 5 - Classification of goods - Classification held in favour of assessee by Commissioner and upheld by Supreme Court [2011 (7) TMI 1088 - Supreme Court of India] - whether the appellants are entitled for refund of duty or not - Held that:- adjudicating authority had observed that the refund claim had been filed by the appellants consequent to Hon’ble CEGAT’s judgment dated 26-9-2002. The adjudicating authority further observed that Hon’ble CEGAT’s order supra was never stayed by any appellate authority and that Hon’ble CEGAT, in their order supra had held that “The appeals of the appellants stand allowed accordingly with consequential relief, permissible under the law”; that therefore, the appellants should have filed the refund claim within one year of Hon’ble CEGAT’s order. Further, I find that for not applying refund after CEGAT’s order supra, the appellants had contended before the adjudicating authority that they did not do so because the matter was pending before Hon’ble Supreme Court. Further, I find that for holding the refund claim of the appellants as time-barred, the adjudicating authority had relied upon clause (ec) supra. But I find that the clause (ec) supra of Explanation to Section 11B of the Act was introduced w.e.f. 11-5-2007, whereas the refund claim in the present appeal pertains to the period from March, 2001 to October, 2002. I find that during the period prior to 11-5-2007, there was no ‘relevant date’ prescribed in the Explanation to Section 11B supra in so far as consequential refunds are concerned. Further, I find that clause (ec) supra had not been given retrospective effect and thus, the same can be made applicable only in respect of the duties which had been paid after the said amendment and for which the refund claims are being filed thereafter. Therefore, I hold that the clause (ec) supra of Explanation to Section 11B of the Act, cannot be applied to the duties paid for the periods prior to the said amendment. Clause (ec) is also not applicable to the present case as the duty was paid ‘under protest’ by the appellants. This is evident from the letter dated 7-3-2001 filed by the appellants with the Deputy Commissioner, Central Excise & Service Tax Division Sangrur, intimating thereunder that they would pay the duty on “Lehar Kurkure Namkeen” and “Cheetos Tomato wheels namkeen” under protest. Therefore, the relevant date of one year for filing refund, become nugatory in the present case, as evident from the plain reading of the provisions of Section 11B of the Act, supra which states that that the limitation of one year shall not apply where any duty and interest, if any, paid on such duty has been paid under protest. Balance sheets filed by the appellants for the relevant period that they have shown the refundable amount as recoverable from the excise authorities, under the schedule relating to loans and advances in their balance sheets for the period from 2001-02 onwards till 2012-13. Further I find that the appellants have also submitted a copy of Chartered Accountant’s certificated dated 18-2-2013 validating the entries in their balance sheets. I find that the balance sheets are conclusive evidence clearly showing the recoverable refundable amount from Excise department. Further, I observe that to rebut such conclusive evidence as that of balance sheets, which are in fact a statutory obligation for a limited company under Companies Act, one need to have sound and reasonable evidence to counter the same. Further, I also observe that the appellants have submitted a chart which showed the MRP at which the products in question have been sold during that period i.e. prior to 2001-02 during the disputed period, namely, 2001-02 and 2002-03 and much after the disputed period, namely, 2003-04. Adjudicating authority had observed that that since the products in question were subject to MRP based assessment under Section 4A of the Act, and definition of retail sale price in the Explanation to Section 4A was inclusive of the duties and taxes, the duty paid by the appellant during the relevant period had formed part of the retail sale price and, therefore, the appellant had passed on the duty burden to the consumers. I find that if this reasoning of the adjudicating authority is accepted then all MRP based products would not be eligible to claim refund of duty, if any. Further, I find that when the duty was paid under protest and shown to be recoverable from the department and further more there was no fluctuation in the MRP of the products, it clearly implies that the appellants had not passed on the duty element to the buyers. Thus, I hold that the appellants had succeeded in proving that the products in question manufactured and sold by them, did not include duty paid under protest. Refund is not hit by the doctrine of unjust enrichment, neither hit by time limitation - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2015 (1) TMI 380
  Input Tax Credit - Allowability of tax credit on purchases made from M/s. Shree Bhavani Ispat - Registration of all the selling dealers was cancelled retrospectively – Genuineness and bona fide of case – Held that:- Following the decision in MADHAV STEEL CORPORATION Versus STATE OF GUJARAT[2015 (1) TMI 233 - GUJARAT HIGH COURT] - no error has been committed by the Tribunal in entering into the merits of the case and even considering the appeal/s on merits against the order of assessment passed by the Deputy Commissioner - when even considering the documents on record forming part of the paper book, which have been relied upon by the learned advocate appearing on behalf of the appellant/s, the appellant/s – dealer/s have failed to prove the actual physical movement of the goods alleged to have been purchased from the vendors - when the respective appellant/s – dealer/s have failed to establish and prove the aforesaid important aspect of actual physical movement of the goods alleged to have been purchased by them from M/s. Shree Bhavani Ispat and M/s. Mangal Enterprises and on which the input tax credit have been claimed, the AO as well as the Tribunal have rightly rejected the claim of the respective appellant/s – dealer/s of input tax credit claimed u/s 11. The appellant/s – dealer/s have failed to satisfy / prove the actual physical movement of the goods alleged to have been purchased by them from the two vendors on which the input tax credit have been claimed and when the sale transactions are found to be not genuine and it appears that there were only billing activities, no error has been committed by the AO as well as Tribunal in denying the input tax credit - it is not established and proved by the dealer that in fact there was movement of goods from its vendor – M/s. Shree Bhavani Ispat, Bhavnagar - no error has been committed in holding that the activities by the selling dealer – vendor were the billing activities only and there was no selling deals - when there was no movement of goods and it was only billing activities, the input credit claimed on such transactions is rightly disallowed – Decided against assessee.

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• 2015 (1) TMI 379
  Maintainability of writ petition - Alternate remedy available - Held that:- The non-exercise of jurisdiction by a writ court on the ground of alternative remedy is a self-imposed limitation and not an absolute bar in exercise of jurisdiction where the order challenged on the face of it is unreasonable and arbitrary besides being without jurisdiction - the writ court will not shy away from exercising its jurisdiction under article 226 of the Constitution of India – there was no merit in the plea of alternative remedy and the matter is to be examined on merits on exercise of jurisdiction under article 226 of the Constitution of India. Amendment in entitlement certificate - Benefit of deferral of sales tax - Whether the Commissioner of Sales Tax is bound/obliged to amend the entitlement certificate to include within it such processes which have been amended in the eligibility certificate as process of manufacture and therefore eligible to the benefit of deferral of sales tax – Held that:- No occasion arises to remand the matter to the authorities under the Sales Tax Act to determine whether the process carried out by the petitioner amounts to manufacturing activities - Firstly, the sales tax authorities while assessing the petitioner have passed assessment orders consistently from the year 2001-02 onwards holding that the petitioner is manufacturer of HR sheets as per customers requirement – the assessment orders passed by the AO over a period of four years under the Sales Tax Act has not been challenged in appeal/ revision by the Revenue - Therefore, there has been a determination that the petitioner's activity/process of slitting, pickling and cutting to length of HR/CR coils into sheets is a manufacturing activity – earlier also, it has been held that where an eligibility certificate is issued by the implementing agency, then it would be just and proper for the sales tax authority to issue an entitlement certificate – thus, the question whether or not the activity for which the entitlement certificate has been issued would amount to manufacture could be determined at the stage of assessment - there is no reason not to issue the entitlement certificate in line/accordance with the eligibility certificate. The eligibility certificate dated October 4, 2008 as amended by addenda dated January 20, 2009 and the entitlement certificate dated August 27, 2008 have been issued by the sales tax authorities under the MVAT Act – the contention of revenue cannot be accepted - in terms of section 89 of the MVAT Act, the Commissioner of Sales Tax is obliged to issue an entitlement certificate wherever an eligibility certificate has been issued by the implementing agency in an incentive scheme - the only condition provided under section 89 of the MVAT Act is that the same can be issued subject to such conditions as may be prescribed - the only condition prescribed is under rule 83 of the MVAT Rules - The rule provides that the entitlement certificate would be issued to a unit which has paid its tax, interest and penalty if any, payable under the Act and also has filed due returns for the period ending before the grant of entitlement certificate – thus, the petitioner is entitled to a grant of the entitlement certificate, no sooner it has received the eligibility certificate from the implementing agency under the 1993 Scheme. The petitioner is entitled to grant of an addenda to the entitlement certificate dated August 27, 2008 in line with/in accordance with the addenda dated January 20, 2009 issued to eligibility certificate dated October 4, 2008 – thus, the order dated February 26, 2010 of the Joint Commissioner of Sales Tax is set aside and the Joint Commissioner of Sales Tax (H.Q.) is directed to issue addenda to the entitlement certificate dated August 27, 2008 in line with the addenda dated January 20, 2009 issued to the eligibility certificate dated October 4, 2008 - We further reschedule the eligible period from September 1, 2008 to February 28, 2015 as noted in the entitlement certificate dated August 27, 2008 and in the eligibility certificate dated October 4, 2008 to a period of 39 months from the date the Sales Tax Commissioner issue a entitlement certificate or till the sales tax incentive of ₹ 18,96,00,000 is exhausted - This rescheduling of the period has become necessary in view of the respondents inaction in not issuing the addenda to entitlement certificate dated August 27, 2008 though the petitioner was clearly entitled to the same – Decided in favour of petitioner.

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