TMI Tax Updates - e-Newsletter
October 15, 2016

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. TAX RETURN PREPARER UNDER MODEL ‘GST’ LAW

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Index Numbers of Wholesale Price in India (Base: 2004-05=100) Review for the month of September, 2016

2. 2nd Meeting of Heads of BIRCS ECAs

3. RBI Reference Rate for US $

Notifications

Customs

1. 126/2016 - dated 14-10-2016 - Cus (NT)

Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver- Reg

VAT - Delhi

2. F.3(14)/Fin(Rev-I)2012-13/DSVI/334 - dated 7-10-2016 - DVAT

Appointment of Assistant VATO

Circulars / Instructions / Orders

Income Tax

1. 11/2016 - dated 13-10-2016

The Income Declaration Scheme, 2016 – reg.

Customs

2. 107/2016 - dated 12-9-2016

Examination/lnspection of goods under import without Delivery Order—reg.

3. 73/2016 - dated 26-7-2016

Procedure to be followed by existing licencees for application of New Warehousing Bond Licences under Section 57/Section 58/Section 58A of the Customs Act, 1962, pursuant to the enactment of the Finance Bill, 2016–reg.

4. 74/2016 - dated 26-7-2016

Carriage of coastal cargo from one Indian Port to another Port in vessels carrying out coastal runs-reg.

5. 19/2016 - dated 26-7-2016

Routing of export goods from CFSs of Kandla Sea Port through Mundra Sea Port-M/r.

Highlights / Catch Notes

Income Tax

• Reasonable Cause Can Prevent Penalty for Delayed Filing Under Notice Section 153A, Affects Penalty u/s 271F.

  Case-Laws - HC : If a cause was found to be reasonable and for non-filing of return immediately in response to notice u/s 153A, such cause can also be construed as a reasonable cause, while considering as to whether penalty has to be levied u/s 271F - HC
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• Jobbing Transactions Not Speculative u/s 43(5) Proviso (c) of the Income Tax Act.

  Case-Laws - HC : Speculative loss - Jobbing transactions in the present facts would not be covered by the definition of speculative transaction in view of Section 43(5) proviso (c) of the Act. - HC
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• Tribunal Clarifies Bifurcation of Abated and Unabated Assessments u/s 153A of Income Tax Act.

  Case-Laws - AT : Assessments framed u/s 153A - bifurcation of abated and unabated assessments - Tribunal explains the provisions and intention of the legislatures - AT
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• Fees for 'settlement and custody' to NSDL/CDSL not subject to Section 194J TDS as they aren't 'technical services.'.

  Case-Laws - AT : TDS u/s 194J - ‘settlement and custody’ fees paid to NSDL/CDSL are not covered by the provisions of Section 194J, as they cannot be considered as ‘technical services’. Consequently, there can not be any disallowance on the reason that TDS was not made, u/s 40(a)(ia) - AT
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• Taxpayer Avoids Penalty by Declaring Surrendered Income Pre-Notice; Accepted by Assessing Officer u/s 271(1)(c.

  Case-Laws - AT : Penalty under Section 271(1)(c) - assessee made surrender immediately after search and before issuance of any notice and had declared the surrendered income in the returns of income accepted by the Assessing Officer - No penalty - AT
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• Shares' Value Drop Taxed on Real Income Using Consistent Accounting by Taxpayer in Case.

  Case-Laws - AT : Diminution of value of shares - the amount that is to be taxed is the real income which is to be deducted on the basis of the accounting system regularly maintained by the assessee and that was done by the assessee in the present case - AT
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• Depreciation Allowed on Asset with Partial Payment if Liability is Recorded in Accounts.

  Case-Laws - AT : Eligibility for depreciation - part payment made for the acquisition of asset - Once the corresponding liability in the accounts has been shown, then depreciation on the asset should be given irrespective of the fact that this year only part payment was made for the acquisition of that asset - AT
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• Unilateral Liability Remission Not Taxable if Event Didn't Occur in Current Year u/s 41(1)(a.

  Case-Laws - AT : Addition u/s 41(1)(a) - unilateral remission of liability - even where the assessee has obtained the benefit by way of remission of its trade liability, the same cannot be brought to tax during the year under consideration as the event of remission has not happened during the year - AT
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• Income Declaration Scheme 2016: Declare Undisclosed Income, Pay 45% Tax, Enjoy Immunity from Prosecution. Limited Time Offer.

  Circulars : The Income Declaration Scheme, 2016 – reg. - Order-Instruction
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Customs

• Anti-Dumping Duty on Carbon Black in Rubber Valid When Authority Follows Statutory Principles; Grievances Not Grounds for Challenge.

  Case-Laws - AT : Quantification of ADD - carbon black used in rubber applications - When the DA is following the statutory principles, the same cannot be faulted on the ground of perceived grievance.
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Service Tax

• Cenvat Credit Allowed for Peripheral Services if Used in Export Deliveries.

  Case-Laws - AT : Cenvat Credit - Any service cannot be disqualified on the basis that the same has only peripheral connection with the output service as long as it is proven the same has been used in providing export services.- AT
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Central Excise

• SSI Exemption Granted: Respondent Not Using Another's Brand Name Under Notification No. 8/2001-CE.

  Case-Laws - AT : SSI Exemption - whether after assignment agreement in respect of brand name, it can be inferred that the respondent is using the brand name of another person and accordingly not entitled for the S.S.I. exemption Notification No. 8/2001-CE - Held No - Benefit of exemption allowed - AT
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• Cenvat Credit Eligibility Confirmed for Structural Items Used in Support Structures u/r 2(a) of Cenvat Credit Rules.

  Case-Laws - AT : Cenvat credit - railway tracks are embedded to earth - the structural items used in the fabrication of support structures would fall within the ambit of Capital Goods as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit. - AT
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• SSI Exemption Upheld: No Financial Flowback or Mutual Interest; Units Can't Be Combined for Central Excise Taxation.

  Case-Laws - AT : SSI Exemption - dummy units - There is no financial flow back and there is no mutuality of interest between the units. Therefore, all the four units cannot be clubbed together - AT
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• WCL Rightly Availed CENVAT Credit on Inputs Before Exemption Certificate Production by M/s GMADA, Says Tribunal Decision.

  Case-Laws - AT : WCL availed CENVAT credit on the inputs for manufacturing of their final product before production of exemption certificate by M/s GMADA, the appellant has rightly availed CENVAT credit on inputs - AT
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• Exemption Allowed for Indirect Supplies to UNICEF-Financed Project Under Notification No.108/95-CE Dated 28.08.1995.

  Case-Laws - AT : Exemption Notification No.108/95-CE dated 28.08.1995 - goods not supplied directly to UNICEF but were supplied to project assisted and Financed by UNICEF - benefit of exemption allowed - AT
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Case Laws:

• Income Tax

• 2016 (10) TMI 506
  Condonation of delay - Held that:- Delay in filing the special leave petition is condoned. We do not see any reason to interfere with the impugned order, because in our opinion the High Court was right when it dismissed the petition on the ground of delay as there was no justifiable reason for the delay. The special leave petition is, accordingly, dismissed.

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• 2016 (10) TMI 505
  Deduction under Section 80-O - whether deduction was not allowed on the gross receipts but only on that part of receipts which form part of the total income of the assessee? - Held that:- On reading the statement of case, it is noted that it records that for the earlier Assessment Year, i.e. A. Y. 1982-83, adjustment of expenses should be limited only to the items that have nexus to the earning of the income and restored the issue to the Assessing Officer to determine the same. Notwithstanding the above findings/ directions, the Applicant-Assessee filed a Reference being Reference No.5 of 2000. This on the basis that Section 80AB of the Act would not be applicable for the purpose of computing deduction under Section 80-O of the Act. In the subject Assessment Year, the statement of case does not state that expenses were allocated in a prorata manner without any nexus. This for the reason that according to the Applicant, it is entitled to deduction on gross basis without being governed by Section 80AB of the Act. (Please see the emphasized portion of statement of case). In any case, the present Reference has been made in view of the Reference made for the Assessment Year 1982-83 and only with a view to maintain consistency. The attempt on the part of the Applicant-Assessee is to enlarge the scope of the question which has been referred to us for our opinion by the Tribunal. The issue which has been referred to us for our opinion, is not with regard to allocation of expenditure on a prorata basis but the issue is whether deduction has to be allowed on the basis of the gross receipts or on that part of the receipts which form part of total income of the Applicant-Assessee, i.e. on application of Section 80AB of the Act. - Decided in favour of assessee.

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• 2016 (10) TMI 504
  Forum for redressal of grievance - Held that:- Public policy demands that a person has right to choose the forum for redressal of his grievance, but he cannot be permitted to choose two forums in respect of the same subject matter for the same relief. It yet needs to be clarified that the writ Court may exercise its discretionary jurisdiction even if the parties approached other forum. There must be extraordinary situation or circumstance, which may warrant different approach, particularly, where the orders passed by the Court are sought to be violated or thwarted with impunity. The Court cannot be a silent spectator in such extraordinary situation. (Ref: Awadh Bihari Yadav and others versus State of Bihar and others, (1995 (8) TMI 320 - SUPREME COURT)). However, this is not the fact situation obtaining in the instant case. What to talk of an extraordinary situation or circumstance, the petitioner firm has not even disclosed about the pendency of the appeal in its writ petition and the same only finds mention in the list of dates appended therewith. There being no extraordinary situation or circumstance warranting this Court to step-in to interfere, we are clearly of the view that the instant writ petition is not maintainable. The petitioner firm having chosen to avail of the remedy, as provided in the statute that too earlier to the filing of the instant petition, cannot maintain this petition and the same is accordingly dismissed, leaving the parties to bear their own costs. Pending application, if any, also stands disposed of. However, before parting, it may be necessary to observe that anything stated in the judgment shall not be construed to be an expression of opinion on the merits of the case and the appellate authority shall proceed to decide the appeal uninfluenced by any observations that may be contained hereinabove.

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• 2016 (10) TMI 503
  Benefit of deduction under Section 80IB - Held that:- In the present case, the Revenue does not dispute the entitlement of respondent assessee to the benefit of deduction under Section 80IB of the Act. In the result, even if, the stand of the Revenue is accepted in this case and the expenditure claimed is disallowed for not having deducted tax at source, the only result would be that the disallowed expenditure would be added to the total income of the respondent assessee. However, this additional income (arising on disallowance of expenditure) undisputedly would also be entitled to 100% deduction from tax under Section 80IB(10) of the Act.

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• 2016 (10) TMI 502
  Penalty u/s 271F - non-filing of return immediately in response to notice under Section 153A - Held that:- The fact that the petitioner has not filed the return of income was well within the knowledge of the first respondent, even at the time, when notice under Section 153A of the Act was issued. It is not as if, immediately thereafter, proceedings under Section 271F were initiated, but in the interregnum, the petitioner's representation dated 19.05.2015, was taken note of. The first respondent records in her order that in the representation, it was specifically stated that they could not file their return due to ill-health and consequent surgery. That apart, the first respondent records that there is a request for furnishing the photocopies of the documents, which were seized/impounded during the search. This request made by the petitioner's/husband's letter dated 19.05.2015, was complied with on 02.06.2015. Thus, the fact that the petitioner could not file return of income for reasons given in the representation dated 19.05.2015, was found to be acceptable by the first respondent, and there is no finding that the representation is false, while entertaining the request for furnishing the photostat copies of the seized/impounded documents. Therefore, if for such purpose, the cause pleaded by the petitioner was found to be reasonable and consequently their plea that they were unable to file return of income due to certain factors, this yardstick can also be made applicable and extended while considering a proposal to levy penalty under Section 271F. Therefore, if a cause was found to be reasonable and for non-filing of return immediately in response to notice under Section 153A, this Court finds that such cause can also be construed as a reasonable cause, while considering as to whether penalty has to be levied under Section 271F. Therefore, the cause expressed by the petitioner is found to be a reasonable cause and the explanation merits acceptance. With regard to the other allegations made by the petitioner as against the officer in her personal capacity, does not merit acceptance, as it appears to be vague allegation, in any event those allegations are not germane for deciding the legal issue in the instant case. Therefore, all such allegations stand eschewed. The other issue pointed out by the learned Senior counsel for the petitioner is that the counter affidavit has not been sworn to by the first respondent. In the first paragraph of the counter affidavit, the officer has clearly stated that she is the jurisdictional Assessing Officer of the petitioner and it is fairly admitted in the title to the counter, it has been wrongly mentioned as counter of the first respondent, when it should have been mentioned as counter affidavit on behalf of the first respondent and this appears to be a bonafide mistake, the explanation offered by the learned counsel for the Revenue is acceptable. Writ Petition is allowed and the impugned orders levying penalty under Section 271F, for all the assessment years, are set aside - Decided in favour of assessee.

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• 2016 (10) TMI 501
  Transfer pricing adjustment - determine the profitability of the concerned comparable - Held that:- On a comparison with the data available and made available, undoubtedly, the object of the statute is to “pull in transactions which otherwise escaped the radar of tax assessment under one head or the other. The transfer pricing methodology – shorn of its details is an attempt by each nation to locate the incidents of income which would be subjected to levy within its jurisdiction where international transactions are involved. This exercise does not compare with other income assessments where the methodology adopted in their domestic jurisdiction will differ”. The TNMM method depends on accurate data with respect to all the three elements – wherever they apply. In the Comparable Uncontrolled Price (CUP) method - which is premised upon the elements in Rule 10B(1)(a), the methodology adopted is the price charged or paid for property transfer or services provided in the Comparable Uncontrolled transaction. Therefore, the nature of the transaction and the appropriate filter determines the elements that are to be considered in TNMM. Therefore, the costs, sales and assets employed wherever relevant are to be applied. From this perspective, the revenue’s contention that segmental data was available, cannot be accepted. The mere availability of proportion of the turnover allocable for software product sales per se cannot lead to an assumption that segmental data for relevant facts was available to determine the profitability of the concerned comparable.

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• 2016 (10) TMI 500
  Activity of jobbing entered into - whether is not a speculative transaction within the meaning of Section 43(5)(c) of the Act? - Held that:- In view of the clear provision as found in Section 43(5) proviso (c) of the Act, the jobbing activity done to guard against business loss could not be considered as a speculative transaction. Thus loss on account of Rs. 60.37 lakhs claimed by the Respondent Assessee was allowed to be set off against business profits. We find that there is no dispute between the parties that the transactions entered into by the Respondent Assessee are in fact jobbing transactions. The provisions of Section 43(5) proviso (c) of the Act are very clear in excluding jobbing activity done to guard against loss from the ambit of speculative loss. It is a self-evident position on reading of Section 43(5) proviso (c) of the Act. Therefore jobbing transactions in the present facts would not be covered by the definition of speculative transaction in view of Section 43(5) proviso (c) of the Act. No substantial question of law

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• 2016 (10) TMI 499
  Penalty u/s. 271(1)(c) - assessee failure to submit accurate particulars of the income - Tribunal quashed the penalty observing that when the return of income was accepted as it is, there was no question of thereafter, imposing the penalty - Held that:- The assessee itself was never subjected to search or survey, Revenue could also have relied on explanation 5 or 5A as the case may be of section 271 to levy penalty. Even though the income has been disclosed in the return filed subsequently, section 271(1)(c) would permit the Assessing Officer to levy penalty equal to or not exceeding three times the amount of tax sought to be evaded by reason of concealment of particulars of income or furnishing of inaccurate particulars of such income. In the present case, when the assessee had declared certain income which was accepted by the Assessing Officer, it would not be even the case of the Revenue that any income was sought to be evaded. The Tribunal therefore, in the facts of the case, committed no error. - Decided against revenue.

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• 2016 (10) TMI 498
  Unexplained cash credit u/s 68 - assessments framed u/s 153A - bifurcation of abated and unabated assessments - non incriminating material found during the course of search - Held that:- We find that the provisions of section 132 of the Act relied upon by the ld DR would be relevant only for the purpose of conducting the search action and initiating proceedings u/s 153A of the Act. Once the proceedings u/s 153A of the Act are initiated, which are special proceedings, the legislature in its wisdom bifurcates differential treatments for abated assessments and unabated assessments. At the cost of repetition, we state that in respect of abated assessments (i.e pending proceedings on the date of search) , fresh assessments are to be framed by the ld AO u/s 153A of the Act which would have a bearing on the determination of total income by considering all the aspects, wherein the existence of incriminating materials does not have any relevance. However, in respect of unabated assessments, the legislature had conferred powers on the ld AO to just follow the assessments already concluded unless there is an incriminating material found in the search to disturb the said concluded assessment. In our considered opinion, this would be the correct understanding of the provisions of section 153A of the Act , as otherwise, the necessity of bifurcation of abated and unabated assessments in section 153A of the Act would become redundant and would lose its relevance. Hence the arguments advanced by the ld DR in this regard deserves to be dismissed. In view of the aforesaid findings we hold that the additions towards share application monies in the sums of Rs. 20,00,000/- and Rs. 72,00,000/- for the Asst Years 2008-09 and 2009-10 respectively , which were unabated / concluded assessments, on the date of search, deserves to be undisturbed in the absence of any incriminating material found in the course of search. Hence we hold that the ld AO ought to have only followed the old assessed income either u/s 143(3) or 143(1) of the Act for the relevant years. Since the issues are addressed on preliminary ground of absence of incriminating materials, we refrain to give our findings on the merits of the additions made towards share application money. Accordingly the grounds raised by the assessee are allowed. - Decided in favour of assessee

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• 2016 (10) TMI 497
  Deduction under section 80IA(4) - eligibility - whether the Cargo facility being operated and maintained by the assessee is an ‘infrastructure facility’ within the meaning of section 80IA(4) of the Act? - Held that:- Under the Explanation to section 80IA(4), the definition of ‘infrastructure facility’ includes airport within its scope and the cargo facility is an integral part of the airport. The Coordinate Bench of this Tribunal at Bangalore in the case of Menzies Aviation Bobba (Bangalore) Pvt. Ltd (2015 (11) TMI 401 - ITAT BANGALORE ) has held the ‘cargo facility’ to be infrastructure facility eligible for deduction u/s 80IA(4) of the Act. Further, it is seen that GHIAL has constructed the Cargo building as per the specification of the Menzies and Menzies has provided the facilities at the cargo building and while GHIAL has leased out the cargo terminal to the assessee, Menzies has leased the facilities to the assessee and it is the responsibility of the assessee to operate and maintain the cargo facility in accordance with the obligation of GHIAL to operate and maintain the facility by virtue of the concession granted by the Govt. of India. Each assessee is eligible to claim deduction u/s 80IA(4)(i) of the Act only in relation to the activity carried on by it and there cannot be any duplication of the claim. Therefore, we are of the opinion that the ‘Cargo facility’ operated and maintained by the assessee is infrastructure facility eligible for deduction u/s 80IA(4) of the Act. Assessee has not entered into any agreement with the Central Govt., or State Govt. or local authority or a statutory body as provided u/s 80IA(4) - Held that:- The assessee has applied to the Government of India, Ministry of Civil Aviation for registration as a Regulated Agent for handling the Cargo facilities at Hyderabad International Airport and vide letter dated 24.11.2008, the assessee was granted the registration while GHIAL has granted the assessee the right to handle the Cargo facilities by virtue of the agreement. The assessee’s contention is that the assessee has been recognized also as a ‘Service Provider Right Holder’ as stipulated under the Concession Agreement itself and that further that the Government has recognized the assessee as ‘a Regulated Agent’ and therefore, the decision of the Hon’ble Madras High Court in the case of CIT, Chennai vs. AL Logistics (P) Ltd.[2015 (1) TMI 401 - MADRAS HIGH COURT] is applicable to the assessee and the assessee’s contention that since the assessee has been given approval by the Ministry of Civil Aviation, it is not necessary to enter into a specific and independent agreement with the Government for claiming deduction under section 80IA of the Act, has to be accepted. - Decided in favour of assessee

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• 2016 (10) TMI 496
  TDS u/s 194J - TDS on ‘settlement and custody’ fees paid to NSDL/CDSL - human intervention - Held that:- There is no human element and services are fully automated. Moreover, there is no exclusivity and the NSDL/CDSL renders service to many other clients. Since the facts are similar to the facts in the case of Kotak Securities Ltd [2016 (3) TMI 1026 - SUPREME COURT ], we are of the opinion that ‘settlement and custody’ fees paid to NSDL/CDSL are not covered by the provisions of Section 194J, as they cannot be considered as ‘technical services’. Consequently, there can not be any disallowance on the reason that TDS was not made, u/s 40(a)(ia). Moreover, these companies have also treated these amounts as ‘incomes’ and offered to tax. The amendment brought to provisions of Section 40(a)(ia) do apply to the facts as well. In view of these reasons the disallowance made u/s. 40(a)(ia) is hereby deleted. - Decided in favour of assessee

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• 2016 (10) TMI 495
  Unaccounted purchases - addition made by Assessing Officer from M/s Konked International which was not verified u/s. 133(6) - AO has made the addition on the ground that inspector could not trace the address of the party M/s KI and notice issued u/s. 133(6) of the Act was returned un-served - Held that:- the payment was made by assessee through account payee cheque and that party was duly registered with Sales Tax Departments of Govt. of West Bengal. There was also no defect in the books of account of assessee. Therefore, we do not find any reason to interfere in the order of Ld. CIT(A) in granting relief to assessee Addition on account of outstanding liability in respect of M/s Bhart Somani - Held that:- AO has made the addition on account of non-existence of the party however payment was made through account payee cheque, so the identity of the party cannot be doubted. Therefore, we do not find any reason to interfere in the order of Ld. CIT(A) and we also rely in the judgment of Hon'ble jurisdictional High Court in the case of Diagnostics vs. CIT & ANR (2011 (3) TMI 15 - CALCUTTA HIGH COURT ). TDS u/s 194C - Non-deduction of TDS on transport charges - Held that:- At the outset we find that the provisions of section 194C of the Act were made applicable to the individual assessee w.e.f. 1.6.2007 and it is admitted position that the matter relates to the assessment year 2006-07. Therefore in our considered view the assessee in the instant case was not liable to deduct TDS and accordingly there is no default for non-deduction of TDS. Bogus purchases - Held that:- We find that AO has made the addition on the ground that there was bogus purchase in the books of the assessee. However the ld. CIT(A) deleted the same by observing that the all the transactions are genuine. From the facts we find that the lower authorities have not brought anything on record about the payment claimed by the assessee to the party. The payment was made through account payee cheque. The lower authorities have not confronted the reply received from the party under section 133(6) of the Act to the assessee. There was no defect in the bills of the purchases of the party. The ld. CIT(A) has given clear finding that the payment to the P. Beriwal has been made as authorized by the party M/s SE. The ld. DR has not brought anything on record contrary to the findings of ld. CIT(A). Hence we do not find any reasons to interfere in the order of ld. CIT(A). Hence this ground of revenue’s appeal is dismissed. Addition on account of excess liability shown in the respect of ESS Refilling Station - AO has made the addition on account of the difference in the balance shown by the assessee and the party - Held that:- The excess balance shown by the assessee in its books of accounts is balance sheet item and it has corresponding effect in the form of purchases which was shown in the profit & loss account of the assessee. In the instant case the AO has not brought any defect in the amount of purchases shown by the assessee in relation to the excess balance of the party. Therefore in our considered view the AO should have disallowed the amount of the purchases corresponding to the excess balance shown by the assessee. In the instant case before us the AO has admitted all the purchases as genuine in relation to the excess balance shown by the assessee for Rs. 90752.00. The AO has not taken into account the opening balance as shown by the assessee. All the transactions took place during the year are matching with the confirmation of the party as received in response to the notice issued under section 133(6) of the Act. The learned DR has not brought anything on record contrary to the finding of ld. CIT(A). We also find that the confirmation received by the AO in response to notice under section 133(6) of the Act have not been confronted to the assessee. In view of above we find no reason to interfere in the order of learned CIT(A). Hence this ground of appeal of the Revenue is dismissed. Short deduction of TDS under section 194-I viz a viz 40(a)(ia) - whether the expenses claimed by the assessee are allowable deduction though the TDS on such expenses has been deducted at the lower rate? - Held that:-From the provisions of section 40(a)(ia) of the Act we find that it requires deduction of tax and deposit of tax in Government account. The provisions of section are silent to treat the assessee as defaulted in case of short deduction of TDS. Therefore, in our considered view of the action of AO for making the disallowance deserves to be deleted Decided in favour of assessee

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• 2016 (10) TMI 494
  GP determination - low in the G.P. rates - estimation of purchases - Held that:- It is seen that the learned CIT(A) noticed that in respect of these transactions, i.e. purchases of Rs. 70,60,756/- the assessee had shown G.P. of 0.68% on sale of items purchased from M/s. Crystal Enterprises and G.P. of 1.19% on sale of items purchased from M/s. Induja Traders Pvt. Ltd. Stating that, inter alia, the assessee had not given his overall G.P. ratio, the learned CIT(A) proceeded to hold, on estimate, that 25% of the purchases amounting to Rs. 70,60,756/- i.e. R.17,65,189/- is to be brought to tax in assessee’s hands. We find that this averment of the learned CIT(A) to be factually incorrect. In our view, when the G.P. of the assessee from A.Y. 2008-09 to 2010- 11 hovered between 1.11% to 0.76% and the G.P. on sale of the said purchases is 0.68% and 1.19%, nothing appears abnormally low in the G.P. rates. There is no basis whatsoever for the learned CIT(A) to have estimated the said purchases at Rs. 17,65,189/- (i.e. 25% of Rs. 70,60,756/-) and neither has the learned CIT(A) rendered any cogent reasons for coming to the said finding. In our view, the learned CIT(A)’s estimation that 25% of the alleged purchases of Rs. 70,60,756/- is profit therefrom, be taxed as income of the assessee, is unsustainable and therefore delete the same. Consequently, ground of assessee’s appeal is allowed.

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• 2016 (10) TMI 493
  Rejection of Claim of depreciation on the ground that the cost of asset has already been allowed as application of income in past assessment years - income for charitable purposes - Held that:- We find an identical issue had come up before the Tribunal in the case of DCIT Vs. Sanjeevan Vidyalaya Trust (2011 (9) TMI 1113 - ITAT PUNE) wherein the Tribunal after considering the decision of Hon’ble Supreme Court in the case of Escorts Ltd. and Others (1992 (10) TMI 1 - SUPREME Court) and following the decision of the Hon’ble Bombay High Court in the case of DCIT Framjee Cawasjee Institute (1992 (7) TMI 331 - BOMBAY HIGH COURT) has allowed the claim of depreciation in case of relevant asset which has already been allowed as application of income for charitable purposes. - Decided in favour of assessee.

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• 2016 (10) TMI 492
  Penalty under Section 271(1)(c) - assessee made surrender immediately after search and before issuance of any notice and had declared the surrendered income in the returns of income accepted by the Assessing Officer - Held that:- The Hon’ble Supreme Court in the case of CIT Vs. Suresh Chandra Mittal (2001 (6) TMI 63 - SUPREME Court ) has been pleased to hold that once the revised returns have been regularized by Revenue the explanation of the assessee that he has declared additional income to buy peace and to come out of vexed litigation could be treated as bona fide and penalty under Section 271(1)(c) was not leviable, though the assessee had surrendered additional income by way of revised returns after persistent queries by the Assessing Officer. This decision also supports the case of present assessee, rather it is on better footing as the assessee in the present case had made surrender immediately after search and before issuance of any notice and had declared the surrendered income in the returns of income accepted by the Assessing Officer. Besides, the CBDT has time and again vide its Circulars No. 286 of 2003 and 286 of 2013 prohibited the assessing authorities to make assessment solely on the basis of confessional statements of the assessee and to concentrate on documentary evidence. The very purpose behind it is that in case of retraction from its statements by the assessee, the case of the Revenue should not fail. We thus while setting aside the orders of the authorities below direct the Assessing Officer to delete the penalty questioned in the above ground of the appeals for the assessment years under consideration. The ground is accordingly allowed in favour of assessee

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• 2016 (10) TMI 491
  Disallowance u/s 14A - Held that:- Assessee voluntarily disallowed the employee welfare expenses in sum of Rs. 10,709,710/- and interest expenses to the tune of Rs. 2,510,473/-. Now the expenses remains to the tune of Rs. 325,000/- on account of legal and professional expenses and an amount of Rs. 65,629/- on account of miscellaneous expenses. Disallowance is not required to be made more than the expenditure. The expenditure remains Rs. 325,000/- + Rs. 65,629/- =390,629/-. These expenses have shown on different head but finding no justifiable piece of evidence, we are of the view that Rs. 25,000/- can also be disallowed as expenditure to earn the exempt income. Therefore, in view of the said circumstances the finding of the CIT(A) on this issue is hereby ordered to be set aside and Assessing Officer is directed to assess the income of the assessee in view of the observations made above. Accordingly this issue is decided in favour of the assessee against the revenue. Disallowance of diminution of value of shares - Held that:- This matter of controversy has already been adjudicated by the Hon’ble Supreme Court in case of United Commercial Bank [1999 (9) TMI 4 - SUPREME Court] wherein this controversy has been decided in favour of the assessee against the revenue wherein held that preparation of the balance-sheet in accordance with the statutory provision would not disentitle the assessee in submitting the income-tax return on the real taxable income in accordance with the method of accounting adopted by the assessee consistently and regularly. That cannot be discarded by the departmental authorities on the ground that the assessee was maintaining the balance-sheet in the statutory form on the basis of the cost of the investments. In such cases, there is no question of following two different methods for valuing its stock-in-trade (investments) because the bank was required to prepare the balance sheet in the prescribed form and it had not option to change it. For the purpose of income-tax as stated earlier, that is to be taxed is the real income which is to be deducted on the basis of the accounting system regularly maintained by the assessee and that was done by the assessee in the present case Long Term Capital Loss on account of IL & FS during the year by determining cost of acquisition u/s.45(2A) of the Act read with Circular No.768 dated 24.06.1998 - Held that:- No distinguishable facts have been placed on record by the revenue to which it can be assume that the CIT(A) has passed the order wrongly and illegally. The specific directions has been given by the CIT(A) to determine the cost of acquisition u/s.45(2A) of the Act read with Circular No.768 dated 24.06.1998. Nothing seems unjustifiable. Since the matter of controversy has rightly been adjudicated by the CIT(A), therefore, we nowhere found any ground to interfere with this order, therefore we uphold this issue in favour of the assessee and against the revenue. Accordingly, this issue is decided in favour of the assessee and against the revenue.

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• 2016 (10) TMI 490
  Eligibility for depreciation - part payment made for the acquisition of asset - Held that:- Once the assessee receives the rights to construct extra floor/ storey, it enhances the value/cost of the building and assessee under the principle of accounting has debited the entire amount of FSI right to the block of asset of the building by making a corresponding entry as "liability" in the Balance-sheet. This can also be explained by way of an example; suppose, assessee would have taken a bank loan for paying the entire or balance premium (say Rs. 2,72,65,056) on FSI to the Government/ BMC, then assessee would have debited the entire amount to FSI account under the head ‘fixed assets’ and credited to the bank and disclosed it as its liability in the Balance sheet. Now, if assessee has paid the premium on installment scheme, then assessee would debit the whole amount on the asset side and make a credit to the vendor account by showing it as liability payable to him for the amount which remains to be paid. It is immaterial whether for many years that liability or installment has been paid subsequently or not. Once the corresponding liability in the accounts has been shown, then depreciation on the asset should be given irrespective of the fact that this year only part payment was made for the acquisition of that asset. Thus, we hold that, assessee would be eligible for depreciation for the entire amount of Rs. 3,40,81,320/- debited to the account of asset. Rate of depreciation on intangible assets - whether it has to be allowed @ 10% or 25% - Held that:- We do not find any merits in the contention of the assessee that the additional FSI is a business or commercial rights falling within the realm and scope of ‘intangible asset’ within the scope of section 32(1)(ii). The FSI only relates to giving of the right to construct additional floor to the assessee which only goes to enhance the value or cost of the existing asset / building. It strictly pertains to the addition in the building only and, therefore, depreciation allowable would be at the rates applicable to the buildings only and for not some kind of intangible right u/s 32(1)(ii). Accordingly, we uphold the observation and order of the Ld. CIT(A) to the extent that the depreciation allowable would be on rates applicable to the building only that is, @10% and not @ 25% for some kind of intangible right. Thus in our conclusion, the assessee would be entitled to depreciation @ 10% on the whole of the consideration towards FSI of Rs. 3,40,81,320/-. In view of our finding ground no.1 is treated as dismissed and ground No.2 is treated as allowed.

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• 2016 (10) TMI 489
  Addition u/s 41(1)(a) - unilateral remission of liability - Held that:- Where the creditor company is confirming to the Assessing officer not once but on couple of occasions through written confirmations that the amount is not payable by the assessee, there is nothing more that the Assessing officer can do to come to a conclusion that the amount is no more payable by the assessee. In our view, given that the assessee is still claiming the amount as payable in its books of accounts, it is a matter where the creditor has taken some unilateral steps whereby it is not demanding or pressing for such payment. The reason could be unilateral write off of old outstanding amounts as not recoverable from the assessee or due to some accounting mismatch as claimed by the assessee. The fact remains that the creditor is no more demanding any such amount from the assessee and has confirmed the same to the Assessing officer. In light of these facts, it is a clear case of unilateral remission of liability in the hands of the assessee. What is relevant is to determine the year of obtaining the benefit as the benefit can be brought to tax in that year itself and not in any other year. In the instant case, M/s Tirupati Balaji Mineral Pvt. Ltd. has confirmed that there are no transactions during the previous year under consideration as well as the fact that there is no opening balance in the account of the assessee maintained in their books of accounts for the year under consideration. It is therefore clear that the unilateral action on the part of M/s Tirupati Balaji Mineral Pvt. Ltd. in remitting the subject amount has not happened in the previous year under consideration. In light of the same, even where the assessee has obtained the benefit by way of remission of its trade liability, the same cannot be brought to tax during the year under consideration as the event of remission has not happened during the year. Hence, the addition of Rs. 3,16,553 under section 41(1)(a) is hereby deleted. Regarding amount payable in respect of M/s Kay Jay Marbles Ceramics Pvt. Ltd all the facts lead the Assessing officer to treat the amount as taxable under section 41(1)(a) of the Act. There is however no evidence to support the proposition that there is a unilateral action on the part of the creditor in terms of remission of liability unlike the case of M/s Tirupati Balaji Minerals Pvt ltd. Further, the assessee continues to show the liability in its books of accounts and has also not done any unilateral write off in its books of accounts. In such situation, merely because the amount is outstanding since 2003, it cannot be inferred that the liability has ceased to exist and the assessee has obtained any benefit by way of remission or cessation of its trading liability. There has to be some positive evidence or action on the part of the assessee or the creditor to support the theory of remission or cessation which is apparently not present in the instant case. Having said that, we donot feel the necessity to examine the contention of the assessee that since the purchases are included in the closing stock, there has been no deduction that has been claimed by the appellant. We leave this contention open. Hence, in light of above, we donot agree with the position adopted by the Revenue that it is case which falls within the four corners of section 41(1)(a) of the Act. Hence, the addition of Rs. 1,81,251 under section 41(1)(a) is hereby deleted.

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• 2016 (10) TMI 488
  Addition on account of unexplained cash credit - Held that:- The opening balance of cash-in-hand for Rs. 16 lakhs as reflected in the previous year’s balance-sheet i.e. 31-03-2006 has been accepted by the Department. Before us Ld. DR has not brought out anything contrary about the opening balance of the cash-in-hand. In our considered view, the opening balance, alone has been credited in the consolidated cash book of assessee. Therefore, the issue of making any addition on account of unexplained cash credit does not arise in the aforesaid facts and circumstances. Ld. AR has also submitted the amalgamated cash book and cash flow statement which are placed on page 8 and 19 respectively of the paper book. We find no defect in the aforesaid documents. Hence, we find no reason to interfere in the order of Ld. CIT(A). We hold accordingly and this ground of Revenue’s appeal is dismissed. Addition on account of undisclosed investment - Held that:- We find that advance shown in the balancesheet as on 31.03.2007 was after adjusting the loan liability from Shri Manuvir Agarwal. We further find that it was a clerical error having no impact on the profitability of the assessee. As such, we find that there is no undisclosed investment on account of adjustment of liability with the amount of advances. Before us, Ld. DR failed to bring anything contrary to the advance argument of Ld. AR in this regard. In this view of the matter, we find no infirmity in the order of Ld. CIT(A) and we uphold the same. This ground of Revenue’s appeal is dismissed. Addition on account of undisclosed income - Held that:- We find that AO had made the addition for Rs. 13,01,631/- on account of payment made to RDB & Co. (HUF) on the ground that this payment was not reflecting in the balance-sheet of assessee. However, we find that there was a opening loan liability for Rs. 11,26,631/- which was adjusted by Rs. 10 lakh by transferring the same to a new account with the name RDB & CO. (HUF) (housing loan). We find that assessee has shown this amount as housing loan in the current year and thereafter certain amount was also received through banking channel which was shown as housing loan. The old loan amount was repaid by assessee during the current year through banking channel. We further find all the repayment of loan and accepting the fresh loan has been made through banking channel. There was certain other movement of cash through banking channel on personal account of assessee also this was not shown in the loan statement of the party as it was adjusted with the capital account of assessee. The Ld. AR in support of its claim has placed the confirmation from RDB & Co. (HUF) which are placed on pages 25 to 28 of the paper book. Before us Ld. DR failed to bring anything contrary to the confirmation filed by Ld. AR. In view of above facts and circumstances in the present case, we uphold the order of Ld. CIT(A). This ground of Revenue is dismissed. Addition on account of undisclosed income - Held that:- AO has made the addition on surmise and conjecture. He has not exercised his power by issuing notice u/s. 133(6) of the Act to the broker for ascertaining the nature and source of aforesaid receipts. Before us Ld. AR has submitted that the aforesaid receipts represents the sale proceeds of the said shares and in support of its claim has submitted the copy of the contract notes which are placed on pages from 41 to 45 of the paper book. In this view of the matter, we do not find any infirmity in the order of Ld. CIT(A) accordingly, we uphold the same. This ground of Revenue’s appeal is dismissed.

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• 2016 (10) TMI 487
  Undisclosed credit entries reflecting in the bank statements - Held that:- We disagree with the view taken by the lower authorities that the credit entries reflecting in the undisclosed bank statement are representing the income from undisclosed sources. It is because that it is the duty of the lower authorities to establish the exact nature and character of such receipts. The argument placed by Ld AR that these credit entries are reflecting from the disclosed bank account has not been considered by the lower authorities. Ld. AR before us has filed the reconciliation statement of all the entries reflecting in the disclosed and undisclosed bank account. We find that all the credit entries reflecting in the undisclosed bank account are coming from the disclosed bank account of assessee. In support of this, Ld. AR has filed bank statement along with reconciliation which are placed on record. Ld. DR has not brought any defect in the details filed by assessee. In view of above, we find no undisclosed income / investment has escaped assessment. Therefore, we reverse the order of Authorities Below. AO is directed accordingly. Hence, inter-connected ground of assessee is allowed. Addition u/s 40A - Held that:- As decided in CIT vs. Crescent Export Syndicate [2008 (7) TMI 977 - CALCUTTA HIGH COURT ] the genuineness of the purchase has been accepted by the ld. CIT (Appeal) which has also not been disputed by the department as it appears form the order so passed by the learned Tribunal. It further appears from the assessment order that neither the Assessing Officer nor the CIT ((Appeal) has disbelieved the genuineness of the transaction. Therefore was no dispute that the purchase were genuine. Tribunal has correctly came to the conclusion by deleting the addition under section 40A(3) of the Act. - Decided in favour of assessee.

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• Customs

• 2016 (10) TMI 471
  Imposition of Anti-Dumping Duty - Phenol - imported from South Africa - sunset review - mid term review - Notification No. 32/2015-Cus ADD dated 10.7.2015 - principles of natural justice - is injury caused to the DI due to import of subject goods? - closure of a manufacturing unit, HOCL during post POI - violation of Rule 23 of AD Rules - return on investment - Held that: - the DA determined the export price in respect of import from South Africa on the basis of best available information in accordance with Rule 6(8) of AD Rules. Dumping margin has been arrived at 40 - 50%. The DA has taken note of Rule 11 of AD Rules read with Annexure -Il while determining the injury to Domestic Industry. Volume of import during injury investigation grew by 70%. Demand grew by 33% . On the price effect, the DA has noted that there is undercutting of price from the subject country with or without anti-dumping duty. The landed value of the subject goods from subject country is lowest compared to other countries. Performance of HOCL - they were operating at full capacity in 2010-11 and thereafter, the production as well as sales declined. The lack of working capital was given as reason. This was attributed to the reason that dumping import affected realization of fair selling price in the domestic market. The injury margin has been calculated as per norms by the DA. There is no violation of Rule 23 in the present case - Hon'ble Delhi High Court in Fairdeal Polychem LLP vs. UOI [2016 (1) TMI 287 - DELHI HIGH COURT] held that Rule 23(2) of AD Rules has to be harmonized with Article 11.4 of WTO Agreement. On application of first proviso to Rule 17(1) with necessary changes, period of 12 months can be further extended by Central Government in its discretion. As such no infirmity found in the investigation by the DA. Return on investment for the DI - 22% taken as per long standing practice in terms of agreed norms. ADD rightly imposed - appeal rejected - decided against appellant.

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• 2016 (10) TMI 470
  Quantification of ADD - carbon black used in rubber applications - import from China PR, Russia and Thailand - sunset review - Customs Notification No. 54/2015 - CUS (ADD) dated 18/11/15 - whether the DA should have arrived NIP on actual cost data submitted by DI instead of constructed costing based on best utilization of raw material/utilities by the DI? - was the best utilization principle to fix price correct? - Held that: - India is following lesser duty rule for fixing anti dumping duty. Article 9 of the Agreement on Anti Dumping specifically provides that the amount of anti dumping duty should not exceed the margin of dumping under Article 9.3 and recommends imposition of lesser duty, if such lesser duty would be adequate to remove the injury to the Domestic Industry. The principles laid down in Annexure III for cost of production categorically state best utilization of raw material/utilities/production capacities are to be considered. The reason is mentioned in the said principles. This is to nullify injury, if any, caused to DI due to inefficiency. It is not necessary for the DA to specifically identify such inefficiencies while constructing cost in normal situation, and the cost construction has to be followed in terms of the principles laid down under para 4 of Annexure III. Wherever there is identified 'other causes' which are causing injury to the DI, apart from dumping of subject goods, the cost construction has to be arrived at after applying the normation principle. The DA is bound by the principles laid down in the said Annexure as it is part of the statutory provisions of AD Rules, 1995. When the DA is following the statutory principles, the same cannot be faulted on the ground of perceived grievance. No specific empirical data has been pleaded by the appellant to challenge the correctness of cost construction by the DA. Rather, the challenge is on the principles laid down in Annexure III - no reason to interfere with the findings of the DA - appeal dismissed - quantification justified - decided against appellant.

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• 2016 (10) TMI 469
  Imposition of ADD - Steering Knuckles - import from China PR - Customs Notification dated 12.04.2010 - sunset review - whether the continued imposition of ADD even after sunset review by the DA justified? - Held that: - apart from domestic market in China for the appellant, India is the only market for significant trade of subject goods. They do have spare capacity of about 15% for production. There is a positive dumping margin recorded. Though, the price injury has been recorded as negative, this alone cannot form basis for revocation of AD duty. In sunset review it is not only the existence of injury during the current period of investigation is considered, the likelihood of recurrence of such injury in case of withdrawal of AD duty is also to be examined. Admittedly, examination being in the realm of future projection has to be made on the basis of various parameters including trends in import, clear possibility of changed situation in the trade of subject goods etc. The continued import even with imposition of AD duty on the subject goods is one of the indicators to be analysed. The DA observed that with the revocation of AD duties the Indian prices are likely to be attractive to the exporter in China and there is a strong likelihood or increase in substantial import as happened in the post POI period. Excess capacity available with the appellant is one of the relevant factors considered. The performance of DI deteriorated due to decline in demand coupled with price pressure of dumped imports. ADD rightly imposed - appeal rejected - decided against appellant.

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• 2016 (10) TMI 468
  Valuation - Technical Collaboration Agreement - related party transaction - transaction value - payment of royalty by the appellants to the related supplier - whether the rejection of the transaction value justified on the believe that the relationship does not affect the price and on the fact that no payment of royalty has taken place? - Held that: - there is no Technology Transfer Agreement entered into by the appellant with the related supplier. The fact has been confirmed by the Ld. Counsel in the letter in writing vide their letter dt. 28.09.2001 to the Commissioner (Appeals) title Memorandum of Cross-objection, no payment of royalty has taken place. Impugned order passed without application of mind, as the appellant did not attend the personal hearing despite given many opportunities - the same is set aside - transaction value accepted - appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2016 (10) TMI 466
  Scheme of Arrangement in the nature of Demerger - Held that:- Considering all the facts and circumstances and taking into account all the contentions raised by the affidavits and reply affidavits, as satisfied that the observations made by the Regional Director, Ministry of Corporate Affairs, do not survive. As come to the conclusion that the present scheme of arrangement is in the interest of the shareholders and creditors of both the companies as well as in the public interest and the same deserves to be sanctioned and the same is hereby sanctioned. Prayers in terms of paragraph 20(a) and (b) of the Company Petition No. 365 of 2016 and in terms of paragraph 16(a) of the Company Petition No. 366 of 2016 are hereby granted. The petitions are disposed of accordingly. So far as the costs to be paid to the Central Govt. Standing Counsel is concerned, quantify the same at Rs. 10,500/per petition. The same may be paid to the learned Standing Counsel appearing for the Central Govt.The petitioner company is further directed to lodge a copy of this order alongwith the schedule of immovable assets of the Demerged Undertaking of the Demerged company as on the date of this order and the Scheme duly authenticated by the Registrar, High Court of Gujarat, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty, if any, on the same within 60 days from the date of the order. The Petitioner company is directed to file a copy of this order alongwith a copy of the scheme with the concerned Registrar of Companies, electronically, along with INC28 in addition to physical copy as per relevant provisions of the Act.

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• 2016 (10) TMI 465
  Scheme of Arrangement in the nature of Amalgamation - Held that:- This Court is of the view that the observations made by the Regional Director, Ministry of Corporate Affairs, do not survive. No directions are required to be issued to the Petitioner Companies. This Court is of the view that based on the material on record it can be concluded that the present Scheme of Arrangement in the nature of Amalgamation is in the interest of the Shareholders and Creditors of both the Companies as well as in the public interest, therefore, the same deserves to be sanctioned and the same is hereby sanctioned. The Reduction of Issued, Subscribed and Paid up share capital of the Transferee Company viz. INI Design Studio Private Limited as envisaged under Clauses 5 and 7 of the Scheme is specifically granted. Prayers in terms of Paragraph No. 15(a) of the Company Petition No. 378 of 2016 for the Transferor Company viz. INI Design Services Private Limited and prayers made in terms of Paragraph Nos. 17(a) and 17(b) as well as the Minutes under Section 103(1) of the Companies Act, 1956 in terms of Paragraph 14 of the Company Petition No. 379 of 2016 for the Transferee Company viz. INI Design Studio Limited are hereby granted.

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• PMLA

• 2016 (10) TMI 464
  Denial of bail - generation of money in the form of 'Proceeds of Crime - offence of Money Laundering - Held that:- By no stretch of imagination, figures indicate any exorbitant cash credits or income as imputed to the petitioner. Further more, in Para 3 of the reply, the respondent has himself mentioned that the petitioner's flat in Ahinsa Vihar, Sector 9, Rohini, Delhi was purchased by him for an amount of Rs. 1,60,000/- only (more than 20 years ago) on 14.6.1995. So, there is nothing unusual or objectionable if the market value of such property over the two decades has appreciated, and so, on these grounds alone, it would be preposterous to conclude that the petitioner has generated any money in the form of 'Proceeds of Crime'. Regarding the specific allegations of his having purchased Pseudoephedrine worth Rs. 68 lacs in 2012, and of having sold it subsequently to one Suresh Kumar alias Mehnga Ram for Rs. 70 lacs, first of all, there is no document to support the allegations of such transactions, and more importantly, there is no explanation or indication by the complainant/respondent whatsoever to show as to in what manner, the petitioner had been engaged in projecting or claiming the aforesaid 'Proceeds of Crimes' as 'untainted property', which is an essential ingredient to constitute the offence of Money Laundering as defined u/s 3 of the PML Act. For the reasons recorded above, and also in view of the fact that the principal assets of the petitioner in the form of his flat, is already stated to have been attached by the Authorities, we find no justification to deny him bail, as prayed for. His petition is, therefore, allowed. He shall surrender before the Ld. Designated Court below either before the next date fixed, or within a fortnight from the date of this Order, whichever is earlier, after which, he may be granted bail on such terms and conditions, as deemed fit and proper by the Ld. Designated Court.

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• Service Tax

• 2016 (10) TMI 486
  Demand of service tax - jurisdiction of learned Commissioner to pass order - scope of SCN - manufacture of alcoholic beverages - Management Consultancy Service - Franchise Services - CBEC’s Circular F.No. 249/1/2008-CX 4 dated 24th October 2008 - whether the learned Commissioner was justified in going beyond the scope of SCN and holding that the activity undertaken by the appellants falls under Franchise Service whereas the Ld. Commissioner in the adjudication categorically already held that the activity undertaken by the appellant does not fall under the category of Management Consultancy Service? - Held that: - the learned Commissioner would have dropped the proceedings against the appellants, but instead of doing so, the learned Commissioner held that the activity undertaken by the appellants falls under ‘Franchise Service' which was also not the scope of re-adjudication awarded by this Tribunal in initial proceedings. Therefore, the impugned order lacks jurisdiction and beyond the scope of the show cause notice. As, in the show cause notice it has been alleged that the activity undertaken by the appellants falls under the category of ‘Management Consultancy Service’ but the Ld. Commissioner in the adjudication categorically held that the activity undertaken by the appellant does not fall under the category of ‘Management Consultancy Service'; therefore, no merit found in the impugned order to demand service tax - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 485
  Refund claim u/r 5 of CCR, 2004 - Notification No. 5/2006-CE (NT) dated 14/3/2006 - input service - Mandap Keeper - Outdoor catering - event management - interior decorator - storage and warehousing - technical testing and analysis - erection commissioning and installation - Pandal and Shamiana - photography - cable services - renting of immovable property - Held that: - The dispute is eligibility of such credit for the purpose of refund under Rule 5. First of all, the eligibility of certain input services for credit purposes is being disputed and denied by the Original Authority during the course of processing the refund claim under Rule 5. The correct course of action would be to decide the eligibility of various input services for credit and thereafter in the refund proceeding decide the correctness of the claim in terms of the provisions of Rule 5 readwith the relevant notification. Such process has not been followed in the present cases. Board vide its circular dated 19/1/10 clarified that there cannot be two yard sticks, one for availing credit and another for granting refunds. One way to interpret the eligibility of credit is to check whether the absence of such input services would adversely impact the quality and efficiency of the exported service. If the answer is in affirmative the input service should be held as eligible for credit. The decision in the respondent's own case [2010 (8) TMI 47 - PUNJAB AND HARYANA HIGH COURT] relied upon where it was held that Any service cannot be disqualified on the basis that the same has only peripheral connection with the output service as long as it is proven the same has been used in providing export services. Once it is established that the said services have been used for providing the output service, rebate claim becomes admissible subject to verification of the payment of service tax on the said services. If the documents contained basic details of service availed, tax paid, the details of service provider and service recipient, the credit cannot be denied on certain procedural grounds. The fact that the service have been utilized and tax on such services have been paid is the basic issue to be satisfied. If there is no dispute on these requirements, denial of credit on certain technicalities cannot be sustained - refunds allowed - appeal rejected - decided against Revenue.

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• Central Excise

• 2016 (10) TMI 484
  Cenvat credit - denial of amount of Rs. 1.20 Crore - documents on which credit was taken are not proper - Held that:- the entire credit is related to 16 services which are specified under Rule 6(5). The credit was denied on the basis of a report submitted by Superintendent (Adjudication) that there are some discrepancies in the documents. However there is no finding of the Adjudicating Authority that the input service was not received or payments there against were not made by the appellant. Moreover it is observed that the Adjudicating Authority has not given sufficient opportunity to the appellant for explaining the discrepancies to the Adjudicating Authority. Therefore, we find that to this extent, the Adjudicating Authority has grossly violated the principle of natural justice. Cenvat credit - denial of amount of Rs. 80 lakhs - credit attributed to the trading activity and not related to the manufacturing activity - Held that:- there is no dispute that the said Cenvat credit is attributed to the trading activity. Therefore, the same is primafacie not admissible to the appellant. Period of limitation - credit taken during the period 2008 to 2011 and the show cause notice was issued on 13-03-2013 - appellant have been submitting monthly returns alongwith details of Cenvat credit availed by them from time to time - suppression of facts - Held that:- the appellant is engaged in the manufacturing of final product and availing the credit on various services. However it cannot be ascertained from the record that part of the services are used for trading activity, therefore the department had no occasion to know this fact even from Cenvat statement and monthly returns filed by the appellant. Therefore, it cannot be said that there is no suppression of fact on the part of the appellant. Demand - wrong availment of Cenvat credit - Held that:- it is observed that this demand is towards an amount of Cenvat credit of input services utilized for payment of excise duty. In the judgment cited by the appellant in the case of CCE vs Raghuvar (India) Ltd. [2000 (5) TMI 40 - SUPREME COURT OF INDIA], the issue has been settled in favour of the appellant. We further find that as against wrong availment of Cenvat credit, there cannot be made double demand i.e. one of an amount of wrongly availed credit and second an amount of Cenvat credit utilized out of the same wrongly availed credit. This exercise will clearly amount to duplication of demand of the same amount, therefore the demand is primafacie, not sustainable.

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• 2016 (10) TMI 483
  Manufacture - whether the activity of profiles cutting from M.S. plates is amount to manufacture of excisable goods - appellant submitted that while computing demand, benefit of cum-duty price was also not considered - issues regarding limitation and cum-duty price were not raised either before lower authority or first appellate authority - Held that:- there is no quarrel on the merit of the case that duty on the process carried by the appellant is payable. On limitation and issue of cum-duty price, on perusal of orders of both the lower authorities, we find that these issues were not raised. Since, the issues on limitation and valuation are mixed question of law and fact, it is a fit case for remand to examine the facts that whether any suppression of facts or mis-declaration etc. exist on the part of the appellant or otherwise. On cum-duty price also examination is required. We, therefore, remand the matter to the original authority to decide afresh on the issue of limitation and cum-duty price and to re-quantify the demand accordingly. The penalty also to re-quantified accordingly. - Appeal disposed of by way of remand

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• 2016 (10) TMI 482
  SSI Exemption - use of brand name of others - whether after assignment agreement in respect of brand name, it can be inferred that the respondent is using the brand name of another person and accordingly not entitled for the S.S.I. exemption Notification No. 8/2001-CE dtd. 01-03-2001 or otherwise - Held that:- as regard assignment agreement, there is no dispute in the facts of legal assignment of the brand in favour of the respondent vide agreement. Therefore, agreement stands legal and in force. Ld. Commissioner (Appeals) held the admissibility of exemption notification relying on the judgment of Collector of C.Ex., Ahmedabad vs Vikshara Trading & Invest P. Ltd. [2003 (8) TMI 49 - SUPREME COURT OF INDIA], wherein under identical set of facts, the S.S.I. exemption Notification was allowed despite the fact that the assignment was not registered. We find that the said judgment is squarely applicable in the present case. Therefore, here is no infirmity in the order of Ld. Commissioner (Appeals) in as much as the S.S.I. exemption was extended to the respondent on the basis of assignment agreement. - Decided against the Revenue

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• 2016 (10) TMI 481
  Refund claim - excise duty paid on additional discounts and turnover discounts - eligibility for deduction from the wholesale price for determination of value under Section 4 of the Central Excises & Salt Act, 1944 - Hon'ble Supreme Court dismissed the revenue appeal in view of decision of larger bench in [2016 (8) TMI 1071 - SUPREME COURT]

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• 2016 (10) TMI 480
  Cenvat credit - credit was disallowed mainly on the ground that various steel items were used in conjunction with boiler, sinter plant, steel melting shop, coke oven etc. and claim has been made that those steel items are to be considered as parts, accessories and capital goods, which was not accepted by the Revenue - Held that:- The eligibility of manufacturer for availing credit on various steel items like in the present case has been a subject matter of decision by the Tribunal and Hon’ble High Courts and Hon’ble Supreme Court. In the appellant s own case the Hon’ble Supreme Court (2015 (4) TMI 569 - SUPREME COURT ) held that railway track and equipments used for handling raw material are eligible for credit. Admittedly, railway tracks are embedded to earth and are not regularly moved from place to place. We find that the structural steel items have been used for the fabrication of support structures for capital goods. The appellants have argued that the various capital goods, such as, kiln, material handling conveyor system, furnace etc. cannot be suspended in mid air. They will need to be suitably supported to facilitate smooth functioning of such machines. It is obvious that the structural items have been suitably worked upon for this purpose. Accordingly, the goods fabricated, using such structurals, will have to be considered as parts of the relevant machines. The definition of Capital Goods includes, components, spares and accessories of such capital goods. Accordingly, applying the User Test to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of Capital Goods as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit. - Decided in favour of assessee

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• 2016 (10) TMI 479
  Denial of CENVAT credit - cenvat credit on iron and steel items (structural steels) used for fabrication of various structures of plants and machineries at site and /or in manufacture of structures supporting capital goods like boiler, coal handling mill, rolling mill, furnaces, conveyors, chimneys etc - inputs under Rule 2(k) of Cenvat Credit Rules, 2004 - Held that: - the decision in the case of C.C.E., Jaipur vs. Rajasthan Spinning & Weaving Mills [2010 (7) TMI 12 - SUPREME COURT OF INDIA] relied upon where it was held that the subject items namely, angles, channels, beams etc. would be eligible for the cenvat credit after applying the user test. Demand of duty on angles, channels, etc. manufactured and captively consumed in fabrication of structures of capital goods - imposition of penalty - Denial of exemption under N/N. No.67/95-CE - Held that: - When the details submitted by the appellant was not examined by the Commissioner then the matter needs fresh adjudication - matter remanded to the original adjudicating authority who will decide the issue de novo after examining all the records of evidence of use and consumption of subject items, if not already produced, the same are to be produced by the appellant before the original adjudicating authority within one month and thereafter within next two months, the original adjudicating authority shall pass appropriate orders. Appeal disposed off - decided partly in favor of appellant.

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• 2016 (10) TMI 478
  Demand of duty with interest - electric wires and cables - N/N.06/2006-CE dated 01.03.2006 - whether the product namely electric wires and cables classifiable under CETH 8544 4990, supplied under International Competitive Bidding to Megha Power Project is eligible for exemption from duty under Notification No. 06/2006-CE dated 01.03.2006 and whether condition of Notification No. 06/2006-CE has been fulfilled? - Held that: - all the items of machinery as well as all components or raw materials for manufacture of the machinery and their components, required for initial setting up of a unit etc. of specified Power Project (alongwith other plants/ projects) are classified in Chapter Heading 98.01 of Customs Tariff. Therefore, there cannot be any dispute on subject items, ‘Electric Wires & Cables’ as the facts stand are classifiable under Chapter Heading 98.01 of Customs Tariff - goods entitled to the benefit of exemption Notification No. 6/2006-CE dated 01.03.2006 - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 477
  SSI exemption - dummy units - clubbing of clearances - modvat/cenvat credit - ERW pipes - reference made to the decision in the case of M/s. Nova Industries (P) Ltd. Versus CCE- Chandigarh [2015 (5) TMI 99 - CESTAT NEW DELHI] - Held that: - the facts are similar to the facts in the case of Nova Industries Pvt.Ltd. and on the analysis of that decision, it is held that all the units are having separate machinery, separate registration number and dealing separately. There is no financial flow back and there is no mutuality of interest between the units. Therefore, all the four units cannot be clubbed together and the same has been confirmed by the adjudicating authority in the impugned order giving detailed findings on the issue after her personal inspection of the units. In the circumstances, it can be held that the all the units cannot be clubbed together and the respondents are entitled to the benefit of SSI exemption from time to time - issue answered in favor of respondent. Clandestine removal of goods - Held that: - in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following : (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of : (a) raw materials, in excess of that contained as per the statutory records; (b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty; (c) discovery of such finished goods outside the factory; (d) instances of sale of such goods to identified parties; (e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) statements of buyers with some details of illicit manufacture and clearance; (h) proof of actual transportation of goods, cleared without payment of duty; (i) links between the documents recovered during the search and activities being carried on in the factory of production; etc. Any of the charges mentioned above not proved, hence, the charge of clandestine removal of goods is not sustainable against the respondents. The quantity and value of clearance in respect of each of the manufacturing unit is required to be identified and duty liability is to be determined. No effort has been made to quantify the value and quantity of ERW pipes cleared by each units. Therefore, without ascertaining of value of the goods cleared clandestinely, the demand is not sustainable - issue answered in favor of respondents. Appeal dismissed - decided against Revenue.

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• 2016 (10) TMI 476
  Demand on account of clandestine clearance of scrap - Held that: - a certificate issued by chartered engineer certifying that the factory of the appellant is not able to manufacture such huge scrap during the impugned period. Shri Amajit Singh Bajaj, in the course of examination has denied of purchasing scrap from the appellant. Moreover he has admitted that he has supplied only tempo for transportation of the scrap and received transportation charges from the appellant. In absence of evidence of procurement of excess inputs and clearance of excess finished goods on record, the demand on account of clandestine clearance of scrap is not sustainable. Denial of credit on HR/CR coil - allegation that the appellant has received the invoices and not inputs - Held that: - the appellant has taken the defence that these HR/CR coil has been sent to job work for cutting/slitting. The job charges have been paid and the goods have been received from the job worker against job work challan. These evidences had not been given credence by the adjudicating authority during the course of adjudication. The adjudicating authority has only relied on the statement that the appellant has not received HR/CR coils. It is admitted position that the appellant has not received HR/CR coil in the factory and the same has been sent to the job worker directly for cutting/slitting. These facts have not been considered by the adjudicating authority. It is also found that there is statement of supplier of coil that they have supplied these coils to the appellant but no statement of the transporter has been recorded to find out the truth. In the absence of such positive evidence, the evidence produced by the appellants are having evidentiary value - Therefore, the credit on HR/CR coil cannot be denied to the appellants. The demand on account of goods received and cleared without cover of invoices - parts cleared on payment of duty but later these parts have come back for repairs and further they have been cleared without payment of duty as the second time duty is not required to be paid - Held that: - in the absence of any documentary evidence in support of the appellant's contention, the defence taken by the appellant is not admissible - the demand of Rs. 13,698/- confirmed. The demand of duty of Rs. 32,61,960/- confirmed on account of shortage of inputs detected during verification of stock confirmed - the demand of duty of Rs. 13,698/- confirmed on account of clandestine clearance of auto parts which is appropriated is confirmed - the demand of interest confirmed for the amount of duty demanded hereinabove - other demands including penalty set aside - appeal disposed off - decided partly in favor of appellant.

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• 2016 (10) TMI 475
  Clandestine manufacture and clearance of excisable goods - investigation - Whether the panchnama drawn during the course of investigation can be relied upon and photocopies of the documents are admissible in the absence of original documents? - Held that: - the photocopies of the documents which are not available in original has been relied on by the revenue is not admissible evidence - the decision of the Apex Court in the case of J.Yashoda vs. Shobha Rani [2007 (4) TMI 11 - SUPREME COURT OF INDIA] relied upon - panchnama and the photocopies of the documents are not admissible evidence. Clubbing of clearances - Whether the clearances made by the respondents, namely, M/s.Dirba Pipes Pvt. Ltd., M/s,North India Pipes Pvt. Ltd., M/s.M.A. Pipes Pvt. Ltd. and M/s.Garg Pipes Pvt. Ltd. can be clubbed together and the benefit of SSI exemption can be denied and duty can be demanded? - organisational structure gone through - Held that: - on organisational structure, it cannot be held that all the units are controlled by one person - decision in the case of M/s. Nova Industries (P) Ltd. Versus CCE- Chandigarh [2015 (5) TMI 99 - CESTAT NEW DELHI] relied uponwhere it was held that all the units are having separate machinery, separate registration number and dealing separately.There is no financial flow back and there is no mutuality of interest between the units. Therefore, all the four units cannot be clubbed together - issue answered in favoe of respondents. Clandestine removal of goods - Held that: - in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following : (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of : (a) raw materials, in excess of that contained as per the statutory records; (b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty; (c) discovery of such finished goods outside the factory; (d) instances of sale of such goods to identified parties; (e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) statements of buyers with some details of illicit manufacture and clearance; (h) proof of actual transportation of goods, cleared without payment of duty; (i) links between the documents recovered during the search and activities being carried on in the factory of production; etc. Any of the charges mentioned above not proved, hence, the charge of clandestine removal of goods is not sustainable against the respondents. The quantity and value of clearance in respect of each of the manufacturing unit is required to be identified and duty liability is to be determined. No effort has been made to quantify the value and quantity of ERW pipes cleared by each units. Therefore, without ascertaining of value of the goods cleared clandestinely, the demand is not sustainable - issue answered in favor of respondents. The original documents were not available with revenue. No efforts were made to trace the documents, no official was held liable for the said discrepancy which shows the negligent attitude of the investigating agency. Appeal dismissed - decided against Revenue.

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• 2016 (10) TMI 474
  Denial of CENVAT credit - demand of duty along with interest and penalty - production of exemption certificate - clearance of exempted as well as dutiable products as per Rule 6 of the CENVAT Credit Rules, 2004 - Held that: - the Revenue has failed to appreciate the fact that inputs are available for credit at the time of start of manufacture of the goods. There is a great difference between manufacture and their clearance. In this case manufacturing process started much earlier before the date when the exemption certificate was obtained by M/s GMADA. Prior to obtaining the exemption certificate, the character of final manufactured goods was dutiable, in that circumstances, the CENVAT credit availed by the appellant is in accordance of law. The same view was taken by Hon'ble High Court of Bombay in the case of CCE, Thane I vs. Nicholas Piramal (India) Ltd. [2009 (8) TMI 224 - BOMBAY HIGH COURT]. The appellant has paid an amount of 6% of the value of exempted final product at the time of clearance of final exempted product by utilizing their CENVAT credit account. The Adjudicating Authority has not considered the fact that CENVAT credit to the extent of 6% of the value of exempted final product has already been reversed and the set off the same has granted which reveals that the demand to the extent of reversal 6% of the value of exempted goods twice taxing the appellants which not is permissible in law. M/s WCL availed CENVAT credit on the inputs for manufacturing of their final product before production of exemption certificate by M/s GMADA, the appellant has rightly availed CENVAT credit on inputs - demand of duty, interest and penalty not justified - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 473
  Demand of duty with interest and penalties - construction equipments - Whether the parts of WTLB and Hydra Cranes are liable for duty prior to 29.04.2010 being covered under ‘automobiles’ or not? - Held that: - the expression ‘automobiles’ has not been defined in the Central Excise Act. Therefore, it is not permissible to adopt the definition of very same expression appearing in another different enactment. The case referred CCE, Pune-I vs JCB India Ltd. [2014 (2) TMI 632 - CESTAT MUMBAI] not applicable in the present case as there is a disagreement with the view taken in the case. The matter remanded to the Tribunal for consideration on the issue that How to define expression ‘automobiles’ when it is not defined in Central Excise Act/Rules or any Notification issued thereunder. Can the expression given in the Acts, namely, Air (Prevention and Control of Pollution) Act, 1981 or Motor Vehicles Act, 1988 be adopted or that meaning of the expression ‘automobiles’ can be assigned from the uniformally defined in the various dictionaries and known in common parlance? Another matter which needs consideration is the Notification No.11/2011 dated 24.03.2011 giving the effect of demand of duty w.e.f. 29.04.2010 on the parts, components and assemblies of goods falling under Tariff Item No.8426 41 00, headings 8417, 8429 and sub heading 8430.10 is clarificatory and applicable prior to 29.04.2010 or mandatory and applicable from 29.04.2010 onward.

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• 2016 (10) TMI 472
  Notification No.108/95-CE dated 28.08.1995 - benefit of exemption - goods not supplied directly to UNICEF but were supplied to project assisted and Financed by UNICEF - certificate for claiming benefit under the clause (b)(ii) of Notification No. 108/95 by an Officer not bellow the Rank of Deputy Secretary to Government of India was not produced by the appellant - Held that:- the said notification as amended by notification No.40/99 dated 02/11/99 at clause (b) (i) provides that the goods supplied to organizations appearing in the annexure for the projects that is approved by Government of India and finance by such organizations and certified by such organization that the said goods are intended for such use, then such goods are exempted from the whole of duty of Central Excise. We find that various certificates and purchase orders and instruction of UNICEF to deliver the goods at various places and certificate issued by Procurement Officers of UNICEF which were produced before the first appellate authority were sufficient proof to establish the eligibility of appellant to the benefit of the said notification No. 108/95. The understanding of first appellate authority that goods were not supplied directly to United Nations Organization but supplied to a project and is covered by Clause (b)(ii) of the said Notification and required a certificate from officers not bellow the Rank of Deputy Secretary is not a correct appreciation of the provisions of said notification. We hold that the appellants were entitled for the clearances dealt with in three impugned show cause notices for benefit of said notification No. 108/95-CE dated 28/08/95. - Decided in favour of appellant

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• CST, VAT & Sales Tax

• 2016 (10) TMI 467
  Evaluation of stock - inspection - Government Order passed stating that the stock discrepancy not exceeding 2% of the total volume of business may not taken serious notice of and the Inspecting Officer should be forbidden from making notice of any proposal based on such discrepancies to the assessing authority concerned and to ignore the discrepancy based on the general performance of the assessee in the past years - When the stock variation is less than 2% of the total volume of business, what the Department has to do, especially when the Enforcement Wing Officials conducted an inspection in the place of business of a dealer? - Held that: - The Government Order appears to have been given only to alleviate unnecessary problems faced by the dealers. Nevertheless the Government has also noted that this sort of discrepancy can be ignored based on the general performance of the assessee in the past years. Therefore, if an assessee has come to adverse notice of the Department on earlier occasions, he cannot as a matter of right claim that by applying the Government Order, the discrepancy should be ignored. Therefore, for each assessment viz-a-viz, a dealer should be specifically considered, if such an issue arises. The Tribunal failed to go into the correctness of the findings recorded by the Appellate Assistant Commissioner in its order dated 12.2.2001, on a perusal of the connected records and documents as well as the stock reconciliation statement by the Enforcement Wing Officials was proper and justified. Merely by quoting the order of the Assessing Officer, and allowing the Appeal filed by the Revenue, is erroneous and the impugned order is utterly perverse. Further more, there is no specific finding to the effect that the Appellate Assistant Commissioner has committed an error in allowing the Appeal nor there is any record which the Tribunal relies upon to show that the findings recorded by the Appellate Assistant Commissioner are factually incorrect - petition allowed - decided in favor of petitioner.

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• Indian Laws

• 2016 (10) TMI 463
  Guilty for committing offence punishable under Section 20(b)(ii)(C) read with Section 29 NDPS Act - Held that:- Since the appellant has opted to accept the findings of the Trial Court on conviction and there is ample evidence to prove the allegations, his conviction under Section 20(b)(ii)(C) read with Section 29 NDPS Act is affirmed. Regarding Sentence Order, it transpires that he has already undergone almost the entire substantive sentence awarded to him. Nominal Roll dated 04.03.2015 reveals that he has remained in custody for six years, seven months and twenty-six days as on 03.03.2015. He is not involved in any other criminal case and is not a previous convict; his overall jail conduct is satisfactory. Substantive sentence i.e. RI for ten years each under both the heads can’t be modified or altered as it is the ‘minimum’ sentence prescribed under the Act.

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