Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 18, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Levy of GST on Lottery - is differential levy of tax permissible? - It was after extensive deliberations that, the GST Council had approved the rates as presently obtaining in respect of lottery. It is within the domain of such Council to decide the rate of tax - differential levy of tax is permissible.
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Constitutional validity of levy of GST on Lottery - a lottery is an ‘actionable claim’ and goods or moveable property. - lottery can be taxed under the Central Goods and Services Tax Act as well as the West Bengal Goods and Services Tax Act, 2017.
Income Tax
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Deemed Dividend u/s 2(22)(e) - the transaction between two group concerns were in the nature of current account and inter banking account containing both types of entries i.e., receipts and payments, the same cannot be brought in the purview of loans and advances so as to attract Section 2(22)(e)
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Deemed dividend U/s.2(22)(e) - outstanding balances occurred due to commercial exigencies such as regular trading business and consistent services rendered by the assessee - In these circumstances the provision of Section 2(22)(e) cannot be invoked as clarified by the CBDT
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Netting off of interest interest income - The source of interest earning remained intact. In doing so, the assessee had to incur interest expenditure on overdraft. The source of income and application of income is same, i.e. FD. - netting off of interest has to be allowed to the assessee
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Assessee is entitled to deduction u/s 10B of the Act in respect of the interest income earned on FDRs made for the purposes of keeping margin money or for availing any other credit facility from banks.
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Penalty u/s.271(1)(c) - disallowance of expenses - The allegation of the AO that the expenses incurred are /or personal purpose since there is no income earned during the year under consideration without bringing any corroborative evidence on record is misplaced - No penalty.
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Addition on account of un-explained loan - assessee discharged its initial onus to prove the identity of the investor company, its creditworthiness and genuineness of the transaction in the matter - No additions.
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Transfer pricing - selection of comparable - Capacity adjustment to account for differences in capacity utilization of the Appellant vis-à-vis the comparable - adjustment to the profit margins have to be made on account of underutilization of capacity.
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Prior period expenses - non deduction of tds - the prayer for allowing deduction of expenses in the year in which TDS is paid to the Government is acceptable subject to the condition that the liability in question should be crystalized/ascertained.
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Addition on account of machinery surrendered during the course of survey - It cannot be understood as how, there is no allegation of pressure or intimidation in respect of surrender of unexplained cash and unexplained creditors and there is only pressure or intimidation in respect of unexplained investment in machines and moulds.
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TDS u/s 195 - Limitation for issue of notice u/s 201(1)/201(1A) - proceedings initiated after lapse of 5 years - the notice issued by the AO in this case is beyond 4 years and the same is barred by limitation.
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Deduction u/s 54F - Capital gain arising from depreciable assets is long term capital gain for the purpose of claiming exemption under Section 54F/54E of the
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Addition on account of excess stock found during the course of survey action - unrecorded and unexplained stock / expenditure - The assessee has failed to discharge his onus to explain the source of expenditure or how the same has been paid - Additions confirmed.
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Valuation of the closing stock - valuation method of "At cost" which is changed to "At cost or market value whichever is less‟ is more prudent - Change in the method of valuation of stock allowed.
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Deduction u/s 80P(2)(d) on interest received on investments - when the interest income is received from a cooperative bank, the recipient co-operative society would not be entitled to deduction u/s 80P(2)(d)
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Validity of proceedings initiated u/s 132A - search and seizure - non-disclosing the “reason to believe” or "reason to suspect” - in view of amendment in Section 132A of the Income Tax Act, 1961 by the Finance Act, 2017 “reason to believe” or “reason to suspect” was not to be disclosed to any person or authority or Appellate Tribunal.
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Revision u/s 263 - The word ‘may’ used in Section 263 should be presumed to be shall or otherwise interpreting the word “may” as not mandatory, orders can be passed even without affording an opportunity to the assessee of being heard while the Commissioner exercises his jurisdiction u/s 263 thereby violating the principles of natural justice.
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Reopening of assessment - notice has been issued beyond a period of four years - claim of deduction u/s 10B - the claim having been examined by the Assessing Officer during the assessment proceedings, it would not be open for reopening on such grounds.
Customs
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Redemption of confiscated goods - Gold - foreign currencies - prohibited item or not - the impugned gold has been imported without following the due process of law that is to say without following the procedures thereof - impugned goods have acquired the nature of being prohibited goods
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SEZ Unit - smuggling Gold - appellant knowingly removed the gold bars of SEZ without proper procedure. - The appellant could not get any relief only by mentioning the commercial reason, if the excuses given by the appellant is accepted it would lead the situation whereby giving any excuse whole scheme of SEZ can be planted.
Service Tax
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Validity of demand of service tax after migration to GST Regime - although Chapter V of the Finance Act of 1994 stood omitted u/s 173 of GST Act, but the savings clause provided u/s 174(2)(e) will enable the continuation of the investigation, enquiry, verification etc., that were made/to be made under Chapter V of the Finance Act of 1994.
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Refund claim - Club or Association service -the incorporated association and its member being one and the same, the activities undertaken or the services provided by the former will not be considered as a service, exigible to service tax under the principle of mutuality - refund allowed.
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Liability of service tax - Chit transaction - The legislature felt the need for inclusion of the transactions within the fold of service and hence amended the Finance Act, 1994 by Finance Act, 2015. As a corollary it has to be understood that it was not taxable prior to the amendment. - Refund to be allowed, subject to unjust enrichment.
Central Excise
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Principles of Natural Justice - Three sets of dates for hearing were fixed for the petitioner to respond to the show cause notice. The petitioner did not avail of such opportunities. The authorities proceeded not to grant further adjournment on March 13, 2018 - no infirmity in the refusal of the authorities in not granting further adjournment given the conduct of the petitioner.
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CENVAT Credit - allegation is only on the basis of the assumption and presumption, therefore, it cannot be held that the appellants were not manufactured the goods during the impugned period.
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CENVAT Credit - duty paying documents - Since the entire quantity covered by the bill of entry, has not been moved to one unit, the appellant has issued an internal document termed as ‘transfer memo’ in which the quantities transferred to Durgapur unit has been indicated - Credit allowed.
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MRP based Valuation - inclusion of ‘optional service charges and ‘rustproof protection charges’ in the ‘maximum retail price’ for assessment - There is no evidence that, in the present proceedings, the marked price had been altered at any stage subsequently - Option charges cannot be included in the MRP
VAT
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Higher Rate of tax / CST - inter-State sales against deferred payment - seeking permission to produce C-Forms after a gap of more than 10 year - Levy of higher tax under Section 8(2) of the CST Act is perfectly justified
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ITC is a form of concession which is provided by the Act; it cannot be claimed as a matter of right but only in terms of the provisions of the statute; therefore, the conditions mentioned in the aforesaid Section had to be fulfilled by the dealer
Case Laws:
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GST
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2018 (10) TMI 942
Central excise credit - Migration to GST Regime - petitioner claimed the credit transfer through Trans- III - case of respondent is that petitioner submitted a wrong form; that is Trans-III, instead of Trans- I - Held that:- Because of the uncertainty in the new tax regime, the petitioner was given to believe that it was Trans-III. He has also maintained that the then the draft rules also indicates the same effect. In the end he has submitted that the 4th respondent may consider the Ext.P7 and take an appropriate decision - petition disposed off holding that the 4th respondent will consider the Ext.P7 and pass appropriate orders, at the earliest.
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2018 (10) TMI 941
Constitutional validity of levy of GST on Lottery - petitioners have sought a declaration that, lotteries are exempt from tax under Sl. No. 6 of Schedule III read with Section 72 of the Central Goods and Service Tax Act, 2017 and Sl. No. 6 of Schedule III read with Section 72 of the State Goods and Service Tax Act, 2017 - scope of the word 'goods' - petitioner has submitted that, when CGST, 2017 and IGST, 2017 propose to tax a lottery, it goes beyond the constitutional definition of ‘goods’ - actionable claim - Transfer of Property Act, 1882. Is lottery a ‘goods’ or an ‘actionable claim’? - Held that:- In the case of Sunrise Associates [2006 (4) TMI 118 - SUPREME COURT OF INDIA], it is held that a lottery is in essential a chance for a prize, the sale of a lottery ticket can only be a sale of that chance. It has held that, there was no distinction between the two rights. The right to participate being an inseparable part of the chance to win, is therefore part of an ‘actionable claim’. It goes on to hold that, the sale of a lottery ticket does not necessarily involve the sale of goods. It is nothing other than a contract of carriage. The actual ticket is merely evidence of the right to transfer. A contract is not a property but only a promise supported by consideration, upon breach of which either a claim for specific performance or damages would lie. Like railway tickets, a ticket to see a cinema or a pawnbroker’s ticket are memoranda or contracts between the vendors of the ticket and the purchasers. Tickets are themselves normally evidence of and in some cases the contract between the buyer of the ticket and its seller. A lottery ticket can be held to be goods if at all only because it evidences the transfer of a right. It has examined the question as to what right a lottery ticket represents. It has held that, on purchasing a lottery ticket, the purchaser would have a claim to a conditional interest in the prize money which is not in the purchaser’s possession. The right would fall squarely within the definition of ‘actionable claim’ and, would therefore be excluded from the definition of goods under the Sale of Goods Act and the sales tax statute. It has held that, lotteries being actionable claims are generally speaking “goods” or moveable property - the first issue has to be answered by holding that, a lottery is an ‘actionable claim’ and goods or moveable property. Can lottery be taxed under Central Goods and Services Tax Act, 2017 and West Bengal Goods and Services Tax Act, 2017? - Held that:- In the facts of the present case, it has not been substantiated that, the State Legislature promulgating the West Bengal Goods and Services Tax Act, 2017 did not have the competence to pass the law or that it violates any fundamental rights of the petitioner or any other right of the petitioner or any provision of the Constitution. The definition of ‘goods’ in Article 366(12) of the Constitution allows the Legislatures to classify lottery as ‘goods’ and charge tax thereon - The Integrated Goods and Services Tax Act, 2017 makes provisions for levy and collection of tax on inter-state Supply of Goods or Services or both by the Central Government. It defines Import of Goods in Section 2(10) and Import of Services in Section 2(11) of the Act of 2017. By Import of Goods, it means Import of Goods from a place outside India. By Import of Services, it means the supply of any service where the supplier of services located outside in India, the recipient of services located in India and the place of supply of service is in India. Schedule III under Section 7 of the CGST Act, 2017 deals with activities or transactions which shall be treated neither as a supply of goods nor as a supply of services. Entry 6 of Schedule III of CGST Act, 2017 takes out ‘actionable claims’ other than lottery, betting and gambling from the scope of such Act. Consequently, since lotteries are generally speaking ‘goods’ and come within the definition of ‘actionable claims’, and since, lotteries are kept out of the purview of ‘actionable claims’ which do not attract the CGST Act, 2017, lottery can therefore be charged to tax under the CGST Act, 2017 - The second issue is answered by holding that, lottery can be taxed under the Central Goods and Services Tax Act as well as the West Bengal Goods and Services Tax Act, 2017. If so, is differential levy of tax permissible? - Held that:- The Goods and Services Tax Council established under Article 279A of the Constitution of India at its 17th meeting deliberated extensively with regard to the rate of tax to be imposed on lotteries. Differential rate of tax was introduced in the 17th Goods and Services Tax Council Meeting held on June 18, 2017. The States before the Court were present in such meeting. It was after extensive deliberations that, the GST Council had approved the rates as presently obtaining in respect of lottery. It is within the domain of such Council to decide the rate of tax - differential levy of tax is permissible. To what reliefs, if any, are the parties entitled to? - Held that:- No relief can be granted to the petitioners, in the facts of the present case. Petition dismissed.
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2018 (10) TMI 940
Refund of Tax paid - IGST - deemed export - application cannot be uploaded electronically - Held that:- The procedure mandates that the demand for refund should be through an application uploaded electronically. The petitioner could not follow that procedure because of the unavailability of the online facility. The Government of India issued a circular for “setting up an IT Grievance Redressal Mechanism to address the grievances of taxpayers due to technical glitches on GST Portal” - So, here too, the petitioner may apply to the Nodal Officer. The petitioner applying, the Nodal Officer will look into the issue and facilitate the petitioner’s uploading FORM GST TRAN-1 or any other applicable Form, without reference to the time-frame. Petition disposed off.
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Income Tax
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2018 (10) TMI 939
Power of ITAT to recall and re-hear the case by way of rectification order u/s 254(2) - Misc. application filed by assessee - Applications were heard on 13th May, 2016, but the Tribunal pronounced the order on these Miscellaneous Applications after six months and more on 18th November, 2016, accepting the error pointed out by the assessee - The result is that the initial order dated 6th September, 2013, is recalled and set aside and all appeals which were decided by the said order would have to be re-heard and re-decided. This petition of the Revenue seeks to challenge such an order - Held that:- The Special Leave Petition is dismissed on the ground of low tax effect, leaving the question of law open. Pending applications, if any, stand disposed of.
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2018 (10) TMI 938
Deduction u/s.80IB - Addition on account of business receipts from Shri Rasiklal Dhariwal - Held that:- The Special Leave Petition is dismissed both on the ground of delay and merits.
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2018 (10) TMI 937
Assessee upheld to be local authority - exemption from income tax to the local authority - whether Appellant is not a ‘local authority’ as contemplated u/s 10(20)? - Held that:- Delay condoned. Leave granted. The appeals are allowed in terms of the signed reportable judgment. Parties shall bear their own costs.
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2018 (10) TMI 936
Reopening of assessment - notice has been issued beyond a period of four years from the end of relevant assessment year - claim of deduction u/s 10B - Held that:- There is not even a suggestion on record that there was any failure on part of the assessee to disclose truly and fully all material facts. Only on this ground, impugned notice should have been set aside. Nevertheless, there are additional grounds on which we would like to make few comments. We have recorded the reasons. AO principally alleges is disproportionate bifurcation of expenditures between eligible and non eligible units. He is obviously hinting at inflated profit of eligible unit and deflated profit of non eligible units. Entire issue pertained to assessee's claim of deduction under section 10B of the Act. High Court had noted that this claim was examined by the Assessing Officer in the original assessment proceedings. Not be open for him to reexamine the claim, may be on another aspect or element of the claim being raised through reassessment proceedings. In the present case, yet another element of the claim being cited as a ground for reopening the assessment.We have noticed that during the original assessment, the Assessing Officer had raised multiple queries with respect to this claim.8. Thus the claim having been examined by the Assessing Officer during the assessment proceedings, it would not be open for reopening on such grounds. - Decided in favour of assessee.
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2018 (10) TMI 935
Revision u/s 263 - non service of proper notice - sufficient cause - change in name of Sadabahar to CVPL - petitioner says an attempt of service on Sadabahar in 2013 cannot be said to be a due or proper service as Sadabahar had ceased to exist by then and has come to be known as CVPL, with its registered office at a different premise - Held that:- Respondents were aware that Sadabahar is now known as CVPL with its registered office at 12-B Cossipore Road, Kolkata-700002 and not with its address at P-41 Princep Street, Kolkata-700072. Any affixation of notice at premises no. P-41 Princep Street, Kolkata-700072 cannot, therefore, be said to be a notice upon CVPL in the year 2012-2013. CVPL has, therefore, not been served though entitled to before the Commissioner passed his order dated 14th January, 2013 and, as such, there is violation of principles of natural justice. Moreover, when the statute is very clear that the Commissioner should afford an opportunity to the assessee of being heard, CVPL should have been heard when Sadabahar much prior to 2012-13 has become CVPL and is the assessee or representing the interest of Sadabahar, the assessee. The word ‘may’ used in Section 263 should be presumed to be shall or otherwise interpreting the word “may” as not mandatory, orders can be passed even without affording an opportunity to the assessee of being heard while the Commissioner exercises his jurisdiction under Section 263 of the Income tax Act, 1961 thereby violating the principles of natural justice. As the order and the two notices under challenge are set aside, all consequential steps taken subsequent to the order dated 14th January, 2013 or in pursuance thereof are also set aside. The department should not also emphasise or rely upon the letter written by CVPL on 12th March, 2014. This will, however, not prevent the respondent no. 2 from proceeding under Section 263 of the Income Tax Act, 1961 afresh against the petitioner no. 1 for the Assessment Year 2007-2008. The Department shall serve a fresh notice upon the petitioner no. 1 and proceed to fix a hearing date in exercise of his jurisdiction under Section 263. - decided in favour of assessee
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2018 (10) TMI 934
Validity of proceedings initiated u/s 132A - search and seizure - non-disclosing the “reason to believe” or "reason to suspect” - Held that:- The proceedings were initiated under Section 132A of the Income Tax Act, 1961 and the authorities came to the conclusion that person who was going in train, had cash/sale proceeds with him and the Income Tax Authorities came to the conclusion that it was concealed income. Apex Court in the case of N.K. Jewellers & Anr. Vs. Commissioner of Income Tax, New Delhi [2017 (9) TMI 1299 - SUPREME COURT] found that in view of amendment in Section 132A of the Income Tax Act, 1961 by the Finance Act, 2017 “reason to believe” or “reason to suspect” was not to be disclosed to any person or authority or Appellate Tribunal. Considering the law laid down by the Apex Court, the claim of the present petitioners is not justified at all. This Court finds that the ACJM, Mandal while deciding the application of the petitioner has clearly recorded a finding, after considering the case law, that the money which has been seized by the police can always be claimed by the petitioner, after the Income Tax Department concludes its proceedings, which have been initiated by issuing notice to the petitioner. This Court finds that in case summon to the petitioner was issued under Section 131 of the Income Tax Act and petitioner has been asked to explain the amount so seized, the authorities are bound to conclude the proceedings as per law and the petitioner has all the liberty to avail remedy provided against such order being passed.
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2018 (10) TMI 933
Entitled to deduction u/s 80P(2)(d) on interest received on investments made with Alapuzha District Cooperative Bank Limited - Held that:- The benefit of this section is available only for the interest / dividend that are received by a co-operative society for investments made with another co-operative society. In the instant case, the assessee had produced certificate of registration of the payer, viz., Alappuzha District Co-operative Bank Limited. also registered under the Reserve Bank of India under the Banking Regulations Act, 1949 for doing the business of banking. The first appellate authority, while dismissing the appeals filed by the assessee for the assessment year 2013- 2014 and 2014-2015, had elaborately considered the distinction between the co-operative society and a cooperative bank. The CIT(A) had categorically concluded that Alappuzha District Co-operative Bank Ltd. is is co-operative Bank and not a co-operative society. This categorical finding of the CIT(A), was never dispelled before the Tribunal. Admittedly, when the interest income is received from a cooperative bank, the recipient co-operative society would not be entitled to deduction u/s 80P(2)(d) - decided against assessee.
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2018 (10) TMI 932
Disallowance on account of pro-rate interest on loan u/s 36(i)(iii) - Held that:- Hon'ble Supreme Court in the case of CIT vs. Munjal Sales Corporation [2008 (2) TMI 19 - SUPREME COURT], wherein held that if assessee has huge interest free funds including the profit earned by the assessee during the year which is sufficient to cover the advancement of loan, then no interest should be disallowed. The assessee has demonstrated that the huge amount of money was lying in the capital of the partners and the profit earned during the relevant assessment year itself was approximately ₹ 1.19 crores. Therefore, such an availability of funds interest free is sufficient to cover up a small interest free loan of ₹ 16 lacs given to sister concern. Additions for the business purpose relating to furniture and fixtures and commercial expediencies - Held that:- Assessing Officer also ignored the loans and advances given to the sister concern. Therefore, this needs to be verified and therefore, we remand back this issue to the file of the Assessing Officer to adjudicate upon it as per the evidence produced before the Assessing Officer by the assessee. Needless to say, the assessee be given opportunity of hearing by following principals of natural justice. AO as well as the CIT(A) has not taken the cognizance of the evidence produced before the Assessing Officer more particularly that of balance sheet and its profit. Therefore, this issue also needs to be remanded back to the file of the Assessing Officer. Needless to say, the assessee be given opportunity of hearing by following principals of natural justice. Ground No. 4 is partly allowed for statistical purpose.
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2018 (10) TMI 931
Disallowance u/s 14A - Held that:- Disallowance under section 14A cannot be made where the dominant object of the investment is controlling interest. However the Hon‟ble Supreme Court in case of Maxxopp investments Ltd Vs. Commissioner of income tax (2018 (3) TMI 805 - SUPREME COURT OF INDIA) has held that the dominant purpose in making investment in shares is not relevant for the purpose of disallowance to be made under section 14 A of the act. We reverse the finding of CIT appeal and restore the order of the assessing officer so far as disallowance under section 14 A of the act is concerned. However the learned assessing officer is further directed to give the credit of the disallowance already offered by the assessee of ₹ 3 05815/– under section 14 A of the Act which is already offered by the assessee. If the above amount has already been added by the assessee in its computation of total income or during the course of assessment proceedings and is already taxed, the learned assessing officer is required to reduce the disallowance of ₹ 665592/– by the sum of ₹ 305815/–. Accordingly, ground No. 1 of the appeal of the revenue is partly allowed. Changed the method of valuation of the closing stock of shares from "at cost" to “at cost or market value, whichever is less” - Held that:- The valuation of the closing stock at cost or market value whichever is less is the most prudent method as it does not recognize the revenue which has not been earned by the assessee. Further it was not shown by the revenue that how the change in the method of the valuation of the closing stock is not bona fides. The decision in UCO BANK [1991 (7) TMI 5 - CALCUTTA HIGH COURT] relied upon by the ld AO supports the case of the assessee as assessee was following valuation method of "At cost" which is changed to "At cost or market value whichever is less‟ is more prudent. No infirmity in the order of the learned Commissioner of income tax appeals. Accordingly, ground of the appeal of the revenue is dismissed
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2018 (10) TMI 930
Monetary limit - tax effect - cumulative tax effect - Held that:- Paragraph 5 of CBDT Circular No.3/2012 had come up for consideration before the Hon’ble Karnataka High Court in the case of CIT, Central Circular Vs. PSI Hydraulics [2012 (10) TMI 1184 - KARNATAKA HIGH COURT] wherein held merely because the order of the CIT(A) is consolidated order passed for several years tax effect should not be seen for each AY separately. The Hon’ble Karnataka High Court held that paragraph 5 of Circular No.3/2013 was discriminatory and offended Article 14 of the Constitution of India. The Hon’ble High Court finally held that even though the cumulative tax effect in a common order passed by CIT(A) for several years is more than 10 lakhs but if the individual tax effect in each assessment year is less than the monetary limit prescribed in Circular No.3/2011, the same should be held to be not maintainable.
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2018 (10) TMI 929
Addition on account of excess stock found during the course of survey action - unrecorded and unexplained stock / expenditure - Held that:- The cost of items which has been recorded in the bill of entry, has been paid by the assessee. In terms of section 69C of the Act, if the assessee offers no explanation about the source of the expenditure, or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure, may be deemed to be the income of the assessee for such financial year. The assessee has failed to discharge his onus to explain the source of expenditure or how the same has been paid. There might be number of ways through which such expenditure could be adjusted between two parties which remain in the knowledge of the those parties. This may be by way of passing certain benefit to the Associated Enterprises also. Since, in the instant case, the assessee has not explained as how the said cost/price has been paid to the Associated Enterprises, thus, the lower authorities are justified in treating the said expenditure as unexplained expenditure and deemed income of the assessee. The ground of the appeal of the assessee is accordingly dismissed. Addition of foreign travel expenses - Held that:- We find that except standard explanation that participation of doctors in the International conferences helped in understanding the products, no documentary evidence which could specifically establish that expenses on hotel and registration of doctors was related to the business of the assessee are filed. The counsel of the assessee was asked by the bench to submit the detail of the conference in which the doctors participated and asked to explain, whether the products sold by the assessee were subject matter of those conferences, but no such evidences have been produced before us by the counsel of the assessee. The filing of copy of bills of expenditure on hotel or registration in itself cannot establish whether the expenditure has been incurred wholly and exclusively for the purpose of business. In view of the aforesaid discussion, we are of the opinion that action of the lower authorities in disallowing the expenses in dispute is justified in terms of section 37(1) of the Act. The ground of the appeal is accordingly dismissed. Disallowance of 4/5th of advertising and expenses - Held that:- It is undisputed that assessee has not claimed for such a spreading over of the expenditure. The only ground of disallowance in the year under consideration is in view of the decision of the Hon’ble Supreme Court cited by the Assessing Officer. The Tribunal in the preceding year has already deleted the disallowance made on similar ground, thus respectfully following the same, we set aside the finding of the Ld. CIT(A) on the issue in dispute and the disallowance made in the year under consideration is directed to be deleted.
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2018 (10) TMI 928
Deduction u/s 54F - capital gain arising on transfer of depreciable asset - whether the capital gain resulting from sale of depreciable assets is short term capital gain or long term capital gain for the purpose of exemption under Section 54F towards investment in new house - double deduction - Held that:- In the case of CIT vs. ACE Builders (P.) Ltd. [2005 (3) TMI 36 - BOMBAY HIGH COURT] has held that the legal fiction created in Section 50 is to deem capital gain as short term capital gain and not to deem an asset as short term capital asset and therefore it cannot be said that Section 50 converts long term capital asset into short term capital asset and therefore exemption under Section 54F is available for depreciable assets as Section 54F does not make any distinction between depreciable assets and non depreciable asset. CIT(A) also considered and followed the said decision of the Hon'ble Jurisdictional High Court in deciding the issue in favour of the assessee. Capital gain arising from depreciable assets is long term capital gain for the purpose of claiming exemption under Section 54F/54E of the Act. - Decided against revenue
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2018 (10) TMI 927
TDS u/s 195 - Limitation for issue of notice u/s 201(1)/201(1A) - proceedings initiated after lapse of 5 years - failure to deduct TDS on transfer of immovable property to the assessee by the non-resident - assessee in default - Held that:- In the instant case the fact that the vendor is NRI was recorded in the sale deed itself, as evident from the Ld.CIT(A)’s order and he is the resident of 7690A, Green Meadow, USA. Having recorded the residential status in sale deed no extra time is required to prosecute the matter against the payee and the payer. All the vendors are shown as residents of India. The assessing officer was under the impression that the vendor was resident of India, thus taken the time for initiating the proceedings u/s 201(1)(1A) of the act. Where as in the instant case residential status was recorded in the sale deed and the AO determined the nil demand in the assessment in representative capacity. The department could not demonstrate the reasons for delay. It is also observed from the facts that the department has initiated simultaneous proceedings against the assessee as well as the vendor. Therefore, the facts of the case law relied upon by the Ld.CIT(A) are distinguishable and not applicable to the assessee’s case. Since, the facts of the assessee's case are identical to the decision of the Tribunal in the case of Bheemarasetty Sunitha [2017 (8) TMI 476 - ITAT VISAKHAPATNAM], respectfully following the view taken by this Tribunal, we hold that the notice issued by the AO in this case is beyond 4 years and the same is barred by limitation. Therefore, we set aside the order of the CIT(A) and quash the orders passed u/s 201(1)/201(1A) by the AO and allow the appeal of the assessee.
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2018 (10) TMI 926
Penalty levied u/s 271(1)(c) - non specification of charge - defective notice - Held that:- From the notice it is not clear whether Assessing Officer has initiated penalty proceedings for concealment of particulars of income or for furnished inaccurate particulars, however, the Assessing Officer has imposed penalty for filing of inaccurate particulars of income. Therefore, the notice issued by the Assessing Officer is a vague notice and is liable to be quashed in the light of the decision of the Hon'ble Jurisdictional High Court in the case of Smt. Baisetty Revathi (2017 (7) TMI 776 - ANDHRA PRADESH HIGH COURT) and also the decision of the Hon'ble Supreme Court in the case of SSA‟s Emerald Meadows (2016 (8) TMI 1145 - SUPREME COURT). - decided in favour of assessee
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2018 (10) TMI 925
Addition on account of machinery surrendered during the course of survey - whether the assessee made any payment out of undisclosed sources for acquiring the 6 moulding machines which were found at the factory premise of the assessee during the course of survey proceeding - cording statement at midnight though the assessee has alleged that the statement was recorded under pressure and intimidation - Held that:- On perusal of the statement, we find that there is no evidence that the statement of Sh. Sachdeva, particularly, the surrender was recorded at midnight. At the beginning of the statement, the date is recorded as 01/10/2010, whereas at end of the statement the date recorded is 02/10/2010. Thus, possibility of recording the statement in daylight of 02/10/2010 could not be rejected. Merely mentioning the date at the end of the statement as 2/10/2010, it cannot be presumed that it was recorded at midnight of 01/10/2010. No such fact has been asserted by Sh. Sachdeva before the lower authorities. The assessee firm, is interpreting the statements of Sh. Sachdeva according to its choices. Thus, the ratio in the case of Kailash Ben Manharlal Chokshi [2008 (9) TMI 525 - GUJARAT HIGH COURT] cannot be imported to the facts of the instant case. As during the course of survey the assessee surrendered income of ₹ 1,30,19,418/- which included surrender on account of unexplained cash of ₹ 9,25,018/- unexplained creditors of ₹ 29,56,944/- and unexplained investment in machines and moulds of ₹ 91,37,456/-. The assessee has duly honoured the surrender of unexplained cash and unexplained creditors. It cannot be understood as how, there is no allegation of pressure or intimidation in respect of surrender of unexplained cash and unexplained creditors and there is only pressure or intimidation in respect of unexplained investment in machines and moulds. As during the course of survey proceeding, the assessee tendered cheques amounting to ₹ 40,23,000/- corresponding to the tax liability on the income surrendered ₹ 1,30,19,418/-. The cheques were deposited in bank by the tax authorities subsequent to the survey proceedings. If the statement was recorded under pressure or intimidation, the assessee should have objected immediately and requested the bank to dishonour those cheques. As far as records of the case before us, no such request was made by the assessee either to the Income-tax Authorities for not to deposit the said cheques or to the bank authorities to stop the payment of those cheques. Allegation of pressure and intimidation on Sh. Sachdeva by the survey team is without any basis or supporting evidence and accordingly same are rejected. Whether the statement recorded on oath under survey proceedings could be accepted as a statement recorded as per law and it could be made basis for making addition? - Held that:- We find that in the instant case, the Ld. CIT(A) has upheld the addition not merely in view of the statement of Sh. Sachdeva or surrender of the income corresponding to investment in machinery, but the Ld. CIT(A) has examined the addition in view of the provisions of section 69A, where if the assessee is found to be owner of a valuable article and same is not found to be recorded in the books of accounts, the assessee is required to explain satisfactorily the source of acquisition of said article and in case of failure it is deemed to be the income of the assessee. It is extremely necessary to examine genuineness of the correspondence between the assessee and M/s Amman Hydraulics (India) and other records of the assessee as well as records of M/s Amaan Hydraulics (India). Without examining and verifying the records in this respect, rejecting the contention of the assessee in holding that investment in machines was made out of undisclosed sources would not be justified and against the conscience of Justice. We feel it appropriate to restore this issue in dispute to the file of the Ld. CIT(A) for carrying out enquiries as mentioned above. He may remand the matter to the AO, if circumstances so requires. The assessee is directed to produce proprietor of M/s Amaan Hydrolic (India) before the authorities alongwith all necessary documentary evidences for cross-examination by him. The assessee may be provided results of the enquiries and cross-examination by the Income-tax Authorities and also afforded adequate opportunity of being heard. CIT(A) is then directed to decide the issue in dispute in accordance with law without prejudice by our observations above. The grounds of the appeal are accordingly allowed for statistical purposes.
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2018 (10) TMI 924
Addition u/s 69A on account of unexplained unsecured loans - Held that:- There is a material on record and finding of fact by the Ld. CIT(A) which has not been rebutted by the department that out of the said amount added by the AO, sums aggregating to ₹ 89,42,500/- were in fact cheques given to the assessee on 31.3.2010 which were not presented to the bank before the end of the year and once the amount has not been received during the year nor credited in the bank account of the assessee or in the books, then no addition for amount of ₹ 89,42,500/- could have been made. The remaining balance amount of ₹ 45,02,898/- relates to purchases made from M/s. Raj Overseas, where regular running ledger account and other documents like purchase bills, etc., were produced before the authorities below to show that it is a genuine purchase transaction and how this amount has been treated as unsecured loan by the AO is not clear. Apart from these facts, it is also noted that these parties in response to the notices u/s 133(6) have clearly confirmed this aspect, but AO without applying his mind on the material available on record has made the addition simply because these persons could have furnished their replies along with documentary evidences. Such observation de hors any material facts or evidences, we do not find any reasons for such an addition, therefore it has rightly been deleted by the Ld. CIT(A). - Decided in favour of assessee.
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2018 (10) TMI 923
TPA - Transfer pricing - selection of comparable - selection criteria - Held that:- The assessee is engaged in the business of manufacture and trading of laboratory and processing equipment. The assessee imports products from IKA Group for sale in the domestic market and also undertakes manufacturing operations locally to export the products to IKA Group. In addition, the assessee also provides research and development services and marketing and technical support services to Group companies, thus companies functionally dissimilar with that of assessee need to be deselected. Capacity adjustment to account for differences in capacity utilization of the Appellant vis-à-vis the comparable - Held that:- The Indian transfer pricing regulations, OECD Guidelines and the US transfer pricing regulations call for an adjustment to be made in case of material differences in the transactions or the enterprises being compared so as to arrive at a more reliable arm's length price/ margin. While the Indian transfer pricing regulations refer to the adjustments on uncontrolled transactions, however the same has to be read with Rule10B(3) of the Rules which clearly emphasizes the necessity and compulsion of undertaking adjustments. Hence in case appropriate adjustments cannot be made to the uncontrolled transaction, due to lack of data, then in order to read the provisions of transfer pricing regulations in harmony, the adjustments should be made on the tested party. - adjustment to the profit margins have to be made on account of underutilization of capacity. Disallowance of prior period expenses - non deduction of tds - Held that:- The Assessee had made disallowance of the disputed sum for the reason that tax was not deducted at source on the provision so made in the books and in view of the provisions of Sec.40(a)(ia) for non deduction of tax at source, the expenditure cannot be allowed as deduction. The limited prayer of the learned counsel for the Assessee was that as and when TDS is paid the deduction in question has to be allowed. We are of the view that the prayer for allowing deduction of expenses in the year in which TDS is paid to the Government is acceptable subject to the condition that the liability in question should be crystalized/ascertained. It is made clear that crystallization even if it is in earlier period should not result in disallowance u/s.40(a)(ia) of the Act and on payment of TDS the deduction should be allowed subject to such expenses being otherwise allowable.
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2018 (10) TMI 922
Deemed Dividend u/s 2(22)(e) - beneficial or the registered shareholder of the company - Held that:- Under Article 141 of the Constitution, ratio of decision of the Hon’ble Supreme Court and principle underlying decision is binding. It is most crucial to note that in that case matter was referred to reconsider the earlier decision with their observation that for applying deemed dividend provision it is sufficient if the shareholder is beneficial shareholder. It need not be necessary that shareholder must be registered shareholder. Because as per earlier decision for applying deemed dividend shareholder must satisfy both character of shareholder i.e. Registered as well as beneficial shareholder. Shareholder needs to be beneficial Shareholder. If the shareholder is not a beneficial shareholder then as per this observation also provisions of deemed dividend will not apply. Hence, all the decision supports the contention of assessee that deemed divided cannot be apply in assessee’s hand as it is neither registered nor beneficial shareholder of EIPL. We can safely conclude that since assessee was neither the beneficial nor the registered shareholder of the company, the amount so received is not liable to be taxed as deemed dividend. Moreover, the transaction between two group concerns were in the nature of current account and inter banking account containing both types of entries i.e., receipts and payments, the same cannot be brought in the purview of loans and advances so as to attract Section 2(22)(e). - Decided in favour of assessee.
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2018 (10) TMI 921
Exclusion of claim on account of interest for computing deduction u/s 10B - As decided in assessee's own case for Assessment Year 2009-10 [2015 (2) TMI 102 - ITAT DELHI] interest income having close nexus with the business activity of the assessee is assessable as income from business and, hence, eligible for the benefit u/s 10A and section 10B. In view of the above discussion, we hold that the assessee is entitled to deduction u/s 10B of the Act in respect of the interest income earned on FDRs made for the purposes of keeping margin money or for availing any other credit facility from banks. The impugned order on the issue of deduction u/s 10B is set aside and the matter is sent back to the AO for computing deduction u/s 10B afresh in conformity with our above findings and conclusions. Non exclusion of the amount claimed as interest paid on loan used for the purpose of construction of property while computing the business income - Held that:- Undisputedly the assessee has paid the interest on loan utilized for the construction of property had shown its income under the head ‘income from house property’, interest thereon is allowable deduction u/s 24B of the Act. So following the decision rendered by co-ordinate bench of Tribunal in its own case for Assessment Year 2009-10 [2015 (2) TMI 102 - ITAT DELHI], we direct the AO to allow the deduction claimed by the assess after verifying the amount of loan utilized, interest paid thereon and thereafter assess the income from the house property earned by the assessee, by providing opportunity of being heard. So ground determined in favour of the assessee. Non exclusion of the scrap sale from turn over as well as total turnover while computing the deduction u/s 10B - Held that:- The amount of sale of scrap is not includable in the total turnover or local turn over as the assessee is not into the business of scraps, so we find no illegality or perversity in the findings returned by the ld. CIT(A), hence ground determined against the assessee.
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2018 (10) TMI 920
Penalty u/s.271(1)(c) - disallowance of expenses - assessee claimed the expenses were for business purpose only and not for personal purpose - Held that:- Company is engaged in the business of financial services for its clients and during the year under consideration the company was not able to get fruitful results for its clients and hence, no fees were earned by the company during the year under consideration. Since, the expenses are of fixed and administrative nature, they had to be incurred by the company during the year under consideration. Thus, there was no case of concealment of income nor there was any case of furnishing inaccurate particulars since the expenses incurred by the company are pertaining to the company itself and duly reflected in the return of income filed u/s. 139(1) for the year under consideration i.e. A.Y. 2012-13. The allegation of the AO that the expenses incurred are /or personal purpose since there is no income earned during the year under consideration without bringing any corroborative evidence on record is misplaced, accordingly, the penalty levied on this very ground is not sustainable. The CIT(A) has dealt with the issue threadbare and reached to the conclusion that even if the assessee has not carried any business during the previous year relevant to the assessment year, the expenses debited towards depreciation, bad debts, administrative expenses which are statutory in nature are to be incurred for complying with legal and statutory requirements under various laws are allowable deductions. Even if the AO disallowed these expenses during the course of Assessment, penalty is not leviable as the AO has not pointed out the concealment of particulars of income or furnished inaccurate particulars of income by assessee. No penalty is leviable in the instant case. - Decided in favour of assessee.
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2018 (10) TMI 919
Addition invoking the provisions of Section 14A r.w.r.8D - Held that:- As held in STHITHI INSURANCE SERVICES PVT. LTD. AND VICE-VERSA [2018 (6) TMI 1538 - ITAT CHENNAI] application of Rule 8D is not automatic. If the assessee computes to the satisfaction of the Ld.Revenue Authorities the expenses incurred by it with respect to investments earning exempt dividend then the same should be disallowed. Only when such computation is not possible Rule 8D should be applied for computing the disallowance U/s.14A of the Act. Since we have already decided the issue with respect to computation of disallowance U/s.14A r.w.r. 8D of the Rules in the decision cited supra, we remit back the matter to the file of Ld.AO to compute the disallowance U/s.14A of the Act in the similar manner. - Decided in favour of assessee for statistical purposes
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2018 (10) TMI 918
Disallowing the deduction of Interest paid on overdraft facility claimed by the appellant from Interest earned on FDR u/s 57(iii) - Held that:- There is no dispute that the assessee purchased FD of ₹ 12 crores out of interest free loan from one trustee, namely, Dr [Mrs] Vimla Lal. There is no dispute that the assessee availed overdraft facility against the said FD and utilised the borrowing towards purchase of shares of a group company. In our considered opinion, the assessee had two options, viz., the assessee could have liquidated the FD and utilised the amount towards purchase of shares of group company and, secondly, the assessee could have taken over draft the FD and utilised the funds towards the purchase of shares of group company. The assessee opted for second option. The source of interest earning remained intact. In doing so, the assessee had to incur interest expenditure on overdraft. The source of income and application of income is same, i.e. FD. Therefore, in our considerate view, netting off of interest has to be allowed to the assessee. Our view is also fortified by the judgment in the case of ACG Associated Capsules [P] Ltd [2012 (2) TMI 101 - SUPREME COURT OF INDIA]. Ground No. 1 is accordingly allowed. Disallowance of short term capital loss - Held that:- It is true that the assessee accepted the shares of M/s Varun Industries Ltd as security against the loan given to Swati Rajesh Shah. It is equally true that the assessee has nothing to do with the profits /losses in the sale of shares of M/s Varun Industries Ltd. If the sale transactions would have resulted into gain, we are certain that the assessee would not have paid the tax on the gains on the plea that the gain belongs to Swati Rajesh Shah. By the same analogy, any loss on sale of shares belong to Swati Rajesh Shah and the assessee has been rightly denied claim of loss.
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2018 (10) TMI 917
Revision u/s 263 - section 14A disallowance - Held that:- The assessee has shown profit on sale on investment of ₹ 3,21,933/- in its statement of computation for assessment year 2011-12. The assessee in its reply to the show cause notice has specifically contended that the assessee has not earned any exempt income during the year. The amount of ₹ 3,21,933/- shown in the computation of income is not exempt income. It has been offered as short term capital gain - there is no question of apportioning the expenses on exempt income. The Hon'ble Delhi High Court in the case of Chemnivest Ltd. vs. CIT [2015 (9) TMI 238 - DELHI HIGH COURT] held that section 14A will not apply if no exempt income is received or receivable during the relevant previous year. Further in the case of CIT vs. Chettinad Logistics (P.) Ltd. [2017 (4) TMI 298 - MADRAS HIGH COURT], also took a similar view that Section 14A cannot be invoked where no exempt income was earned by the assessee. Therefore, we find that the order of the Assessing Officer is neither erroneous nor prejudicial to the interest of the Revenue. Therefore, no revision under section 263 of the Act is warranted for disallowance under section 14A of the Act. Deletion of assets from block of assets - Held that:- As seen that there is no reference in the assessment order about this issue. The assessee contended before the Ld. PCIT that value of lease hold improvement was completely extinguished or written off by the assessee, therefore, it should not be reduced from the block of assets for the purpose of computation of depreciation. The assessee has not given any explanation regarding the write off of “furniture and fixtures”. As we have noted above there is no reference about the issue in the assessment order, if it was examine by the AO or not, therefore, non consideration of the issue by the AO makes the order erroneous as well as prejudicial to the interest of the revenue. Therefore, the contention of the ld. AR of the assessee on this issue is not acceptable. Interest paid on late deposit of tax - Held that:- We have noted that this issue has not been examined by the Assessing Officer as there is no reference in the assessment order. Therefore, we uphold the order passed by ld. PCIT on this issue. Revised relates to packing material not routed through P&L Account - Held that:- Perusal of assessment order reveals that AO has not discussed the issue while allowing relief to the assessee. We have further noted that the PCIT has recorded that the submission of AR found to be acceptable, however, it was further observed by the PCIT that necessary details regarding opening stock, purchase, consumption/sale and the closing stock at the end of the year was not furnished. On the basis of his observation Ld. PCIT concluded that AO failed to made enquiry and proper application of mind, therefore, the order passed by the AO is erroneous and prejudicial to the interest of revenue. PCIT has accepted the submission of assessee on the issue and not identified as to which information or details were not furnished. Once the Ld. PCIT accepted the explanation and reasoning furnished by the assessee no further necessary details are required to be verified with regard to opening stock, purchase and consumption and closing stock. Therefore, in our view the order on this issue is not erroneous. - Appeal decided partly in favour of assessee.
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2018 (10) TMI 916
Addition being cash deposits made into the bank accounts of the assessee - Held that:- We are unable to agree with the percentage of profit claimed by the assessee. The fact that the receipts are coming from faraway places also show that the assessee should be incurring expenses in his business. Under these set of facts, we are of the view that this issue may be put to rest, if the “net income”, i.e., net of all expenses is estimated at 5% of the aggregate amount of deposits. Accordingly we direct the AO to estimate the business income of the assessee @ 5% of aggregate amount of deposits. The assessee has already declared a sum of ₹ 2,04,525/- as his business income. Hence the difference between the business income estimated at 5% of aggregate amount of deposits and the business income declared by the assessee shall be added by the AO. Appeal filed by the assessee is partly allowed.
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2018 (10) TMI 915
Addition u/s. 14 A r.w.r. 8D - Held that:- The assessee has claimed exempt dividend income of ₹ 13038588/- and that was earned from non interest bearing funds and assessee has not made any expenditure in order to earn above said income. similar facts, ITAT decided matter in favour of assessee and a lump sum disallowance of ₹ 20,000/- was made. Therefore with consonance to the aforesaid ITAT order, we dismiss this ground of appeal of the department. Disallowance u/s 14A - Held that:- So far ground with regard to directing AO not to consider the investment made in HDFC Fixed Mutual fund and HDFC cash management fund for the purpose of computation of disallowance out of interest paid as per sub clause 8D(2)(ii) but to consider these investments for making disallowances as per rule 8D(2)(iii) without appreciating fact that rule 8D(ii)(b) the average value of investment, income from which does not or shall not form part of total income as appearing in balance sheet of the assessee, on the first day and the last day of the previous year has to be taken for computing disallowance under sub clause (ii) of clause (2) of Rule 8D. So far ground related to directing for not considering the interest paid on term loan of ₹ 1,68,50,925/- for computation as per Rule 8D without appreciating the fact that as per Rule 8D(ii)A amount of expenditure by way of interest other than amount of interest included in clause (i) incurred during the previous year is to be taken for working out disallowance under sub clause (ii) of clause (2) of Rule 8D. There is no provision in Rule 8D to exclude part of the interest for working out the disallowance u/s 14A. Ld. A.O. has discussed the issue at page no. 2 to 4 and ld. CIT(A) has discussed the issue at page no. 2 to 13. Since in assessee’s own case for assessment year 2008-09 and 2009-10, disallowance u/s. 14A restricted to ₹ 20,000/- on lump sum basis and ld. CIT(A) in impugned year follows appellate order for assessment year 2008-09 & 2009-10 and accordingly disallowance in quantum appeals are restricted to ₹ 20,000/- by the ITAT . Accordingly, this became infructuous.
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2018 (10) TMI 914
Addition towards deemed dividend U/s.2(22)(e) - Held that:- From the order of the CIT(A), it is crystal clear that there was various commercial factors existing between the assessee and M/s. Samba Publishing Company Pvt. Ltd. The business transaction between the assessee and M/s. Samba Publishing Company Pvt. Ltd., were intermingled and both the entities were consistently working together to develop a common business. The circular of the CBDT cited supra squarely applies to the case of the assessee which specifically narrows down the scope of the rigger in the provision of Section 2(22)(e) of the Act. In the case of the assessee, outstanding balances occurred due to commercial exigencies such as regular trading business and consistent services rendered by the assessee. In these circumstances the provision of Section 2(22)(e) cannot be invoked as clarified by the CBDT circular cited supra. Further the case laws referred by the CIT(A) extracted herein above also squarely applies to the case of the assessee. In this situation, we do not find it necessary to interfere in the order of the Ld.CIT(A). - Decided against revenue.
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2018 (10) TMI 878
Addition on account of un-explained loan - allegation that invester is engaged in providing accommodation entries to several beneficiaries with the help of several bank accounts opened in the name of several proprietary concerns and companies - Held that:- It is clear that assessee produced sufficient documentary evidences before AO to prove the ingredients of Section 68 of the Act. The AO, however, did not make further enquiry on the documents filed by the assessee. The AO has thus, failed to conduct scrutiny of the documents at assessment stage and merely suspected the transaction between the investor company and the assessee because some materials found during the course of search in the case of Sh. Aseem Kumar Gupta or his statement recorded, but these would not prove anything against the assessee. It is not reported, if any, cash was found deposited in the account of the investor before making investment in assessee company. Therefore, clearly prove that assessee discharged its initial onus to prove the identity of the investor company, its creditworthiness and genuineness of the transaction in the matter. Addition on account of unexplained loan deleted - decided in favour of assessee. Addition on account of income from house property - Held that:- AO has been increasing the rent 10% every year which is not justified, which was even as per Rent Control Act, the rent could be enhanced after three years. In the absence of any justification or reasons, we are of the view that rent should not be enhanced every year by the AO particularly without there being any evidence with the AO. We may not note that in AY 2009-10, AO has made the addition of ₹ 3,77,520/- on account of income from house property for both these properties after allowing statutory deduction. It appears that assessee did not challenge the same computation before the appellate authorities. Therefore, considering the past history of the assessee and the annual rental value decided by the AO in preceding AY 2009-10 at ₹ 3,77,520/- for both the properties, we set aside the orders of the authorities below and direct the AO to adopt the same amount as income from house property in a sum of ₹ 3,77,520/- and make addition accordingly. The addition is, therefore, restricted to ₹ 3,77,520/- instead of ₹ 4,36,036/-. This ground of appeal of the assessee is partly allowed.
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Customs
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2018 (10) TMI 911
Principles of natural justice - Petitioner's request for cross-examination of Mr. D'souza and Mr. Shete, being persons whose statements are relied upon in the show cause notice, was rejected - Held that:- It is clear that the Respondent No.2 Commissioner of Customs (Import) is not seeking to rely upon the statements of Mr. D'souza and Mr. Shete, for adjudicating the show cause notice. Therefore, in these circumstances, no fault can be found with the impugned communication dated 6th September, 2018, rejecting the Petitioner's request for cross-examination of Mr. D'souza and Mr. Shete. No prejudice is caused to the Petitioner with not giving of cross-examination of Mr. D'souza and Mr. Shete. - Petition dismissed.
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2018 (10) TMI 910
Jurisdiction - CBI - Proper Officer - contentions raised before the trial court in their discharge petitions are that CBI is not proper officer to decide about under valuation - The contentions of A1 to A3 is that the UO letters were sent by them on the approval and instruction of the Commissioner, who is the controlling Officer, therefore, they cannot be prosecuted either for 120(B) I.P.C, conspiracy, 420 of IPC, cheating or misappropriation under Section 13(C) of Prevention and Corruption Act. Held that:- The disputed fact whether the respective UO letters referred above sent by the accused A1 to A3 were issued with the knowledge of the Commissioner or can be decided only after trial. The UO letters issued by A1 to A3 were not part of their duty but created falsely to cheat the exchequer. No element of duty is found in issuing a misleading, false document under the capture UO letter. Hence, Section 155 (2) of the Customs Act have no relevance. The said Section 155 of Customs Act places embargo for mitigating proceedings against the customs official only in respect of the act done in the course of their duty in consonance with the act, not for the acts done dishonestly and contrary to law. The Section 155 of the customs act refers to act done in good faith, in pursuance of this Act or the rules or regulations are protected from legal proceedings. The sub Section (2) of Section 155 puts embargo to initiate any proceedings, without a months notice, for anything purporting to be done in pursuance of this Act. Issuing UO letters contrary to Act, rules and Regulations containing falsehood does not attract Section 155 of the Act, to claim protection. Hence, the orders of the trial court dismissing the discharge petitions are liable to be confirmed. Petition dismissed.
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2018 (10) TMI 909
Petition for inventorisation - Smuggling - Gold - petitioner would submit that the petition for inventorisation of seized goods does not deserve indulgence of the Court for failing to address the genuine grievance or apprehension faced by the petitioner necessitating inventorisation under Section 110(1A) of the Customs Act, 1962 - Held that:- The learned Magistrate has rightly gone into the entire details as per Section 110 (1B) and 110 (1C) of the Customs Act, 1962. Since the Magistrate has conducted inspection and issued certificate for inventorisation of seized goods, based on the instructions from the department, nothing survives in this Criminal Revision Case. Therefore, there is no perversity in the order passed by the learned Additional Chief Metropolitan Magistrate, E.O.II, Egmore, Chennai - this Criminal Revision Case is dismissed.
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2018 (10) TMI 908
SEZ Unit - smuggling Gold - Confiscation - penalty - Held that:- There is no dispute about illicit transaction of gold bars as well as gold jewellery between M/s D. Jewel and M/s Choksi Vachhraj Makanji that the gold bars imported by M/s D. Jewel in their SEZ Unit were removed without any documentation and without following the procedure. The SEZ is area which is considered as foreign territory for all the purpose of taxation, duties etc. therefore, the goods cannot remove into and out side SEZ freely. The goods imported by SEZ are meant for either export as such or for manufacture of export goods. The appellant knowingly removed the gold bars of SEZ without proper procedure. The excuse given by the appellant is that there is an urgency to execute the export order, however, the law does not provide any relaxation for any reason, therefore, appellants have admittedly violated the provision of SEZ Act and Rules as well as the provision of Customs Act. The appellant could not get any relief only by mentioning the commercial reason, if the excuses given by the appellant is accepted it would lead the situation whereby giving any excuse whole scheme of SEZ can be planted. Penalty on partners - Held that:- High Court of Gujarat in the case of CCE, Vs. Jai Prakash Motwani (Supra) categorically held that when the penalty on partnership firm is imposed no separate penalty should be imposed on the partner as a partnership firm is consist of partners - separate penalty on the partner should not be imposed. Penalty on employees - Held that:- They are mere employees working under the direction of their employer firm - penalty not justified. Appeal allowed in part.
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2018 (10) TMI 907
Redemption of confiscated goods - Smuggling - Gold - foreign currencies - prohibited item or not - absolute confiscation - penalty - whether the adjudicating authority as a discretion to release the gold confiscated or the seized gold requires allowing to be redeemed on payment of find in lieu of confiscation in terms of Section 125 of the Customs Act, 1962? Held that:- A plain reading of Section 125 of the Customs Act gives understanding that while the adjudging officer may permit the redemption of goods on payment of fine in lieu of confiscation of goods which are prohibited in nature, he shall, in the case of other goods 'may' permit redemption on payment of fine in lieu of confiscation - There are two situations which emerge out of the legal position which needs to be addressed; firstly, whether the impugned goods are in the nature of prohibited goods wherein the adjudicating authority has an option to permit the goods to be redeemed on payment of fine in lieu of confiscation. Secondly, whether the adjudging officer has a discretion so as to allow or not such goods to be redeemed on payment of fine in lieu of confiscation. For the goods to acquire a nature of being prohibited who either be prohibited under Customs Act or any other law for the time being in force or the goods should have been imported wherein the conditions subject to which the goods are permitted to be imported are not complied with - As per the records of the case, the appellant have not submitted anything to show on record that the goods have been properly imported. It is to be inferred that the impugned gold has been imported without following the due process of law that is to say without following the procedures thereof. Therefore, it is to be held that the impugned goods have acquired the nature of being prohibited goods in view of Section 2 (33) of the Customs Act, 1962. Having found that the impugned goods have acquired the nature of prohibited goods, the issue which remains to be decided as to whether the adjudicating authority can exercise in discretion to allow the goods to be redeemed - Going by the wordings of Section 125, it is clear that in such circumstances i.e. whether the goods are prohibited, the adjudicating authority 'may' permit the redemption - However, the Tribunal cannot sit in judgment over the discretion exercised by the competent authority duly empowered under the statute. This Bench of the Tribunal in a case involving identical circumstances has upheld the absolute confiscation of gold biscuits of foreign origin seized from a passenger who claimed that the same were purchased in Mumbai. Appeal dismissed - decided against appellant.
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Insolvency & Bankruptcy
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2018 (10) TMI 913
Corporate insolvency process - original order was passed by the Adjudicating Authority without issuing notice to the ‘Corporate Debtor’ - Held that:- If the entire scheme of the I&B Code is seen, it will be evident that the Code is to consolidate and amend the laws relating to reorganisation and insolvency resolution of ‘corporate persons’, ‘partnership firms’ and ‘individual’ in a time bound manner. It is a self-contained Code which is exhaustive in nature when it comes to reorganisation and insolvency resolution. An exception had been carved out while enacting the Code that the ‘financial service providers’ have been kept outside the purview of the Code. Being a consolidating legislation only those acts are permitted which are mentioned in the Code and it cannot be made applicable to ‘financial service providers’ including ‘non-banking financial institutions’ and MFI’s banks, which have been kept outside the purview of the Code. The Adjudicating Authority has failed to notice the aforesaid provisions and passed the impugned order dated 8th January, 2018 initiating ‘insolvency corporate resolution process’ against ‘M/s. Mayfair Capital Pvt. Ltd.’, a ‘financial service provider’ (non-banking financial company). As the appellant was not a party before the Adjudicating Authority and the order was passed without notice to ‘M/s. Mayfair Capital Pvt. Ltd.’ (2nd Respondent), which has not been disputed by the 1st respondent and the appeal has been preferred immediately after the impugned order, this appeal cannot be dismissed on the ground of limitation having filed immediately when the appellant came to know the same. The impugned order having passed against the ‘financial service provider’ (non-financial company), is fit to be set aside. Accordingly, we set aside the impugned order dated 8th January, 2018 passed by the Adjudicating Authority.
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2018 (10) TMI 912
Initiation of ‘Corporate Insolvency Resolution Process’ - Held that:- While we accept that the appellant cannot raise any objection with regard to the evidence if filed by the respondent (Financial Creditor), but we are of the opinion that before giving hearing to the appellant (Corporate Debtor), Adjudicating Authority should have given an opportunity to file a reply in view of the decision of the Hon’ble Supreme Court in “Innoventive Industries Ltd. Vs. ICICI Bank and Ors.[2017 (9) TMI 58 - SUPREME COURT OF INDIA]. In the said judgment, Hon’ble Supreme Court in paragraph 28 etc., has allowed to the ‘Corporate Debtor’ to raise the objection. The Adjudicating Authority having failed to notice the aforesaid provision, we set aside the impugned order. If any reply is filed by the appellant within ten days, the Adjudicating Authority will take into consideration the same before passing order of admission or rejection of the application under Section 7 of the I&B Code. As we have granted ten days’ time to the appellant to file reply, we may also grant one week’s time to the respondent (Financial Creditor) to file rejoinder.
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Service Tax
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2018 (10) TMI 905
Rectification of Mistake - Held that:- In the order dated 20.09.2018 passed in main petition due to oversight, the dues of the petitioner were referred to as GST instead of service tax dues. The said error shall stand corrected - ROM Application allowed.
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2018 (10) TMI 904
Validity of demand of service tax after migration to GST Regime - Proceedings initiated u/s 73(i) of the Finance Act of 1994 - Applicability of Section 6 of the General Clauses Act - whether omission of the provisions of a statue render any proceeding initiated under it to be not maintainable any further? - Scope of Section 173 of the Central Goods and Service Tax Act, 2017 Held that:- From the propositions laid down in Fibre Board Pvt. Ltd. [2015 (8) TMI 482 - SUPREME COURT] it is discernible that the earlier propositions laid down Rayala Corporaion (P) Ltd [1969 (7) TMI 109 - SUPREME COURT OF INDIA] and in Kolhapur Canesugar Works Ltd. [2000 (2) TMI 823 - SUPREME COURT OF INDIA], to the extent that Section 6 of the General Clauses Act applies only in respect of a repeal and not to omission of an enactment is an obiter dicta, which is not binding. Secondly, it also cannot be said that the repeal of an enactment does not include the omission and to that extent, the law that is applicable to the repeal of an enactment would also be applicable to that of an omission and no distinction can be made between the two. Thirdly, the proposition as regards inapplicability of Section 6 of the General Clauses Act in respect of an omission of an enactment resulting in an impermissibility to continue further a proceeding that had been initiated under omitted enactment, merely based upon the proposition laid down in Rayala Corporaion (P) Ltd. and in Kolhapur Canesugar Works Ltd. would also have to be looked from the perspective of the provisions of Section 6-A of the General Clauses Act. It is the contention of Mr. KN Choudhury, learned Senior counsel that the pronouncement in Rayala and Kolhapur being a decision by the Constitution Bench would prevail over the pronouncement in FibreBoard Pvt. Ltd. - The said contention of the learned Senior Counsel for the petitioner would have to be looked into from the point of view as to whether the decision rendered in Fibre Board Pvt. Ltd. is a decision which is in conflict with the view expressed in Rayala Corporation (P) Ltd and in Kolhapur Canesugar Works Ltd. We take note of paragraph 30 of FibreBoard Pvt. Ltd, wherein the Supreme Court was conscious of the fact that in the event, a conflicting view is to be taken to an earlier pronouncement by a larger bench, it requires a reference to a larger bench. While dealing with the proposition laid down in Rayala Corporation (P) Ltd (supra) and in Kolhapur Canesugar Works Ltd., the Supreme Court was conscious of the aspect of referring the matter to a larger bench, but thought it to be not required in view of what had been laid down in the said decision. - it is apparent that the propositions of law laid down in Rayala Corporation (P) Ltd (supra) and in Kolhapur Canesugar Works Ltd. had in fact been clarified and therefore it cannot be a pronouncement in conflict that the pronouncement in Rayala Corporation (P) Ltd and in Kolhapur Canesugar Works Ltd. The Division Bench of the Supreme Court in Fibre Board Pvt. Ltd., had deliberated, discussed and explained the proposition laid down in Rayala Corporation (P) Ltd (supra) and in Kolhapur Canesugar Works Ltd. and it is not a case where a contrary view had been taken by remaining oblivious to the proposition laid down in Rayala Corporation (P) Ltd and in Kolhapur Canesugar Works Ltd. The view expressed in Fibre Board Pvt. Ltd., are also views under Article 141 of the Constitution of India and are binding on the High Court. Paragraph 37 of Kolhapur Canesugar Works Ltd. provides that if a statute stood omitted with a savings clause, the savings clause would not render it impermissible for the proceedings initiated/to be initiated under Chapter V of the Finance Act of 1994, which stood omitted by Section 173 of the CGST Act of 2017 to be continued - A conjoint reading of the provisions laid down in paragraph 37 of Kolhapur Canesugar Works Ltd. and Section 173 and 174(2)(e) would lead to a conclusion that although Chapter V of the Finance Act of 1994 stood omitted under Section 173, but the savings clause provided under Section 174(2)(e) will enable the continuation of the investigation, enquiry, verification etc., that were made/to be made under Chapter V of the Finance Act of 1994. The writ petition to be devoid of any merit and the relief sought for interfering with the demand-cum-show cause notices of various dates issued by the Assistant Commissioner Central Goods and Service Tax of the different districts would have to stand rejected - petition dismissed.
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2018 (10) TMI 903
Whether in the facts and circumstances of the case and in law was the Tribunal right in holding that the services rendered by the Assessee amounted to export of service? Held that:- The Revenue is unable to point out any distinction in the facts and in law in this case from that in the decision of this Court in SGS India Pvt.Ltd. [2014 (5) TMI 105 - BOMBAY HIGH COURT] - there is no reason to interfere in this Appeal - appeal dismissed.
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2018 (10) TMI 902
Liability of service tax - Chit transaction - Amendment to sub-section (44) of Section 65B of the Finance Act in 2015 - Revenue contends that the amendment is merely clarificatory in nature and would be applicable from 2012 onwards - Held that:- The amendment made in 2015 cannot be said to be clarificatory and there can be no retrospective operation given to such amendment. The legislature felt the need for inclusion of the transactions within the fold of service and hence amended the Finance Act, 1994 by Finance Act, 2015. As a corollary it has to be understood that it was not taxable prior to the amendment. The assessees claim refund of the amount already paid on demand made by the authorities - The matter will have to be considered, especially, looking into whether the tax was collected from individual subscribers and if so collected, whether there could be any refund effected - appeal allowed by way of remand.
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2018 (10) TMI 901
Refund claim - duty paid under protest - interpretation of statute - 'Distinct Person' - Club or Association service - grounds assigned for claim of refund were that there are no distinct persons viz, service provider and service receiver and since the person contributing and benefiting are the same, as per the principles of mutuality, the activities should not be subjected to levy of service tax. Whether the ld. Commissioner (Appeals) has correctly interpreted the statutory provisions to conclude that the appellant's society and its members are distinct persons due to Explanation 3(a) to Section 65B(44) of the Finance Act, 1994 and therefore, should not be entitled to the benefit of refund of service tax paid on charges recovered from its members? Held that:- There is no much of difference for recognition of the taxable service in dispute, for levy of service tax, under both the un-amended and amended provisions of the service tax statute. In order to be categorized as a "taxable service", there must be existence of two parties i.e. the service provider and the service receiver. As far as the relationship between an incorporated society or club and its members is concerned, it is an undisputed fact that such incorporated association is a distinct legal entity. However, since the association was formed or constituted and existed for the exclusive purpose of catering/meeting to the requirements of its members, as per the laid down policy in the bye law, it cannot be said that there is involvement of two persons, one to be termed as the service provider and the other as the service receiver. Thus, the incorporated association and its member being one and the same, the activities undertaken or the services provided by the former will not be considered as a service, exigible to service tax under the principle of mutuality. Status of the appellant, whether an incorporated body or otherwise - Held that:- Upon registration of the society, the same is legally accepted as a body corporate and thereafter, its function and operation are strictly guided as per the laid down bye laws, provided for the purpose. In this case, it is no doubt, a fact that the appellant is a co-operative society and is duly incorporated under the Act of 1960. The appellant also do not provide any service to its members, who pay the amount towards their share of contribution, for occupation of the units in their respective possession - the purpose for which the appellant's society was incorporated, clearly demonstrate that it is not at all provides any service to its members and the share of contribution is to meet various purposes - the case of the appellant is not confirming to the requirement of 'service', as per the definition contained in Section 65B(44) of the Act. The activities undertaken by the appellant should not fall within the scope and ambit of taxable service, for payment of service tax - Refund allowed - appeal allowed - decided in favor of appellant.
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2018 (10) TMI 900
Refund/rebate of Service Tax paid on export of services - Business Auxiliary Services - service charges in the form of commission by their Parent Company - Export of Service Rule, 2005 - Held that:- The procedure of retaining the service charge/commission amount and only remitting the remaining portion of the proceeds in foreign exchange will have to be necessarily treated as saving of foreign exchange and by implication is akin to receipt of monies in convertible foreign exchange - It is nothing but saving of foreign exchange as the Appellant has retained that portion and not sent the same in foreign exchange to the Parent Company at Singapore along with other said proceeds. Outflow of foreign exchange has been reduced to the extent of commission/service charge retained by the Appellant within India. Such retention has to be necessarily treated as saving of foreign exchange. Appeal allowed - decided in favor of appellant.
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2018 (10) TMI 899
Short payment of Service Tax - period April 1994 to March 2004 - the Ld. Advocate has highlighted several errors in the calculation attached by the department in the Show Cause Notice. It has also been submitted that in many cases excess Service Tax has been deposited by DOT but the same was not taken into account - Held that:- Considering the fact that even at the time of adjudication i. e., in 2008 the appellant was unable to submit documentary evidence to support their arguments, no useful purpose will be served by remanding the matter for further verification and recalculation. The Adjudicating Authority has already restricted the demand to the period of five years from the date of Show Cause Notice. In the facts and circumstances of the present case, we have no option but to up-hold the demand confirmed by Adjudicating Authority with interest. Penalty - Held that:- Penalty waived by taking recourse to Section 80 of the Finance Act, 1994 which was part of the Finance Act during the relevant time - during the transitioning of service from DOT to BSNL lot of confusion in accounts was prevalent which appear to got settled only from September 2003. Appeal allowed in part.
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Central Excise
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2018 (10) TMI 898
Principles of Natural Justice - the impugned order was passed ex parte - also the time to prefer the appeal, and the extended time which can be condoned by the Appellate Authority have expired - Held that:- The impugned order is the result of show cause notice dated January 3, 2006. The show cause notice dated January 3, 2006 relates to the period from December 2002 to February 2003 - There is a previous show cause notice issued by the Department dated July 27, 2005 making similar allegations in respect of two products for the period from July 2002 to March 31, 2004. The earlier show cause notice dated July 27, 2005 did not result in any order of adjudication. Therefore, nothing prevented from the Department to issue the second show cause notice in respect of the same period and the same products. The respondents afforded a reasonable opportunity of hearing to the petitioner. Three sets of dates for hearing were fixed for the petitioner to respond to the show cause notice. The petitioner did not avail of such opportunities. The authorities proceeded not to grant further adjournment on March 13, 2018 - no infirmity in the refusal of the authorities in not granting further adjournment given the conduct of the petitioner and given the number of opportunities granted to the petitioner to contest the claim. The impugned order cannot be said to have been passed ex parte - the petitioner is unable to substantiate the allegations of breach of principles of natural justice - Petition dismissed.
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2018 (10) TMI 897
MRP based Valuation - inclusion of ‘optional service charges and ‘rustproof protection charges’ in the ‘maximum retail price’ for assessment - principles of natural justice - Held that:- There is no allegation that the ‘maximum retail price’ on the goods involved in the present dispute was, in any way, altered by the dealer to justify the invoking of the provisions for recovery of differential duty. The levy of duty under section 4A of Central Excise Act, 1944 is necessarily to be on the ‘maximum retail price’ marked on the package subject to permissible abatement. There is no evidence that, in the present proceedings, the marked price had been altered at any stage subsequently - There is also no allegation that the two charges are contractually fastened on every purchaser of the goods manufactured by the respondent. To the extent that the coverages remain optional, it cannot be said that the ‘maximum retail price’ should include such charges. Appeal dismissed - decided against Revenue.
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2018 (10) TMI 896
CENVAT Credit - ineligible input services - Insurance Service on various machines viz. plant and machinery - Tour Operator services - Repair and Maintenance services - recovery u/r 14 of the CCR 2004 read with Section 73 (1) of the FA 1994 - Held that:- Repair and maintenance services are integral part of the manufacturing concern for which denial of CENVAT credit of the service tax paid on such services is ruled out - credit allowed on repair maintenance services. Tour Operator services - Held that:- So far as Air Travel Agency service and tour operator services are concerned, services of such agencies were used to book tickets and carry out the travel by the officers for marketing as well as business promotion - credit on Tour Operator services allowed. Insurance services - Held that:- The Delhi Bench of the Tribunal has already decided this issue in the case of M/s. SRF Ltd. Vs. C.C.E., Indore [2016 (10) TMI 1235 - CESTAT NEW DELHI], where it was held that insurance paid on plant, machinery and equipment has to be held as input service - credit allowed - appeal allowed - decided in favor of appellant. Appeal allowed in toto.
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2018 (10) TMI 895
CENVAT Credit - input services - Manpower Services - BIS Fees - Clearing and Forwarding charges - Tangible goods services - Held that:- In the assessee/appellant’s own case THE RAMCO CEMENTS LTD. [FORMERLY MADRAS CEMENTS LTD.] VERSUS COMMISSIONER OF CENTRAL EXCISE, CHENNAI [2016 (7) TMI 1072 - CESTAT CHENNAI] wherein, the Ld. adjudicating authority himself has allowed for a later period the CENVAT Credit availed on BIS Certification Fees, Manpower Services and Clearing and Forwarding charges; and submitted that the denial in the impugned Order is therefore unsustainable - Revenue having accepted and allowed the availment of CENVAT Credit, cannot change its stand for any reasons and for different period - credit allowed. Clearing and forwarding services - Held that:- The credit is allowable only up to the place of removal i.e., the factory gate of the appellant, in terms of the dictum of the Hon’ble Apex Court in the case of C.C.E. & S.T. Vs. M/s. UltraTech Cement Ltd. [2018 (2) TMI 117 - SUPREME COURT OF INDIA] - the denial, if any, beyond the factory gate is held to be in order - matter remanded for this purpose of verification. Tangible Goods Services - duty paying document - it is the case of the Revenue that mandatory Service Tax Registration Number has not been mentioned in the invoice and therefore, that invoice was not a valid document - Held that:- Issue decided in the case of M/s. mPortal India Wireless Solutions P. Ltd. Vs. C.S.T., Bangalore [2011 (9) TMI 450 - KARNATAKA HIGH COURT], where it was held that Registration not compulsory for refund - credit allowed. Appeal allowed in part and part matter on remand.
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2018 (10) TMI 893
Clandestine manufacture and removal - MS Ingots - confiscation - penalty - demand were based on statements which were retracted later - demand also based on notebooks maintained by Sh. Anbu, Cashier pertaining to the payments made to production contractor, maintenance contractor and maintenance supervisor and three notebooks alleged to be maintained by one of the chemists - Non-accounting of MS Scrap of 170.150 MT - Seizure of unused invoices - Alleged excess consumption of electricity. Whether the allegation of clandestine manufacture and removal of steel ingots by the appellants is sustainable? - Whether the Department relied on uncorroborated statements and documents whose ownership was not established? Whether seizure and confiscation of 4.544 MT of MS ingots in the factory of M/s. Prince TMT Steels Pvt. Ltd. is maintainable? 3 Note books/pads allegedly maintained by Shri V.R. Sibiraj, Chemist and 4 Note books maintained by Shri Anbu, Cashier - It was alleged that Shri C.K. Abdurahiman, General Manager PRPL has accepted the same - Held that:- On a comparison of the above records with statutory RG-I figures, the officers concluded that there was unaccounted production of 2014.185 MT of ingots. The Commissioner has given a finding that Shri Sibiraj, Chemist and Shri C.K. Abdurahiman, General Manager have accepted the maintenance of records. The Commissioner also found that the above production is corroborated by the note books/pads which evidence payments to production contractor and the fact that the appellants have not accounted for 152.690 MT of MS scrap received (as against 170.150 MT) during 5.7.2006 to 11.07.2006 as per the vehement slips seized from the appellants. The appellants contended that reliance on retracted statement without independent corroboration of materials is not correct in law. Moreover as there was no discrepancy found either in the raw material, stock or finished goods stock, the allegation of unaccounted purchase of scrap, clandestine manufacture and removal would not sustain. It is very pertinent to note that neither the impugned order nor the show-cause notice mentions any other party/person, not even one, to whom the appellants have allegedly cleared MS Ingots clandestinely. The appellants have alleged that the Department is not sure of the evidence, in the form of note books/pads it has collected, so much as it seeks to rely on the same in the case against the appellants while discarding the same in respect of show-cause notices issued to their sister concerns. We find that the stand of the Department was not uniform. Two different show-cause notices based on same set of records and evidences, proceeded on different quantities. Such an approach casts doubt on the maintainability of such evidence. Shri C.K. Abdurahiman, General Manager, Shri Anub Sha, Director, Prince TMT, Shri Sibiraj, Chemist and Sh. Anbu, Cashier have retracted their statements. They were again called for statements and their statements were recorded confirming the original statements. However, during the cross examination they have again retracted the statements. In fact issues raised and were not answered or attended - The records were not relied upon by the department itself in the proceedings against M/s PTSPL, M/s BCPL and Shri Aftab, the production Contractor. Therefore, the corroboration with respect to one of the two facts i.e. production is to be held not corroborated. Clandestine removal is a serious charge and requires to be proved at least to the level of preponderance of probability - Only records which came for consideration pertain to production. It was not proved as to who was the author of the records. Clandestine procurement of Raw material was alleged on the basis of statements. No discrepancy was found in the raw material, finished goods stock in the premises of the appellants. It is not a case of pre-announced audit of the unit by authorities. Electricity consumption - Held that:- Though the invoice mentioned the furnace to be 6 MT, it is evidenced by the drawings supplied by M/s. Inductotherm (India) Pvt. Ltd that the furnace was of 8 MT. The appellants submitted that the invoice No. 3618/21.10.2005 issued by Inductotherm (India) Pvt. Ltd was for 6 MT only. The furnace was of 6 MT only but with lining as applicable to 8 MT furnace. Heat registers maintained by them prove that the capacity was 6 MT only - clandestine removal is a serious charge and for alleging the same the department has to meticulously prove the purchase of main Raw material and other inputs; manufacture of final goods; clandestine removal of the same; transportation; receipt of the same in the customer's premises and the financial transactions. The edifice of the allegation in the show cause notice was sought to be built mainly on four pillars. (i). Production records alleged to have been maintained by Shri Sibiraj, Chemist (ii). Production records alleged to have been maintained by Shri Anbu Cashier about payments to production contractor (iii). Consumption of electricity and (iv). Capacity of furnace. All other aspects were either not investigated or investigated perfunctorily. Out of these four, first two were negated by the department itself while issuing SCNs to the sister concerns i.e. M/s PTSPL, M/s BCPL and Shri Aftab - The third one was nullified by the sample run conducted by VAT department on the directions of Hon'ble High Court of Keralan. The fourth one was not investigated to thoroughly establish as discussed above. Demand not sustainable - appeal allowed - decided in favor of appellant.
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2018 (10) TMI 892
CENVAT Credit - duty paying documents - Revenue was of the view that the appellant was not entitled to avail the Cenvat Credit for such inputs on the basis of the Transfer Memos - goods transferred from one unit to another and details given in Transfer memo - Held that:- The imported ore has been transferred directly to the two manufacturing units of the appellant including Durgapur. The relevant document indicating payment of duty was the bill of entry. Since the entire quantity covered by the bill of entry, has not been moved to one unit, the appellant has issued an internal document termed as ‘transfer memo’ in which the quantities transferred to Durgapur unit has been indicated. There is no dispute regarding the receipt of such goods in the Durgapur unit or the use of such raw material in manufacture of the final product. Similar case has been considered by the Hon’ble Supreme Court in the case of Union of India Vs. Marmagoa Steel Ltd [2008 (7) TMI 95 - SUPREME COURT] where the Apex Court has allowed the Cenvat Credit on the basis of the Bill of Entry attached with a delivery challan indicating the quantities. Credit allowed - appeal allowed - decided in favor of appellant.
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2018 (10) TMI 891
Utilization of credit on AED(GSI) for payment of Basic Excise Duty - introduction of explanation to Rule 3(6) of the Cenvat Credit Rules w.e.f. 1-3-2003 - whether utilization of accumulated credit of of AED(GSI) towards payment of Basic Excise Duty on their final products is correct? - Held that:- The issue is squarely covered by the decision in the case of COMMISSIONER OF C. EX., MUMBAI-III VERSUS CEAT LTD. [2010 (3) TMI 621 - CESTAT, MUMBAI], where it was held that the impugned credit has been legitimately earned by the assessee procurement of inputs on payment of duty and used for payment of duty following the amendment of Cenvat Credit Rules 2002, under Budget 2003 - appeal allowed - decided in favor of appellant.
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2018 (10) TMI 890
CENVAT Credit - denial on the ground that no manufacture taking place - the sole allegation against the appellant-assessee is made on the basis of report of the UAE/Dubai, Customs wherein the goods found to be scrap but the appellant-assessee cleared the goods and the same were found at port in containers and the samples were drawn at port. Held that:- On the basis of sample, it was found that the said goods were casting/forging manufactured by the appellant-assessee. Therefore, it cannot be said that the appellant did not manufacture the goods during the impugned period - the allegation of the Revenue against the appellant-assessee that the appellant-assessee is not manufacturer is made on the basis of assumption and presumptions - Demand rightly dropped. Demand of duty on the goods worth of ₹ 58,11,850/- which were destroyed and sold scrap by the appellant-assessee for ₹ 35 lacs on which the appellant-assessee has paid duty of ₹ 5,71,200/- - Held that:- The sale value of ₹ 35 lacs is to be considered cum duty price as the appellant discharged duty correctly. Availment of credit of ₹ 4,44,410/- - appellant has conceded the same - Held that:- The said demand of ₹ 4,44,410/- is confirmed. Benefit of reduced penalty - Held that:- Considering that during the adjudication, no option of reduced penalty given to the appellant-assessee in terms of proviso to Section 11AC of the Act, option given to deposit penalty of 25% of the duty confirmed within a period of one month from the date of receipt of this order, failing which the appellant- assessee is liable to pay penalty equal to the duty. The penalty to ₹ 25,000/- imposed on Shri Viond Kumar Gard, Managing Director of the appellant-assessee also reduced. Appeal allowed in part.
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2018 (10) TMI 889
CENVAT Credit - input/input services/capital goods - credit denied on the ground that these were not fully utilized in the manufacture of the final product and some quantity of the generated electricity is wheeled out from the factory - Held that:- The appellant should reverse proportionate Cenvat credit of the electricity not used within the factory, after adjusting amount already reversed or deposited, for the intended purpose - reliance placed in the case of Shree Shyam Ispat (India) Pvt. Ltd. [2018 (6) TMI 1537 - CESTAT NEW DELHI] - appeal allowed - decided in favor of appelant.
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2018 (10) TMI 888
CENVAT Credit - farmers from whom the inputs were purchased were non-existence - fake invoices - it was alleged that the appellants were not the manufacturer and issued cenvatable invoices enabling to their buyers to avail inadmissible cenvat credit - principles of natural justice - Held that:- The investigation was not conducted at the end of the appellants and whole case has been based on the investigation conducted at Commissioner Central Excise, Merrut-II. Without investigation, it cannot be held that the appellants were not manufacturer during the impugned period. Moreover, the entries of vehicles at the toll barriers also certified that the movements of raw material and finished goods - During the course of investigation, itself shows that the allegation is only on the basis of the assumption and presumption, therefore, it cannot be held that the appellants were not manufactured the goods during the impugned period. The appellant (M/s Narbada) was manufacturer during the impugned period and paid the duty on the goods manufactured by them, therefore, duty cannot be demanded on the allegation that the appellant was not a manufacturer - M/s Narbada was the manufacturer of the goods and supplied to M/s Nector, therefore, cenvat credit cannot be denied to M/s Nector - appeal allowed - decided in favor of appellant.
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2018 (10) TMI 877
Demand of duty refunded in cash - area based exemption under N/N. 56/2002-CE dated 14.11.2002 - adjudicating authority has confirmed demand on the grounds that the farmers are non existence ensuring non supply of raw material by commission agents to J&K based units and absence of evidence of power by the appellant and no manufacture and sale taking place - Held that:- The check post movement of trucks which were carrying inputs as well as finished goods were found entered - also, the appellant has produced the evidence of the entry of all the transport vehicles i.e. trucks which have entered in the state of Punjab and have left the state of Punjab, as the same has been certified by the Punjab Sales Tax Department having entries of entry and exit all the vehicles, therefore, it cannot be said that the raw material/finished goods have never entered or left in the state of Jammu & Kashmir, therefore, the allegation on the basis of the investigation conducted by the Commissioner of Central Excise, Merrut is not sustainable. During the period of investigation itself, the appellant continued their activity by procuring inputs from U.P and selling the goods after manufacturing to the U.P based buyers and the Department allowed to continue the same during the course of investigation which shows that the allegation on the basis of investigation conducted at the end of Commissioner of Central Excise, Merrut is not sustainable that the appellant is not manufacturer the goods. As there is no corroborative evidence to show that the appellant were not manufacturing the goods, therefore, the allegation alleged in the show cause notice is not sustainable. Without bringing any concrete evidence against the appellant on record, the proceedings against the appellant are not sustainable - the appellant were manufacturing unit in the state of Jammu & Kashmir is entitled for benefit of the exemption Notification No. 56/2002- CE dated 14.11.2002 and claimed the refund of duty paid through PLA - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2018 (10) TMI 887
Input tax credit - set off against tax liability on all intra-state and inter-state sales - TNVAT Act - amendment in the law relating to the levy of tax on the sale or purchase of goods in the State of Tamil Nadu. Whether Section 19(5)(c) of TNVAT Act, 2006 and Rule 10(9)(a) of TNVAT Rules, 2007 are ultra vires the provision of CST Act, 1956? Whether the impugned provisions are violation of Articles 14, 19(1)(9) and 301 of the Constitution of India? Held that:- This Court held that ITC is a form of concession which is provided by the Act; it cannot be claimed as a matter of right but only in terms of the provisions of the statute; therefore, the conditions mentioned in the aforesaid Section had to be fulfilled by the dealer; and subsection (20) of Section 19 was constitutionally valid. It was also noted, in the process, that there were valid and cogent reasons for inserting that provision and the main purpose was to protect the Revenue against clandestine transaction resulting in invasion of tax - the provision was aimed at achieving a specific and justified purpose and could not be treated as discriminatory. Section 19 of TNVAT Act deals with ITC. It incorporates provision for grant of ITC under certain circumstances and, at the same time, also lays down the conditions in which such ITC would be admissible. It is in this context sub-section (5) of Section 19 is to be analysed. Subsection (5) stipulates certain contingencies where such ITC would not be admissible. There is no quarrel about clauses (a) and (b). We are only concerned with clause (c) of this sub-section which provides that ITC would not be allowed on the purchase of goods sold as such or used in the manufacture of other goods and sold in the course of inter-State trade or commerce falling under subsection (2) of Section 8 of the Central Sales Tax Act. Wherever the State Government buys, sells, supplies or distribute goods, it shall be deemed to be the dealer for the purposes of TNVAT Act. At the same time, TNVAT Act does not require registration by the State Government inasmuch as Section 38 which deals with registration of dealers explicitly provides, under sub-section (8) thereof, that this provision shall not apply to any State Government or Central Government - This situation puts those dealers who are making sales to the State Government in disadvantageous position, even when it is clear that there is no possibility of tax evasion as there cannot be any such apprehension in case of sales to the State Government - benefit of ITC is given whenever sale is made to a dealer outside State of Tamil Nadu and the said dealer is a registered dealer. The provisions of Section 19(5)(c) are to be read down by construing that those dealers who are making sales exclusively to the other State Governments (i.e. outside the State of Tamil Nadu), the said States would be deemed as registered dealers for the purposes of availing benefits of ITC. Benefit of ITC would be allowed without insisting on the furnishing of Form C . However, in order to avail this benefit, a certificate from said the State Government to whom the supplies are made would be obtained by the dealer claiming ITC and submitted to the VAT authorities. Appeal allowed.
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2018 (10) TMI 886
Higher Rate of tax / CST - inter-State sales against deferred payment - seeking permission to produce C-Forms after a gap of more than 10 year - Held that:- The assessment years are 2005-06 and 2006-07 and after more than a decade, the assessee cannot be permitted to produce C Forms which relates to long prior assessment years - The effect of Section 8 of CST Act is succinctly that the provision is mandatory and has to be strictly complied with. The very submission of the assessee that if time is granted to produce C-Forms even now, indicates that there is no C-Form furnished by the purchasing dealer till now. Levy of higher tax under Section 8(2) of the CST Act is perfectly justified - revision dismissed - decided against assessee.
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2018 (10) TMI 885
Maintainability of petition - remedy of appeal - Input tax credit - Principles of Natural Justice - It is submitted that the Respondent No.3 has not properly appreciated the Petitioner's contention that mere absence of proof of despatch to evidence the receipt of the so called purchased goods, cannot lead to the denial of inputs tax credit - Held that:- The impugned order, on appreciation of the evidence before him, with regard to the actual receipt of purchased goods in the absence of the despatch proof and/or any other evidence to support the receipt came to the conclusion that the purchases are not genuine. A letter dated 28th December, 2016 of the Petitioner does not address the query of the Assessing Officer as it only states that goods are received by hand delivery but no evidence of the same is provided. There is no reason to exercise our writ jurisdiction as an efficacious alternate remedy of filing an appeal to Deputy Commissioner (Appeals), is available under the MVAT Act - petition dismissed being not maintainable.
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2018 (10) TMI 884
Rate of tax - sale of imported copiers - 'C' forms could not be produced - Assessing Officer has completed the assessment and passed the impugned order without any reply from the petitioner with supportive documents - principles of natural justice - Held that:- Non filing of such reply with supportive documents is explained by the petitioner. It is also seen from the petitioner's request made on 23.07.2018 that they sought for furnishing copy of returns and enclosures so as to enable them to collect the duplicate C-Form from buyers in other state, since the entire records were washed away in the flood took place in the year 2015. The Assessing Officer ought to have given one more opportunity by furnishing the copy of the returns and enclosures to the petitioner so as to enable them to file their reply with supportive documents - the matter has to go back to the Assessing Officer for redoing the assessment once again after giving sufficient opportunity to the petitioner - appeal allowed by way of remand.
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2018 (10) TMI 883
Classification of goods - Lizol / Harpic - whether covered under Schedule-II, Part-A, Entry No. 20 of VAT Act taxable at the rate 4% - 5% or is classified as unclassified item, therefore, has imposed the tax at the rate of 12.5%? Held that:- Harpic and Lizol are covered under Schedule-II, Part A, Entry No.20 of UP VAT Act as such the same are classified items. Rajasthan High Court in the case of Reckitt Binckiser (India) Ltd. v. Assistant Commercial Taxes Officer Anti Evasion, Commercial Taxes Department Ward-III, Jaipur and Another [2017 (4) TMI 1379 - RAJASTHAN HIGH COURT] has held that the products being sold by the assessee would fall in Entry 21 or 29 of the Act, which provides that the products namely Harpic and Lizol classifiable under the aforesaid entry of Schedule IV of Rajasthan VAT Act and the same being used as insecticides or pesticides and further that the entry being specific and clear as such has held that the departmental authorities were wrong in holding that the items harpic and Lizol fall under the residuary entry namely Schedule (V). Petition dismissed - decided against Revenue.
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2018 (10) TMI 882
Validity of assessment order - TNVAT Act - it is alleged that the 2nd respondent, without furnishing the relevant documents and without providing an opportunity of personal hearing, has passed the impugned orders - principles of Natural justice - Held that:- Though the petitioner has sought for a copy of the web report, the 2nd respondent, without furnishing the same and without providing an opportunity of personal hearing, has passed the impugned orders merely stating that the dealer has received notice, but has not filed any reply till date - There is a clear violation of the principles of natural justice. Therefore, this Court is inclined to set aside the impugned orders. All the impugned orders passed by the 2nd respondent are set aside and all the matters are remanded back to the file of the 2nd respondent - petition allowed by way of remand.
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2018 (10) TMI 881
Liability of VAT - tax on Pan Masala, Gutkha etc - UPVAT Act - Revisionist is a registered dealer engaged in the sale and purchase of Pan Masala, Gutkha etc - Submission is that since assessee is neither manufacturer nor importer, therefore, the liability to pay tax cannot be imposed upon it - assessment year 2013-2014 - Held that:- It is admitted that liability to pay tax would not be dependent upon the date of registration of assessee so far as sale of goods are concerned. If it is found, as a matter of fact, that the assessee was engaged in sales of Pan Masala and Gutkha, prior to registration also, the liability of paying tax could be imposed upon it. In the facts and circumstances of the present case, however, the documents which have been found at the time of survey, relates to the previous year. The admissibility of such materials and finding that it relates to the assessee has already been confirmed - Once that be so, the liability to pay tax cannot be resisted. Observation of this Court in Honey Furnitures [2006 (7) TMI 628 - ALLAHABAD HIGH COURT] are clearly distinguishable - It appears that in Honey Furnitures, survey was made in which no material relating to the period of assessment was found against the assessee, and on such basis of materials seized for a subsequent period the authorities proceeded to enhance the turn over for previous year also. No evidence of escaped assessment pertaining to previous year was otherwise brought on record. It was in that context that this Court observed in para-8 that in the absence of any other materials, the assessment made previously cannot be altered. Revision dismissed.
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2018 (10) TMI 880
Exemption form levy of sales tax - consignment sale of edible oil - form-F present - assessment provisional in nature and subject to final adjudication - Held that:- The defence of the assessee that goods had actually been transferred from Mathura to other States, is yet to be adjudicated finally by the Tribunal. This appears to have been done in view of the fact that only provisional assessement proceedings were undertaken subject to a final assessment being made by the assessing authority. Section 28(8) of the Value Added Tax Act is clear inasmuch as the provisional assessment order would ultimately merge in the final assessment order. This Court is not required to make any observation with regard to merits of the respective claim of parties, at this stage. In the interest of justice - Revision disposed off with direction that revisionist shall deposit 50% of the disputed amount of tax within a period of four weeks. The assessee shall also furnish security other than cash or bank guarantee to protect the right of the State in respect of the balance amount and assessing authority would make all endeavours to conclude the regular assessment proceedings within a period of 3 months from the date of presentation of certified copy of this order.
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2018 (10) TMI 879
The counter affidavit should enclose data regarding (i) refund applications filed and claimed (ii) refund applications pending with amount claimed (iii) refunds which have been issued and (iv) refunds paid by the Central Government and the State Government - The steps taken to remove the alleged grievances, as pointed out in the writ petition, would be indicated.
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Indian Laws
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2018 (10) TMI 906
Forgery - purchase of vehicle - draft book was lost/stolen from the Branch and the alleged draft was prepared by forgery - Held that:- Reading of Section 8 & 9 of the N.I. Act together and the principles when are translated in the facts of this case would show that the respondent Ramesh Kumar placed a draft with the appellant which was routed through for collection by the bank of appellant namely Allahabad Bank to the Punjab National Bank on whom the draft was drawn. Section 9 of the N.I. Act does not use the word good faith. It provides that the holder should have received the instrument without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title. Only, therefore, to defeat the title of a holder for value, the evidence must be on record that when he took the instrument he had cause to believe that there was something wrong in the instrument. Cause to believe denotes the different reasons means the suspicion in the kind of some illegality effecting the instrument. Plain reading of Section 9 do not say so that the Court has to go beyond the holders mind and see the care and caution in such eventuality bill of exchange may lose its efficacy at the whims of the person with whom it is negotiated. The bank as a body corporate for the negligence of its officers, who did not discharge their duties properly cannot be allowed to recover the amount from the holder in due course i.e. the appellant. It is not a case that the draft though was negotiated and the payment was withheld to the appellant on the ground that it was outcome of fraud, but instead the amount was paid by the bank with all smile and thereafter instead of catching hold of their officers who negligently paid the same, the recovery suit was filed to cover up their own wrong from the appellant as also the person namely Ramesh Kumar. Therefore, the bank cannot be allowed to take advantage of their own wrong and pass the bucks to others as the buck stopped at the Bank. The appellant will be protected and enveloped by virtue of Section 9 of the N.I. Act as the Act itself permits payment of the draft to the holder in due course - the appellants are holder in due course and amount received by them cannot said to be illegal. Appeal allowed - decided in favor of appellant.
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