Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 1, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Expenses were made in cash and were not supported with third parties evidence and many vouchers were self made - CIT(A) has restricted the disallowance to the extent of 5% of the expenses claimed by the assessee which is quite reasonable - AT
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Penalty u/s 271(1)(c) - assessee claimed remuneration to partners - assessee has contended that the case of the assessee was audited u/s 44AB, however, the learned Auditor did not disallow the excess claim of the remuneration - No penalty - AT
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Determination of income on ‘project completion method - in view of the uncertainties involved, the action of the Assessing Officer in deducing the income of the assessee in the current year by making an ad-hoc estimation of profits is not justified - AT
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Unexplained cash credit - addition u/s 68 - increase in sundry creditors as at the end of the year - AO has merely proceeded to disbelieve the evidence led by the assessee and not made any effort to establish any falsity or untruth in the same - No addition - AT
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Compliance of the statutory requirement of signing and verification of the memorandum of appeal by an authorised person and not by the Managing Director - Authorization is supported by valid resolution of board of directors, CIT(A) is not correct in rejected the appeal - AT
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Fresh claim of exemption by way of application u/s 154 - Claim of exemption under Section 10(10C) - AO directed to examine the claim on merit - AT
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Purchasing of motor vehicle for valuable consideration from assessee’s account and using the same for the business purpose, depreciation cannot be denied on the ground that the vehicle was not registered in assessee’s name”. - AT
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Once the revenue is accepting the status of the assessee being approved gratuity fund and has been extended the benefit of the approved gratuity fund after the application was initially filed on 13/5/1996, Now the revenue cannot deny the benefit merely on the basis of non-grant of the approval by the authorities - AT
Customs
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100% EOU - the capital goods have been allowed to be cleared in DTA and hence depreciation upto 90% will be allowable to the appellant in calculating the duty payable on the capital goods. - AT
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Rejection of declared value - The price of the two commodities, which is significantly different, cannot be compared in this manner. Only if ABS is imported at a price significantly different from the PLATT price then the question on the declared value can be raised on the basis of PLATT price. - AT
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Legality and correctness of levy of Anti-Dumping duties - digital plates imported from China and Japan - The rate of return, costing parameters, differential treatment to violet and thermal plates, exclusion of selling/distribution cost, exchange note fluctuation etc. have all been taken into consideration by the DA - Levy of AD justified - AT
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Imposition of Anti-dumping duty - even if there are high priced transactions and low price transactions from a country, the very fact that the low price transactions cause injury (with positive injury margin) justifies imposition of duty on the entire country. - AT
Service Tax
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Construction of complex service - period 16.06.2005 to 31.12.2006 - The issue regarding demand's sustainability under construction of complex services for an activity that merits classification under works contract services is no longer res-integra - demand set aside - AT
Central Excise
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Valuation - the appellant has not paid any freight, insurance or octroi in respect of such chassis, and therefore, question of the appellant adding these elements in arriving at the assessable value of its final products would simply not arise - AT
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Eligibility for exemption Notification No.167/71-CE - carrying out research and development in the area of polymers, resins, adhesives, bulk drugs and drug intermediates - the said certificate is sufficient evidence to establish that the goods produced by the appellant are produced during the course of carrying out research - exemption allowed - AT
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Classification - non mention of copper alloys or Brass in CETH 74.06 does not mean that it will not contain copper alloys in its ambit - Section note-6 to Section-XV of CETA also confirms this interpretation - AT
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Valuation - they have passed on the cash discount as had been evidenced from the invoice - appellant is eligible for the cash discount deduction in assessable value. - AT
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Cenvat Credit - the burden lies with the Department to prove availment of Cenvat credit on the disputed goods has not been satisfactorily discharged, and thus, confirmation of duty demand on this ground also is not tenable - AT
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Seeking destruction of cigarettes and remission of duty thereupon - Notification issued by Ministry of Health & Welfare requiring adherence of specified pictorial warning on the retail packages as an essential condition of marketing - remission allowed - to be destroyed under supervision - AT
VAT
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Scope of the term 'Dealer' - a public charitable trust running and maintaining a public hospital - GVAT - Petitioner not a dealer - HC
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Whether the re-assessment was permissible under the head of “Rectification of the order in purported exercise of the power u/s 69 of Karnataka Value Added Tax Act, 2003 on the basis of a clarification issued by the Commissioner which itself is after the order of re-assessment dated 28.6.2010? - Held no - HC
Case Laws:
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Income Tax
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2016 (9) TMI 1217
Addition on sale of TDR - taxability - Held that:- The assessee received the TDR on 13.05.2008 by virtue of letter dated 13.05.2008 as per EXIT “C”. In view of the said circumstances apparently on 30.04.2007 the date of the execution of the MOU no TDR was in existence. The TDR cost was Nil, therefore right to eliminate is not taxable. The MOU speaks about the purchase of land however, the word purchase of TDR right has also been mentioned but at the time of execution of MOU dated 30.04.2007 no TDR right was in existence in favour of the seller as well as purchaser. Moreover, it come into notice that the seller was owner of the said land by virtue of Sanad dated 18th August 1962. The TDR right if any was going to be accrued then the same is going to accrued in favour of the owner. The assessee purchased this said land when no TDR was accrued in favour of earlier owner. Assessee did not purchase TDR right from owner. No doubt factual position of the land was well within the knowledge of the party but this fact cannot be denied that the TDR right on the land first time was accrued in favour of assessee which was sold by the assessee for sum of ₹ 1,20,00,000/-. In view of this peculiar facts and circumstances and in view of the law relied by the learned representative of the assessee mentioned above, we are of the view that he said amount in question is not taxable in accordance with law, therefore, we delete the said addition and allowed the appeal of the assessee. Accordingly, this issue is decided in favour of the assessee against the revenue. Disallowance to the extent of 5% on the expenses - Held that:- At the time of examination of the documents / accounts, the Assessing Officer found that all the expenses were made in cash and were not supported with third parties evidence and many vouchers were self made. In some expenses personal element could not be ruled out therefore the Assessing Officer disallowed to the 10% of the total expenditure, however in appeal before the CIT(A), CIT(A) restricted the disallowance to the extent of 5%. No justifiable materials have been placed on record. However, assessee took the plea of preaudited accounts but this factual situation was also there at the time of filing an appeal before the CIT(A). When we consider the reasons of disallowance to the extent of 5% of the expenditure then we found that the documents of the accounts were not supported by third party evidence and the vouchers were self made which can be considered as cogent and convincing evidence in support of the claim of the assessee. Therefore we found that the CIT(A) has restricted the disallowance to the extent of 5% of the expenses claimed by the assessee which is quite reasonable, therefore, the observation of the CIT(A) is not required to be interfere with at this appellate stage. Accordingly this issue is decided in favour of the revenue and against the assessee.
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2016 (9) TMI 1216
Penalty u/s 271(1)(c) - assessee claimed remuneration to partners - assessee has contended that the case of the assessee was audited under section 44AB of the Act, however, the learned Auditor did not disallow the excess claim of the remuneration - Held that:- We find that the assessee has offered explanation in respect of the facts material to the computation of income and which has not been found to be false by the Assessing Officer. The assessee has substantiated the explanation and proved that the explanation filed is bonafide and all the facts and material related to computation of total income has been disclosed by the assessee. In view of above, in our considered opinion, in the case of the assessee, the Explanation-I to the section 271(1)(c) of the Act is not attracted. Though the Assessing Officer has not allowed the claim of the assessee of the excess remuneration, but all the documents in respect of the claim were provided by the assessee in assessment proceedings and in the penalty proceedings the assessee explained his bonafide in claiming the remuneration. Before us also, learned Authorised Representative of the assessee has explained that the learned Auditor did not point out in audit reports under section 44AB of the Act allowability of the remuneration to partners to the extent of ₹ 50,000/- only and, because of which, the assessee has paid tax on the remuneration paid to the partners and the disallowance has also been sustained resulting into double taxation on the remuneration paid to the partners. This explains the bonafide of the assessee in claiming the remuneration to the partners, which is found to be excess by the Assessing Officer. Where the assessee has furnished all the details of its expenditure as well as income, in its return, which themselves were not found to be inaccurate nor could be viewed as concealment of income on its part and merely because the assessee had claimed the expenditure, which has not been accepted by the Revenue, cannot lead to the levy penalty under section 271(1)(c) of the Act.See Reliance Petroproducts Private Limited [2010 (3) TMI 80 - SUPREME COURT ] - Decided in favour of assessee.
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2016 (9) TMI 1215
Determination of income on ‘project completion method - Ad-hoc estimation of profits - assessment completed u/s 143 - Held that:- In the present case, assessee had demonstrated that there was no substantial completion of project in the instant assessment year, and rather the fact-situation clearly showed that on account of litigation amongst the partners the continuation of the project itself was in jeopardy. In any case, the facts brought out by the CIT(A), and which have not been negated by the Assessing Officer in his remand report to the CIT(A), clearly point out that the stage of project in the instant year could not be construed to have been substantially completed. It is also noted by the CIT(A) that the sale and booking money received upto the instant assessment year was also partly refunded to the intending buyers in the subsequent assessment year. We are also conscious of the fact that in the earlier two assessment years, where in one of the assessment years assessment was completed u/s 143(3) of the Act, the income has been assessed by following the ‘project completion method’ adopted by the assessee. There is also no repudiation to the assertions of the assessee before us that the decision of CIT(A) for Assessment Year 2007-08, rendered under similar situation, has not been appealed against by the Revenue before the Tribunal. For all the above reasons, in our considered opinion, CIT(A) made no mistake in holding that in view of the uncertainties involved, the action of the Assessing Officer in deducing the income of the assessee in the current year by making an ad-hoc estimation of profits is not justified. Apart therefrom, in our view, the Assessing Officer has not been able to demonstrate any justifiable reason for departing from his earlier accepted position of Assessment Year 2005-06 that the income is to be computed on ‘project completion method’. For all the above reasons, the order of CIT(A) deserves to be affirmed. - Decided against revenue
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2016 (9) TMI 1214
Unexplained cash credit - addition u/s 68 - increase in sundry creditors as at the end of the year - Held that:- As from the material and evidence on record, the complete details of the impugned credits was made available to the Assessing Officer. The two creditors responded to the enquiries carried out by the Assessing Officer and confirmed the transactions. There is no material led by the Revenue to show that any of the evidences produced before him was wrong or otherwise not credible. The explanations furnished by the assessee, as also by the two creditors have been merely disbelieved and it is not a case where any of the evidence has been found to be false or untrue. Factually speaking, in the present case, the assessee company has completely discharged the initial burden cast on it to explain the nature and source of the credits. The arrangement between assessee and its tenants by way of the tenancy agreement was also before the Assessing Officer. The onus that is cast under section 68 of the Act is not static, inasmuch as it shifts to the Revenue depending on the material and evidence led by the assessee at a given stage. The Assessing Officer had before him the averments of the sundry creditors, the income tax details of the sundry creditors, the balance sheets of the two creditors which showed the amount in question, etc. By merely pointing out that further evidence in the shape of bank account of the creditors was not available, does not distract from the fact that whatever evidence that was on record before the Assessing Officer has not been found untrue or false by him. Therefore, in so far as the assessee is concerned, it has completely discharged it’s onus of explaining the nature and source of the credits in question and such explanation stood corroborated by the two creditors. Considering the entirety of circumstances, in our view, the Assessing Officer has merely proceeded to disbelieve the evidence led by the assessee and not made any effort to establish any falsity or untruth in the same. Therefore, AO was wrong in holding that the explanation rendered by the assessee was not satisfactory within the meaning of section 68 of the Act. Thus we set-aside the order of the CIT(A) and direct the Assessing Officer to delete the addition made under section 68 of the Act. - Decided in favour of assessee.
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2016 (9) TMI 1213
Compliance of the statutory requirement of signing and verification of the memorandum of appeal by an authorised person - whether the memorandum of appeal filed by the assessee company with the CIT(A)-2, Mumbai, had been signed and verified by a duly authorised person or not? - Held that:- We are in agreement with the observation of the CIT(A) that there cannot be any escape as regards carrying out compliance of the statutory requirement of signing and verification of the memorandum of appeal by an authorised person in terms of Section 249 of the Act r.w. Rule 45 of the I.T. Rules, 1962, as it is only on filing of a valid appeal which is signed and verified by a duly authorised person as required under law that the process of appeal is set into motion. However, we find that the CIT(A) after arriving at the aforesaid observation and therein concluding that the appeal in the present case, as required under Section 249 r.w Rule 45 was statutorily required to be signed and verified by the managing director of the assessee company, had thereafter hushed through the matter and lost sight of the fact that at the relevant point of time when the appeal was signed and filed, i.e. as on 05.01.2012 and 06.01.2012, respectively, due to unavailability of the managing director of the assessee company, the same was signed and verified by Sh. C.R. Mulky, who pursuant to the resolution passed by the board of directors as on 17th October 2011 was duly vested with the powers of the Chief executive officer during the period when Shri Bhaskar K. Amin, managing director and chief executive officer, was on leave or remained absent till his retirement on 31st January 2012. Thus we are of the considered view that the appeal filed by the assessee company was duly signed and verified by an authorised person as required in law and the CIT(A) had erred in declining to entertain the appeal of the assessee company and thus wrongly dismissed the same. We thus in light of the aforesaid facts restore the appeal to the file of the CIT(A) with a direction that the same be admitted and disposed of on merits after affording sufficient opportunity of being heard to the assessee company. Thus the ‘Ground of appeal No. 1’ raised by the assessee company is allowed.
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2016 (9) TMI 1212
Fresh claim of exemption by way of application u/s 154 - Claim of exemption under Section 10(10C) - Held that:- In this case, admittedly, revised return was not filed by the assessee. The fact remains that what was received by the assessee is retirement benefit consequent to Early Retirement Option Scheme, 2003 implemented by ICICI Bank. Therefore, the assessee is eligible for exemption under Section 89(1) and 10(10C) of the Act. The Apex Court in the case of National Thermal Power Co. Ltd. (1996 (12) TMI 7 - SUPREME Court ) found that this Tribunal can entertain an additional claim provided the facts are on record. When the assessee is eligible for exemption under Section 89(1) and 10(10C) of the Act, the same can very well be brought to the notice of the Assessing Officer. This Tribunal is of the considered opinion that the Assessing Officer has to examine the same on merit. In view of the above, this Tribunal is unable to uphold the order of the lower authority and accordingly, the same is set aside. The Assessing Officer shall examine the claim on merit and thereafter decide the issue in accordance with after giving a reasonable opportunity to the assessee. - Decided in favour of assessee
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2016 (9) TMI 1211
Addition u/s 14A - Held that:- We noted from the above facts that the assessee before the CIT (A) has demonstrated from the balance sheet that it was having interest funds available with it for investment in shares. The AO or the CIT (A) has nowhere proved the nexus of tax free income generated out of investments made from interest bearing funds, despite the fact that the entire facts were available before them. The assessee has reasonably demonstrated before us that the interest free funds i.e. assessee’s own share capital as well as reserves and surplus is more than ₹ 20 Crores as against the investments in shares that gave tax free income at ₹ 1.03 Crores which is much more lower than the interest free funds available. Hence, this being the position, we are of the view that the assessee’s case is squarely covered by the decision of the Hon’ble Bombay High Court in the case of HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT ] wherein held if there were funds available both interest-free and over draft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company if the interest-free funds were sufficient to meet the investment. - Decided in favour of assessee Disallowance of depreciation on motor car - car is registered in the name of one of the directors and legal ownership is not in the name of the Assessee Company - Held that:- We find from the facts of the case that the assessee has purchased the motor car from its own funds but registered the same in the name of one of the directors. There is no dispute about this fact. In such a circumstance, the issue is covered by the decision of the Hon’ble Bombay High Court in the case of CIT Vs Dilip Singh Sardarsingh Bagga (1992 (9) TMI 74 - BOMBAY High Court ) wherein it has been categorically held that “registration under Motor Vehicle Act is not essential requirement for acquiring ownership of the motor vehicle and purchasing of motor vehicle for valuable consideration from assessee’s account and using the same for the business purpose, depreciation cannot be denied on the ground that the vehicle was not registered in assessee’s name”. Following the above decision of the Hon’ble Bombay High Court in the case of Dilip Singh Sardarsingh Bagga (supra) we allow the claim of the assessee.
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2016 (9) TMI 1210
Payment made to LIC towards Group Gratuity Scheme disallowable U/s 40A(7) - Held that:- It is, though, disputed that the application of the assessee for grant of approval, was not traceable in the office of the revenue but the assessee was able to produce the stamped copy of the application and the letter supporting the application dated 13/5/1996 before the Bench. It is also an admitted position that the LIC vide letter dated 16th May, 1996 has requested the revenue to grant approval. In our view, once the third party i.e. LIC is requesting the revenue to grant approval to the fund created for the benefit of the employees in the form of approval of gratuity fund then the revenue cannot dispute that the assessee has not filed application for grant of approval of the gratuity fund. Moreover, in our view, once the revenue is accepting the status of the assessee being approved gratuity fund and has been extended the benefit of the approved gratuity fund after the application was initially filed on 13/5/1996, Now the revenue cannot deny the benefit merely on the basis of non-grant of the approval by the authorities. For the non action of the revenue, the assessee cannot be denied with the benefit of the pendency of the deduction on account of the above contribution made to the gratuity fund. - Decided in favour of assessee.
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2016 (9) TMI 1209
Valuation of material - addition on the account stock lying with the assessee u/s 28(iv) - ownership of the said stock was not vested with the assessee - During the subsequent years, assessee used such stock as raw material - Held that:- We find that the assessee has taken a consistent plea during the all rounds of litigation that the material used by the assessee was taken at no cost and that the corresponding sales were offered for taxation. However, the Ld. CIT(A) has rejected the contention observing that the said fact could not be verified from the record. From the facts of the case, it is revealed that the assessee had not become the owner of the material in question. The third party/suppliers did not collect the excess material lying with the assessee though they had reimbursed/paid back the cost of material to the assessee. The excess material lying with the assessee was of no use to the assessee. Out of the total material imported worth ₹ 9,09,79,393/-, the assessee had reshipped the goods worth ₹ 7,18,25,299/-. Out of the remaining material worth ₹ 1,91,54,094/-, the Customs & SEEPZ Board Authorities have destroyed the material worth ₹ 1,58,33,067/-. So far as the remaining material of ₹ 33,25,027/- is concerned, the plea of the assessee is that the worth value of the material at the time of use was not that of invoice value. The material at the time of use had reduced to the scrap value which was used by the assessee for its manufacturing activity and the value of the material used was taken at ‘zero’ cost. The profits from the corresponding sales have already been offered for taxation by the assessee. Under such circumstances, in our view, the Ld. CIT(A) was not justified in confirming the additions of ₹ 33,25,027/- at original bill value. Since the assessee has offered the profits from the sales of the goods and the raw material used has been taken at ‘zero’ value, hence, in our view, the value of the material has already been taxed and adding the bill value of the goods at ₹ 33,25,027/- would amount not only to the excess addition but also to the double addition. We, therefore, direct the AO to verify whether the raw material worth ₹ 33,25,027/- (as per their original bill value) was used in the manufacturing activity at ‘zero’ cost and if the corresponding profit from the sale of goods manufactured from the use of the said raw material has been offered for taxation, then no additions be made in respect of the said value of ₹ 33,25,027/-. The action of the Ld. CIT(A) in deleting the remaining additions is upheld.
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2016 (9) TMI 1208
Addition u/s 14A - Held that:- The assessee failed to produce cogent material before him to show that they have sufficient funds in their hands at the time of the alleged investments of funds or that the admitted borrowings had never been utilised for investments to earn exempt income, either by preparing or producing separate account of expenditure or to substantiate how much of the composite expenditure incurred was in relation to the exempted income. In the absence of any evidence on this aspect matter cannot be decided merely on the statement made by the assessee that they had separate own fund utilised in the investment or that the borrowings with which the DPSC Ltd. shares were purchased were fully discharged by 2005-06 and 2006-07 so that no interest remained payable in the FY 2007-08 cannot be accepted. Unless on facts we are convinced that either all these things should have had happened, it is not possible for us to give a finding that at relevant point of time the assessee did not utilize any borrowed funds for investment to generate the exempt income. Equally it is not possible for us to give a finding that the source of purchasing the shares in DPSC Ltd. was discharged prior to the FY 2007-08, as such, no expenditure towards interest on that aspect could have been incurred by them. We, therefore, find in these set of facts and circumstances that the finding of the Ld. CIT(A) on this aspect is very convincing and the reasons are cogent and do not warrant any interference at all. Allowable business expenditure - Claim of deduction for securing entrance fee to the Calcutta Rowing Club on the ground that such an expenditure is in the interest of business - Held that:- CIT(A) confirmed this addition not on the ground that it is a capital expenditure but the confirmation is on the question of fact. The Ld. CIT(A) expressed the opinion that the assessee has not filed any evidence whether the expenditure was the personal expenditure on directors the food expenses incurred on them and their family members and personal friends or for any business purpose. It is the expenditure in relation to business purpose alone that could be allowed as expenditure u/s. 37(1) of the Act. Unless and until the assessee removes this doubt in the mind of the lower authorities that the club membership was used solely for the purpose of business and not for the personal purpose of the directors or their family members or personal friends etc. merely because the assessee says that it has a potentiality to expand the business avenues, in a routine manner, such an expense cannot be allowed to be deducted. Hence, we find it necessary to direct the Ld. AO to verify this fact with reference to the material to be produced by the assessee and to give a finding as to the tax liability of the assessee in respect of the expenditure incurred to secure the access to the club. We, therefore, set aside the finding of the lower authorities on this aspect and restore this issue for fresh adjudication of the Ld. AO. This ground of Cross Objection of assessee is allowed for statistical purposes. Addition u/s. 40(a)(ia) - non deduction of tds on audit fee - delay in deposit of tds - Held that:- The deduction is not available in case the TDS is not deposited in the year of payment. Here the year of payment was 2007-08 ended by 31.03.2007 whereas the deposit of TDS was on 19.09.2008. In view of this mandate of law no such deduction is allowable and the AO has rightly disallowed such an expense and the Ld. CIT(A) has rightly confirmed the same - Decided against assessee Allowability of legal expenses - Held that:- As borne on record that the assessee company incurred legal expenses to the tune of ₹ 4,13,764/- in respect of certain legal cases in Calcutta High Court, the cases were disposed of in the FY 2007-08 but the legal experts sent its bills only in the FY 2008-09, as such, such a liability could not be crystallised during the FY 2007- 08 and it is only on receipt of the bills the liability was crystallized and by that time the books of account were closed, as such, in the books of account for the year 2008-09 they are entered as prior period expenses. However, the AO was unmindful of this fact and disallowed such expenses but rightly corrected by the Ld. CIT(A) holding that the liability for the payment to the advocates crystallized during the period relevant to the AY 2008-09 and as such, a sum of ₹ 31,55,362/- was to be allowed as expenditure pertaining to AY 2008-09 and the bills relating to ₹ 8,10,657/- though issued in the AY 2009-10 but the services were rendered during the AY 2008-09 incurring liability, as such, the assessee had an option to create the provisions for the payment of the same or may debit exact amount on the basis of bills received immediately in the next FY. This finding of Ld. CIT(A) is well considered one and we do not see any illegality or irregularity in it - Decided against revenue Disallowance of advances written off - Held that:- IT(A) discussed this in the light of the written submissions made by the assessee and recorded a finding that the assessee written off this amount being irrecoverable u/s. 36(1)(vii) of the Act and they have not received tax credit certificates relating to Sales Tax, Service tax and work contract tax. The Ld. CIT(A) was convinced himself with the explanation of the assessee that it is a business loss being the payment of advance in ordinary course of business. In these circumstances, the Ld. CIT(A) deleted the addition. On this score, we do not find any material forthcoming from revenue to take different view when the assessee written off the amount as irrecoverable debts and amounts to business loss. We are in agreement with the Ld. CIT(A) that the same has to be allowed as deduction and the Ld. CIT(A) has rightly deleted the same.- Decided against revenue
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2016 (9) TMI 1207
Assessment of income - allegation of tax evasion - income from undisclosed sources - nature of amount of loan given earlier years and adjusted with property - Held that:- We find nothing has been brought on record to show how the entire amount can be added in the year under consideration. Accordingly, after hearing both the sides and finding that the prayer for remand was justified it was considered appropriate to set aside the impugned order and restore the issue back to the AO directing him to address the issues de-novo 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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2016 (9) TMI 1206
Unexplained investments - revision u/s 263 - Held that:- It is not disputed by the assessee that agreement for sale dated 09.01.2007 did mention an advance of ₹ 40 lakhs as paid by the assessee on that date. It is also not disputed that assessee had in a statement recorded from him on 27.04.2012 admitted such sum to be a part of his unexplained business income. The AO after going through the submissions of assessee had held that assessee had disclosed only ₹ 17.5 lakhs in his return of income for the impugned assessment year against the unexplained investments of ₹ 40 lakhs. The AO had considered in detail claim of assessee that a sum of ₹ 22.5 lakhs was received from Mr.P.Murugesan as a part of joint venture. However, he refused to accept this claim. Nevertheless, while completing the assessment he did not make any addition mentioning that the unexplained investment of ₹ 22.5 lakhs would be considered for addition in assessment year 2008-09. No doubt, it is true that the said amount was considered in the assessment done for assessment year 2008-09. The Tribunal had an assessee’s appeal cancelled the said addition for a reason that the income did not belong to assessment year 2008-09, and the addition was based on confession given by the assessee. However, a reading of the assessment done for the impugned assessment year show that the AO after reaching a clear finding that the sum of 22.5 lakhs represented unexplained investments had for no plausible reason shifted the assessment of the said amount to the next year. Such shifting of income without spelling out the reasons rendered it erroneous insofar as it was prejudicial to the interests of the Revenue. Just because on the date when PCIT passed his order u/s.263 of the Act, the addition made by the AO in the very next assessment year, stood confirmed by the CIT(A), we cannot say that the amount which really pertained to assessment year 2007-08 could not be considered in the said assessment year. However, at the same time what we find is that the PCIT had tied hands of AO by directing him to treat the sum of ₹ 22.5 lakhs as an unexplained investment for impugned assessment year without giving an open hand. Thus, while confirming the order of PCIT, we modify it to the extent that the AO shall proceed untrammeled by the direction of PCIT and shall complete the assessment in accordance with law. - Decided partly in favour of assessee
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2016 (9) TMI 1205
Addition u/s 14A - Held that:- The Hon’ble Delhi High Court in the case of Joint Investment Private Limited (2015 (3) TMI 155 - DELHI HIGH COURT) has held that section 14 of the Act or rule 8D cannot be interpreted so as to mean that the entire tax exempt income of the assessee is to be disallowed. That the window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure incurred by the assessee in relation to the tax exempt income. This proportion or portion of the tax exempt income surely cannot swallow the entire amount of tax exempt income. As the assessee has claimed exempt dividend income of ₹ 6,75,076/- and exempt long term capital gain of ₹ 19,62,821/-. The AO, however, made a disallowance of ₹ 2,65,36,592/- in relation to expenditure incurred for earning of the above exempt income. The assessee itself has disallowed an amount of ₹ 4,70,062/- in its computation of income. Considering the proposition of law laid down the disallowance in this case is restricted to the extent that is suo-moto offered by the assessee at ₹ 4,70,062/-. In view of the above, the appeal of the assessee is treated as partly allowed
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2016 (9) TMI 1204
Capital Gain on sale of plot of land - reference made to the DVO u/s. 55A - whether the value of sale shown by the assessee is on the lower side ? - Held that:- It is an undisputed fact that the A.O. has made a reference u/s. 55A of the Act to the DVO to determine the correct market value as on the date of the transfer. Section 55A, permits reference to DVO by the Assessing Officer under certain circumstances. Such reference, however, is with a view to ascertaining the fair market value of capital asset for the purposes of chapter IV. In the instant case, the reference was made to DVO for ascertaining the fair market value of the capital asset as on the date of sale. We find that Section 50C provides for special provision for full value of consideration in certain cases. The said section provides a deeming fiction under which consideration received or accruing as a result of transfer of a capital asset can be replaced by the value adopted or assessed by stamp valuation authority for the purpose of payment of stamp duty in respect of such transfer. In the said Section 50C of the Act, Sub-section (2) permits the assessee to dispute such valuation adopted by the Stamp Valuation Authority and in such a case, it is open for the Assessing Officer to refer the valuation of the capital asset to a Valuation Officer. However, in the present case, we find that the A.O. has made reference u/s. 55A for the determination of market value for the purposes of the computation of capital gain u/s. 48 of the Act. Considering the facts in totality, in the light of the decision of in the case of Gauranginiben S. Shodhan (2014 (2) TMI 78 - GUJARAT HIGH COURT ) we hold that the value adopted as per the DVO’s report is uncalled for and the A.O. is directed to accept the sale consideration of ₹ 6.25 crores and compute the capital gains accordingly. - Decided against revenue.
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2016 (9) TMI 1203
Penalty u/s. 271(1)(c) - determination of liability - guilty of concealment of income - Held that:- Assessee was under a bona fide belief that ₹ 13 crores was a determined liability for A.Y. 2008-09 in accordance with the terms of the Full and Final Settlement Agreement dt. 22.02.2008 signed by him with the two companies. It was noted that he offered this amount for taxation in A.Y. 2009-10 under a bonafide belief that in accordance with the terms of Deed of Settlement recording the Consent Terms between the parties dt. 29.01.2009, this amount had become not payable and he accordingly, wrote back this amount in his books of accounts and paid taxes thereon in accordance with law. Thereafter, on professional advice, he has offered it for taxation in A.Y. 2008-09 and simultaneously, reduced it from his income for A.Y. 2009-10. Under these facts and circumstances, it is difficult to fault the assessee and accuse him of concealment of income. It is clear from the facts that the assessee had no intention whatsoever to conceal this amount of ₹ 13 crores. Even the dates of the two agreements entered into by the assessee with the companies on 22.02.2008 and 29.01.2009 go on to support his argument that his belief was bonafide initially, that this amount of ₹ 13 crores was a determined liability in A.Y. 2008-09 and became income in A.Y. 2009-10. In fact, the assessee paid taxes on this amount in A.Y. 2009-10 to the tune of ₹ 3,13,24,962/- on 27.09.2009. We find that Ld. CIT(A) in his impugned order has noted that the AO accepted the voluntary surrender of the assessee of an amount of ₹ 13 crores for A.Y. 2008-09 in his order u/s. 143(3) of the Act dt. 26.11.2010. Furthermore, the AO also accepted the assessee's revised return for A.Y. 2009-10, in the assessee had reduced his income by the said ₹ 13 crores vide his Order u/s. 143(3) of the Act dt. 20.12.2011. AO held the assessee is guilty of concealment of income of ₹ 13 crores for A.Y. 2008-09. The AO mentioned in the penalty order that the assessee had filed an appeal before CIT(A) against this addition. In fact, the assessee accepted this addition of ₹ 13 crores since he had voluntarily offered it for taxation for A.Y. 2008-09. In view of the above, Ld. CIT(A) has rightly held that that there is no case for imposition of penalty u/s. 271(1)(c) of the Act on the assessee with reference to the amount of ₹ 13 crores, hence, he rightly directed the AO not to impose any penalty u/s. 271(1)(c) with reference to this amount of ₹ 13 crores. - Decided in favour of assessee.
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2016 (9) TMI 1202
Capital gain on inherited land sold - indexed cost of improvements - Held that:- It is a fact that the assessee has filed a detailed cash flow showing different sources from which the money has been brought in. The assessee also has explained that during those days bank accounts were not so common and large families used to keep cash with themselves as most of the receipts were from agriculture and other allied sources. The fact that without improvements the assessee would not have received this amount is also pointed out. The learned DR has not raised any specific objection to the cash flow other than the opening balance, the non banking of cash and production of records for the past 26 years from 1.4.1981 onwards. The learned Counsel has requested the Hon. Bench to have a pragmatic approach in respect of old records as normally people miss or misplace records after a reasonable period. In the circumstances and facts of the case, it is evident that the assessee has made substantial improvements to the land which is supported by year wise cash flow. The Assessing Officer has simply ignored the cash flow stating various other reasons. The Ld. CIT(A) has considered the cash flow and in order to compensate any probable defects and omissions has made an estimated disallowance of 40% which the learned DR during the course of hearing has accepted as correct except for the size of the amount. However, to meet the interest of justice, the disallowance of cost of improvement is directed to be fixed at 45% of the cost claimed, i.e., the assessee is eligible for 55% of the improvement cost claimed. This will take care of defects pointed out by the Assessing Officer and Ld. DR including the opening cash in hand.
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2016 (9) TMI 1201
Disallowance of Exemption under section 54F - Held that:- Since the assessee in the case on hand has utilized the amount of capital gains in investing in the purchase of a residential property (flat) within the extended period as stipulated under section 139(4) of the Act for A.Y. 2008-09, the assessee is entitled for exemption under section 54F of the Act. Disallowance under section 14A - Held that:- We have heard the rival contentions of both the parties and perused and carefully considered the material on record. From the working of the disallowance under section 14A r.w. Rule 8D(2)(iii) made by the AO at para 4 of the order of assessment, it appears to us that there is some merit in the averments of the learned A.R. However, we restore the matter for verification of the correctness of the assessee’s claim, that the AO’s computation of the disallowance under Rule 8D(2)(iii) at ₹ 2,56,495/- is incorrect and that correct working of the said disallowance by the assessee is ₹ 1,28,247/- as given at para 5.1 (supra). The AO is directed to verify the veracity of the assessee’s claim and workout the correct disallowance under section 14A r.w. Rule 8D(2)(iii) after affording the assessee adequate opportunity of being heard.
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2016 (9) TMI 1200
Purchase and sale of shares - business income or Capital gain computation - Held that:- There were no borrowings by the assessee and no interest was paid. The number of transactions has also come down in the impugned assessment year as compared to the preceding assessment year. The average period of holding was 95 days and number of transactions were 70 , while for assessment year 2005-06 it was 70 days and 119 transaction while for assessment year 2006-07 , the average period of holding was 129 days and transactions were 107. In the preceding assessment year 2006-07, the learned CIT(A) has allowed the appeal of the assessee whereby the said gains were accepted as short term capital gains by the learned CIT(A) and the Revenue has accepted the orders of the learned CIT(A) as it was not brought to the notice of the Tribunal that Revenue has preferred further appeal with the Tribunal in this regard for assessment year 2006-07. The AO accepted the said gains as short term capital gains while framing assessment u/s 143(3) of the Act for the assessment year 2005-06. The factual matrix in the instant assessment year under appeal is similar to the preceding assessment years i.e. 2005-06 and 2006-07 and we do not find any reasons of deviating from the settled position in this year. Keeping in view of the above facts and circumstances of the case, we are of the considered opinion that principle of consistency has to be maintained and followed in this year as facts are almost similar to that of preceding years and hence we direct that the income earned by the assessee from purchase and sale of shares with respect to shares held for not more than one year be held as short term capital gains chargeable to tax under the head ‘Capital Gains’ and not as business income chargeable to tax under the head ‘Profits and Gains from Business or Profession’ as held by the authorities below .
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Customs
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2016 (9) TMI 1228
Rejection of declared value - Regrind ABS 20% Glass filled - Rule 10A under the Customs Valuation Rules, 1988 - Notification No. 10/98-Cus (NT) dated 19.2.1998 allowed rejection of transaction value in certain circumstances - discount of 35% over the PLATT price - Held that: - the declared value of Regrind ABS 20% Glass filled has been rejected for the reason that it is significantly different from the PLATT price of the ABS. The price of the two commodities, which is significantly different, cannot be compared in this manner. Only if ABS is imported at a price significantly different from the PLATT price then the question on the declared value can be raised on the basis of PLATT price. The item imported i.e. Regrind ABS 20% Glass filled has very remote connection if at all with the PLATT price - the rejection of declared value cannot be upheld - appeal allowed - decided in favor of appellant.
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2016 (9) TMI 1227
Legality and correctness of levy of Anti-Dumping duties - digital plates imported from China and Japan - Customs Notification No. 3/2012 -CUS (ADD) - Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 - Chinese producers should have been considered as operating in market economy conditions - Held that: - the DA has recorded that in the past three years China PR has been treated as non-market economy in the anti-dumping investigations by other WTO Members. Hence, a rebuttable presumption of non-market economy status has been made in terms of para 8 (2) of Annexure I of AD Rules. The DA on analyzing the responses provided by the producers/exporters of the subject goods from China PR and the DI, concluded that there is significant government interference in the aluminium industry in China. Reliance was also placed on the findings of Canadian authorities in their anti-dumping and subsidy investigation. It was concluded that the price of major raw material, aluminium, is not market determined and hence, the market economy treatment was denied by the DA to the appellants. Impact of safeguard duty on imported raw material - Held that: - the transitional, product specific, safeguard duty was in force on the imports of aluminium coils from China PR from 23/3/2009 to 22/3/2011. Safeguard duty of 14% and 12% for first and second year were imposed. The duty was to remedy the market disruption caused by increased imports. The DA examined the impact of this duty on domestic industry who use this as raw material to produce subject goods. Noting that such imports by DI are only negligible, the DA concluded that the impact of safeguard duty on arriving at NIP is not significant. Erroneous fixation of NIP by the DA - Held that: - the methodology adopted for arriving at the NIP is well within the guidelines framed under AD Rules. The rate of return, costing parameters, differential treatment to violet and thermal plates, exclusion of selling/distribution cost, exchange note fluctuation etc. have all been taken into consideration by the DA - No material point found to interfere with the reasoning adopted by the DA while arriving at the NIP. Wrong determination of injury to DI - Held that: - there is material injury to DI caused by the dumped imports of subject goods. Recommendation was, thereupon, made for imposition of AD duties. - no material ground with supporting evidence to interfere with the findings of the DA and the final customs notification imposing AD duties. Appeal dismissed - decided against appellant.
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2016 (9) TMI 1226
Demand of customs duty on capital goods imported - imposition of penalty - 100% EOU - tissue culture plants - capital goods originally imported duty-free for setting up of the unit. On account of failure to carry on the business, the factory had to be shut down and approach made to Development Commissioner in February 1997 for de-bonding of the unit - whether the appellant is entitled to depreciation on the capital goods on which he is required to pay customs duty now? Held that: - The CBEC circular No. 43/98 dated 26th of June 1998 issued from file No. 314/19/98 allows depreciation for the capital goods other than computers and computer peripherals up to a maximum extent of 90% with the following stipulations for the units operating under EOU scheme for capital goods cleared in DTA. From a careful reading of the notification No. 53/97 customs dated 3rd of June 1997, it is seen that the capital goods at the time of clearance will be entitled to payment of customs duty on depredated value provided that the said unit has been allowed by the Development Commissioner to clear such goods in DTA. the unit commenced its production in the year 1994. The appellant has approached the Development Commissioner for de-bonding of the unit as early as 4th of February 1997. The adjudication order passed by the Commissioner originally, demanding customs duty on capital goods was passed in the year 1999. This order was received by the appellant only in the year 2011. As per the directions of the Tribunal in the 1st round of litigation, the Commissioner was directed to pass a de-novo order. Accordingly the impugned order came to be passed. Meanwhile the appellant has chosen to pay the duty, interest and penalty in the year 2011 in terms of Commissioner's order in the original proceedings and has since de-bonded the unit. Hence it is fair to take the view that the capital goods have been allowed to be cleared in DTA and hence depreciation upto 90% will be allowable to the appellant in calculating the duty payable on the capital goods. Requirement to pay customs duty - goods auctioned by department and assessee not in possession of the goods - Held that: - The appellant's unit was registered as 100% EOU. The unit was started in 1994 and was in existence till 2011, i.e. till de-bonding of the unit. The customs duty as computed originally by the Commissioner was discharged by the appellant in 2011 and thereafter the capital goods were auctioned by the government. - appellant liable to pay the customs duty and cannot take shelter under the fact that the government has auctioned the goods. Customs duty payable on the capital goods need to be reworked after allowing 90% depreciation. Consequently the customs duty payable by the appellant will considerably come down as also the interest payable thereon - in view the facts and circumstances of the case and also the fact that the appellant could not carry on its business because of adverse turn of business circumstances, a lenient view taken and the penalty imposed is waived. Appeal disposed off - decided partly in favor of appellant.
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2016 (9) TMI 1225
Imposition of Anti-dumping duty - import of hot rolled flat products of stainless steel - Final Findings dated 11.10.2011 of Designated Authority (DA), Directorate General of Anti-Dumping and Allied Duties, Ministry of Commerce & Industry - notification No. 104/2011-Cus dated 25.11.2011 of Ministry of Finance - Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 - Held that: - market share alone is not a fair indicator of presence of injury or otherwise. Domestic prices have been undercut by imports from the subject countries throughout the injury investigation period. Further, the prices of domestic industry has not increased in line with increase in costs. The profitability of the domestic Industry has been shown to be adversely affected during the said period. The Tribunal in Kothari Sugars & Chemicals Limited Vs. Designated Authority [2005 (8) TMI 411 - CESTAT, NEW DELHI] held that if the volume of imports at a particular price level is sufficient enough to have adverse impact on domestic selling prices, the same should not be taken into account and given due weightage in the analysis. It otherwise meant that even if there are high priced transactions and low price transactions from a country, the very fact that the low price transactions cause injury (with positive injury margin) justifies imposition of duty on the entire country. Regarding source data it has been recorded that the DGCI & S and IBIS data have been used wherever required. The methodology for arriving the NIP has been disclosed. 22% return on investment has been granted to domestic industry as per consistent practice followed in this regard. The injury margin calculation for residual exporters of a country follows a methodology different from that adopted for price underselling which is determined in respect of a country as a whole - imposition of duty justified. Appeal disposed off - decided against appellant.
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2016 (9) TMI 1224
Application for renewal of CHA Chennai license - license issued at Vishakapatnam and their branch license registered with Chennai Customs - expiry of Chennai license - respondent allowed to operate as CHA in Chennai Customs under Regulation 10(2) of the Customs House Agents Licensing Regulations (CHALR), 1984, on the basis of CHA licence issued to them, under Regulation 10(1) of the said Regulations, by Visakapatnam Customs - whether, merely because, the Commissioner of Customs (Seaport-Import), the licencing authority, has acted as an adjudicating authority, to adjudge an issue, as to whether, the 1st respondent is entitled to get the licence, issued by the Commissionerate, Chennai, renewed under Regulation 10(2), irrespective of the fact that when the original licence, at Vizag Customs has not been renewed, whether the duty to be discharged by him, at the time of considering a renewal application is adjudicatory or administrative, in nature? The decision in the case of GAJRAJ SINGH Versus STATE TRANSPORT APPELLATE TRIBUNAL [1996 (9) TMI 607 - Supreme Court Of India] has been relied upon. It was held that adjudication is not required, while considering a renewal application. Grant or renewal of licence, is administrative in nature. Section 129 of the Customs Act, 1962, provides for an appeal. Bare reading of the Section may indicate that any decision or order passed by the adjudicating authority, can be appealed to the Tribunal. The Regulations dealing with grant of licence for renewal should be harmoniously read with the provisions of the Customs Act, 1962 and should be given the effect, in conformity with the legislative intent. On the principle of harmonious construction and going through the entire Regulations, it was held that an order, rejecting an application for renewal, is administrative in nature. The Tribunal held that the appeal filed against the order, on the application to renew the licence issued to the Customs House Agent, under the CHALR, 1984 or 2004, as the case may be, is not maintainable - no interference required with the order of the Tribunal - appeal dismissed - decided in favor of respondent.
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Service Tax
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2016 (9) TMI 1241
Club or Association services - Commissioner (Appeals), Cochin set aside the Order-in-Original on the ground that M/s. National Club (respondent) is a Members club and not a Proprietary Club and in a members club there is no question of two sides i.e. Members and Club, both are same entity - Revenue submitted that the impugned order is not sustainable in law because the issue involved in the present case has not attained the finality. The judgment of the Hon’ble Jharkhand High Court at Ranchi and the Gujarat High Court at Ahmedabad relied upon by the Commissioner (Appeals) Cochin has been challenged before the Hon’ble Apex Court and the matter is still pending. During the pendency of the appeal before the Supreme Court, the orders passed by the Commissioner is in jeopardy and cannot be considered as precedent. Held that:- there is nothing wrong in the order passed by the Commissioner (Appeals) and we are not inclined to interfere in the same. - Decided against the Revenue
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2016 (9) TMI 1240
Cenvat credit - service tax paid on input services - used in the manufacture of axles and gear boxes, which are used in the manufacture of final products i.e. motor vehicles & chasis Held that:- by respectfully following the decisions of the Hon’ble Bombay High Court in the case of Commissioner of Central Excise and Customs, Aurangabad vs. Endurance Technology Pvt. Ltd. [2015 (6) TMI 82 - BOMBAY HIGH COURT] which is an uphelded decision of Tribunal reported in [2011 (7) TMI 373 - CESTAT, MUMBAI] and the coordinate bench of the tribunal in the case of Parry Engg. & Electronics P. Ltd. vs. C.C.E. & S.T., Ahmedabad-I,II,III [2016 (1) TMI 546 - CESTAT AHMEDABAD], we hold that the appellants are the receiver of the services rendered by the 3rd party job worker and the said services have been used directly or in directly in or in relation to the manufacture of motor vehicles chassis. Hence, the appellants are entitled to credit of service tax paid on the input services. In the case on hand, the goods, on which services were provided, instead of coming to the appellants factory were dispatched to another job worker of the appellants i.e. HVAL/HVTL. The definition of input services does not specify that the services should be received in the factory of the manufacturer. The condition to avail cenvat credit on input service is that it should be used in or in relation to the manufacture of final products. In this case the service was used in the manufacture of motor vehicle chassis directly or indirectly. It is also a fact that the service charge paid by the appellant to the job worker is included in the assessable value of the final products. - Decided in favour of appellant
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2016 (9) TMI 1239
Cenvat credit - availed irregularly - bank charges, AMC and pest control charges - nexus with the manufacturing activity of the appellant - Held that:- by following the decisions of tribunal in the case of MPI Machines Ltd. vs. CCE, Indore [2014 (1) TMI 718 - CESTAT NEW DELHI] and in the case of Hindustan Coca-Cola Beverages (P) Ltd. vs. CCE, Hyderabad [2009 (5) TMI 379 - CESTAT, BANGALORE], I am of the opinion that the impugned order is not sustainable in law and the learned Commissioner (A) has wrongly declined the CENVAT credit on the said services by holding that there is no nexus with the manufacturing activity of the appellant. I hold that the appellant is entitled to CENVAT credit as there is a nexus between the disputed services and the business of the appellant. - Decided in favour of appellant with consequential relief
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2016 (9) TMI 1238
Construction of complex service - period 16.06.2005 to 31.12.2006 - appellant engaged in construction of residential complexes - whether comes under indivisible works contract which merits classification under the category of works contract service - Held that:- in this case, it is seen, that the contract is an indivisible contract involving both transfer of property of goods and services and that appropriate sales tax/VAT is paid for the value of the goods involved in the execution of the works contract. It is also seen that the Learned Commissioner has merely confirmed demand only under construction of complex service. As per Explanation to Section 65(105)(zzzza), we find that the legislature has clarified that where the activity involves both transfer of property in goods to the service recipient, which is leviable to tax as sale of goods and also construction service, such activity would be classifiable as "works contract services". The issue regarding demand's sustainability under construction of complex services for an activity that merits classification under works contract services is no longer res-integra in view of the Hon’ble Supreme Court's judgment in the case of Commissioner of Central Excise and Customs, Kerala Vs. Larsen and Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT]. The Honourable Supreme Court in its judgment has held that prior to 01/06/2007, there was no section specifically levying service tax on works contract and accordingly, no service tax can be imposed on works contract services entered prior to 01/06/2007. Accordingly, we are of the view that the works contract is subject to levy of service tax only with effect from 01/06/2007 and the demand of service tax under construction of complex service is being set aside. Since the original demand itself is being set aside, demand of interest under Section 75 and penalty under Section 76 of the Finance Act, 1994 is also being set aside. As regards imposition of penalty under Section 77 of the Finance Act, 1994, we find that penalty is unsustainable as the issue as to whether the activity of construction of complex would fall under construction service or works contract service has always been under dispute and hence we find that there is a reasonable cause for not taking registration within the prescribed time limit. Invokation of extended period of limitation - Imposition of penalty under Section 78 of the Finance Act, 1994 - Held that:- it is found that there have been conflicting views prevalent on the issue and that the issue has attained finality only after the Supreme Court verdict in 2015. In view of the conflicting views being prevalent, we find that there is no suppression/fraud/contravention with an intention to evade payment of tax and accordingly, invocation of extended period of limitation also fails and consequently penalty under Section 78 is set aside. - Decided in favour of assessee
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Central Excise
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2016 (9) TMI 1237
Classification - Whether the brass granules manufactured by the appellant are required to be classified under CETH 74.0-3.21, as claimed by the Revenue or under CETH 74.06 as claimed by the Respondent - Held that:- copper predominates by weight and brass granules has to be treated as copper granules on the basis of predominance criteria. It is further observed that CETH 74.07 also pertains to copper bars, rods and profiles' but it also covers alloys of copper under CETH 7407.12. Accordingly, non mention of copper alloys or Brass in CETH 74.06 does not mean that it will not contain copper alloys in its ambit - Section note-6 to Section-XV of CETA also confirms this interpretation. Accordingly, this bench does not find any reason to interfere with the order passed by the first appellate authority regarding classification of brass granules. Classification - Whether the cast form of Copper made by the Respondents should be classified as 'billets' as claimed by the Respondents or the same should be classified as 'Ingot' claimed by the Revenue - whether the chapter notes under Chapter 72 of CETA can be made applicable to Chapter 74 entries - Held that:- if the definitions of 'Ingot' & 'Billet' were uniform for all base metal then the same could have been placed as Section notes under Section XV of CETA. As per the above definition given in Indian Standards for copper and copper alloys both Billets & Ingots are products of casting. Billets of Copper & Copper alloys are intended for further working whereas Ingots are primarily for re-melting for production of copper and copper alloys. In the present appeals it is not the case of Revenue that cast products are meant for re-melting. In view of the above definitions given in Indian Standard for Copper and copper alloys will be more appropriate and the definitions of 'Billets & Ingot' given in chapter notes under Chapter 72 of the CETA cannot be applied to interpret entries of Chapter-74, as these notes are not existing as Section notes under Section XV of CETA. In view of the above, we hold that cast articles manufactured by the Respondents for further working are appropriately classified as 'billets' and will be eligible to exemption under Notification No.9/2003-CE dated 01.03.2003, as amended. - Decided against the Revenue
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2016 (9) TMI 1236
Cenvat credit - wrongly availed on the invoices raised by their unit no. 1 at unbranded goods - Held that:- it is found that there is no dispute that the unit no. 1 of the appellant has discharged the duty liability on the said unbranded pickles the same was received by the appellant and repacked into branded goods. If there is no dispute as to the receipt of goods by appellant, discharge of Central Excise duty on the goods received and consumed, CENVAT credit cannot be denied at the recipient unit, only on the ground that manufacturer should not have paid the Central Excise duty. This law is clearly settled in favour of the appellant. Demand - cash discounts were not passed on but claimed as deduction - Held that:- the issue is now settled by the Hon'ble Apex Court in the case of Purolator India Ltd. Vs. CCE, Delhi-III [2015 (8) TMI 1014 - SUPREME COURT]. In the said judgment their Lordship have clearly held that the cash and volume discount between assessee and its buyers is known at or prior to clearance of goods, it can be deducted from the sale price. In the case in hand the appellant had produced evidence in form of Xerox copies of credit notes before first appellate authority, which indicated they have passed on cash discount as contracted between them and their purchaser. In our view they have passed on the cash discount as had been evidenced from the invoice. Hence, respectfully following the above judgment of Hon'ble Apex Court, we hold that the appellant is eligible for the cash discount deduction in assessable value. - Decided in favour of appellant with consequential relief
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2016 (9) TMI 1235
Demand and imposition of penalty - cash discount granted on the chassis cleared on payment of duty - non-inclusion of the amount of freight, insurance and octroi paid on the chassis received by it from M/s.Tata Motors in arriving at the assessable value on which the duty was paid by it - Held that:- the goods namely chassis were received by the appellant from M/s. Tata Motors Ltd. under proper central excise invoices and central excise duty paid thereon was clearly mentioned in those invoices. The appellant merely took credit of the duty so paid by M/s. Tata Motors Ltd. Therefore, if there is any discount allowed by M/s. Tata Motors Ltd. which the Revenue was of the view was not admissible then it follows that the demand should have been raised on Tata Motors, which had paid duty on chassis after allowing such discount. Regarding non-inclusion of freight, insurance and octroi in respect of such chassis supplied by Tata Motors in arriving at the assessable value of the final product by the appellant, we find that Chartered Accountant’s Certificate dated 01.06.2007 was submitted by the appellant to the effect that cost of transportation, insurance, road tax, entry tax, octroi etc. upto the place of the consignee was included on the average basis in the assessable value of the final product of M/s. Tata Motors Ltd. and that such assessable value is used for payment of duty of excise at the time of removal of finished goods from Lucknow plant. Notwithstanding the C.A. Certificate to support the appellants contention, we find that in the impugned order it is stated that “it also appeared that M/s.Tata Motors Ltd. has not considered other elements such as freight, insurance, entry tax to arrive at the assessable value of the chassis for discharging duty.” That being the case, the duty demand in respect of such elements even if they were held to be includible in the assessable value can be raised on M/s. Tata Motors and not on the appellant. Further there is nothing on record to suggest that the appellant paid anything more than the amount mentioned in the Tata Motors invoices. In other words, the appellant has not paid any freight, insurance or octroi in respect of such chassis, and therefore, question of the appellant adding these elements in arriving at the assessable value of its final products would simply not arise. Also when the impugned demand is not found sustainable, the penalty obviously cannot survive. - Decided in favour of appellant
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2016 (9) TMI 1234
Cenvat Credit - sale of waste and scrap of metal goods arisen during the course of repair and maintenance of various plant and machinery - non-payment of central excise duty - Held that:- in view of the settled principles of law, we are not in agreement with the findings of the lower authority that prescription of Chapter Note in the tariff will create the duty liability on the waste and scrap of metal goods arisen during the course of repair and maintenance of plant and machinery. With regard to applicability of Rule 3(5A) of Cenvat Credit Rules, 2004 to the facts of the present case, we find that on initial procurement of capital goods, the appellant had not taken any Cenvat credit and such facts were brought to the notice of both the lower authorities by the appellant. Therefore, the burden lies with the Department to prove availment of Cenvat credit on the disputed goods has not been satisfactorily discharged, and thus, confirmation of duty demand on this ground also is not tenable. - Decided in favour of appellant
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2016 (9) TMI 1233
Seeking destruction of cigarettes and remission of duty thereupon - Notification issued by Ministry of Health & Welfare requiring adherence of specified pictorial warning on the retail packages as an essential condition of marketing - goods reached their date of expiry as per industrial standard as the Central Excise Authorities did not permit the appellant for slitting of 457 cardboard boxes containing 5482200 cigarettes so as to repack said cigarettes into retail packages having specific warning. Held that:- due to issue of Notification dated 03.5.2009 it became mandatory that at least 40% of the principal display area of the front panel of the pack was required to have specified health warnings. The impugned goods were packed much before the issue of said Notification. Rules 21 of Central Excise Rules, 2002, provide that Commissioner is empowered to remit duty payable on goods which are claimed by a manufacture as unfit for marketing at any time before removal. We find that impugned order rejecting such permission is not tenable in law. We, therefore, allow appellant's application dated 14/4/2011 filed before Commissioner Central Excise, Ghaziabad, for remission of duty of ₹ 54,71,419.74 and allow destruction of 548200 cigarettes referred to earlier and direct the Commissioner Central Excise, Ghaziabad to ensure destruction of said cigarettes by following procedure provided by law for the time being in face for such destruction. - Decided in favour of appellant
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2016 (9) TMI 1232
Notification No.167/71-CE dated 11.09.1971 - eligibility for exemption - carrying out research and development in the area of polymers, resins, adhesives, bulk drugs and drug intermediates - Held that:- the said Notification dated 11.09.1971 provides for full exemption to all excisable goods produced in a research Institute during the course of carrying out research. The condition of the said notification is that the Assistant Commissioner of Central Excise is satisfied that the goods produced in such research institute are produced during the course of carrying out research. It further provided that further condition for availing notification is that the manufacturer has to produce such certificate as may be required by said Assistant Commissioner of Central Excise for verifying that the goods have been produced during the course of carrying out research. Appellant have produced the said certificate which is in the form of letter issued by authority in the Ministry of Science and Technology, Department of Scientific and Industrial Research, New Delhi on 18th December, 2003 referring to the subject of recognition of appellant’s In-House R&D unit by department of Scientific and Industrial Research and informs that it has been decided to accord recognition to the In-House R&D unit of appellant’s firm. We find that the said certificate is sufficient evidence to establish that the goods produced by the appellant are produced during the course of carrying out research. - Decided in favour of appellant
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2016 (9) TMI 1231
Imposition of penalty - Rule 25 of the Central Excise Rules 2004 - duty evasion - default in payment of duty - one day in an instance and two days in another instance owing to severe financial difficulties - Held that:- by respectfully following the decision of Tribunal in the case of M/s Annapurna Earcanal Ltd V/s Commissioner of customs and C.E., Hyderabad [2016 (9) TMI 1113 - CESTAT HYDERABAD], the impugned order to the extent of imposition of penalty under Rule 25(1) of Central Excise Rules 2004 is set aside. - Decided in favour of appellant
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2016 (9) TMI 1230
Invokation of extended period of limitation - Classification - Gloves, manufactured and used for sports - whether to be classified under Chapter heading No.9506 of Schedule to CETA, 1985 or under Tariff Item No.4203 2110 of said schedule - notification issued by Government of India for All Industries Rate of Drawback through which the goods manufactured by appellant, were shown to have been classifiable under Tariff Item No.950621 - Held that:- the show cause notice was issued by invoking proviso to Sub-Section 1 of Section 11A to Central Excise Act, 1944. The show cause notice was issued on 25.06.2013 and the period covered by the show cause notice, is from June, 2008 to February, 2012. For issue of show cause notice under extended period, separately it is to be established that the noticee has either suppressed information or miss-declared the information or contravened the provisions of Central Excise Law or Rules made thereunder, and separately, they had intention to evade duty. In the present case, we find that Government of India through their notification for All Industry Rate of Drawback classified the goods manufactured by noticee, under Tariff Item No.9506 21, and admittedly, the noticee have paid the Central Excise duty liable to be paid for the goods classifiable under Tariff Item No.9506 21. Therefore, Revenue could not establish that the appellants had intention to evade duty. We, therefore, hold that the show cause notice is hit by limitation. - Decided in favour of appellant
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2016 (9) TMI 1229
Cenvat credit - various iron and steel articles - steel items used in fabrication of capital goods and welding electrodes, Oxygen Gas and LPG Gas used in the manufacture of capital goods or for repair of the same - Held that:- without going into the factual aspect as to whether the iron and steel articles were used for construction or as supporting structurals, in view of the decision of Hon’ble Gujarat High Court in the case of Mundra Ports & Special Economic Zone Ltd. [2015 (5) TMI 663 - GUJARAT HIGH COURT] which is an over-ruled decision, held that the amendment issued on 07.07.2009 cannot be held to be clarificatory amendment and as such, would be applicable only prospectively, we are of the view that the same would be entitled to credit inasmuch as the period in the present appeal is before 07.07.2009. Invokation of extended period of limitation - Demand - show cause notice stands issued on 30/09/2008, for the period, September, 2007 to December, 2007 - Held that:- the credit was being availed after reflecting the inputs in the statutory RG-23 D Part-I and Part-II records. The fact of availment of credit was also being reflected in the statutory returns being filed with the Revenue. Non-disclosure of a fact for which there is no column in the records or in the returns, does not ipso facto lead to the conclusion that such non-disclosure is with malafide intention, especially, when there is no legal obligation on the part of the assessee to disclose a particular fact. As such, it is well settled law that if during the relevant period, the decisions of the higher authorities are in favour of the assessee and the law was reversed only subsequently, by a Larger Bench or by any other decision, no malafide can be attributed to the assessee and longer limitation period would not be available to the Revenue. As regards the welding electrodes and Oxygen Gas etc, we find that he issue again is no more res-integra and stand decided by various High Courts. One such refercne can be made to Chhattisgarh High Court in the case of Ambuja Cements Eastern Ltd. Vs. Commissioner of Central Excise, Raipur [2010 (4) TMI 429 - CHHAITISGARH HIGH COURT] wherein welding electrodes used for repair and maintenance purpose were also held to be cenvatable. Similarly, in the case of Hindustan Zinc Limted Vs. Union of India [2008 (7) TMI 55 - HIGH COURT RAJASTHAN], the Hon’ble High Court allowed the CENVAT Credit on the welding electrodes. By following said decision, we hold that the appellant is entitled to the credit. - Decided in favour of appellant with consequential relief
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CST, VAT & Sales Tax
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2016 (9) TMI 1223
Scope of the term 'Dealer' - a public charitable trust running and maintaining a public hospital - Bombay Public Trust Act - The hospital has a medical store in the premise from where the medicines and other pharmaceutical drugs and equipments are sold - requirement of registration of this medical store as a dealer for the purpose of the Gujarat Sales Tax Act, 1969 - identical issue came up in the case Bhailal Amin General Hospital vs. State of Gujarat and anr [2016 (8) TMI 670 - GUJARAT HIGH COURT] where it was held that the definition of term 'dealer' contained in Section 2(10) of the Gujarat Value Added Tax Act would not include the medical store. Section 2(10) of the Gujarat Sales Tax Act - Section 2(10) of the VAT Act - is the petitioner coming within the definition of dealer under GST Act? - Held that: - on all material counts the definitions in both the Acts are similar. Only minor difference being that in the GST Act in the exception, the words “which are not in the nature of business” are added, which forms part of perimateria Explanation II to section 2(10) of the GST Act. If at all, this explanation is wider than the Exception III of 2(10) of the VAT Act, it may be possible to argue that the later expression of “which are not in the nature of business” is only by way of a clarification and there is no material change between the two definitions. - In any case, the petitioner must get the benefit of judgement of this Court in case of Bhailal Amin General Hospital. Petitioner not a dealer - petition disposed off - decided in favor of petitioner.
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2016 (9) TMI 1222
Rectification of re-assessment order under Section 69(2) of the VAT Act - fabrication of iron and steel gates and windows etc - Entry Sl.No.4 of the Sixth Schedule taxable at 4% and at 5.5% after issuance of clarification on 26.3.2015 - Entry Sl.No.23 of Sixth Schedule taxable at 12% - Whether the re-assessment was permissible under the head of “Rectification of the order in purported exercise of the power under Section 69 of Karnataka Value Added Tax Act, 2003 on the basis of a clarification issued by the Commissioner which itself is after the order of re-assessment dated 28.6.2010? Held that: - the material which did not exist at all at the time of order of re-assessment was passed on 28.6.2010 would not form basis for rectification of the re-assessment order. When it is undisputed position that the basis of the exercise of power for rectification is the clarification order dated 21.2.2012 issued by the Commissioner which in any case has come into existence after the order of re-assessment, the power of rectification was unavailable. Further, it is not the case of respondent-revenue that any other clarification like 21.2.2012 was already in existence prior to 28.6.2010 i.e. date on which the order of re-assessment was passed. No material which has come into existence after the order/re-assessment is passed can be made as the basis for exercise of power under Section 69 of the Act - question is answered in favour of the petitioner-assessee and against the revenue - petition allowed.
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2016 (9) TMI 1221
Pre-sale inspection charges - works contract for supply and installation of machinery - Gujarat Sales Tax Act - export sale - assessee had a taxable turnover of ₹ 25.57 crores (rounded off) which included a sum of ₹ 3.71 lacs (rounded off) towards performance test/inspection charges - such tests carried out in the premises of the assessee's factory itself by a third party agency and were pre-sale tests - “sale price” as defined under section 2(29) of the Act - whether on the facts and in the circumstances of the case, the tribunal has rightly held that, the appellant cannot levy tax on performance test/inspection of goods as the same is not the part of sale price? - Held that: - The pre-sale inspection or performance testing though was done at the site of the factory of the assessee, it was being done at the instance of the purchaser for which the purchaser had separately paid and the inspection was being carried out by third party agency. Though the terms of the contract also referred to inspection as part of the sale consideration, the same when appreciated in connection with other conditions would show that such inspection was after installation inspection and did not refer to presale inspection - the test performed for the inspection was neither done by the assessee nor was charged by the assessee and would therefore not be included in the expression “any some charged for anything done by the dealer in respect of the goods.” as defined in section 2(29) of the act. Set off on packing materials used for delivery of the product - Section 44 of the Gujarat Sales Tax Rules, 1970 - the decision in the case of Rajsheel Ltd. v/s State of Andhra Pradesh [1989 (5) TMI 292 - SUPREME COURT OF INDIA] has been referred where it was held that the seller did not intend to sell the packing separately and was therefore not entitled to set off under Rule 44 of the Gujarat Sales Tax Rules. - Held that: - when there is no independent sale of packing material but the value of the packing material goes into determining the value of the goods sold, the deeming fiction provided under Section 6(C) of the said Act would apply and even the value component of packing material would be taxed at the same rate as the goods themselves. Even on the other hand, on facts it is found that the packing material is sold separately from the sale of goods, the rate of tax on such packing material would be one prescribed for such packing material. In either case, there would be a sale of packing material either as a integrated part of the sale of principal goods or separately. As noted, Rule 44 of the Sales Tax Rules, 1970 envisages the drawback, set off, or refund of tax at prescribed rates of purchase of goods sold in course of intra-state trade etc - All such conditions are satisfied - rightly held by the Tribunal that the set off would be available. Appeal dismissed - decided against Revenue.
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2016 (9) TMI 1220
Validity of order of assessment - TNGST Act, 1959 - Vaccum Cleaner - Excise Duty paid on the MRP as per the (Union Budget) Notification issued by the Central Excise (vide amended Central Excise Notification No.13/2002)CE(NT) dated 01.03.02 - verification of invoices in terms of the Appellate Assistant Commissioner - issue only for the two assessment years viz., 1998-1999 and 1999- 2000 - whether the dealer had charged Maximum Retail Price as sales price? - Held that: - before coming to any conclusion, a thorough verification of the whole invoices raised by the appellant is felt necessary so as to whether the appellant have charged MRP as sale price in the invoices, if charged the assessment made has to be sustained - matter remanded back to the Assessing Officer with a direction to verify all the invoices raised during the relevant assessment years in respect of sale of vaccum cleaner and to find out whether the appellant have charged MRP as sale price and to pass appropriate orders. Imposition of penalty u/s.12(3) (b) of the Act - Held that: - As the issue relating to turnover is remanded, the issue relating to penalty is also remanded to the Assessing Officer with a direction to consider penalty levy if need be. Writ petition allowed - matters remanded back to the Assessing Officer for fresh consideration.
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2016 (9) TMI 1219
Refund claim - Section 50 of the VAT Act - refund should have been made within thirty days from the date of the order passed by the first appellate authority. Despite requests made by the petitioner, refund has not been made for more than eight months - Held that: - where the appeal is allowed in favour of the petitioner, the duty is cast on the respondents to make refund within the timeframe and in case if it is not refunded, it is the duty of the respondents to inform the assessee the reason for not refunding the amount. Refund has to be made within thirty days unless the said order is stayed under Section 64 of the VAT Act and the stay order be communicated to the petitioner. Stay order passed by the Additional Commissioner, Commercial Taxes - non-communication of stay order to petitioner as he was not found - Held that: - Assessing Authority, Commercial Taxes directed to pay the refund amount within one week - refund to be made subject to production of bank guarantee - the petitioner is directed to appear before the Additional Commissioner, Commercial Taxes without awaiting for any notice in this regard, on Wednesday the 31st August, 2016 at 11.00 a.m. and upon appearance, the Additional Commissioner, Commercial Taxes is directed to supply notice, etc. to the petitioner for submitting its reply/defence - petition disposed off - decided in favor of petitioner.
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Indian Laws
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2016 (9) TMI 1218
Auction - complaint about service in relation to immovable property - Held that:- As to the relief sought vide paragraph 7(i) and 7(ii), the material documents on record reveals that the land in question was mortgaged by respondent No.4 in favour of respondent-Punjab National Bank and because respondent No.4 failed to repay the loan, the Bank besides initiating proceedings under Section 14 of the Act of 2002 also took recourse to proceedings under Section 13 (4) of the Act of 2002 and auctioned the land in question which was purchased by respondent No.6 in whose favour sale certificate has been executed and duly registered on 17.06.2010 Since the proceedings initiated under Section 13(4) of the Act of 2002 has not been questioned and there is accrual of right in favour of respondent No.6 with the registration of valid sale certificate divesting respondent No.1 to 4 of their title over the property in question, the relief sought by the petitioner cannot be granted. More particularly when there is no pre existing title in favour of the petitioner. As to direction sought vide paragraph 7(iv), since the District Consumer Forum is a Court of limited jurisdiction conferred under Section 11 of Consumer Protection Act, 1986. And though it may have a jurisdiction to entertain a complaint about service in relation to immovable property. However, it will be beyond its jurisdiction to adjudicate claim as to title over an immovable property or even assume a title of either of the party in absence of cogent material and admissible document and further direct to execute the sale deed in respect of the land which as apparent was owned by respondent No.4 who mortgaged it in favour of respondent-Punjab National Bank, which, because of the account being NPA was subjected to proceedings under Section 13(4) of the Act of 2002 and was purchased by respondent No.6 in an auction. In the realm of these facts, even the relief sought vide paragraph 7(iv) cannot be granted.
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