Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 12, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
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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Section 194C of the Act would apply in case of a payment being made by a contractor to a contractee and not vice-versa. In the present case, the payment of licence fee was made by the contractee to the contractor and therefore section 194C of the Act would not apply - HC
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Best judgment assessment - rejection of books of accounts - There is no restricting words in Section 144 restricting the AO to only assess profitability after rejecting books of accounts to compute income of the assessee.
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Nature of expenditure - Disallowance of construction of statue of Shri Sardar Patel at a circle in the town where the assessee is situated to increase the visibility of the assessee in the public at large - allowed as revenue expenditure
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The activity of drying and threshing of tobacco leaves amounts to manufacture, which is eligible for additional depreciation as per the provisions of section 32(iia) of the Act
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Scope of comparison of information contained in the return - Provision of section 143(1)(a)(vi) would not be invoked to issue intimation proposing adjustment to the income/loss so filed in ITR-1 Form
Customs
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CHA should exercise such control/supervision as may be necessary to ensure proper conduct of such employees in transaction of business as CHA and he be held responsible for all acts or omissions of his employees in regard to their employment.
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Advance License Scheme - Bond was executed Jointly - The appellant did not import the subject goods and is only a merchant exporter, proceedings should have been initiated against the co-authorization holder/importers and not against the appellant
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Valuation of imported goods - The rejection of transaction values by the adjudicating authority on the basis of bills of entry of prime goods cannot be approved
Indian Laws
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Direct Tax Collections for F.Y. 2017-2018 show Growth of 15.8% up to September, 2017
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Dishonour of cheque - complaint against the nominal director being wife of MD - In view of Section 141 when there is no averment against the petitioner the proceedings against the petitioner is an abuse of process of law and is liable to be quashed - HC
Service Tax
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Refund claim - input tax credit - the professional indemnity insurance service is an essential ingredient for providing the output service and has direct nexus with the providing of output service.
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Levy of personal Penalty u/r 77(2) - non payment of service tax by the company - directors and employees of the KAL are not liable to discharge the service tax liability of KAL during the relevant period.
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Demand of service tax - The appellant emphasized that activity is not taxable only because appellant are making payment only for cost sharing does not have any force - demand confirmed
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Rejection of VCES Scheme - case of Revenue is that appellant have not made true Declaration - the mandate of section 111(2) is that after one year from the expiry of date of declaration, no action shall be taken
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Levy of service tax - Business run by an Individual can be termed as held as "commercial concern" - Security agency service - Held Yes
VAT
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Classification of Brake Fluid - it is not at all lubricating either the brake or any part which is under the braking system. - By no stretch of imagination, Brake Fluid and Lubricant can be treated as under one entry - HC
Case Laws:
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Income Tax
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2017 (10) TMI 484
TDS u/s 194C OR 194J - payments made by the assessee to IRCTC - non deduction of tds - disallowance under section 40(a)(ia) - whether IRCTC was not Government and that the payment was made to a contractor and therefore required deduction of tax at source in view of section 194C? - Held that:- The assessee was granted a contract by IRCTC for providing catering service for which the assessee would make payment in the nature of licence fee. According to the Revenue, on such payments, the assessee had to deduct tax at source which admittedly the assessee had not done. Under sub-section (1) of Section 194C, any person responsible for paying any sum to any resident for carrying out any work in pursuance of a contract between the contractor and the specified person is required at the time of credit of such sum in the account of the contractor or at the time of payment to deduct tax at specified rate. The Tribunal was thus right in observing that section 194C of the Act would apply in case of a payment being made by a contractor to a contractee and not vice-versa. In the present case, the payment of licence fee was made by the contractee to the contractor and therefore section 194C of the Act would not apply. In that view of the matter, we see no reason to interfere. However, this may not be seen as our confirmation of the Tribunal’s view that IRCTC was a government body and therefore also requirement of deducting tax at source did not arise or that proviso to sub-section (1) of Section 201 may have retrospective effect. We keep both these questions open.
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2017 (10) TMI 483
TDS u/s 194J - liability to deduct tax at source for license fees paid to IRCTC - Held that:- Under sub-section (1) of Section 194C, any person responsible for paying any sum to any resident for carrying out any work in pursuance of a contract between the contractor and the specified person is required at the time of credit of such sum in the account of the contractor or at the time of payment to deduct tax at specified rate. The Tribunal was thus right in observing that section 194C of the Act would apply in case of a payment being made by a contractor to a contractee and not vice-versa. In the present case, the payment of licence fee was made by the contractee to the contractor and therefore section 194C of the Act would not apply. We are broadly in agreement with the view of the Tribunal. In plain terms, section 194C of the Act does not cover the present situation where the assessee was making payment of licence fee to the IRCTC for catering service - Decided in favour of assessee.
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2017 (10) TMI 482
Addition u/s 68 - explanation about the nature and source of receipt - Held that:- A perusal of record would show that the assessee miserably failed to submit any details with respect to ₹ 11 lakhs received from Jayaben Balkrishna Oza. The assessee had developed a story that this amount was taken as an advance for sale of flat at Shefali Apartment, but he failed to demonstrate execution of any sale deed to legal heirs of Jayaben Balkrishna Oza. He failed to demonstrate refund of this amount to L/R of Smt. Jyababen Balkrishna Oza. The ld.CIT(A) has considered all these aspects in the finding extracted supra. After going through well reasoned finding of the ld.CIT(A) we do not see any error in it. Accordingly, this ground of appeal is rejected against assessee. Short term capital gain accrued to the assessee on sale of a land - year of taxability - Held that:- We find that this amount of ₹ 62.35 lakhs is taxable in the hands of the assessee. It is also pertinent to observe that it is taxable in the Asstt.Year 2010-11. The assessee has tried to withhold information about taxability of this amount in the Asstt.Year 2010-11 by offering this amount as business profit, which is not appreciable step at the end of the assessee. Considering these details and exercising power contemplated under section 153(6)(i) r.w. Explanation 2(a) of the Income Tax Act, 1961, we direct the AO to assess short term capital gain at ₹ 62,34,953/- in the Asstt.Year 2010-11. With the above directions, we reject this ground of appeal of the assessee.
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2017 (10) TMI 481
TPA - selection of the comparables - Held that:- Assessee engaged in manufacturing and production of Industrial Valves. Automated and Distributed Control System. It also provide Engineering services, offering innovative automation products, solutions and value adding life cycles fitted to customer’s specific needs. It offers environmental technology services e.g. advance process control, advance emission monitoring and authority reporting to help customers in oil and gas, paper and pulp, Power sector and other Industries, thus companies functionally dissimilar with that of assessee need to be deselected from final list of comparability. We find that the observation of the ld. DRP that the assessee has not demonstrated as to how both the divisions are not enter-twined is not at all tenable. By no stretch of imagination, the manufacture and sale of engineering goods on one hand and provision of engineering services on the other can be considered as the same segment unless specific facts to the contrary is put on record. The assessee is claiming that the engineering service segment on stand-alone basis has depicted profit but the goods segment has resulted in loss, which has resulted in the overall loss in the combined results considered in comparability analysis. This aspect deserves proper examination. Hence, we find that the objection of the ld. Counsel of the assessee that the segmental data should be considered in bench marking and comparability analysis is germane. Hence, we uphold the same. Accordingly, the issue is remitted to the file of the TPO. The TPO shall take into account the segmental detail and data and do the analysis afresh.
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2017 (10) TMI 480
Additions u/s. 40A(3) and 40A(3A) - best judgment assessment - rejection of books of accounts - Held that:- From the perusal of Section 144 we donot also find any restriction on the powers of the AO to only estimate income based on profitability after rejecting books of accounts. There is no equity under taxing statute and if the provision of the statute are clear and unambiguous, full effect is to be given to them to compute income of the assessee. There is no scope of adding or deleting any word in taxing statute if the language is clear, simple and unambiguous. We donot find any restricting words in Section 144 restricting the AO to only assess profitability after rejecting books of accounts to compute income of the assessee. Further perusal of Section 40A(1) also clearly reveals that it has a non obstante clause which clearly stipulates that Section 40A(which includes 40A(3)/40A(3A) ) has an overriding effect notwithstanding anything to the contrary contained in any other provision of the 1961 Act relating to the computation of income under the head ‘Profit and gains of business or profession’ . Section 28 deals with computation of income from profits and gains of business or profession which is to be computed in accordance with the provisions contained in Section 30 to 43D which included Section 40A(3)/40A(3). Section 40A(1) has a non obstante clause ‘notwithstanding anything to the contrary contained in any other provision of the 1961 Act relating to the computation of income under the head ‘Profit and gains of business or profession’’ as is contained in Section 40A(1) and in our considered view even if accounts are rejected u/s 145(3), the AO can estimate income of the assessee by taking recourse to Section 40A(3) which has an overriding effect over Section 145(3) r.w.s. 144. The assessee in the instant case has admitted that books of accounts were rightly rejected by the AO u/s 145(3) and hence in our considered view, the AO has rightly framed assessment for AY 2009-10 which was upheld by learned CIT(A) which we are not inclined to interfered and hence we uphold/sustain the appellate order of learned CIT(A) and the additions are confirmed. The assessee fails in this appeal. So far as appeal of the assessee for AY 2008-09 AO shall work out disallowance in the similar manner as for AY 2008-09 as was done for AY 2009-10 by invoking applicable provisions of Section 40A(3)(a) and (b). We also have noticed that assessment for AY 2008-09 was framed by the AO by invoking Section 69C wherein all purchases stood dismissed, while for framing assessment for AY 2009-10, the AO invoked Section 40A(3)/40A(3A) wherein disallowance has been made based on payments made to the so called purchasing parties in excess of ₹ 20000/- otherwise than by account payee cheque or account payee draft which has led to double jeopardy to the assessee as the assessee has opening creditors on 01-04-2008 of ₹ 10.82 crores who virtually got disallowed twice, once when entire purchases were disallowed for AY 2008-09 u/s 69C and secondly when payments against those purchases were made against preceding year outstanding’s in AY 2009-10 which has led to double jeopardy . However, this figure of double jeopardy needs to be worked out by the AO and in any case since now we have directed the AO to compute disallowance with reference to Section 40A(3)(a) and (b)
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2017 (10) TMI 479
Disallowance of interest expenditure - Held that:- It is admitted position that the partner’s capital during the year in appeal are not interest-free funds at the disposal of the partnership-firm. The profit belongs to partner and gets added to the capital on which interest is payable by the firm. On these facts, we do not see any purpose of sending the issue back to the file of CIT(A). The assessee has not been able to justify before us as to what facts required to be re-examined by the Revenue. It is the assessee which has failed to discharge the onus in spite of specific opportunities in this regard. We are of the view that assessee has not been able to make out any demonstrable case to show the availability of interest-free funds at its disposal to support its claim for remitting the matter back to the file of the CIT(A).
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2017 (10) TMI 478
Nature of loss - ‘business loss’ OR ‘capital loss’ - CIT(A) granted relief to the assessee and treated the loss arising of securities as business loss as per the claim of the assessee - Held that:- It is the case of the assessee that the impugned loss arose on sale of securities and bonds emanated from investments which were sub-classified under ‘available for sale’ (AFS) category at the time of purchase. In view of the aforesaid facts, we find merit in the claim of the assessee that the loss arising on sale of securities/bonds are of trading nature notwithstanding the fact that the securities were grouped under the head ‘investment’ owing to the prescribed format of the RBI. We find that the order of the CIT(A) dealing with the issue is consistent with the CBDT instruction as well as the facts of the case and does not require any elaboration. Accordingly, we decline to interfere with the order of the CIT(A). - Decided against revenue Allowable business expenditure - Disallowance of construction of statue of Shri Sardar Patel at a circle in the town where the assessee is situated - Held that:- It is trite that ‘for the purpose of business’ contemplated under s.37 is wider in scope than the expression ‘for the purpose of earning profits’ and may comprehend many acts incidental to the carry on of a business. Thus, so long as the expenditure has been incurred on the grounds of commercial expediency and in order to directly or indirectly facilitate the carry of the business, the fact that there was no compelling necessity to incur the expenditure on which deduction is claimed is an irrelevant consideration. The expenditure in the instant case has gone irretrievably in the course of carrying on of business. The expenses incurred has potential to increase the visibility of the assessee in the public at large and thus has bearing on business acceleration. Therefore, we find considerable merit in the claim of the assessee. Consequently, claim of the assessee towards urban development expenditure allowed. Claim of amortization of securities premium - Held that:- We notice that this amount represents the excess of acquisition cost over the face value of Government securities taken under HTM category. We find that the issue is squarely covered in favour of assessee by the decision in the case of CIT vs. Rajkot Dist. Co-op Bank Ltd. in Tax Appeal [2014 (3) TMI 110 - GUJARAT HIGH COURT] as placed reliance upon the CBDT Circular No.17 of 2008 and held that loss on account of premium paid on the face value of the security is required to be amortized for the remaining period of maturity. Thus the claim of the assessee towards amortization of security premium requires to be accepted. Assessee appeal allowed.
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2017 (10) TMI 477
Validity of Order u/s. 263 - Treating the loss as a notional loss - Held that:- The value of the stocks being closely connected with the stock market, at the end of the financial year, while valuing the assets, necessarily the bank has to take into consideration the market value of the shares - If the market value is less than the cost price, in law, they are entitled to deductions and it cannot be denied by the authorities under the pretext that it is shown as investment in the balance-sheet - See CIT Vs. HDFC Bank Ltd. [2014 (7) TMI 724 - BOMBAY HIGH COURT ] The claim of the assessee for loss on the transfer of securities from the category ‘Available for Sale’ to ‘Held to Maturity’ is an allowable deduction, we find merit in the contention of the assessee/appellant. Since, the loss in question is allowable, the Ld. CIT has no jurisdiction to exercise the powers under section 263 of the Act. We, accordingly, set aside the impugned order passed by the Ld. CIT u/s 263 of the Act as bad in law - Decided in favour of assessee.
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2017 (10) TMI 476
Disallowance of premium charges on FC forward contracts/underlying options - Held that:- In this case, the assessee is into the business of processing and export of tobacco. The assessee also is into the business of warehousing. The assessee has purchased a software park at Navi Mumbai from M/s. Maharashtra Industrial Development Corporation Limited for which it has borrowed certain term loans from banks. Subsequently, those term loans were converted into foreign currency loans for the purpose of reducing interest cost. The assessee entered into forward exchange contracts to hedge the underlying exposure in the form of external borrowings to mitigate the possible loss in fluctuation of currency. In the process, it has incurred loss, which has been debited to profit & loss account under the head premium charges on FC forward contracts. The total forward contracts entered into with the bankers, does not exceed the value of underlying exposure to foreign currency at any point of time. We further observed that the forward contracts entered by the assessee does not falls within the definition of section 43(5)(d) of the Act. Therefore, we are of the view that the A.O. was erred in disallowing premium charges on FC forward contracts on the ground that the loss incurred by the assessee is a speculative loss, which falls u/s 43(5)(d) of the Act. The CIT(A) after considering the relevant provisions of the Act and also relied upon certain judicial precedents, directed the A.O. to delete additions made towards premium charges. We do not find any error in the order of the CIT(A) Disallowance of foreign exchange fluctuation loss - Held that:- In this case, on perusal of the facts available on record, we find that the assessee has acquired the asset in India and the acquisition of such asset has been financed out of term loans borrowed from India banks. Though the assessee subsequently converted Indian currency loan into foreign currency loans for the purpose of reducing cost of interest, these loans cannot be considered as foreign currency loans acquired for the purpose of acquiring an asset from a country outside India. Therefore, we are of the view that the provision of section 43A, of the Act has no application to the facts of the present case. The assessee has incurred exchange loss due to rise in dollar rate, which has been treated as revenue in nature. The assessee has acquired term loans in foreign currency and repaid the said loan in instalments over a period. The difference between opening balance of the loan and closing balance of the loan as on the date of balance sheet has been arrived at by multiplying the rate of exchange as on that date, which results in exchange loss. Similarly, the assessee has converted its working capital loan into foreign currency loan for the purpose of reducing interest cost. In the process, it has incurred exchange loans due to adverse movement of currency, which resulted in exchange loss. Therefore, we are of the view that the A.O. was erred in treating exchange loss incurred by the assessee due to adverse movement of currency as capital in nature, which is not allowable u/s 37(1) of the Act. The CIT(A) after considering the relevant provisions of the Act, has rightly deleted additions made by the A.O. Disallowance of additional depreciation claimed u/s 32(iia) - activity of drying and threshing of tobacco does not amount to manufacture - Held that:- The activity of drying and threshing of tobacco leaves amounts to manufacture, which is eligible for additional depreciation as per the provisions of section 32(iia) of the Act, accordingly directed the A.O. to allow additional depreciation claimed by the assessee. See CIT Vs. Premier Tobacco Pakcers Pvt. Ltd. (2006 (2) TMI 101 - MADRAS High Court ) Revenue appeal dismissed.
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Customs
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2017 (10) TMI 475
Benefit of N/N. 65/88-Cus. - import of Orthopaedic Tractor Fluoroscopic Operating Table - case of Revenue is that while the goods are orthopaedic tractor fluoroscopic operating table and universal operating tables, it is not known whether they would satisfy the requirement of S.No. 5 of Part-C of N/N. 65/88-Cus as mended by the N/N. 123/94-Cus dated 3.6.1994, viz., S.No. 5 Operating Table Electro Hydraulic type - Held that: - the matter remanded to the adjudicating authority only for re-computation of the duty liability in terms of N/N. 65/98-Cus. provided that the imported items will fall within the ambit of Sl.No. 5 of part-C to the Notification, as amended - penalty set aside - decided partly in favor of appellant and part matter on remand.
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2017 (10) TMI 474
Valuation of imported goods - semi-precious gems cubic Zerconia of all sizes from 1.00 mm to 3.00 mm - rejection of declared value - Held that: - The revaluation of the imported goods has been done by the duly constituted Committee by the Commissioner of Customs. The Valuation Committee was constituted in pursuance of Rule 9(1) Rule 6 and Rule 4(1) of Customs Valuation Rules and the opinion of experts were also obtained - out of the three members, majority of two members was from the trade who were expert in examining the grade, quality of stones and true prices thereof. Thus, the opinion of independent experts was duly obtained for arriving at the correct assessable value. It was also observed that Shri D K Bangad, apart from being an officer, was also a qualified stones expert and since he was not anyway involved in the investigation / adjudication of this case, he was also an independent Member - the valuation of the imported goods has been done as per law - appeal dismissed - decided against appellant.
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2017 (10) TMI 473
Revocation of CHA license - forfeiture of security deposit - liability of principal for the acts of his agents - Principle of Vicarious Responsibility - alleged role played by the appellant in fraudulent exports carried-out under claim of undue export benefits - Held that: - it is evident that the shipping bills for the fraudulent export consignments were filed by the appellant-CHA which helped the unscrupulous persons to play the fraud on the exchequer. It is also evident that the appellant has never met and was not aware about the actual IEC holders whose number was used by Sh. Krishnan Kumar Garg in filing the documents. Sh. Garg has further admitted that he signed the documents without verifying the credentials of exporter. Without any authorization by the firms involved in the export, the appellant-CHA has filed the export documents resulting in undue claim for drawback/DEPB. It is further on record that export documents were obtained through the export facilitators/kingpins in the fraud rather than the actual IEC holder. As per the Principle of Vicarious Responsibility, a Principal is liable for all acts and omissions of his agent. In the present case, we note that Sh. Krishnan Kumar Garg was a G.card holder and employee of the appellant during the period when the shipping bills for the fraudulent exports were made. Sh. Garg was an authorized signatory of the appellant, hence the signatures appended by him on the export documents will necessarily have to be held as affixed by him in the course of normal business and on behalf of appellant. After having authorized Shri Garg to sign the documents on behalf of the appellant, the appellant cannot escape the vicarious responsibility for the acts and omissions of Sh. Garg. Reliance placed in the case of Rajendra Purohit Vs Union of India [2011 (11) TMI 333 - Gujarat High Court], where it was held that Regulation 19 (8) prescribes that CHA should exercise such control/supervision as may be necessary to ensure proper conduct of such employees in transaction of business as CHA and he be held responsible for all acts or omissions of his employees in regard to their employment. The contraventions of various regulations stand established against the appellant - appeal dismissed - decided against appellant.
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2017 (10) TMI 472
Advance License Scheme - import of Aluminum Coil, Adhesive Film, Protective Film and LDPE/GDPE Granules - fulfillment of export obligation - Held that: - Goods imported into India against the Advance Licence are exempted from whole of the duty of Customs leviable thereon, subject to the condition that the importer at the time of clearance of the imported goods, executes a bond with the proper officer of Customs, binding itself to pay, on demand, an amount equal to the duty leviable, but for the exemption contained therein, on the imported materials. It is an admitted fact on record that the export obligation in terms of N/N. 93/2004Cus., dated 10/09/2004 has not been achieved as per the FOB value indicated in the Advance Licence - it is evident that M/s Alstone International and M/s V.L. Estates Pvt. Ltd. were the actual importers of the duty free raw material and also filed Bills of Entry for clearance of such goods from the port of import. Since, the Notification dated 10/09/2004 specifies the condition that the importer has to execute the bond, binding himself to pay the duty on account of imported goods, in the eventuality, the export obligation has not been achieved - proceedings can only be initiated against the importer of the goods, who has executed the bond before the customs authorities. In the present case, the appellant and M/s V.L. Estates Pvt. Ltd. have jointly executed the bond for availing the duty exemption under Advance Licence Scheme. The appellant did not import the subject goods and is only a merchant exporter, proceedings should have been initiated against the co-authorization holder/importers and not against the appellant for confirmation of the adjudged demand - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 471
Benefit of N/N. 13/2010 dated 19.02.2010 - imports of broadcasting equipments - denial of benefit on the ground that imports of broadcasting equipments by the appellant did not satisfy some of the conditions prescribed in the notification - In particular it has been highlighted that they have failed to produce the certificate from Joint Director General of Organizing Committee of CWG 2010 specifically certifying the list of equipments proposed to be imported. Held that: - it has been prescribed that the list of such equipments needs to be certified by the organizing committee of CWG 2010. From the circular issued by CBEC dated 13.08.2010 it is evident that there was lot of chaos as well as urgency in getting the goods cleared in time for the conduct of CWG 2010. Circular has accordingly related some of the procedure to be followed in Customs House so as to facilitate the quick clearance of such equipments - In any case, it is found that the equipments proposed to be imported by the appellant has been duly certified by the Director Engineering of Doordarshan which is a constituent of Prasar Bharti. It is nobody’s case that such broadcasting equipments imported by the appellant has been mis-used or diverted for use other than in the CWG 2010 - further it is also on record, that all the imported equipments have also been re-exported duly. Benefit cannot be denied only for the reason that certificate as required under the notification has not been produced from the appropriate authorities - the failure to submit undertaking from Prasar Bharti to re-export the goods also loses its significance in view of the fact that the equipments have been re-exported. Appeal allowed - decided in favor of appellant.
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2017 (10) TMI 470
Benefit of N/N. 80/70-Cus, read with N/N. 129/86-Cus - six sections of ten spindles each, being parts of ‘Auto-Cone winding machinery’ - concessional rate of duty - Held that: - It would appear from the impugned order that the first appellate authority has not given due consideration to the grounds on which original authority had extended the benefit of the said notification. That benefit is sought to be denied in the impugned order by casual dismissal - This finding of the first appellate authority does not appear to follow from any discussion in the order. Not only is such a finding not sustainable in law but is also not in consonance with the remand order - There being no justification for findings of the first appellate authority, it would appear that the impugned order must needs be set aside - benefit of exemption granted by the original authority is sustained - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 469
Valuation of imported goods - foreign liquor - rejection of declared value - Since, the prices of the importer-appellants were much below than the declared prices of DDFSPL, the Department has entertained the view that there was deliberate attempt to undervalue the goods and evade substantial customs duty - Extended period of limitation - Held that: - The Bills of Entries, in the present case, were filed by the importer-appellants between the period August' 2009 to February 2013. The provisions for recovery of short-levied or non-levied duties are contained in Section 28 of the Customs Act, 1962. The said statutory provision mandates the time limits for issuance of the show cause notice in different circumstances - On a conjoint reading of both sub-sections (2) and (4) of Section 28 ibid, it would reveal that in case of short levy or non-levy of duty, other than the situation involving collusion, wilful mis-statement and suppression of facts, the proper officer shall issue the show cause within a period of one year from the relevant date, calling upon the concerned person to show cause, as to why the duty cannot be recovered from him. However, in exceptional circumstances, where non-levy or short levy of duty is by reason of fulfilment of the above ingredients, then instead of the period of one year, the proceedings can be initiated within five years, for recovery of such duty - In the present case, it is an admitted fact on record that the show cause proceedings were not initiated within the normal period of one year from the relevant date i.e. filing of Bills of Entries and payment of duty on the declared value. In view of the settled position of law and in view of the fact that the Department has not brought on any iota of evidence of the involvement of the importer-appellants in the fraudulent activities, concerning collusion, wilful mis-statement and suppression of facts with reference to value of imported goods, in our considered view, the demand could not have been issued for extended period - In the case in hand, it is an admitted fact that the show cause notice has been issued beyond the period of one year from the date of filing the Bills of Entries and payment of duty on the declared value. Thus, the proceedings are wholly barred by limitation of time as per the dictates of Section 28 ibid. The appeals by the importer-appellants are to be allowed on the ground of limitation - decided in favor of appellant.
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2017 (10) TMI 468
Valuation of imported goods - Mix Stock Lot of Alcoholic Beverages - rejection of declared value - The declared values for various types of alcoholic beverages are admittedly lower than the prices noticed by the customs in the case of other imports. Through the impugned order, the assessable value of various items have been enhanced on the basis of various bills of entry indicated in the SCN - Held that: - As per the scheme of valuation under the Customs Act 1962, as per Section 14, the transaction value is required to be accepted for assessment purposes except in circumstances, outlined in Rule 3 (earlier Rule 4) of the Custom Valuation Rules. Unless the price actually paid for the transaction falls within the exceptions, customs authorities are bound to assess the duty on the transactional value. The adjudicating authority has not recorded any specific reason for disregarding the transaction value, other than the suspicion that values are mis declared as seen by comparison with various other bills of entry, as is cited in the show cause notice - rejection of the transaction value was not strictly in terms of the provisions of Customs Act read with the Customs Valuation Rules. The rejection of transaction values by the adjudicating authority on the basis of bills of entry of prime goods cannot be approved. Allegations of mis-declaration of value on the above basis also cannot be sustained. However, the enhancement in value ordered by the customs appraiser on the basis of data of stock lot goods which stand admitted by the importer at the time of assessment is upheld. Appeal allowed in part.
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2017 (10) TMI 467
Maintainability of appeal - continuation of ADD - sunset review - acetone, imported from Japan and Thailand - extension of period - N/N. 16/2015-Cus-ADD dated 22.04.2015 - orders by the Department of Revenue missing - Held that: - In the absence of any order or Notification issued by the Department of Revenue in terms of Customs Tariff Act or the Anti-Dumping Rules, 1995, no appeal lies with the Tribunal - similar issue decided in the case of Panasonic Energy India Co. Ltd. & Others [2017 (9) TMI 63 - CESTAT NEW DELHI], where it was held that there is no determination of ADD levy by notification as published in the official gazette by the Central Government under Rule 18 and, as such, the appeals under Section 9C in the present case are not maintainable - appeal dismissed being not maintainable.
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2017 (10) TMI 466
Continuation of ADD - Maintainability of appeal - order from Department of Revenue is missing - Held that: - admittedly, in these 2 appeals before us, there are no orders by the Department of Revenue regarding imposition of Anti-Dumping Duty on the subject goods. In fact, the present appeals are only against the recommendations made by the DA - similar appeals came up before the Tribunal, where there was no order by the Department of Revenue, Ministry of Finance to impose any ADD on goods in terms of Section 9 in the case of Panasonic Energy India Co. Ltd. & Others [2017 (9) TMI 63 - CESTAT NEW DELHI], where it was held that there is no determination of ADD levy by notification as published in the official gazette by the Central Government under Rule 18 and, as such, the appeals under Section 9C in the present case are not maintainable. In the absence of any order or Notification issued by the Department of Revenue in terms of Customs Tariff Act or the Anti-Dumping Rules, 1995, no appeal lies with the Tribunal - appeal are not maintainable and are dismissed.
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Corporate Laws
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2017 (10) TMI 465
Guilty of misfeasance and malfeasance in relation to the Company - committing breach of trust in discharge of the duties towards the Company - liability under the provisions of Section 543 - Held that:- Admittedly, the case has been set up on the basis of report prepared by the Chartered Accountant whose statements have been quoted herein above. The present case is a case of voluntary winding up of the Company and not at the instance of any of its creditors. It is now an admitted position that the entire affairs of the Company were in the hands of one and single person namely Mr. Manik Chand Agarwal who has expired. Even as against Mr. Manik Chand Agarwal, as per the statement of the OL, who has stated that the application is being filed in view of report of Mr. NC Jain, Chartered Accountant and the record as available with him, there does not appear to be any single particular specific act which can be said to have been committed by any of the particular Director as required within the meaning of the provisions of Section 443(1) of the Act of 1956. The allegations which were originally made, have not been found to be correct by the Income Tax Authorities and the appeal thereto has also been dismissed. In the written submissions, a new case is sought to be made out which is not in any manner coming out from the report of Mr. NC Jain or his statements. The allegations are vague and bald which could not be said to be sufficient to hold the respondents guilty of causing breach of trust or misfeasance within meaning of Section 543 of the Act.
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2017 (10) TMI 463
Insolvency procedure - application under Section 9 of the I&B Code is maintainable at the instance of Workmen Association? - Held that:- We hold that the application under Section 9 at the instance of Appellant-JK Jute Mill Mazdoor Morcha - is not maintainable. The Adjudicating Authority has rightly rejected the claim though for some other reason. It does not mean that an application under Section 9 of I&B Code is not maintainable at the instance of an individual employee/workman who has rendered services to the 'corporate debtor' and if there is debt and default: such individual workman/employee can prefer an application under Section 9 giving details of debt and date of default but it should not be less than one lakh rupees in view of Section 4 of the I&B Code. In such cases if corporate insolvency resolution process if started against the corporate debtor, it is always open to the other creditors, including workmen/employees, their legal heirs to file claim before the Insolvency Resolution Professional once notice is published in the newspaper under Section 15 of the I&B Code and/or prior to completion of insolvency resolution process. This observation we are making so that in such case the 'corporate debtor' cannot take plea that earlier the application moved by workers' association/Trade Union in respect of such workmen/employee/legal heirs of deceased employees under Section 9 and the appeal under Section 61 have been rejected. In absence of any merit the appeal preferred at the instance of JK Jute Mill Mazdoor Morcha is dismissed with liberty to individual workman/employee to raise such claim, if there is a debt and default.
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Insolvency & Bankruptcy
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2017 (10) TMI 464
Corporate Insolvency Resolution Process - Held that:- We accept the prayer made in the application as no serious objection has been raised against the substituted Interim Insolvency Professional. In pursuance of Section 13 (2) of the Code we direct that public announcement shall be made by the Interim Resolution Professional within the statutory period with regard to admission of this application under Section 7 of the Code. We also declare moratorium in terms of Section 14 of the Code. Some necessary consequences of imposing the moratorium flows from the provisions of Section 14 (1) (a), (b), (c) & (d).
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2017 (10) TMI 462
Corporate Insolvency Resolution Process (CIRP) - claim of the 'Operational Creditor' - Held that:- A perusal of the additional affidavit and the documents annexed therewith also shows that based on the recommendations of the BIFR in the year 2010, the Hon'ble High Court has also taken notice of the said recommendation vide order dated 9.7.2010 and also put in motion the process of liquidation. Hence taking into consideration the documents annexed as above as well as the provisions of Notification dated 7.12.2016, as stated above we are in no doubt that the file is required to be placed before the Hon'ble High Court/Official Liquidator appointed by it and not before this Tribunal. The Petitioner is “directed to approach the Official Liquidator with the claim as made in the application, as this Tribunal is precluded from considering the Corporate Insolvency Resolution Process as sought to be initiated by the Petitioner based on amount claimed to be in default against the 'Corporate Debtor'.
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FEMA
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2017 (10) TMI 461
Detention at the airport at the instance of the Enforcement Directorate - Look Out Circular (LOC) was issued by the Enforcement Directorate - violation of FEMA - Proceedings under PMLA - Held that:- In the present case, the LOC does not indicate any credible reason for issuing the same. Plainly, recourse to LOC cannot be taken as a matter of course; restricting the right of a citizen to travel is a serious imposition on his/her fundamental rights and even if it is assumed that such action is permissible in law, it can be taken only when necessary and for good reason. This Court also finds it difficult to understand the conduct of the officers of the Enforcement Directorate. Admittedly, the petitioner had joined the investigations and had appeared before the concerned officers as required by them. Notwithstanding the same, a request for LOC was issued and the petitioner was not even informed of such LOC. Notwithstanding the legality or validity of the LOC, the petitioner would have taken that into account before making his travel plans. The petitioner became aware of the LOC at 11.00 PM on 22.08.2017, when he was about to board a flight. Thus, insofar as the LOC issued is concerned, the same is wholly unsustainable. Accordingly, the LOC issued against the petitioner is set aside. However, considering that the Enforcement Directorate is continuing with the investigation and may require the attendance of the petitioner.
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2017 (10) TMI 460
Condonation of Delay - reason i.e. the premises of the appellant firm lying locked and shifting of residence by the appellants as well as the chamber of the counsel of the appellant has been stated - Held that:- As stated earlier, by an order dated 11th May, 2009 this Tribunal had directed the appellants to deposit 20% of their amount of penalty along with submissions of unconditional bank guarantee of remaining 30% within a period of 45 days from 11th May, 2009 failing which the appeal would stand dismissed on this ground alone. The appellant cannot be permitted to change its stand. The above directions of this Tribunal have not been followed by the appellant till date. No sufficient cause has been given by the appellant for not depositing the pre-deposit amount till date. It is also observed that the appellant was aware of the proceedings. As further observed that the reasons given for Condonation of delay in filing the restoration application is rather vague and devoid of merits. As such, the above appeals/applications are dismissed. No sufficient cause has been shown in the applications. The grounds taken in the applications are vague and general in nature. However, in the interest of justice, equity and fairplay we still gave the offer to the appellant's counsel that in case the appellant complies with the order of this Tribunal dated 11.05.2009 and deposit 20% of their amount of penalty along with submissions of unconditional bank guarantee of remaining 30% within a period of 30 days from the date of this order, then this Tribunal would consider the request of restoring the appeal. There was no positive response on behalf of appellant counsel for the appellant is trying to raise the stay application again by stating that the penalty has been imposed incorrectly. Thus, there is no valid justification on behalf of the appellant. As such, the application for restoration for appeal and Condonation of Delay are dismissed.
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2017 (10) TMI 459
Proceedings contemplated under Section 51 of FERA, 1973 - Held that:- In the case of Shri Joji Thelliankal, who had acted as an agent to identify NRE account holders, there was no fool proof evidence on record, to establish that Shri Joji Thelliankal received premium amount and thus it was found by the trial court that there is no corroborative evidence except the statements. It was held that no other evidence on the records placed to show that Shri Joji Thelliankal was indulging in any money transfer business. Therefore, the benefit of doubt was given to Shri Joji Thilliankal in the absence of any cogent evidence, as both David Mathew and Monikutty Augustine have denied for having taken part in any such translation knowingly. Therefore no penalty was imposed any penalty on Shri Joji Thailliankal, although it was found that he contravened the provisions of Section 9(1)(b) of the Foreign Exchange Regulation Act, 1973. However, it is the admitted position that Shri P.R. Ganapathy who did not dispute the receipt of the money both in his reply to the Memorandum and during the personal hearing before the Authority. He only attempted to project it as investment from friends. It is correctly mentioned in the impugned order that his denial that he had not given money in return for the cheques/DDs as the statements recorded rather confirmed that the cheques/DDs were received after making payment in cash. Admittedly penalty amount has been deposited by the appellant. I totally agree with the impugned order passed against Shri P.R. Ganapathy. There is no infirmity in the order. Even I am of the view that routine small function such a big amount is not possible to receive as gift from NRI. It is evident that against the gift amount, the cash must have been given by the appellant. As the amount in question was unaccounted sources for his own benefit and directly involved in the contraventions of the provisions of Section 9(1)(d) of FERA, 1973.
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Service Tax
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2017 (10) TMI 456
Refund claim - professional indemnity insurance service - scope of input service - case of the Revenue is that after amendment of the definition of input service from 1.4.2011, the word the activity relating to business has been deleted from the definition of input service and the impugned service cannot be said to be directly used for providing any output service - Held that: - the adjudicating authority has allowed refund for general insurance service for employees, equipments and property, for insuring the company against unforeseen circumstance. On the same analogy, the professional indemnity insurance service has to be viewed in the context of providing the consultancy or other professional services, where the assessee has to safeguard itself against unforeseen legal damages/costs due to negligence or other bonafide mistakes of the employees/partners. Hence, the professional indemnity insurance service is an essential ingredient for providing the output service and has direct nexus with the providing of output service. From the perusal of the insurance cover placed on record by the respondent, the cover is not for a particular employee but is a general insurance cover taken by the assessee for the firm and any partner, member or employee to indemnify against legal liability for damages, defence costs etc. As the insurance cover is not meant for personal use or private consumption of any employee, it does not fall in the exclusion clause of the definition of the input service. Refund allowed - appeal dismissed - decided against Revenue.
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2017 (10) TMI 455
Levy of personal Penalty u/r 77(2) on directors / employees - non payment of service tax by the company - retrospective effect of Section 77(2) - whether the appellants are liable to penalty under Section 77(2) of the Finance Act, 1994 for the offence of non payment of service tax committed by the company M/s Kingfisher Airlines Ltd. wherein the appellants are either directors or employees? Held that: - penalty can be imposed on any person who contravenes any of the provisions of this chapter of the Finance Act, 1944 or any rules made thereunder for which no penalty is separately provided in this chapter - In the facts of the case, the offence is nonpayment of admitted liability of service tax by the company M/s Kingfisher Airlines Ltd. The liability is on the company and not on the directors or the employees, therefore if the company fails to discharge the statutory liability, it is the company against whom the action of recovery of such unpaid tax can be made under the statute. Therefore by not paying the dues, the company admittedly contravened the provisions of the chapter of Finance Act,1994 and rules made thereunder. As regards individual persons, in the present case, directors and employees of the KAL are not liable to discharge the service tax liability of KAL, therefore the appellants have not contravened the provisions of Act or rules made thereunder. Rule 26 of CER, 2002 is invokable on the individual person for the specific acts of the individual person prescribed therein. Under this rule a person, other than an assessee, can be penalised. Unlike this rule 26, there is no pari materia rule in the chapter of the Finance Act, 1994 or in the Rules made thereunder. Despite existing of Rule 26, a Rule 27 was made to penalise the assessee, which is pari materia to Section 77(2) of the Finance Act, 1994. Therefore in absence of similar provision of Rule 26 of Central Excise Rules, 2002 in the Finance Act, 1994 or rules made thereunder, no personal penalty on individual person can be imposed in connection with evasion of service tax by the assessee (KAL). For service tax matters, when legislators thought deem fit that individual persons such as director, manager, secretary or other officer, of the company who committed specified contraventions a penal provision by way of insertion of Section 78A was enacted in the Finance Act, 1994. Had the provision of Section 77(2) sufficient for penalising individual person, there was no need of Section 78A. This further strengthen the view that Section 77(2) of the Finance Act, 1994 was not adequate to penalise any individual person. The Section 78A was enacted on 10.05.2013 whereas period in the present case involved is April,2010 to March,2012, hence the same is not relevant in the present case. The appellants can not be penalised invoking section 77(2) of the Finance Act, 1994 as the provision of the same is applicable only on the assessee not on individual person - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 454
Refund claim - classification of services - refund claims were filed claiming that the services provided by them is not maintenance and repair services but it is BAS - Held that: - The two impugned orders however differ on the classification of the service. The order-in-appeal dated 07/12/2013 held that the said services are classifiable under BAS whereas the order-in-appeal dated 30/09/2013 held that the service is classifiable as maintenance and repair service. However, both the orders held that the services provided did not amount to export of service. It is seen that the order dated 12/07/2003 was not produced before the Commissioner (Appeals) during the personal hearing held on 08/12/2013 - matter on remand. Refund claim - time limitation - Held that: - the refund claim for the period April 2008 to January 2010 was filed on 06/02/2013. If the limitation prescribes under Section 11B read with Section 83 of the Finance Act is applied the entire claim becomes barred by limitation - reliance placed in the case of Anam Electrical Manufacturing Co. [1997 (1) TMI 80 - SUPREME COURT OF INDIA], where it was held that even in the case of illegal levy, the limitation prescribed under Section 11B has to be followed and no extension can be granted - the claim filed by the appellant for the period April 2008 to January 2010 is fully time barred and claim for the period January 2010 to June 2012 filed on 26/11/2012 is partially time barred. Appeal allowed in part.
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2017 (10) TMI 453
100% EOU - Reverse charge mechanism - Online information and database access to retrieval services - classification of services - cost relating to lease line charges for e-mail and internet services, software maintenance and software licence fee, maintenance of IT services, systems support, etc are managed centrally - contention of the appellant is that payment made to BC Components International BV, Netherland is not consideration but it is cost sharing - Held that: - For the purpose of Finance Act, 1994, BC Components International BV, Netherland and the appellant are two different entity. Accordingly the relationship is clearly of service provider and service recipient. As per Section 65(75) of the Finance Act, online information and database access for retrieval means providing data or information retrieval or otherwise to the consumer in electric form or through computer network. As per 65(105)(zh) taxable service means any service provided or to be provided to any person by any person in relation to online information and database access or retrieval or both in electronic form through computer work in any manner - In the present case appellant have booked communication and technical fees under the head of expenditure in foreign currency, further this expenses related to payment towards IT cost charged by the BC Components International BV, Netherland. Merely because the total cost charged by the BC Components International BV, Netherland is allocated to the various companies based on the logical basis like number of users, system usages etc, it cannot be said that appellant have not received service and paid consideration thereof. The appellant emphasized that activity is not taxable only because appellant are making payment only for cost sharing does not have any force. Taking into consideration overall facts, it is clear that appellant have received the service and paid consideration to BC Components International BV, Netherland therefore they are liable to pay service tax on reverse charge mechanism. Time limitation - Held that: - appellant have not disclosed the said arrangement to the department and it is only came to the notice of the department while conducting audit therefore appellant have suppressed the fact from the department - extended period invoked. CENVAT credit - Held that: - except mere submission, they have not adduced any evidence such as they are eligible for Cenvat credit, whether they discharged excise duty from PLA etc. In absence of such evidence, Cenvat credit cannot be extended to the appellant. Appeal dismissed - decided against appellant.
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2017 (10) TMI 452
Works contract service - recipients are municipal corporations and government bodies - appellant claims that they were not liable to tax as the projects executed by them are excluded in the definition of “works contract service” by Explanation (ii)(b) in section 65(105)(zzzza) of Finance Act, 1994 as the recipients are municipal corporations and government bodies - Held that: - much after the issue of the impugned order a finality on the nature and taxability of this much-litigated service has emerged with the decision of the Hon’ble Supreme Court in Commissioner of Service Tax v. Larsen & Toubro Ltd [2015 (8) TMI 749 - SUPREME COURT]. While clarifying that the taxability of ‘works contract service’ arises only after 1st June 2007, the decision also made it amply clear that the activities enumerated therein, to the extent originally listed as separate taxable services in section 65(105) of Finance Act, 1994, were ever intended to be taxed only on providing services simpliciter. Consequently, composite contracts are liable to be taxed only with effect from 1st June 2007 when ‘works contract services’ was legislated into Finance Act, 1994 by express incorporation of section 65(105)(zzzza). In order to ascertain whether the contention of the appellant that their contracts for sewage treatment plant/water treatment plants, would fall within the specifically described components of section 65(105)(zzzzd) of Finance Act, 1994, each of these will have to be scrutinized - appeal allowed by way of remand.
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2017 (10) TMI 451
Rejection of VCES Scheme - case of Revenue is that appellant have not made true Declaration - non-issuance of SCN - Held that: - the Commissioner of Central Excise has the reason to believe that declaration made by the appellant under this scheme is false, therefore, the reasons to be recorded in writing is wrong. Serving the notice to the appellant with regard to such declaration requiring him to show cause why he has not paid or short paid. Section 111 (1) to (2) of the Act further provides no information shall be taken under subsequent after expiry of one year from the date of declaration. In this case, it is an admitted fact that no show cause notice in writing in compliance to section 111 of the Act has been issued to the appellant. Further, the mandate of section 111(2) is that after one year from the expiry of date of declaration, no action shall be taken - Admittedly, as no show cause notice has been issued to the appellant, in that circumstances, the declaration filed by the appellant is required to be accepted. - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 450
GTA service - the transporters did not issue any consignment notes - case of Revenue is that even if no consignment notes were issued for such transportation of goods, still the service will fall under the purview of GTA service for the purpose of levy of service tax - Held that: - in an identical issue, this Tribunal in the case of Nandganj Sihori Sugar Co. Ltd. Vs. CCE, Lucknow [2014 (5) TMI 138 - CESTAT NEW DELHI] has held that in order to fall under the purview of GTA service, requirement of issuance of the consignment note is a mandatory condition and in absence of issuance of consignment note, the transportation activity will not be covered under GTA service - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 449
Reverse Charge Mechanism - IPR service - whether IPR service received by the appellant from the service providers namely M/s. Preesman International BV Netherlands, M/s. Piet Schreurs, De Kwakel BV, Netherlands and M/s. Marhein Rose & Trading Co., Netherland for cultivation and sale of cut flowers under the licence agreement is liable for service tax in the hands of the appellant under reverse charge mechanism? - Held that: - the issue raised for the first time before this bench by the appellant that IPR in the present case does not cover under the definition of IPR service provided under the Finance Act 1994 is indeed question of law which needs consideration - Since this issue was not raised before any of the lower authorities the matter needs to be remanded to the adjudicating authority for reconsideration of the entire case - appeal allowed by way of remand.
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2017 (10) TMI 448
Refund claim - case of appellant is that service tax paid by them for the amount received from ESIC, service tax is not leviable as the said premises is let out to government organisation - time limitation - whether the refund claim filed by the appellant is hit by limitation or otherwise? - Held that: - it is admitted by both sides that appellant is not required to pay service tax on an amount received as rent from ESIC. Appellant seems to have paid the said amount under mistake of law and has correctly filed an application for refund of the same - Ld. Counsel is correct in referring to the decision of Apex Court in the case of ITC Limited [1993 (7) TMI 75 - SUPREME COURT OF INDIA] wherein their Lodships have settled the law, and held that if any amount is paid which was not payable by the party under the provisions of statute but had in fact paid under mistake of law, the party has to write to recover it that there is corresponding legal obligation on the part of the government to refund excess duty so collected as excess collection in such cases will be without authority of law - refund to be allowed - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 447
Condonation of delay in filing appeal - delay of one day in filing the appeals - whether the appeals filed by the appellant before the first appellate authority is hit by limitation or otherwise? - Held that: - As per the provisions of Section 85(3) of the Finance, 1994, an assessee is required to file an appeal against Order-in-Original with the first appellate authority within two months from the date of communication of the said Order-in-Original; can file an appeal before the adjudicating authority with an application for condonation of delay within 30 days on expiry of two months statutory period granted to them. As per the provisions of Section 85(3) of the Finance Act, 1994, the limitation for filing the appeal is within two months starts from 3rd March 2016 and ends on 2.5.2016. Further, condonable period of 30 days is granted to filing the appeal with an application for condonation of delay, which according to the Revenue starts on 3.5.2016, while it is the case of the appellant that the first day i.e., 3.5.2016 has to be excluded and the period of one month for filing an appeal with application for condonation of delay starts from 4.5.2016 and they have filed appeal on 3.6.2016 which is the last day for filing the appeal. Following the ratio of the Tribunal's decision in the case of Kouni Travels Pvt. Ltd. [2009 (9) TMI 208 - CESTAT, BANGALORE], where it was held that the time limit for condoning the delay is to be construed by excluding the first day of the period of 30 days within which the first appellate authority can condone the delay - there is no delay in filing the appeal before the first appellate authority - matter back to the first appellate authority with a direction to restore the appeal to its original number - appeal restored.
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2017 (10) TMI 446
Validity of SCN - time limitation - suppression of facts - the original authority has not given the breakup of the amount confirmed under each category of services and therefore there is no quantification of each service by the department - Held that: - The appellant / assessee has to be put to notice the amount confirmed under each category so that they are able to defend their case in appeal and also to help comply with the order - It has to be said that the entire details for raising the demand has been furnished by appellant. There is no specific fact/act of suppression brought out from records. Though there is general allegation of suppression in the SCN it is not supported by any evidence - appellant succeeds on the ground of limitation - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 445
CENVAT credit - inputs/capital goods - towers, shelters & prefabricated building etc. - Revenue is of the view that the appellants have taken cenvat credit wrongly, as the said items are not covered within the definition of capital goods or inputs - Whether the appellant is entitled to avail cenvat credit of duty paid on towers material, shelters & pre-fabricated buildings etc. or not? - Held that: - As the Larger Bench of this Tribunal in the case of BSNL and others [2016 (3) TMI 165 - CESTAT NEW DELHI (LB)] has held that cenvat credit is not available on the above said items, as they have become immovable property and has affixed to the earth - the appellant is not entitled to avail the cenvat credit on the items in question. Whether in the facts and circumstances of the case, the extended period of limitation is invocable or not? - Whether the penalty is imposable on the appellant or not? - Held that: - on merits, if the issue of availment of cenvat credit was in dispute upto the level of this Tribunal, in that circumstances, the allegation of suppression or concealment on fact/mis-statement is not sustainable - the extended period of limitation is not invocable, therefore, the demands pertaining to the extended period of limitation are set aside - penalties also set aside. Appeal allowed in part.
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2017 (10) TMI 444
Determination of tax liability - First grievance of the appellant is that without considering reconciliation statement filed by appellant being considered ld. Adjudicating Authority, determined the liability arbitrarily - Held that: - revenue should have appreciated the figures submitted by the appellant and made reconciliation to arrive at the appropriate base for taxation. That not being done, an exercise is required to be made by the learned Authority to reach to a rational conclusion to tax the required amount to be taxable - Ld. Adjudicating Authority should determine the liability on the basis of the consideration received, providing taxable service as is corroborated by the invoices. Scrutiny of the reconciliation statement filed by appellant deserves consideration. Appellant shall cooperate with the authority to explain on the reconciliation statement for determination of proper liability - matter is remanded to the Adjudicating Authority to do the needful with the direction above and pass a reasoned and speaking order following due process of justice. Liability of tax in deposit - law requires that it is the receipt or the receivable amount in respect of provision of taxable service is only to be taxe - Held that: - ld. Adjudicating Authority shall scrutinize the receipts of the appellant from the services provided by the appellant and on examination of the materials demonstrating considerations if any received, in respect of provision of taxable service, that shall be the basis to compute the tax liability, following due process of justice. The third grievance of the appellant is that in terms of the agreement the receipts made by appellant were for providing its infrastructure for use. There was no franchisee agreement entered into between the appellant and the service recipient. When the appellant came to know that the service provided in respect of renting of immovable property is taxable, it paid the service tax due to the Government. But Revenue says that the agreement was for franchise service for which appropriate adjudication has been made - There is no ingredient of any franchise agreement when such document is examined. Ld. Authority has extracted in the show cause notice the definition of franchise agreements - Since appellant says that it has discharged the service tax under the category of renting of removable property for the period stated in the show cause notice dated 21/10/2009 that needs verification by ld. Adjudicating Authority. Taxation of reimbursement of staff salary - Held that: - Reading of the adjudication order and the object of the public sector appellant which is engaged in public warehousing it does not appeal that it has been engaged in such activity. Therefore, levy of demand on such allegation is inconceivable. Accordingly, there shall be no demand on this count. Levy of service tax - provision of taxable service under the taxing entry of business support service - Held that: - Since the space was rented out by the appellant for commercial purpose, that was a case of renting of immovable property which became taxable w.e.f 01.06.2007. Tax has been paid from that date. Definition of Business Support Service including provision of infrastructural service was not applicable and therefore service tax was not payable thereon for the impugned period i.e., prior to 01.06.2007. Ld. Adjudicating Authority has to examine such averments of learned Advocate in readjudication proceeding. Appeal allowed in part and part matter on remand.
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2017 (10) TMI 443
Works contract - ‘commercial or industrial construction service’ for the period from August 2004 to June 2007 - primary contention of the appellant is that they are ‘project management consultants’ and are not provider of ‘commercial or construction service - Held that: - Without delving into the claim to be a ‘project management consultant’, we find that that such composite contract are ‘works contract service’ that are taxable only with effect from 1st June 2007 as held by the Hon’ble Supreme Court in Commissioner of Service Tax v. Larsen & Toubro Ltd [2015 (8) TMI 749 - SUPREME COURT] - demand for the period prior to 1st June 2007 cannot survive - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 442
Levy of service tax - Business run by an Individual can be termed as held as "commercial concern" - Security agency service - manpower recruitment or supply service - contention of the appellant is that for most of the relevant period the liability was limited to ‘commercial concern’ which the appellant claimed not to be - Held that: - It would appear that the appellant did bill and had been collecting service tax as applicable. There is, thus, no ground for them to claim that tax liability did not arise - The claim of the appellant that, as an individual operator, the expression ‘commercial concern’ would not apply to them is based on an imperfect understanding of the provisions. A ‘commercial concern’ is one which undertakes any activity with profit motive. The appellant cannot claim to be excluded from such coverage. Accordingly, the appellant is, and was always, liable to tax in the said categories from the very inception - appeal dismissed - decided against appellant.
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2017 (10) TMI 439
Commercial or Industrial Construction service - charitable organization - taxability - case of appellant is that APMC is charitable trust therefore service provided to charitable trust is not for commercial purpose hence the same is not taxable - Held that: - adjudicating authority has not utterred a word as regard the above submission, therefore matter needs to be re-considered by the adjudicating authority particularly on the above submission made by the appellant before the adjudicating authority also before this Tribunal - appeal allowed by way of remand.
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Central Excise
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2017 (10) TMI 441
Issuance of Writ of prohibition - 100% EOU - finished products produced in a 100% EOU, sold in India as the DTA sales - N/N. 2/95-CE dated 04.1.1995, as amended - it is submitted that the finished products produced in a 100% EOU, when sold in India as the DTA sales, the duty amount payable is 50% of the customs duty including other duties like SCD and ACD respectively. The petitioner is stated to have paid a total sum of ₹ 74,35,252/- in terms of N/N. 2/95. The petitioner would state that they are not liable to pay SCD and ACD, which amount to ₹ 41,58,997/- - the petitioner seeks a Writ of Prohibition. Essentially, the petitioner would contend that the impugned show cause notice cannot be allowed to be proceeded further and the difference of levy on goods manufactured in a case of 100% EOU and that of the levy of goods manufactured and cleared by any other unit is significant, as, in the case of 100% EOU, it is on the goods allowed to be cleared and sold in India whereas in other cases, the levy is on the goods manufactured and removed. Held that: - The words 'allowed to be sold' in Clause (ii) of Proviso to Section 3(1) of the Act are relevant in this regard. The petitioner paid appropriate duty on the DTA sales on the goods allowed to be sold and consequently, there cannot be a further levy. Therefore, if the show cause notice is allowed to be proceeded further, it would go contrary to the charging provision namely Section 3 of the Act as applicable to 100% EOU. Scope of SCN - the impugned SCN is sought to be challenged on technical grounds without meeting the allegation as pointed out in the impugned SCN - Held that: - On a reading of the SCN dated 24.4.2002, this Court is of the view that such exercise cannot be done, as the legal position or for that matter the effect of Exemption Notification cannot be applied in the abstract, but are required to be applied to the facts and circumstances of each case. Therefore, however strong the case of the petitioner would be on legal grounds, while examining the applicability of the same, it is essential and necessary to go into the factual matrix. The allegation against the petitioner being one of irregularity in the availment of concession under the DTA sales furnishing inflated export sales, is purely a factual issue, which has to be agitated by the petitioner before the Adjudicating Authority. Whether or not there has been inflation and whether the respondent was justified in arriving at the actual NFEP at 3.95% is correct or otherwise, has to be thrashed out before the Adjudicating Authority. After the factual scenario becomes clear, then only a situation arises for applying the legal principle. Writ of Prohibition cannot be issued to prohibit the respondent from proceeding with the adjudication of the show cause notice dated 24.4.2002 - the writ petition is dismissed as not maintainable/ premature.
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2017 (10) TMI 440
Violation of import conditions - Levy of Excise duty on Sugar - `Export Certificate' issued by `Export Agency' - Rule 5 of the Sugar Export Promotion Rules, 1973 - Held that: - appeals are admitted to decided the question of law.
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2017 (10) TMI 438
Valuation - validity of SCN - demand was paid alongwith interest - Held that: - it is absolutely clear that appellant have not undervalued the goods, initially valuation was arrived at after considering the non levy of the customs duty due to supply in the nature of deemed export. When the World Bank has denied the loan to the PGCIL supply become normal and deemed export benefit was not available. The appellant admittedly on own their ascertainment duty amount of ₹ 23 lacs was paid alongwith interest and intimated to the department. In such case no show cause notice should have been issued in terms of Section 11A(2B) - all ingredient of non issuance of show cause notice such as appellant on their own ascertainment paid duty alongwith interest and intimated to the department. Therefore the appellant have made a fit case to invoke Section 11A(2B). Whether CVD amount should be included in the cost of final product? - Held that: - appellant have availed Cenvat credit in respect of CVD therefore it cannot be said to be a cost of final product - In the case of Dai Ichi Karkaria Ltd [1999 (8) TMI 920 - SUPREME COURT OF INDIA], Hon’ble Supreme Court clearly held that element of excise duty on which Cenvat credit was availed is not includible in the value of the manufactured goods - demand set aside. Appeal allowed in part.
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2017 (10) TMI 437
CENVAT credit - disputed goods were used for manufacture of the capital goods and repair and maintenance of the capital goods - other items were purely used as structural items - present matter is a remand to adjudicating authority - Held that: - the adjudicating authority has not specifically referred to the observations made in the report dated 24.01.2014 that substantial quality of the disputed goods were used for manufacture of capital goods and for repair of capital goods within the factory; and that wherever the disputed goods were used for the purpose, other than of manufacture and repair, the appellant had not availed any Cenvat credit. However, in the remand proceedings also, the adjudicating authority has not dealt with the issue, for which, the matter was specifically remanded to him. The verification report dated 24.01.2014 cannot be discarded at this juncture, inasmuch as the ld. Adjudicating Authority has not specifically addressed the issue and has not based his findings on any additional documents/ records in this context - credit allowed - decided in favor of appellant.
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2017 (10) TMI 436
Redemption fine - seized cash - appeal was filed by the Revenue on 8.9.2016 and copy of the same was served on the respondent. Respondents were required to file cross objection, if any, within 45 days of the receipt of the appeal memo - Held that: - Admittedly, till date, no cross objections have been filed by the respondents. Moreover, on 15.11.2016, the application for condonation of delay filed by the Revenue was considered by this Tribunal and on the said day Ms. Rinky Arora, Advocate appeared on behalf of the respondent and attended the proceedings. In that circumstances, it cannot be said that the appeal papers have not been received by the respondent and they were debarred the opportunity of filing of the cross-objections. Therefore, at this stage, again time is sought to file cross objection which is not permissible. Stay order - no stay order has been granted by the Hon’ble High Court against the order of this Tribunal - Held that: - the same cannot be the reason that as the appeal is pending before the Hon’ble High Court against the order of this Tribunal to set aside the impugned order. Appeal dismissed - decided against Revenue.
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2017 (10) TMI 435
CENVAT credit - job-work - short receipt goods from job worker - Held that: - The short receipt of processed goods is only on account of process loss at the end of the job worker and there is no allegation that either the inputs have been diverted or the processed goods have been diverted. In the absence of those evidence, the Cenvat credit cannot be denied on the differential quantity of inputs and processed goods - similar issue decided in the case of M/s Real Ispat And Power Ltd. Versus Commissioner of Central Excise And Customs, Raipur [2016 (4) TMI 327 - CESTAT NEW DELHI], where it was held that As there is no allegation of diversion of inputs or processed goods, the Cenvat credit taken up by the appellant cannot be denied - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 434
CENVAT credit - returned goods - Rule 16(1) of Central Excise Rules 2002 - case of the Revenue is that as these returned goods have been cleared as such therefore they are required to reverse the Cenvat credit availed on these returned goods under Rule 3(5) of CCR, 2004 - Held that: - those returned goods have been tested by the appellant and found that these are scrap and cannot be reused which have been cleared on payment of duty. It is not the case of the Revenue that these goods have been cleared as such without payment of duty. In that circumstances when returned goods have been tested in their factory and found scrap which has been cleared on payment of duty. Therefore, provisions of Rule 3(5) of Cenvat Credit Rules 2004 are not attracted to the facts of this case. Reliance placed in the case of M/s Tube Products of India Vs. CCE [2015 (12) TMI 1004 - CESTAT CHENNAI], where it was held that such second clearances, as in the instant case, are also covered by the expression ‘any other case’ figuring in the second part of sub-rule (2). It would follow that the duty paid by the appellant on their second clearances of tubes is in order and no additional amount of duty can be demanded from them. The appellant is not required to reverse Cenvat credit equal to availed the Cenvat credit on these returned goods - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 433
Clandestine removal - Cement - corroborative evidences - On the basis of loose slips and corresponding statements recorded duly investigation and cash seized from the residential premises, it was alleged that the appellants have clandestinely removed huge quantity of cement without payment of duty - Held that: - adjudicating authority has not considered all the facts and merely held that as the maximum capacity of production 33.600 MTs and presumed that the cement has been manufactured by the appellant during Feb. 2006 to December 2006 and cleared during on 1.1.2007 to 26.3.2007. The said allegation is not sustainable on the basis of stocks taken by the department during the course of investigation on various dates - on the basis of the investigation conducted by the DGCEI in the impugned case, the matter was reported to the Sales Tax department who also investigated and the case against the appellant has been dropped - demands on the basis of loose slips pertaining to the period 1.1.2007 to 26.3.2007 is not sustainable against the appellant in the absence of any corroborative/concurrent evidence - demand set aside. Appeal allowed - decided in favor of appellant.
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2017 (10) TMI 432
Refund claim - excess payment of Excise Duty - time limitation - unjust enrichment - Held that: - it is clear that as against the final refund claim of ₹ 26,23,859/- receivable amount shown in the balance sheet is ₹ 35,55,102.50 which is more than the refund claim amount, therefore it is clear that amount of refund claims stands booked as receivable in the balance sheet. Therefore merely because the refund amount has been varied as compared to the original amount, it cannot said that refund amount is not included in the total receivable amount shown in the balance sheet - I do not agree with the Ld. Commissioner's view that C.A. certificate is additional evidence. C.A. certificate is not new evidence whereas it is extract of the amount of receivable shown in the balance sheet therefore the data which was appearing in the balance sheet is same which was produced before the adjudicating authority. The same was the basis of C.A. certificate therefore C.A. certificate could not have been rejected by the Ld. Commissioner(Appeals). The Adjudicating authority has analysed the entire issue on unjust enrichment and verified balance sheet for the purpose of unjust enrichment and thereafter concluded that the amount of refund has been shown as receivable in the balance sheet and on that basis it was held that appellant have not been unjustly enriched - refund allowed - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 431
Principles of Natural Justice - Valuation - dummy units - the appellants specifically sought cross examination of the witnesses and argued that in terms of section 9D of the CEA, 1944, the statement of witnesses cannot be relied upon - Held that: - the adjudication order has been passed in violation of procedure laid down in section 9D of the Central Excise Act, 1944. Therefore, the matter needs examination in terms of procedures laid down in Section 9D of the Act - appeal allowed by way of remand.
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2017 (10) TMI 430
Refund claim - denial on the ground that refund claim u/r 5 of CCR, 2004 should have been filed on monthly basis whereas respondent filed the refund claim on quarterly basis - Held that: - overall time period of one year is provided for filing of refund in terms of Section 11B - The appellant have filed refund claim within one year. As regard the dispute whether it should be filed on monthly or quarterly basis, it is facility provided to the assessee even if the assesse has not opted for such facility of filing refund on monthly basis, the same cannot be reason for rejecting refund claim - reliance placed in the case of Commissioner of Central Excise & Customs, Nagpur I Versus Fabrimax Engineering Pvt. Ltd. [2016 (7) TMI 498 - CESTAT MUMBAI], where it was held that N/N. 27/2012 contemplates for filing of refund claims of unutilised Cenvat credit quarterly, but it does not bar an assessee from filing refund claim for the entire period which may be more than a quarter - matter remanded to the adjudicating authority who shall pass a fresh order after re-processing refund claim within a period of three months - appeal allowed by way of remand.
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2017 (10) TMI 429
CENVAT credit - by product “Spent Sulphuric Acid” emerging in the manufacturing process of ‘Linear Alkyl Benzene Sulphonic Acid(LABSA) - N/N. 06/2002-CE dated 01.03.2002 - Held that: - similar issue decided in the case of M/s. Advance Detergents Ltd. Versus CCE, Puducherry [2017 (3) TMI 550 - CESTAT CHENNAI], where it was held that spent sulphuric acid not being final product, the appellant cannot be denied of the CENVAT credit available to it on the input used to manufacture LABSA. Mere emergence of spent sulphuric acid does not debar the appellant to this benefit - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (10) TMI 428
Levy of sales tax - Tobacco - there is a conflict between the Kothari Products [2000 (1) TMI 823 - SUPREME COURT OF INDIA] line of judgments and the Agra Belting Works [1987 (4) TMI 82 - SUPREME COURT OF INDIA] line of judgments, together with the aforesaid conundrum insofar as the doctrine of precedent qua this Court is concerned - Held that: - the Hon ble Chief Justice of India is requested to constitute an appropriate Bench in order to decide as to whether the Kothari Products [2000 (1) TMI 823 - SUPREME COURT OF INDIA] line or the Agra Belting Works [1987 (4) TMI 82 - SUPREME COURT OF INDIA] line is correct in law and other associated issues - matter referred to the Larger Bench.
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2017 (10) TMI 427
Cancellation of registrations - TNVAT Act - The Joint Commissioner hold that the second respondent Mr.Nirmal Kumar Bohra, has obtained registration showing himself as proprietor of M/s.B.S.Silver Emporium by submitting manipulated documents to the office of the Assistant Commissioner, Peddunaickenpet Assessment Circle - Held that: - the petitioner has not been afforded an opportunity to putforth their contentions. Infact, copy of the impugned order has not been communicated to the petitioner and he has obtained the same under the Right to Information Act. The first respondent has set aside the order passed by the Joint Commissioner (CT), Chennai North Division, dated 19.11.2015 - The cancellation of the registration by the Assistant Commissioner was at the instance of the petitioner herein. When the Joint Commissioner heard R.P.No.69 of 2015, she had issued notice to the petitioner herein, heard the second respondent and the petitioner herein and by a detailed and speaking order, dismissed the Revision Petition. Copy of the order, dated 19.11.2015, in R.P.No.69 of 2015, has been communicated to the petitioner. Challenging the said order dated 19.11.2015, further revision was filed by the second respondent before the first respondent. Thus, the elementary principle that should have been followed by the first respondent is to issue notice to the second respondent,(the revision petitioner) as well as the petitioner herein, who is a proper and necessary party to the proceedings. The matter is to be remanded to the first respondent for fresh consideration, then the registration certificate issued to the second respondent should not be cancelled in the interregnum - petition allowed by way of remand.
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2017 (10) TMI 426
Classification of goods - levy of sales tax - Brake Fluid - The petitioner's contention is that Brake Fluid cannot be categorized as Lubricant and therefore, Sales Tax / Commercial Tax cannot be charged by treating as a Lubricant - whether the tax can be charged in respect of Brake Fluid by treating it under Entry No.9 Part-III of Schedule-II which prescribes the rate of tax in respect of description of goods as Lubricant @ 15% or tax has to be charged by treating the Brake Fluid under the residuary entry being Entry No.1 of Part-VII of Schedule-II which is @ 8%? Held that: - Brake Fluid is a different kind of liquid altogether which is never used for the purpose of lubrication. Earlier the braking system in vehicles used to be mechanical braking system, like the braking system which we have in bicycle and the moment the pressure is applied to liver of the brake, it is transmitted mechanically to the brake pads which were fixed to the wheel of the vehicle as they are fixed at the wheel of the bicycle - With passage of time Hydraulic Brake System came into existence and the Brake Fluid was introduced. The Brake Fluid perform the same job which was being performed by the mechanical system and it transfers the force on the brake pads fixed on the brake drums (Brake Shoe). It is not at all lubricating either the brake or any part which is under the braking system. Today we have pressure brake also which exclusively work on air pressure and if the logic canvassed by the State Government is considered then the State Government will charge Sales Tax on air also as lubricants because air is again being used in braking system in some of the modern age braking system. Reliance placed in the case of Commissioner, Trade Tax, U. P., Lucknow Vs. H. C. S. Comnet System Ltd. [2014 (1) TMI 1648 - ALLAHABAD HIGH COURT], where the Allahabad High Court was dealing with an issue relating to VSAT and the issue before the Court was whether VSAT (Very Small Aperture Terminals) and Satellite Receiver can be treated as one entry or the two item separately - The High Court has held that The functioning of “VSAT” and “Satellite receiver” is different, their actual use is different, they are differently known by the people who deal therein, and work differently. It would not be correct to treat a “VSAT” as a “satellite receiver”, so as to attract tax-ability under entry 75(i) of Notification dated January 29, 2000 issued under section 3A(1)(d) of the U. P. Trade Tax Act, 1948. Since it is not separately mentioned in entry 75(i) and 75(ii), it would be covered by entry 75(iii), being an item of electronic goods, not covered by any other item in entry 75 and would be taxable under entry 75(iii). By no stretch of imagination, Brake Fluid and Lubricant can be treated as under one entry - petition allowed - decided in favor of petitioner.
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2017 (10) TMI 425
Omission by respondent No. 2 to look into the requests made by the petitioners respectively on 24.08.2012, 21.02.2013, 18.09.2013, 18.03.2014 and one application dated 07.02.2015 - petitioner pray that before proceeding further with the proceedings for assessment in terms of notice dated 06.06.2012, these applications moved by them must be decided - Held that: - the stance of the petitioners in their letters to the respondents and this state of affairs, therefore, clearly show that the burden is upon the petitioners to demonstrate that they are not dealers and, therefore, action under Section 23(4) of the 2002 Act cannot be taken against them. They have to demonstrate that sales invoices are not genuine - The material on record, therefore, is sufficient to empower the respondents to proceed against the petitioners. They have given sufficient opportunity to the petitioners and the petitioners have continued to claim that their bankers were not giving details or then burden was upon the respondents to establish that the petitioners were dealers. The grievance made in the present writ petition is misconceived and erroneous - petition dismissed - decided against petitioner.
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Indian Laws
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2017 (10) TMI 458
Acquittal of accused under Section 138 of the Negotiable Instruments Act - Held that:- It cannot be said that the accused issued the cheques (Exh.14 to Exh.17) on the given dates to the complainant towards discharge of debt or liability on him. It is, therefore, clear that those cheques were not issued by the accused, in accordance with the provisions under Section 138 of the Negotiable Instruments Act. Section 138 of the Negotiable Instruments Act. In the instant case, the cheques were issued towards security and guarantee and those cheques were not issued for discharge of debt or liability of the accused. Thus, the provisions under Section 138 of the Negotiable Instruments Act are not attracted. The learned trial Judge has rightly acquitted the accused under Section 138 of the Negotiable Instruments Act.
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2017 (10) TMI 457
Dishonour of cheque - Maintainability of complaint u/s 138 of NI Act - whether petitioner is not a signatory to the cheque and that she being a nominal director is in no way connected with the day today affairs of the company - Held that:- In the complaint other than the cause title depicting the petitioner as director and impleading her as the third accused no other averment has been made that she is a person who at the time of the commission of the offencce was incharge of and was responsible to the company for the conduct of the company as well as the company. As per the dictum laid down in S.M.S.Pharmaceuticals Ltd., vs. Neeta Bhalla [2005 (9) TMI 304 - SUPREME COURT OF INDIA ] that absolutely when there is no averment in the complaint that the petitioner was in charge and responsible for the day to day affairs of the company, the essential requirements under Section 141 of the N.I Act, is not satisfied. Excepting the oral submissions raised by the counsel for the respondent at the time of the arguments before this court that the petitioner is the wife of the second accused who is the Managing Director and that she is also involved in the day to day affairs of the business no other averment has been made against her in the complaint. In view of Section 141 when there is no averment against the petitioner the proceedings against the petitioner is an abuse of process of law and is liable to be quashed. In the result, this Criminal Original Petition is allowed and the complaint as against the petitioner alone is quashed.
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