Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 31, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Taxability of amount received - PE in India - DTAA - whether payments made by the assessee’s customers to it constituted royalty, in respect of software supplied? - supply of software, in the nature of articles or goods. - The mere fact that separate invoicing was done for purchase and other transactions did not imply that it was royalty payment - HC
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Depreciation on JCB Excavator, Motor Grader and Soil Compactor used in the business of construction of road exclusively - @ 15% OR 50% - if there are two views possible, then the view which favours the assessee has to be adopted. - AT
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Unexplained cash credits u/s.68 - amount collected on behalf of its sister concern - all three relevant parameters of identity, genuineness and creditworthiness have not been discharged at assessee’s behest in its endeavor to delete the impugned addition - AT
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Addition being 50% of the interest on housing property - in the absence of any actual financial contribution for acquiring the asset the mere addition of the name of the spouse as a coowner by itself can not be the determinative criteria denying the deduction claimed by the husband - AT
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Considering the nature of asessee’s business, the G.P rate of 10% is quite acceptable. Since the declared profit of 11.67% was more than the rate of 10%, the CIT(A) has rightly chosen to delete the entire addition. - AT
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Levy of penalty u/s.271(1)(c) - bogus purchase - surrender of income on account of investigation to buy the peace is not voluntarily - it is a fit case to levy the penalty - AT
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Whether the losses of the earlier years which has already been set off against the other incomes can be notionally brought forward and set off from the income of the eligible unit before allowing the deduction u/s 80IA - Decided in favour of the assessee - AT
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LTCG on sale of rights in land - AO was not empowered to adopt any valuation in place of actual sales consideration on the basis of his own notions or calculations - invoking the provisions of section 50C and in substituting some other valuation was clearly beyond the provisions of law - AT
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Rectification of mistake - investments made u/s 54EC - original assessment order passed by the AO is proper and it does not call for any rectification. Consequently, the rectification order passed by the AO u/s 154 suffers from illegality. - AT
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Penalty u/s 271(1)(c) - assessee has not placed any material suggesting that the issue is debatable in view of the fact that there is a direct nexus between the advance bearing funds and the loan advanced to the partner. - AT
Customs
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Classification of import of Beef leather cut pieces - The goods are finished leather suitable for manufacture of car seat covers which may be classifiable in a chapter other than 41, the goods would not be eligible for the benefit of the exemption notification no. 21/2002 - AT
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Valuation - Levy of CVD on MRP based value - import of induction cookers in SKD - goods are subject to quality testing - Goods that are not subject to the prescription of declaring the 'maximum retail price' under Legal Metrology Act, 2009 do not come within the ambit of section 4A of Central Excise Act, 1944. - AT
Service Tax
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Refund of unutilised credit - export of service - there is one-to-one relation and indefeasible right undeniable - The calculation should not deprive the appellant from the relief admissible in the respective quarter giving due regard to the spirit of the Board circular. - AT
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CENVAT credit - forged invoices - duty paying documents - the transfer advice came from M/s. BSNL, Madurai exhibiting the duty element. Accordingly there should not be denial of Cenvat credit to the appellant - AT
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CENVAT credit - services availed for export of goods - use of hired building - When the software professionals were housed in a hired campus used in software development, absence of direct nexus between such input service and the output service is inconceivable - credit allowed - AT
Central Excise
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Classification of goods - not a printed article - product came out of the printing industry cannot fall under the Tariff Heading 482100 but shall fall under 490190 - AT
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CENVAT credit - input service - Business Auxiliary Service relating to sales commission - credit allowed - AT
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Marketability of manufactured product - whether the Tissue Culture Media manufactured by appellant and consumed captively to manufacture anti-rabies vaccine was marketable? - Held No - Demand set aside - AT
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Deemed Manufacture - activity of filing gases from tanker to individual cylinders, mixing more than one gases in specified proportion - labelling or relabelling - Scope of Note 10 of Chapter 28 of the Central Excise Tariff Act, 1985 - Activity is not amounting to manufacture - SC
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SSI Exemption - determination of turnover - value of the chassis supplied by customers to the manufacturer appellant are not be included to determine the aggregate value of clearances for home consumption. - AT
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Once the appellant has crossed the SSI exemption benefit and starts paying central excise duty on their manufacturing they would be entitled to the facility of CENVAT credit on the inputs used for their manufacturing. - AT
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Copper scrap druid is a waste/scrap material of copper wire/cables having various types of insulations including plastic and therefore, the same falls under Chapter 85 (Tariff Headings 85.44/85.46/85.47) of Central Excise Tariff) - Benefit of exemption allowed - AT
Case Laws:
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Income Tax
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2017 (1) TMI 1339
Gain arising on sale of shares - ‘business income’ OR ‘capital gains’ - Held that:- In view of judgments of Hon’ble Supreme Court in the case of Radha Swami Sat Sang, vs. CIT (1991 (11) TMI 2 - SUPREME Court) and CIT v. Excel Industries Ltd. (2013 (10) TMI 324 - SUPREME COURT ), upholding principal of consistency and in view of the circular of the CBDT and in view of facts of this case as discussed above, claim of the assessee deserves to be upheld. Therefore, after taking into all the facts and circumstances of the case and in view of the detailed discussion made by us in earlier part of our order, we find that the detailed findings recorded by Ld. CIT(A) for upholding the claim of the assessee by treating the income arising from purchase and sale of shares as assessable under the head of ‘capital gains’ are well reasoned and do not require any interference from our side Disallowance made by the AO u/s 14A read with Rule 8D - Held that:- The assessee has maintained separate accounts with regard to its business income and expenses incurred in earning the business income. It is further brought to our notice that the expenses incurred with regard to the activity of making investment in shares have been debited to the capital account and have not been debited to P & L account. The P & L A/c prepared by the assessee is exclusively for the purpose of reflecting its transactions arising out of business activities i.e. comprising of business income and business expenses. Under these circumstances, there was heavy onus upon the shoulders of the AO to establish if any of the expenses debited in the P& L account did not pertain to its business activity but with any other activity say for earning income from capital gains. Unfortunately, no such exercise has been done by the AO before invoking the provisions of section 14A. It was all the more necessary in the light of the fact that expenses incurred on PMS brokerage fee and other incidental expenses for making investment into shares have not been debited in the P & L account by the assessee. These facts have also not been disputed by the Ld. DR before us. Thus the reasoning given by the Ld. CIT(A) for deleting the disallowance made by the AO is in accordance with law and facts of this case. - Decided in favour of assessee
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2017 (1) TMI 1338
Taxability of amount received - PE in India - DTAA - whether payments made by the assessee’s customers to it constituted royalty, in respect of software supplied? - Held that:- The supplies made (of the software) enabled the use of the hardware sold. It was not disputed that without the software, hardware use was not possible. The mere fact that separate invoicing was done for purchase and other transactions did not imply that it was royalty payment. In such cases, the nomenclature (of license or some other fee) is indeterminate of the true nature. Nor is the circumstance that updates of the software are routinely given to the assessee’s customers. These facts do not detract from the nature of the transaction, which was supply of software, in the nature of articles or goods. This court is also not persuaded with the submission that the payments, if not royalty, amounted to payments for the use of machinery or equipment. Such a submission was never advanced before any of the lower tax authorities; moreover, even in Ericson (2011 (12) TMI 91 - Delhi High Court ), a similar provision existed in the DTAA between India and Sweden. Interest payments and Section 234B is concerned, the court is of the opinion that the issue is covered by GE Packaging (2015 (1) TMI 1168 - DELHI HIGH COURT ). This question of law too is answered against the revenue, and in favour of the assessee.
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2017 (1) TMI 1337
Disallowance of cost of production - Held that:- AO had added the said sum treating it as bogus expenditure,that he had not given any reason as to how and why the expenses were not genuine. To make any disallowance or to make any addition, the AO is supposed to pass a reasoned and speaking order specially when the assessee produces documentary evidences. Mere stating that expenditure incurred by an assessee is not sufficient to fasten tax liability to that assessee. In the case under consideration, the AO had not explained as to how the expenditure claimed under the head other production expenses was non-genuine. Therefore,we are of the opinion that order, passed by the FAA, needs no interference from our side. Upholding his order, we decide the first Ground of appeal against the AO. Disallowance made u/s.40A(3)- Held that:- We find that the AO had made a disallowance @20% of total expenditure on adhoc basis, that he had not given the details of expenditure that was covered by section 40A(3), that the FAA had verified the cash book and had observed that most of the expenditure were less than ₹ 20,000/-. So, in our opinion he was justified in restricting the disallowance at ₹ 10 lakhs considering the fact that there were certain expenses that were more than ₹ 20,000/-. Addition u/s.68 - Held that:- No difference with regard to miscellaneous receipts as appearing in the impounded books and regular books. The AO failed to understand the difference in presentation.The FAA has given a categorical finding of fact that,as per the table given above,entire receipt was offered for taxation by the assessee during the year under appeal. In these circumstances,there is no need to interfere with his order. Ground No.3 stands dismissed. Disallowance of expenditure - Held that:- The assessee had actually returned in its FBT return the entertainment expenses so claimed. Therefore, a further disallowance would definitely amount to double addition of the same expense. Further, we find that the AO disallowed the expenses being of personal in nature. The assessee is a private limited company, therefore, there cannot be any personal expense so far as a legal person is concerned, therefore, we do not find any reason in sustaining an addition. Addition on account of remuneration paid to the directors - Held that:- Considering the entire facts involved in this line of business, in our considerate view, the remuneration paid to the Directors was reasonable and commensurate with the services provided by them. Accordingly, we direct the AO to delete the addition made by him and also delete the enhancement done by the Ld. CIT(A). Addition on account of various expenses including payment made to junior artists and expenses related with dress/make up/ costumes/dubbing and mixing etc. - Held that:- We direct the AO to restrict the disallowance to 5% of all expenses other than expenses incurred towards payments made to junior artists. Payment made to junior artists has to be allowed fully. Thus Ground is decided in favour of the AO in part. Addition on account of proportionate cost of production by applying Rule 9A (5) of the Rules - Held that:- In the instant case, we find that all the three movies were released before 90 days from the end of the previous year. A perusal of the chart exhibited on page-542 of the paper book show that the assessee has shown aggregate income which is much higher than the cost of production of these movies. As the facts are in line with the provisions of Rule 9A(2), the entire cost of production deserve to be allowed. Accordingly, we direct the AO to delete the enhancement made by the Ld. CIT(A) Addition on account of production cost - Held that:- We find that the assessee had filed a reconciliation statement giving details of payments made by the distribution division,that the AO did not point out any discrepancy in the statement, that while determining the income of the assessee he had clubbed the incomes of all the divisions, that he did not allow clubbing the expenses of the same divisions, that he has not brought on record any proof that disputed amount was part of the inflated expenses,that during the original assessment proceedings he had considered the issue of cost of production and had not made any addition. Therefore, we are of the opinion that the order of the FAA does not suffer from any legal or factual infirmity. Confirming his order,we decide the effective ground of appeal against the AO. Disallowance of ₹ 3.01 crores had been confirmed in the assessment year 2007-08 - Held that:- While deciding the appeal,filed by the assessee, for the AY.2007-08(supra) we have held that the amount in question was to be assessed in that year. There is no need to quote any authority to hold that same income cannot be taxed twice.As the issue of taxability of the income in a particular year has reached finality, so, in our opinion the order of the FAA does not need any interference from our side.
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2017 (1) TMI 1336
Levy of penalty u/s .271(1)(c) - Complete disallowance u/s 10B deduction - Held that:- The case file already indicates that the assessee has been granted an STPI registration on 18.02.2009. Learned CIT(A) has thus held it entitled for the impugned deduction w.e.f. the said date on proportionate basis. We afforded adequate opportunity of hearing to both the parties. The Revenue fails in disputing assessee’s above certification w.e.f. 18.02.2009 so as to deny it Section 10B deduction relief. The latter party has also not been able to repel the CIT(A)’s conclusion holding it entitled for Section 10B deduction only w.e.f. the date of certification i.e. 18.02.2009 instead of the entire relevant previous year. We accordingly find no reason to interfere in well reasoned CIT(A)’s order under challenge Penalty u/s.271(1)(c) - Held that:- There is hardly any dispute in view of our findings on quantum issue that the assessee’s auditor’s statement about its non STPI certification allegedly made in the course of assessment was factually incorrect as the assessee’s certification stood proved w.e.f. 18.02.2009 (supra) as concluded in the above quantum proceedings. We thus observe that the learned CIT(A) has rightly quoted hon’ble apex court’s decision in a Reliance Petroproducts case [2010 (3) TMI 80 - SUPREME COURT] to conclude that the assessee’s bonafides are very much in order and each and every disallowance/addition made in the course of quantum proceedings does not necessarily resulting in Section 271(1)(c) penalty in question.
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2017 (1) TMI 1335
Amount of advances given in the course of business - whether is allowable expenses while computing the business profit? - Loan liability written back - Held that:- The advance was provided on the principal of commercial expediency and for the purpose of the business. It is settled proposition of law that in what manner the assessee should conduct his business is that left to the discretion of the assessee and the assessing officer cannot sit in the arm chair of the businessman to decide what should have been the income earned. Therefore in our considered view we do not find any interfere in the order of ld. CIT(A)in allowing claim - Decided in favour of assessee Amount of loan given in the course of business is allowable expenses while computing the business profit - Held that:- The loan given in the course of the business is a business transaction and therefore it should be allowed for deduction while computing the business income of the assessee. Hence the issue raised by the assessee is allowed Loan liability written back has arisen in the normal course of business and therefore chargeable to tax as income - Held that:- The loan was given to the mills in the course of the business and in the event of writing off the same in the books as irrecoverable is allowable for deduction. While holding so, we have relied in the case of CIT Vs. Ramaniyam Homes (P) Ltd. (2016 (4) TMI 954 - MADRAS HIGH COURT). Accordingly in our considered view the same ratio is also applicable in the instant issue. Therefore we do not find any reason to interfere in the order of ld. CIT(A).
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2017 (1) TMI 1334
Allowability of business expenditure - Held that:- There is not even the list of marketing services vis-à-vis the corresponding sales along with the commission payments in question so as to prove the argument that the former assessee had in fact availed marketing services of the latter assessee as per the relevant agreements on record and therefore, the impugned commission disallowances are liable to be deleted. No merit in Shri Devatia’s last argument that the department itself has been allowing these assessees’ claims regarding rendering of marketing services in all earlier assessment years. We observe in these peculiar facts that each and every assessment year is a separate unit and merely because an assessee has proved some expenses in earlier assessment year does not ipso facto lead to a conclusion that the very payee has rendered in fact the very services in all latter assessment years as well.
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2017 (1) TMI 1333
Depreciation on JCB Excavator, Motor Grader and Soil Compactor used in the business of construction of road exclusively - @ 15% OR 50% - Held that:- The issue of allowability of depreciation on JCB and other equipments has been decided by the Hon’ble Kerala High Court in the case of CIT vs. Galord Constructions (2009 (8) TMI 1156 - KERALA HIGH COURT ) it can be safely inferred that two views have been expressed by the different High courts and the Coordinate Benches. It is settled position of law by the judgment of Hon’ble Supreme Court rendered in the case of Vegetable Products Ltd. (1973 (1) TMI 1 - SUPREME Court) that if there are two views possible, then the view which favours the assessee has to be adopted. Respectfully following the judgment of Hon’ble Apex Court , we hereby direct the AO to allow the depreciation @ 50%.
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2017 (1) TMI 1332
Unexplained cash credits u/s.68 - amount collected on behalf of its sister concern - Held that:- The assessee has failed to file even details of the cheques bounced in order to discharge its primary onus much less than the substantive burden. Shri Talati at this stage refers to assessee’s huge losses to the tune of ₹ 7,81,61,822/- to plead that there was no need on its part to adopt such a tax evasion method. We find no merit in this plea as this alone cannot form a valid reason to delete the impugned addition wherein the assessee has failed in proving its above stated explanation to have collected consideration in lieu of sale of goods from the payee entity at its sister concern’s behest. We accordingly conclude that all three relevant parameters of identity, genuineness and creditworthiness have not been discharged at assessee’s behest in its endeavor to delete the impugned addition as in Sumati Dayal vs. CIT [1995 (3) TMI 3 - SUPREME Court] holding that such an explanation must satisfy the test of human probabilities. We thus find no reason to interfere in the CIT(A)’s order affirming Assessing Officer’s action making the impugned unexplained cash credits addition - Decided against assessee.
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2017 (1) TMI 1331
Addition being 50% of the interest on housing property - the property jointly owned by assessee and his wife, assessee was entitled to claim to the extent of 50%of the interest on housing loan only - Held that:- The spouse who though shown as a co-owner may appear to be entitled to claim deduction simply on the basis of the said fact but in the facts of the present case has to be excluded from availing the benefits due to the tax-payer when there is substantial evidence to the contrary that the property was neither purchased nor sourced through a loan applied by the wife. Hence, in the absence of any actual financial contribution for acquiring the asset the mere addition of the name of the spouse as a coowner by itself can not be the determinative criteria denying the deduction claimed by the husband and on verification of facts, it has to be allowed. The fact that no rental income has been received by the assessee’s wife is also a consistent claim on record which needs to be verified. Statute permits deduction of interest on loan taken for purchase of house property to the person taking the loan for acquiring, constructing, repairing, renewing or reconstructing with borrowed capital, it is such a person who has himself made the initial down payment and paid EMIs from his own resources for purchase of the property belonging to him (or acquired through that loan) and has received the rent income if any from the property who alone is entitled to tax relief. Accordingly on a consideration of the material available on record and the views of the tax authorities as expressed in the orders and the argument of the assessee before the CIT(A), I am of the view that the impugned order deserves to be set aside. The assessee on facts has placed fresh evidences before the CIT(A) which as per record have been remanded to the AO who has failed to file any Remand Report. In the circumstances, while remanding the issue to the CIT(A) it is directed that another reasonable attempt may be made to obtain a Remand Report from the AO and in case the AO still fails to respond, the CIT(A), may consider and verify the evidences at his level and pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. - Appeal of the assessee is allowed for statistical purposes.
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2017 (1) TMI 1330
Reopening of assessment - Disallowance being commission paid by the assessee to a Non-Resident Agent - Held that:- Nature of commission paid by the assessee was not proved in the absence of agreements. That apart, we find that the reopening was initiated after four years from the end of the assessment year. In the original assessment assessee had produced all details which were called by the ld. Assessing Officer. For a reopening after four years it is necessary that there should be failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. There is nothing on record to prove that assessee had failed to disclose fully and truly all material facts relating to the assessment in the original assessment proceedings. Especially so, since assessee filed all required information called for by the ld. Assessing Officer during the original assessment proceedings. In the circumstances, it s of the opinion that assessee has to succeed in all the grounds raised by it. - Decided in favour of assessee
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2017 (1) TMI 1329
Reopening of assessment - addition to the total income on account of non-genuine purchases - GP addition - AO made a specific addition on account of unverified purchases u/s 68 - Held that:- It is quite clear that at the level of the Assessing Officer, the purchases have been held to be unverifiable primarily for the reason that the notices issued by the Assessing Officer under section133(6) of the Act were either not served or if they were served, the same were not responded to by the respective parties. In contrast, the CIT(A) has recorded a categorical finding in para 6.29 to 6.30 of her order and has observed that the purchases were liable to be held as genuine and not bogus. In the context of assessment year 2010-11, we find that the said findings of the CIT(A) have not been assailed by the Revenue and cannot be said to be based on irrelevant material. Even before us, the Ld. Departmental Representative has merely reiterated the stand of the Assessing Officer, which in our opinion cannot be sustained in the face of the findings of the CIT(A). The CIT(A) has observed that the payments made are supported by confirmation of the parties, copies of invoices, bank statements and further that none of the parties have named the assessee in their statements. Considering these circumstances, we hereby affirm the order of the CIT(A) in principle that the purchases cannot be treated as bogus. On conclusion of the CIT(A) is that even if, some of the purchases were not verifiable, the addition, if any, could be made only for the embedded profit. In this context, for assessment year 2010-11, the CIT(A) has examined the G.P rate declared by the assessee @11.67% and not that considering the nature of asessee’s business, the G.P rate of 10% is quite acceptable. Since the declared profit of 11.67% was more than the rate of 10%, the CIT(A) has chosen to delete the entire addition. In the absence of any infirmity in the action of the CIT(A), the same is affirmed.
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2017 (1) TMI 1328
Carry-forward the losses of earlier years - Held that:- Section 79 was enacted with the object of preventing what may be shortly described as buying of losses by taking over controlling interest in the shareholding of a company which had carried forward losses.We find that the FAA has not passed a speaking order.From his order,it is not clear as what was the shareholding for the initial year and what changes took place during the year under consideration. He has listed names of several companies and their shareholding pattern. But,nothing is coming out as to how the provisions of section 79 are applicable or not. He has not commented upon the clause (a)and (b)of the section and their applicability to the facts of the case. Therefore, we are of the opinion that,in the interest of justice, matter should be restored back to his file for fresh adjudication.He will decide the matter after affording a reasonable opportunity of hearing to the assessee. Effective ground of appeal is decided in favour of the AO, in part.
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2017 (1) TMI 1327
Levy of penalty u/s.271(1)(c) - surrender of income on account of investigation to buy the peace - bogus purchase - revised return fled - Held that:- During the assessment an information was received from DGIT (Inv.), Mumbai about the four firms engaged in Hawala entries. The name of the four firms were Ganesh Enterprises, Amar Enterprises, Saradge Enterprises and Anshu Mercantile Pvt. Ltd. Notice was given to the assessee but there was no proper reply, however, the assessee accepted the bogus purchase to buy peace and paid the tax accordingly. In the said circumstances the said law is not applicable to the facts of the case. Moreover the law relied by the departmental representative speaks that surrender of income on account of investigation to buy the peace is not voluntarily and statute does not recognize these type of defenses under the explanation 1 to section 271(1)(c) of the Act. Admission of bogus purchases leads to the concealment of income and furnishing the inaccurate particulars of income in the return. The surrender of income was not voluntarily and it is a fit case to levy the penalty. Therefore, in view of the law settled in Mak Data P. Ltd. Vs. Commissioner of Income Tax [2013 (11) TMI 14 - SUPREME COURT] we are of the view that it is a fit case to levy the penalty, hence the order passed by the CIT(A) is correct and in accordance with law which is not liable to be interfere with at this appellate stage. - Decided against assessee.
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2017 (1) TMI 1326
Eligibility to deduction u/s 80IC - Held that:- We find that the CIT (A) had called for a remand report and on the basis of the remand report has accepted that the assessee has filed the original return of income on 30.09.2011 and thereafter the return filed on 30.03.2011 is the revised the return of income and hence the assessee has satisfied the condition for claiming deduction u/s 80IC. Therefore, we do not see any reason to interfere with the findings of the CIT (A) on this issue. As regards the computation of deduction u/s 80IC we find that the assessee has accepted that the profit attributable to smaller components of the sale kit is not eligible for deduction u/s 80IC of the Act and has worked out the disallowance at ₹ 80.00 lakhs and accordingly apportioned it amongst the three eligible units. The Revenue is challenging the said allocation on the ground that the AO has not been given an opportunity to verify the said allocation. We find that during the assessment proceedings itself, the assessee had given the computation, but the AO has not gone into the said computation and the allocation on the ground that the assessee is not eligible for deduction u/s 80IC as it has filed the return after the stipulated time u/s 139(1). Therefore, we remit the issue of computation of allocation of both the common expenditure and also the profit attributable to the smaller components of the eligible unit to the AO for verification and allowance thereafter in accordance with law. Whether the losses of the earlier years which has already been set off against the other incomes can be notionally brought forward and set off from the income of the eligible unit before allowing the deduction u/s 80IA is covered in favour of the assessee by the decision of the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills Private Limited vs. ACIT, reported in [2010 (3) TMI 860 - Madras High Court ]
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2017 (1) TMI 1325
LTCG on sale of rights in land - whether the lower authorities were justified in substituting the sales consideration with the amount for deemed sales consideration by invoking provisions of section 50C for computing long term capital gains with respect of sale of rights in land made by the assessee during the year under consideration? - Held that:- Since in the facts of the case before us the transaction was carried out by the assessee prior to 01.10.2009, therefore provisions of section 50C could not have been applied. Since, the impugned agreement was not registered, therefore, there was no occasion for any assessment of stamp valuation. Under these circumstances, the AO was not empowered to adopt any valuation in place of actual sales consideration on the basis of his own notions or calculations. Thus, we find that action of the lower authorities in invoking the provisions of section 50C and in substituting some other valuation was clearly beyond the provisions of law as applicable upon the impugned transaction. Under these transactions, we hereby delete the addition made by the AO. - Decided in favour of assessee
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2017 (1) TMI 1324
Condonation of the delay of 263 days - Ill health of advocate - Held that:- The reason attributed by the assessee cannot be said to be unreasonable. Primarily, the assessee does not stand to gain by filing this appeal with any delay. Further, the medical record and the death certificate filed by the assessee lends any amount of support to his contention. It is the settled principles of law in Collector of Land Acquisition vs Mst Katiji & Others 1987 (2) TMI 61 - SUPREME Court ) that when the question of delivery of substantial justice is spitted against the technical consideration, the later must give way to the former and the adjudicating authorities cannot take a pedantic view while dealing with this sort of matters. While respectfully following the ratio of the above decision, we hold that it is a fit case to condone the delay and to receive the appeal for consideration on merits. Point no. 1is answered in favour of the assessee. Dismissing the appeal on the withdrawal of the same by the assessee - Held that:- When the appeal was dismissed as withdrawn at the instance of the assessee, it is not open for the assessee to take a turnaround and to contend that the dismissal of the appeal by the Ld. CIT(A) is without any jurisdiction. While respectfully following the judicial reasoning delineated above, we hold that it is a fit case to set aside the matter to the file of the Ld. CIT(A) to give a fresh disposal thereof according to law after affording reasonable opportunity of being heard to the assessee. We order accordingly.
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2017 (1) TMI 1323
Rectification of mistake - assessee is not entitled for capital gains deduction in respect of the investments made u/s 54EC - whether the buyer has not become full owner of the transferred asset on that date since the contents of clauses (4) and (8) were not met? - Held that:- The date of registration of the property is not to be reckoned for the purpose of computing the timing of reinvestment of the capital gains when the said sale deed recited clause (4), which is extracted above. Since, the final payment is made only in January 2008 in accordance with the said clause (4) of the agreement, the original assessment order passed by the AO is proper and it does not call for any rectification. Consequently, the rectification order passed by the AO u/s 154 of the Act suffers from illegality. Further, we find, the case laws cited by the CIT (A) are not on the similar facts as in the case of the assessee. - Decided in favour of assessee
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2017 (1) TMI 1322
Disallowance u/s. 14A of the Act r. w. r. 8D - Held that:- AO directed to restrict the disallowance to 2% of the exempt income.
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2017 (1) TMI 1321
Penalty u/s 271(1)(c) - nexus between the advance bearing funds and the loan advanced to the partner - Held that:- The undisputed facts that emerged from the record are that the assessee firm had advanced a loan of ₹ 2,56,76,179/- on which no interest has been charged assuming that the assessee was having interest free funds in the form of capital introduced by the partner and the other interest deposits of ₹ 10,74,969/- and ₹ 2,12,284/- respectively, even than the money so advanced exceeded the interest free funds. There is no dispute with regard to the fact that this loan was given out of the interest bearing funds on which the assessee had claimed interest. Under these facts, we are unable to accept the submission of the ld. Counsel for the assessee that the issue is squarely covered by the judgment of Hon’ble Supreme Court rendered in the case of Reliance Petroproducts Ltd. (2010 (3) TMI 80 - SUPREME COURT ). The assessee has not placed any material suggesting that the issue is debatable in view of the fact that there is a direct nexus between the advance bearing funds and the loan advanced to the partner. Therefore, we do not see any infirmity in the order of ld. CIT (A), the same is hereby affirmed. - Decided against assessee.
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Customs
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2017 (1) TMI 1308
Proceedings against the IRS officer working as Commissioner of Customs - period of limitation for initiating criminal proceedings - Offences punishable u/s 120B read with Section 420 IPC and u/s 13(2) read with Section 13(1) (d) of P.C. Act - right of protection u/s 155(2) of the Customs Act - no proceedings other than a ‘suit’ can be initiated against him after expiration of three months from the accrual of cause of action - Held that: - allegations against the petitioner are that instead of securing government revenue, he hatched conspiracy with coaccused to cause undue pecuniary advantage to the private party and ordered release of duty draw back - The impugned order based upon fair appreciation of facts and law warrants no intervention. - petition dismissed.
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2017 (1) TMI 1307
Exemption under N/N. 21/2002-Cus dated 1st February 2002 - classification of imported item - Beef leather cut pieces set TFC 235-seat - classified under heading 41152090 or under heading 42050090 of the First Schedule to the Customs Tariff Act, 1975? - Held that: - The specific description in the notification that enables importers to avail the exemption is ‘blue chrome tanned leather, crust leather, finished leather of all kinds, including splits and sides of the aforesaid.’ Second column of the said Table restricts the eligibility for exemption only to such goods of that description as are classifiable under chapter 41 - the goods are finished leather suitable for manufacture of car seat covers which may be classifiable in a chapter other than 41, the goods would not be eligible for the benefit of the notification - appeal disposed off - decided against assessee.
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2017 (1) TMI 1306
Valuation - import of old and used photocopier machines - enhancement of value and discarding the declared value - Imposition of redemption fine and penalty - Held that: - there is no whisper about any defence led by appellants to appreciate that there was proper declaration of the imported value. Considering the Chartered Engineer's certificate as well as stream of import of the past, utility of the goods and the future life span of the photocopiers imported, enhancement of declared value made to the above extent is Justified. Coming to redemption fine and penalty, looking to the extent of enhancement and the assessable value determined and other relevant factor of age of machines, it is considered proper to reduce the redemption fine and penalty - appeal disposed off - decided partly in favor of appellant.
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2017 (1) TMI 1305
Valuation - Levy of CVD on MRP based value - import of induction cookers in SKD - goods are subject to quality testing - Whether the enhancement of value of goods imported under the three bills of entry was in accordance with Customs Valuation (Determination of Price of Imported Goods) Rules, 2007? - Held that: - reliance placed in the case of EICHER TRACTORS LTD. Versus COMMISSIONER OF CUSTOMS, MUMBAI [2000 (11) TMI 139 - SUPREME COURT OF INDIA], where it was held that if the transaction value cannot be determined u/r 4(1) and does not fall under any of the exceptions in Rule 4(2), there is no question of determining the value under the subsequent Rules. Whether the imported goods are 'induction cookers' and, if they are, whether the provisions of section 4A of Central Excise Act, 1944 will be applicable as to render the assessment of additional duty of customs to be levied on the 'maximum retail price'? - Held that: - the induction cookers are imported as parts and, being electrical consumer goods, are required to be subject to testing before they can be marketed. Hence, the goods are, as yet, not subject to the provisions of Legal Metrology Act, 2009 in its imported form - When the imported products are not permitted for sale to the consumer as such without mandatory testing, the classification under Customs Tariff Act, 1975 cannot provide the escapement from Legal Metrology Act, 2009. Goods that are not subject to the prescription of declaring the 'maximum retail price' under Legal Metrology Act, 2009 do not come within the ambit of section 4A of Central Excise Act, 1944. Appeal allowed - decided in favor of appellant.
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Corporate Laws
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2017 (1) TMI 1303
Compounding of offence - Held that:- i) We are imposing a penalty of ₹ 2,50,000/- (Rupees Two Lakh Fifty thousand only) on the Applicant Company and ₹ 50,000/- (Rupees Fifty thousand only) each on Applicant 2 & 3 which is to be paid within 3 weeks from the date of receipt of the Order and report compliance of the same. (ii) From the available records it is understood that the company has not obtained shareholders approval as required u/s. 94 of the Companies Act, 1956. Therefore, we direct the company and the directors to pass appropriate resolution within one month from the date of receipt of this order and report compliance to Registrar of Companies, Hyderabad as well as to the Registry. The Applicants are warned not to repeat any violation else strict action will be taken thereby. In view of the above, the case is disposed off.
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2017 (1) TMI 1302
Scheme of Arrangement (hereinafter referred to as ‘proposed scheme’) between the Demerged Company and the Resulting Company - Held that:- Considering the approval accorded by the shareholders and creditors of the Petitioner Companies to the proposed scheme; and the circumstance that the objections/observations raised by the Regional Director having been satisfied, by way of said affidavit dated 04.10.2016, there appears to be no impediment to the grant of sanction to the proposed scheme. Consequently, sanction is hereby granted to the proposed scheme. The Petitioner Companies will comply with the statutory requirements in accordance with law. Upon the sanction to the proposed scheme being effective from the appointed date of the proposed scheme, i.e. 1st January, 2015, the Demerged Undertaking (as defined in the proposed scheme) of the Demerged Company shall stand merged in the Resulting Company. In any event, notwithstanding what has been stated on behalf of the Petitioner Companies hereinabove, the Resulting Company shall file an undertaking with this Court, within two weeks from today, stating therein, that it will take over and defray all the liabilities of the Demerged Undertaking (as defined in the proposed scheme) of the Demerged Company. Notwithstanding the above, if there is any deficiency found or, violation committed qua any enactment, statutory rule or regulation, the sanction granted by this Court to the proposed scheme will not come in the way of action being taken, albeit, in accordance with law, against the concerned persons, directors and officials of the Petitioner Companies.
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2017 (1) TMI 1301
Scheme of Arrangement and Demerger - Held that:- The requirement of convening meeting of the Unsecured Creditor of the Transferor Company to consider and, if thought fit, approve with or without modification, the proposed scheme is dispensed with. The Transferor Company does not have any secured creditors. The Transferee Company has seven equity shareholders. All the equity shareholders have given their written consents/NOCs to the proposed scheme. The said written consents/NOCs have been placed on record. The same have been examined and found in order. In view of the foregoing, the requirement of convening meeting of the equity shareholders of the Transferee Company to consider and, if thought fit, approve with or without modification, the proposed scheme is dispensed with. The Transferee Company does not have any secured or unsecured creditors. In view of the circumstance that the requirement of convening meetings of the shareholders and creditors has been dispensed with, the requirement of publishing notices for meetings in newspapers is also dispensed with.
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Service Tax
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2017 (1) TMI 1320
Refund claim - export of services - rejection on the ground that registration certificate was issued on 21.6.2010 to the appellant, whereas all the input services were availed prior to registration - time limitation as per Section 11B of Central Excise Act - Held that: - While, it is a fact that number of appellate forums have taken a view that cenvat credit in respect of services and inputs/capital goods availed even before registration is very much eligible to the assesseee a contrary view has been taken by the Hon’ble High Court of Madras, which is jurisdictional High Court for this Tribunal, in the case of CCE Coimbatore Vs Sutham Nylocots [2014 (11) TMI 496 - MADRAS HIGH COURT], where it was held that Even though the assessee claimed exemption on the ground that they had subsequently registered with the Department, as regards the liability as found in the order of adjudication as well as in the order of the Tribunal, we do not find any justifiable ground to accept the plea of the assessee based on the exemption Notification alone that the registration being not a mandatory one, the assessee would be entitled to the benefit of Modvat credit. Refund allowed - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 1319
Refund of unutilised credit - export of service - Circular No. 20/01/2010-ST, dated 19.01-2010 - Held that: - the authority should re-calculate the refund admissible to the appellant taking into consideration the carried forward refundable amount as well as accrued refund of the respective quarter. The calculation should not deprive the appellant from the relief admissible in the respective quarter giving due regard to the spirit of the Board circular. The authority should also keep in mind that in Cenvat credit jurisprudence, there is one-to-one relation and indefeasible right undeniable as has been held in the case of Collector of Central Excise, Pune Vs Dai Ichi Karkaria Ltd [1999 (8) TMI 920 - SUPREME COURT OF INDIA] - refund allowed - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 1318
CENVAT credit - forged invoices - duty paying documents - Held that: - the appellant is Public Sector Undertaking and has centralized purchase policy. There is also no dispute that capital goods came from Madurai was used in the premises of M/s. BSNL, Coimbatore. Similarly there is no dispute that the transfer advice came from M/s. BSNL, Madurai exhibiting the duty element. Accordingly there should not be denial of Cenvat credit to the appellant - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 1317
CENVAT credit - services availed for export of goods - use of hired building - consultancy service - input services or not? - denial on the ground of absence of nexus between input and output services - Held that: - When the software professionals were housed in a hired campus used in software development, absence of direct nexus between such input service and the output service is inconceivable - CENVAT credit of the service tax paid in respect of renting of immovable property is not deniable. Consultancy service - Held that: - the details filed before appellate authority exhibits that those are having direct bearing on the output service because without recruitment of manpower, no output service is possible to be provided - credit allowed. Banking and financial service - Held that: - The banking services which is essential for day to day movement of funds and realization of foreign currency that shall be entitled to CENVAT credit. Convention service - Held that: - The convention service is explained to be membership service availed by the appellant from the federation which looks after interest of the software concerns. Appellant says that it is a statutory requirement under STPA Regulation to obtain membership of that federation. When there was a statutory obligation to be a member of a statutory body recognized by law, denial of CENVAT credit would be contrary to the object of the statutory requirement - credit allowed. Management and Business Consultancy service - Held that: - the details provided by the appellant relates to availing of services of Chartered Accountant, training facility as well as manpower recruitment agency and marketing agencies. These services are also having direct relationship with the output service provided by the appellant for which it should not be denied of CENVAT credit. Credit allowed - appeal allowed - decided in favor of assessee.
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Central Excise
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2017 (1) TMI 1316
CENVAT credit - input service - Business Auxiliary Service relating to sales commission - Held that: - the inclusive part of the definition of Rule 2 (l) ibid should only be considered as examples of the genre of input service that would be permissible. Thus, if sales promotion has been mentioned in inclusive part of the definition, so also it would include the services attendant to such sales promotion, for example, renting of regional sales office, procuring orders and so on. When the services disputed in this case viz. Business Auxiliary Service relating to sales commission are not specifically excluded by the exclusion portion of the definition and in any case they are services essential directly or in relation to manufacture or business activities, the same would definitely fall within the ambit of Rule 2 (l) ibid - eligible input services - credit allowed - appeal allowed - decided in favor of assessee.
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2017 (1) TMI 1315
Reversal of MODVAT credit - exclusive use of the input without any other input to produce the exempted goods - Held that: - the authority from para 18 onwards of his order only dealt with legal propositions without testing the facts with evidence. In such circumstances, an arbitrary order has been passed. Such order does not provide any scope to appreciate that the appellant carried out manufacture of the exempted goods during the material period only using the input in question - In absence of any evidence to show that the appellant has not used the input commonly with others for manufacture of exempted goods as well as dutiable goods, proposition of the appellant that 8% demand on the value of the goods cleared to the Indian Navy is justified - the appellant directed to deposit 8% of the amount of the value of the goods cleared with interest if any, for the default amount to bring an end to the issue - penalty set aside - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 1314
Classification of goods - not a printed article - whether the goods that come out of the printing industry shall fall under tariff 490190 or 482100? - Held that: - perusal of the entry 490190 shows that the goods that came out of appellant's place of manufacture was a printing product, which is broadly covered under the phrase “and other products of the printing industry". This suffices to dispose the appeal with the reasoning given by the heading itself, that product came out of the printing industry cannot fall under the Tariff Heading 482100 but shall fall under 490190 - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 1313
SSI Exemption - Marketability of manufactured product - whether the Tissue Culture Media manufactured by appellant and consumed captively to manufacture anti-rabies vaccine was marketable? - Held that: - The sale of the tissue media to Pasteur Institute was only for use in the laboratory and not for manufacture of vaccine and for further sale - The marketability of tissue culture media in the form in which it is, sold is not possible and cannot be contended. Revenue had burden of proof to establish that the goods were marketable. That was not discharged. Being satisfied that the appellant authority has not at all examined the manufacturing activity, excisability and marketability, the appeal is allowed.
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2017 (1) TMI 1312
Evidence substantiating evasion of duty - parallel invoices issued to make transactions - disguised clearance made claiming the goods to be hank yarn and duty free - Held that: - Maintenance of record by the appellant was found to be fabricated and false and appellant caused loss of revenue for which it faced adjudication - There were no evidence led before us today to discard the appellate authority’s findings as to the falsification of record and issuance of fabricated invoices - there is no evidence to repel the evidence given by the buyers - appeal dismissed.
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2017 (1) TMI 1311
Deemed Manufacture - activity of filing gases from tanker to individual cylinders, mixing more than one gases in specified proportion - labelling or relabelling - Scope of Note 10 of Chapter 28 of the Central Excise Tariff Act, 1985 - Held that: - reliance placed in the case of Ammonia Supply Company vs. CCE, New Delhi [2001 (5) TMI 81 - CEGAT, COURT NO. III, NEW DELHI] wherein the Tribunal has taken the view that Ammonia coming in tankers cannot be treated to have come in bulk packs. From the manufacturing activity undertaken by the assessee, as found by the learned Commissioner himself, and as extracted above, the assessee apart from packing pure Argon and Nitrogen in smaller cylinders is also engaged in the activity of mixing of inert gases (like argon, nitrogen, helium etc.) with other gases like oxygen, nitrogen, carbon dioxide and making available such combination to the consumers in smaller cylinders - Whether such mixing of the gases in question amount to manufacture has been gone into by the learned Tribunal in Goyal Gases (P) Ltd. vs. CCE, Meerut [1999 (7) TMI 243 - CEGAT, NEW DELHI] and it was held that the filling of mixture of the said gases in cylinder does not amount to manufacture for purposes of Section 2(f) of the Central Excise Act, the consequential questions relating to excisability, duty demand and penalty do not require separate consideration. Appeal dismissed - decided against appellant.
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2017 (1) TMI 1310
SSI Exemption - determination of turnover - valuation - Whether the value of chassis supplied by the customers are to be included to arrive at aggregate value of clearance of the appellant manufacturer in order to decide on the eligibility for SSI benefit? - Held that: - the provisions of N/N. 8/2003 dated 1.3.2003 and N/N. 6/2002-Central Excise dated 1.3.2002, it is clear that the value of the chassis supplied by customers to the manufacturer appellant are not be included to determine the aggregate value of clearances for home consumption. Whether the appellant is entitled to cum-duty benefit, where they had not collected excise duty from their customers? - Held that: - The Revenue has not given any acceptable reason for denying the cum-duty benefit to the manufacturer appellant - the manufacturer appellant is entitled to cum-duty benefit, where they are not collecting the duty from their customers. Whether the appellant would be entitled to facility of CENVAT credit on the inputs used in the manufacturing of the goods, when they start paying central excise duty? - Held that: - The appellant is making payment of duty of central excise on the manufacture once they crossed the SSI exemption limit. When there is payment of duty for the goods manufactured, there cannot be any reason not to offer the facility of CENVAT credit for the inputs used for such manufacturing. CENVAT credit is available for all the manufacturers who are paying central excise duty on the manufacturing. Therefore, the present appellant also cannot be an exception in this regard. Once the appellant has crossed the SSI exemption benefit and starts paying central excise duty on their manufacturing they would be entitled to the facility of CENVAT credit on the inputs used for their manufacturing. Matter remanded to determine quantification of demand of duty and penalty - appeal allowed by way of remand.
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2017 (1) TMI 1309
Benefit of exemption under serial No.73 of N/N. 6/2002-Central Excise dated 1.3.21002 as amended - import of Druid grade of copper scrap as raw material declared as copper scrap Druid as per ISRI - clearance of PVC granules - Held that: - The respondent have been manufacturing the said items out of scrap/waste generated from copper wire/cable which fall under Chapter 85 (Central Excise Tariff i.e Tariff Headings 85.44/85.46/85.47) of the First Schedule to the Central Excise Tariff Act, 1985 - As per ISRI (Institute of Scrap Recycling Industry, INC, Washington) , it has been explained that copper scrap druid is a waste/scrap material of copper wire/cables having various types of insulations including plastic and therefore, the same falls under Chapter 85 (Tariff Headings 85.44/85.46/85.47) of Central Excise Tariff). If it is so, then there is no discrepancy or anomaly in the impugned order passed by the Commissioner (Appeals) - appeal dismissed - decided against Revenue.
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CST, VAT & Sales Tax
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2017 (1) TMI 1304
Valuation - contract for sale of ballast - whether the cost of transportation/freight included in the contract, is to be included in the turnover of assessee or not? - Held that: - the contract awarded in favor of the assessee, since was for supply of ballast at railway site at Billi, as such the amount of freight incurred, was clearly included in the turnover of the assessee - order set aside - matter remanded back - decided in favor of revenue.
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Indian Laws
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2017 (1) TMI 1300
Dishonour of cheques - Negotiable Instruments Act - filing of complaints - Held that:- It is apparent that as per the Memorandum of Agreement cheque No.344158 for a sum of ₹ 50 lakhs dated 30th November, 2013 was given to the respondent in discharge of the liability for two security cheque Nos.038531 and 038532 for a sum of ₹ 25 laksh each which were dishonoured and now having encashed the said cheque of ₹ 50 lakhs the respondent cannot turn around and say that he has utilized the same in discharge of the other debts of the petitioners and complaint under Section 138 of the Negotiable Instruments Act, 1881 (in short ‘NI Act’) should continue. As noted above, the above noted complaint was for offence punishable under Section 138 NI Act for dishonor of the two cheque Nos.038531 and 038532 and not for any other offence for which the respondent has entered into a settlement agreement. Hence the continuance of the above noted complaint on the plea of the respondent now taken is a clear abuse of the process of the Court. Consequently, complaint case titled “Sanjay Bansal vs. Gangotri Enterprises Ltd. & Ors.” and the order issuing summons and the proceedings emanating therefrom are quashed.
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