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TMI Tax Updates - e-Newsletter
October 19, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Income-tax (28th Amendment), Rules, 2016 - Special Provisions Relating to Tax on Distributed income of Domestic Company for Buy-Back of Shares - Notification
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Levy of Penalty u/s 271 (1)(c) - if the notice is found to be illegal and is found to be unsustainable in law and the consequences would be that there is breach of natural justice - HC
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Validity of revision order u/s 263 - where exhaustive exercise has been done by the AO, the order of the AO in allowing the impugned loss could not have been held to be erroneous. - AT
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Protective addition cannot be converted into substantive addition in the hands of an assessee merely because substantive addition was not made in the hands of another assessee. - AT
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Levy of penalty u/s 271(1)(c) - assessment based on estimated income - professional entry operator - Nothing emerges from record that the assessee agreed to the addition to buy peace of mind and to avoid litigation - levy of penalty confirmed - AT
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Disallowance of deduction u/s 80C on account of LIC premium and the Tuition Fees paid - documentary evidence - The said amounts have been duly paid out from the banking channels and deserve to be allowed - AT
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Compensation received for cancellation of development agreement - AO has developed a misplaced understanding of the nature of the transaction by treating it as capital receipt - assessee has carried out the expenditure towards the performance of the development agreement - to be treated as contractual receipt - AT
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The objects of the assessee society are not in respect of educational purposes because the same amounts to rendering consultancy services - exemption u/s 10(23C)(vi) was rightly denied - AT
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Addition u/s 43B - outstanding demand of sales tax - deduction u/s 43B allowed even if no sales tax liability was shown in the balance sheet where the same has been paid before due date of filing of return - AT
Customs
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Levy of Anti Dumping duty - challenging the finding of the DA - caustic soda - chlorine - the position of "Equal Economic Importance" cannot be given to chlorine in the Indian context - Treatment of chlorine as a by-product is correct - AT
Service Tax
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Imposition of penalty - construction of complex - late payment of service tax - benefit of doubt and bonafide belief - The appellant have shown the reasonable cause for waiver of penalties invoking u/s 80 - penalty waived - AT
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Taxability of club membership fees - there is mutuality of interest between the Association and its Members, inasmuch as the society is comprising of all the major ports in India and any activity even if in the nature of service, is rendered to its members. - Demand set aside - AT
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Invocation of extended period of limitation - the first SCN was issued on 26.5.2009 invoking the extended period of limitation. The Department is precluded from issuing another SCN invoking the extended period. - AT
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Import of services - reverse charge method - it has not been established if the said ‘intellectual property right’ was acknowledged under the relevant Indian law - demand set aside - AT
Central Excise
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Valuation - interconnected undertakings u/s 2(g) of MRTP Act, 1969 - It is apparent that when the affairs of these 3 units were managed by overall control, the benefit accrue to the closely connected family member - Demand confirmed invoking extended period of limitation - AT
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The activity of packing refined edible oil received in tankers into small containers cannot be treated as manufacturing activity in terms of Note 4 of Chapter 15 of Central Excise Tariff Act, 1985 - AT
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Cenvat credit cannot be denied to the assessee merely, on the ground that at the time of investigation, the dealer was non-existent. - AT
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Manufacture - Intermediate products - captive consumption - marketability - The Revenue has sought to demand duty on additive mixture without alleging additive mixture is preparation containing chewing tobacco. - Demand set aside - AT
VAT
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There should have been a specific finding recorded by the AO that the turnover that has escaped in the first and initial round of assessment, is the result of wilful non-disclosure or suppression by the dealer. There is no such finding recorded, No penalty - HC
Case Laws:
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Income Tax
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2016 (10) TMI 599
Levy of Penalty u/s 271 (1)(c) - defective notice - Held that:- Had it been a case where the notice for penalty was not on record in the proceedings of assessment, the matter might stand on a different footing. In any case, where notice for imposition of penalty under Section 271(1)(c) of the Act was already there on record and when the Tribunal was to examine the applicability of this Court decision in the case of M/s.Manjunatha Cotton and Ginning Factory (2013 (7) TMI 620 - KARNATAKA HIGH COURT ) and the law laid down, it was a case where the contention ought to have been considered and examined. As observed by us herein above, the decision in the case of M/s.Manjunatha Cotton and Ginning Factory (supra), would apply and if the notice is found to be illegal and is found to be unsustainable in law and the consequences would be that there is breach of natural justice. Hence, the ultimate order for imposition of penalty cannot be sustained. - Decided in favour of assessee
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2016 (10) TMI 598
Validity of revision order u/s 263 - Held that:- PCIT had issued the show cause notice u/s 263 even without examining the assessment records. Such type of practice is contrary to transparent and fair working and not appreciated in the eyes of law. The assumption of jurisdiction u/s 263 is based upon a valid show cause notice issued u/s 263. The entire premise of the Ld. Principal CIT in issuing show cause notice u/s 263 for holding the impugned assessment order as erroneous and prejudicial to the interest of the revenue is built upon incorrect facts. Further, no proper allegation could be made against the assessee by the Ld. PCIT while framing order u/s 263. Inspite of exhaustive exercise done in the 263 proceedings, the ld. PCIT could not find anything to hold that the impugned loss was not allowable at all by any stretch of imagination under the law. When exhaustive details and documentary evidences were submitted by the assessee before the AO and the assessment order was framed after examining the exhaustive details and evidences, the recourse available for the Ld. PCIT for revision u/s 263 to was to hold that the loss has been wrongly allowed by the AO and view taken by the AO was not at all a plausible view in the eyes of law. Unless such a finding is recorded by Ld. PCIT, especially where exhaustive exercise has been done by the AO, the order of the AO in allowing the impugned loss could not have been held to be erroneous. Same is missing here, Thus, we find that the order passed by the Ld. PCIT is without application of proper mind and beyond the parameters of law and we find the same to be nullity in the eyes of law and the same is, therefore, hereby quashed. - Decided in favour of assessee
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2016 (10) TMI 597
Addition on account of cash deposits in bank account - protective addition v/s substantive addition - Held that:- Neither the Ld. AO nor the Ld. CIT(A) have taken care to ascertain the extent to which cash deposits in bank account, totaling ₹ 1,29,74,300/- was included in the sales turnover of the assessee, originally shown by assessee at ₹ 61,00,552/- and changed later to ₹ 2,07,56,738/-. Thus, to that extent, not only the amount is fully added on account of cash deposited in bank account ; but business profit @ 8% is also added to the income of the assessee. This has, therefore, resulted in double addition, which cannot be upheld. When an appellate authority converts a protective addition into substantive addition ; there must be good reasons for it. It cannot be done lightly without consideration of relevant facts and circumstances, without due application of mind, and without sound basis. Also protective addition cannot be converted into substantive addition in the hands of an assessee merely because substantive addition was not made in the hands of another assessee. What has to be seen is whether substantive additions in the hands of the assessee is just and reasonable in the overall facts and circumstances of the case. Further, double taxation of same amount is against basic tenets of taxation. Moreover, neither the Ld. AO nor Ld. CIT(A) have ,in their respective orders adequately dealt with or specifically rejected the facts (summarized in paragraph 3.2 of this order) claimed by the appellant in the proceedings before lower authorities. On cumulative consideration of the aforesaid facts and circumstances, we set aside the impugned order of Ld. CIT(A) and restore the case to the file of Ld. AO for denovo assessment. The Ld. AO in the proceedings for denovo assessment will be free to make any inquiries and investigations. Also, the assessee will be free to furnish any evidences and explanations.
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2016 (10) TMI 596
Levy of penalty u/s 271(1)(c) - assessment based on estimated income - professional entry operator - as per assessee he has accepted the estimated income to buy peace and avoid protracted litigation - Held that:- The addition on which penalty has been imposed is not based on estimate but the same was offered by the assessee itself based on another case of Nexus Software Ltd. There being no element of estimate, this contention of the assessee carries no merit. Nothing emerges from record that the assessee agreed to the addition to buy peace of mind and to avoid litigation. The record is full of facts that nature of material was available. Plethora of evidence was available to hold that assessee was a professional entry operator, the fact which is accepted by the assessee. Ld. AO and CIT(A) have been reasonable in imposing penalty to the tune of 100%, whereas they could have imposed at the rate of 300% of the tax sought to be evaded by such deplorable accommodation entry racket. Thus no infirmity in the orders of the authorities below confirming the penalty which are upheld - Decided against assessee.
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2016 (10) TMI 595
Trading addition - Held that:- It is a settled law that in the absence of any specific finding, the adhoc additions made by the AO cannot be sustained - Decided in favour of assessee. Disallowance of deduction under Chapter VIA / under section 80C on account of LIC premium and the Tuition Fees paid - AO has disallowed the said deduction only on the basis that no documentary evidence in this regard was produced by the assessee - Held that:- The said amounts have been duly paid out from the banking channels and deserve to be allowed, hence delete the addition in dispute - Decided in favour of assessee.
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2016 (10) TMI 594
Addition u/s 36(1)(iii) - investment in AOP - whether interest bearing funds were diverted as advances to the sister concern, friends and family members without any business expediency and that too without charging any interest? - Held that:- The impugned amounts were invested in earlier years and not in the current year. It is also noted that no evidence has been produced by the Revenue evidencing that the funds were diverted without commercial exigencies. So far as, making investment is concerned, it is the businessman who is to make the investment protecting his business interest. The Assessing Officer cannot be expected to sit in the chare of the assessee and decide in which manner the investment has to be made. Action can only be taken or disallowance can be made only in a situation when it is found that the investment or granting loans is contrary to the provisions of the Act. Compensation received for cancellation of development agreement - contractual receipt or short term capital gain - Held that:- CIT(A) has observed that, AO has developed a misplaced understanding of the nature of the transaction by treating it as capital receipt. It is clear that the assessee has carried out the expenditure towards the performance of the development agreement. - Therefore CIT(A) directed the AO to treat ₹ 50,00,000/- as contractual receipt. - order of CIT(A) is not erroneous. Decided against the revenue.
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2016 (10) TMI 593
Grant of exemption u/s 10(23C)(vi) - eligibility of objects - non educational purposes - Held that:- In the present case, the objections of the revenue that clause-D & G of the objects clause are not for educational purposes could not be rebutted by the assessee to the satisfaction of the department or to our satisfaction. We find force in the objections of the ld. CCIT as per which clauses D & G of the objects of the assessee society are not in respect of educational purposes because the same amounts to rendering consultancy services and hence, we find no reason to interfere with the order of the ld. CCIT declining grant of exemption u/s 10(23C)(vi) - Decided against assessee.
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2016 (10) TMI 592
Addition u/s 43B - sales tax liability and outstanding demand of sales tax - Held that:- A plain reading of the proviso suggests that the deductions is allowable otherwise that in respect of any sum payable towards any tax, duty, cess or fee, but, however, aforesaid section does not apply to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. With regard to the issue raised by the Revenue for deletion of the disallowance of sales tax liability, we find that the allowability of the sales tax liability is governed by the provisions of section 43B of the Act i.e. on actual payment basis. In the instant case the assessee has not brought anything on record which justified that the sales tax liability was taxed in the earlier years. The ld. AR before us submitted that the sales tax was exempted by the West Bengal Government. Therefore there was no collection of sales tax during the period of the exemption on the sales of the goods. The entire sale price has been offered to tax in the year 1998-99. It is well settled law that the sales tax liability is allowed in the year of the payment by virtue of the provisions of section 43B of the Act. The ld. AR drew our attention to the schedule 10 of the balance sheet to demonstrate that no sales tax liability is appearing in the audited financial statements as on 31.3.1998. Our attention was also drawn to paper book where the order of the Sales Tax Department was also placed demanding the outstanding amount of sales tax pertaining to the year 1998-99. In view above we conclude that the payment of the sales tax demand is very much covered under the provisions of section 43B of the Act. Accordingly we do not find reasons to interfere in the order of ld. CIT(A). Hence this ground of Revenue’s appeal is dismissed. Disallowance of interest which paid to the bank against the O.D. account - Held that:- The transactions with regard to the sale & purchase with the M/s Super Smelters were minimal considering the flow of money between the two. Therefore the issue of the diversion of the interest bearing fund cannot ignored/ diverted. However from the submission of the assessee we find that there is regular outflow and inflow of funds in the account of M/s Super Smelters. The fund is going to the account of M/s Super Smelters from the bank of the assessee and after some days the amount is also coming back to the account of the assessee from M/s Super Smelters. This regular activity of the fund transfer shows that the borrowed money has not been utilized solely by M/s Super Smelters for the entire year. For part of the year the assessee has utilized the fund and for part of the year M/s Super Smelters has utilized the fund. Therefore in our considered view the interest on borrowed money needs to be allocated on proportionate basis depending on the utilization of funds. In support of this the ld. AR has allocated the interest amount which is enclosed as annexure 1 in this order. Whether the disallowance of the interest shall be worked after considering the capital of the assessee? - Held that:- Considering AR submission that the amount given to M/s Super Smelters first needs to be adjusted with the owned fund of the assessee and the amount which is over and above of the owned fund of the assessee given to M/s Super Smelters should only be taken for the purpose of the disallowance of the interest, we are finding the force in the submission of the assessee therefore we are inclined to disallow the interest on the borrowed fund only for the period utilized by M/s Super Smelters and only that amount shall be considered which is over and above of the owned fund of the assessee
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2016 (10) TMI 591
TDS on rent - remittance of TDS amount to the government - Held that:- The counter affidavits have been sworn to by the first respondent, without even noticing the mistake in his submissions i.e., the word 'petitioners' should be read as 'second respondent' and the remittance of TDS is said to have been made on 28.09.2012. Conveniently, the date on which the tax was deducted and the date within which it has to be remitted to the Government's Account have not been disclosed. Ultimately, a vague submission has been made in paragraph No.10. Therefore, the counter affidavits filed by the first respondent stand rejected. In the light of the above fact, thorough enquiry into the matter is required to be done and the manner in which the Assistant Commissioner has proceeded with the matter, that too, after the Writ Petitions were filed, notices were ordered and the cases were adjourned from time to time, do not inspire confidence in the mind of the Court, that proper procedure has been followed. For the foregoing reasons, there will be a direction to the first respondent to issue notice to the petitioners and to the respondents 2 to 4 to produce all the records, make a thorough verification and pass appropriate orders strictly in accordance with law, as per the provisions of the Income Tax Act, 1961. The above direction shall be complied with by the first respondent, within a period of three weeks from the date of receipt of a copy of this order, making it clear that the petitioners and the respondents 2 & 3 shall extend their full co-operation in the enquiry to be conducted.
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2016 (10) TMI 590
Penalty u/s 271(1)( c ) - income declared by the assessee in the return of income u/s 153A - Held that:- The Hon’ble Gujarat High Court in the cast of Kirit Dahyabhai Patel V/s ACIT [2015 (1) TMI 201 - GUJARAT HIGH COURT] held that for all practical purposes return filed in response to notice u/s 153A of the Act has to be as return furnished u/s 139(1) of the Act and therefore, if, any undisclosed income as admitted by the assessee in the statement recorded under section 132(4) of the Act during the course of search operation is offered in the said return and due taxes were paid which were duly accepted by the AO then no penalty could be imposed u/s 271(1)(c ) of the Act. In view of the above we are in agreement with the arguments advanced by the ld.AR that the penalty as imposed by the AO and upheld by the ld. CIT(A) was wrong and against the provisions of law - Decided in favour of assessee
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2016 (10) TMI 589
Applicability of explanation to section 73 - whether the principal business of the assessee is granting of loan and advance? - Losses in speculation business - Held that:- CIT(A) has concluded that the main business of the assessee was of granting of loans and advances. When 99% of assessee’s income was derived from interest on loans and advances, therefore, merely because it was not registered as a NBFC, it could not be concluded that the principal business of the assessee was not of granting loans and advances. CIT(A) has also referred to item 5 of the memorandum of association, as per which, one of the main objects was to carry on the business of arranging, organizing, executing all kind of financial services and he has also referred to clause 16 of the incidental objects of memorandum of association, as noted earlier. In the backdrop of these factual findings, it cannot be said that assessee was not primarily in the business of granting of loans and advances. As the assessee’s case was covered by the second exception to the Explanation to section 73 and consequently the addition made by the AO by treating the loss incurred by the assessee company as speculative loss was deleted. Therefore, do not find any reason to interfere with the finding of ld. CIT(A). - Decided in favour of assessee Addition u/s 14A - Held that:- As total dividend income received by the assessee was ₹ 38/- and the same had been offered for taxation in the return of income. Therefore, there was no amount which could be subjected to disallowance u/s 14A. Ld. CIT(A) following the decision in the case of Joint Investment (P) Ltd. Vs. CIT [2015 (3) TMI 155 - DELHI HIGH COURT] , gave a relief of ₹ 57,881/- as the disallowance u/s 14A could not exceed the exempt income. No reason to interfere with the finding of ld. CIT(A). - Decided in favour of assessee
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2016 (10) TMI 588
Unexplained receipts - addition in a proceeding under section 153A - Held that:- Additions made by the AO are beyond the scope of section 153A of the Income Tax Act, 1961, because no incriminating material or evidence had been found during the course of search so as to doubt the transactions. It was noticed that as on the date of search i.e. 28.8.2008, no assessment proceedings were pending for the year under consideration and the AO was not justified in disturbing the concluded assessment without there being any incriminating material being found in search. In fact, in the entire assessment order, the AO has not referred to any seized material or other material for the year under consideration having being found during the course of search in the case of assessee - Decided in favour of assessee.
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2016 (10) TMI 587
Revision u/s 263 - as per CIT(A) AO has not examined the issue in depth so as to verify whether the written down value of the block of assets is net of grant amount and the amount of accumulated depreciation pertaining to the fixed assets disposed during the year was credited to the depreciation account and this aspect was not verified by the AO at the time of assessment - Held that:- The assessee received the grant from NDDB in the earlier years in relation to capital assets which was shown on the liability side of the balance sheet under the head reserve and surplus in the books of accounts. On the other hand, assessee recognized the capital assets at gross purchase value. As per the policy of the assessee the depreciation pertaining to the grant was written off against the grant value shown in the balance sheet and the balance depreciation pertaining to the net value of the fixed assets was charged in the profit & loss account. The assessee for the year under consideration has calculated the depreciation in the books of accounts for ₹ 3,42,10,774/- out of which proportionate depreciation of ₹ 73,34,650/- was adjusted against the grant value shown in the balance sheet and the balance depreciation of ₹ 2,68,76,124/- proportionate to the net value of fixed assets was debited in the profit & loss account. The assessee accordingly has added the depreciation of ₹ 2,68,76,124/- in the statement of income and reduced the depreciation by the amount as worked out as per written down value of the assets under the income tax Act for an amount of ₹ 1,84,61,661/-. We also find that the depreciation under the income tax act was calculated at the WDV which was brought forward from the earlier years. The WDV was duly accepted by the lower authorities. In the year under consideration no grant was received by the assessee in relation to any capital assets. The ld. DR failed to bring anything contrary to the arguments made by the ld. AR at the time of hearing. In view of above, we opined that the depreciation claimed by the assessee under the Companies Act and Income Tax Act is representing the correct figure. Similarly for the amount credited to the depreciation account during the year for the assets disposed, the ld CIT in his impugned order u/s 263 of the Act at the outset failed to bring any error from the financial statement of the assessee and has just directed the AO for examination and verification of the aforesaid amount. From the submission of the ld. AR, we find that this amount was adjusted with the figures of the depreciation account in the books of accounts. The aforesaid amount has not impacted the depreciation amount charged by the assessee in the computation of income. The aforesaid amount was the accumulated depreciation which was adjusted with the original cost of assets as a consequence of sale of the said assets during the year. The ld. DR failed to bring anything contrary to the arguments made by the ld. AR at the time of hearing. Accordingly we find no error in the order of AO having prejudice to the interest of Revenue. - Decided in favour of assessee.
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2016 (10) TMI 586
Penalty u/s 158 BFA (2) - quantum of penalty - penalty order assessment u/s 158BC of the Act was completed at an income of ₹ 6,62,880/- against the returned income of ₹ 3,43,404/- and thus addition of undisclosed income was made of ₹ 3,19,475/- - Held that:- From the para 7 of the penalty order it is vivid that the A.O has imposed penalty on the entire assessed income i.e. on ₹ 6,62,880/- which is not correct as per mandate of second provision to Section 158BFa(2). In our considered opinion penalty u/s 158 BFA(2) of the Act can only be imposed on that portion of undisclosed income determined which is in excess of the grant of undisclosed income shown in the return i.e on ₹ 3,19,475/- as the assessed income u/s 158BC of the Act ₹ 6,62,880/- includes returned amount of ₹ 3,43,404/- and total additions uphold by the CIT(A) on 5 issues, as noted by the A.O in the penalty order para 2, are of ₹ 3,19,475/-. Therefore, we are inclined to hold that the penalty was wrongly calculated and imposed on the total assessed income and penalty u/s 158 BFA (2) of the Act can only be imposed on the amount of undisclosed income determined which is in excess of the amount of undisclosed income shown in the return filed by the assessee for the relevant block period. From the penalty order is apparent that the penalty u/s 158BFA(2) has been imposed by observing that the assessee has not filed the return showing his correct income before the search and thereafter he imposed penalty on the assessed income including returned income which is not a proper approach and application of the mandate of secured proviso to Section 158BFA(2) of the Act. Since in the earlier part of this order we have observed that the penalty u/s 158BFA (2) of the Act can be imposed on the income assessed u/s 158BC of the Act which was in excess to the returned income. From the relevant operative part of the First Appellate order we also observe that it was the argument of the assessee that since the undisclosed income assessed by the A.O was not in excess of the returned income penalty u/s 158 BFA (2) of the Act cannot be imposed. But there were no other arguments on the imposition of penalty on the merits showing that the penalty imposed on the additions made in excess to returned amount cannot be imposed. As there was additions in excess of returned income which is clearly undisclosed income not purely based on the estimation but was based on the seized material found during the counsel of search those penalty u/s 158BFA (2) of the Act is leviable. On the account of additions made as undisclosed income. But not on the entire taxable amount assessed u/s 158BC of the Act including returned income as per second proviso to Section 158 BGFA (2) of the Act. Thus penalty u/s 158 BFA (2) of the Act is directed to be imposed only on the account of additions made in excess to returned income and thus the A.O is directed to recalculate the penalty. Accordingly, therefore, appeal of the assessee is dismissed with the above directions to the A.O to recalculate penalty as per letter and spirit of second proviso to Section 158BFA (2) of the Act.
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2016 (10) TMI 585
Section 80P deduction eligibility - Held that:- Interest income and dividend earned on deposits with other co–operative banks/societies are fully deductible u/s. 80P (2)(a)(1) from the income liable to tax though the assessee has claimed the same as exempt u/s. 80P (2)(d) of the Act. See M/s. The Totgars´ Cooperative Sale Society Limited Versus Income Tax Officer. Karnataka [2010 (2) TMI 3 - SUPREME COURT]
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2016 (10) TMI 584
Deemed dividend u/s 2(22) - revision u/s 263 - Held that:- As decided in assessee’s own case where such a finding that the transactions of assessee with Ganesh Wheat Products (P) Ltd, where the assessee alone does not stand to benefit from such loan transaction, but the company also derives benefit there from, as such transactions assumes the character of a commercial transaction and will not qualify to be dividend to come within the purview of Section 2(22)(e) of the Act. Respectfully following the above decisions of the coordinate Benches of this Tribunal, inasmuch as the proceedings under section 263 of the Act, giving raise to the addition of ₹ 27,68,646/- we hold that the transactions of the assessee with Ganesh Wheat Products (P) Ltd cannot be treated to be dividend to come within the purview of Section 2(22)(e) of the Act, and any additions made on that premise will not survive. We accordingly reach a conclusion that the additions made by the AO and confirmed by the learned CIT cannot be sustained. - Decided in favour of assessee
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2016 (10) TMI 583
Validity of reopening of assessment - unexplained investment - Held that:- As while completing the original assessment, the facts with regard to surrender statement of the assessee during the course of survey of ₹ 10,12,000 as unexplained investment in excess stock was available before the AO, but he did not act on it for the reasons best known to him. But once he has already applied his mind to these facts and has opted not to make an addition in this regard, he cannot make addition of the same by resorting to the procedure for reopening of assessment u/s. 147 of the Act. If it is allowed to be done, it would amount to reopening on account of change of opinion which is not permissible in the eyes of law. It has also been held by the various High Courts that once the AO has applied his mind on particular facts, the same facts cannot be used for reopening of the assessment. Therefore, I find no merit in reopening of the assessment. Accordingly hold that since the reopening of assessment is on account of change of opinion, it is bad in law and is not sustainable in the eyes of law. - Decided in favour of assessee.
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2016 (10) TMI 582
Undisclosed sales - non-availability of information - Held that:- AO raised the issue for the undisclosed sale due to non-availability of information with regard to the quantitative details of the opening stock, purchases and sales, closing stock along with their respective values in the tax audit report. During the proceedings the details were furnished by the assessee but the AO rejected the same and worked out the undisclosed sale as discussed above. At the outset, we find that AO has made the addition on surmise and conjecture without pointing out any defect in the audited financial statement. The AO has failed to bring any defect in the submission of the assessee. In the case of deviation of the Accounting standard the AO should have rejected the books of accounts but he chose not to do so. CIT(A) has correctly deleted the addition made by the AO by observing that the method of valuation adopted by the assessee is consistent. It cannot be rejected merely because it will hamper the revenue. AO has not found any actual defect in the valuation of closing stock. AO has not found any defect in the books of accounts. Even if the average cost method is applied then also the AO calculation is not done properly and closing stock, 5584 pieces of sarees @ 1624 per piece = 90,68,416/- on the average price of the opening stock and purchases during the year( 24,30,650 + 3,72,95,387=3,97,26,037.00/ 24464). While assessee has shown the closing stock valuing 1,10,95,279/-. - Decided against revenue Addition made by the AO on account of depreciation charged on buildings - assessee claimed to have made the investment in the properties by paying composite amount - Held that:- In the instant case, the ld. AR has not brought produced the details of the payment of the composite payment. But he requested to restore the issue to the AO for verification and the ld. DR raised no objection if the same is restored to the AO. Therefore, in the interest of justice and fair play we restore this matter to the file of AO with the direction that in case the assessee has made the composite payment for the purpose of aforesaid properties, then the depreciation as per the order of Ld. CIT(A) should be allowed. Hence, this ground of Revenue’s appeal is allowed for statistical purpose.
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Customs
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2016 (10) TMI 607
Imposition of CVD - Castings for Wind Operated Electricity Generators - imported from China PR - N/N. 1/20 16-Cus (CVD) dated 19.01.2016 - basis for initiating investigation by DA - Rule 6 of CVD Rules - scope of investigation by DA - Held that: - The DA had examined volume effect of the subsidised imports on domestic industry, price effect (underselling), other economic parameters. When the interested parties do not co-operate to the fullest extent, then reliance upon best available facts is acceptable alternative for the DAs worldwide, while proceedings with investigation. The DA went ahead with investigation only where sufficient, prima-facie data was provided by DI. The investigation was terminated wherever such data was not provided by DI. Adequate opportunities were provided to the interested parties by the DA to make submissions. The DA had also examined the question regarding scope of the term 'public body' in terms of Article I of Agreement on Subsidies and Countervailing measures - investigation carried out by DA devoid of any limitations - CVD rightly imposed - appeal rejected - decided against appellant.
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2016 (10) TMI 606
Imposition of ADD - Soda Ash - import from China PR, European Union, Kenya, Iran, Pakistan, Ukraine and USA as well as Turkey and Russia respectively - sale price higher than NIP - price injury to the domestic industry - Held that: - there is no legal provision to mandate the DA to compare NIP with NSR in order to determine the price effect. NSR is not the only parameter to decide on AD duties. The other price effects of imports such as price suppression and price depression are to examined. These aspects have been specifically examined by the DA in para 117 and 118 of his findings dated 17/2/2012. He concluded that there is a price suppression affecting the DI. It was further recorded that per unit profits of DI in respect of production and sale in the domestic market has significantly declined during the injury period. On perusal of the confidential information as submitted by the learned Counsel for the DA as seen from para 117 and 125 of the findings it is noted that the landed price is much lower than the NIP and the return on investigation for the DI is much below the general bench mark. ADD rightly imposed - no force in the submission of the appellant - appeal dismissed - decided against appellant.
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2016 (10) TMI 605
Levy of Anti Dumping duty - challenging the finding of the DA - caustic soda - chlorine - imported from China P.R. and Korea R. P. - costing of chlorine emerging during the manufacture of caustic soda - whether or not the chlorine emerging during the process of manufacture of subject goods has "Equal Economic Importance"? - is chlorine a joint product of the status equal to caustic soda? - Held that: - when more than one product emerge during the common manufacturing process, two or more those can be considered to have "Equal Economic Importance" if they give equal economic return or monetary benefit to the producer. In such situation these products can be considered as joint/ co-products. Even if chlorine has fluctuating price showing upward trend during certain times, cannot economically realise that much benefit to the producer in India as equal to caustic soda. Admittedly, chlorine is of economic importance and the producers do realise significant benefit by sale or partly by captive consumption in making derivatives chemicals. However, it is clear, based on the evidence placed that the integrated downstream manufacture resulting in economic consumption of substantial quantum of chlorine in the DI has not reached a level which will make chlorine a product of "Equal Economic Importance" to the producer. On perusal of the cost audit report, it is seen that Chlorine has been consistently treated as by-product and the Cost Accounting Standards applicable to such treatment have been applied. The realisation out of chlorine produced shows that the position of "Equal Economic Importance" cannot be given to chlorine in the Indian context. Treatment of chlorine as a by-product is correct - appeal dismissed - decided against appellant.
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2016 (10) TMI 604
Condonation of delay - waiver of pre-deposit - Held that: - the appellant has not evidenced the statutory requirement of depositing 7.5% of the amount of penalties imposed by the adjudicating authority - Decided against the assessee
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Corporate Laws
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2016 (10) TMI 600
Restraint orders against the EOGM scheduled to be held for removal of the Petitioner as director of the Company - Held that:- The petitioner and Respondents 2 & 4 agreed for the Respondents to take exit from the Company on valuation of shares taking into consideration of the monies invested and taken from the company by either parties that is the petitioner and the Respondents as well.
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Service Tax
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2016 (10) TMI 622
Taxability of club membership fees - Society registered under Society Registration Act, 1860 - service rendered by club to its members - Held that: - the decision in the case of Ranchi Club Ltde vs Chief Commissioner of Central Excise [2012 (6) TMI 636 - Jharkhand High Court] relied upon where it was held that in view of the mutuality and in view of the activities of the club, if club provides any service to its members may be in any form including as mandap keeper, then it is not a service by one to another in the light of the decisions referred above as foundational facts of existence of two legal entities in such transaction is missing. On perusal of the the Memorandum of Association of the Indian Port Association it is found that the membership of the Association shall be open to all major ports in India. It is also emerging from the Memorandum that the objectives of the Association are to carry out various activities to help the members i.e. various major ports in India. Hence, there is mutuality of interest between the Association and its Members, inasmuch as the society is comprising of all the major ports in India and any activity even if in the nature of service, is rendered to its members. Demand not sustainable - appeal allowed - decided in favor of appellant.
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2016 (10) TMI 621
Demand of service tax for the period 10.09.2004 to 24.03.2008 and also 1.4.2008 to 15.10.2011 - invocation of extended period of limitation - demand of interest and penalty 78 of the Finance Act, 1994 - classification of services - Commercial or Industrial Construction (CIC) Service falling under Section 65 (105) (zzq) or Works Contract Service falling under Section 65 (105) (zzzza) - Held that: - all the contracts are in the nature of works contracts and no demand of service tax can be upheld for such works for the period prior to 01.06.2007. For the period subsequent to 01.06.2007, the Department does not have any option other than to classify the services rendered by the appellant under Works Contract Service. The decision in the case of Commissioner of Central Excise, Kerala, vs. L & T Ltd. [2015 (8) TMI 749 - SUPREME COURT] relied upon. Likewise, such services for the period upto 31.5.2007 cannot also be classified under any service and cannot be charged to Service Tax. Hence, the matter needs to be remanded back to the Commissioner for passing denovo orders. The demand up to 31.05.2007 does not survive. However, for the period from 01.06.2007, the lower authority directed to re-examine the issue by going through the relevant contracts and other documents in the light of the L & T case and pass revised orders. For the period from 01.06.2007 - the first SCN was issued on 26.5.2009 invoking the extended period of limitation. The Department is precluded from issuing another SCN invoking the extended period. Consequently we make it clear that the demand raised in the second SCN dated 19.4.2011 does not survive even in the denovo proceedings beyond the normal time limit under Section 73 of the F.A 1994. Appeal allowed - matter remanded.
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2016 (10) TMI 620
Classification of service - commercial or industrial construction service or works contract service - works contract service wef 1/6/2007 - denial of the benefit of N/N. 12/2003-ST dated 20/6/2003 and benefits of Rule 2A of the Service Tax Determination of Valuation Rules 2006 - The appellant was paying service tax prior to the introduction of Works Contract Service [WCS] (w.e.f. 01/6/2007) under Commercial or Industrial Construction Service. After the introduction of the works contract service they have sought re-classification of their service under the newly introduced WCS - Held that: - the decision in the case of Commissioner of Central Excise, Kerala, vs. L & T Ltd. [2015 (8) TMI 749 - SUPREME COURT] relied upon where it was held that such contracts should be classified only under works contract scheme w.e.f. 01/6/07. Further questions which arise are (i) whether the appellant will be entitled to the benefit of composite scheme and (ii) whether they will be entitled to exclude the value of goods supplied under Rule 2A of the Service Tax Determination of Valuation Rules - this issue stands decided in the case of Ahluwalia Contracts (I) Ltd. vs CCE, Noida [2015 (7) TMI 855 - CESTAT NEW DELHI] where it is held that the issue is not res integra and this case relied upon. They will be entitled to re-classify their services under Works Contract Scheme 01/6/07. They will also be entitled to the benefit of Rule 2A of the Service Tax Determination of Valuation Rules. The issue needs to be remanded back to the original Adjudicating Authority for evaluating the claim of the appellant to the quantum of the benefit entitled to them under Valuation Rule 2A of the Service Tax Determination of Valuation Rules - matter remanded to adjudicating authority - appeal allowed.
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2016 (10) TMI 619
Import of services - reverse charge method - ‘information technology service’ or ‘intellectual property service’ - classification of services - period from 10th September 2004 to 31st March 2007 - transfer of technology against payment based on downloads made by subscribers of the appellant using the service of the provider - involvement of copyright - Reverse Charge Mechanism - rule 2(1)(d)(iv) of Service Tax Rules, 1994 - Held that: - the decision in the case of Government of India v. Indian Tobacco Association [2005 (8) TMI 113 - SUPREME COURT OF INDIA] relied upon where it was held that it is only after enactment of Section 66A, w.e.f. 18-4-2006, that taxable services received from abroad by a person belonging to India are taxed in the hands of the Indian residents. In such cases, the Indian recipient of the taxable services is deemed to be a service provider - the demand relating to the period prior to 18th April 2006 does not have the authority of law. Demand for the period after 18-4-2006 - Section 65(105)(zzr) - section 65(55a) - copyright outside the scope of ‘intellectual property service’ - Held that: - Section 65(105)(zzr) has been invoked in the notice but the nature of ‘technical knowhow’ transferred to appellant from among trade mark, design, patent etc. has not been identified. Likewise, it has not been established if the said ‘intellectual property right’ was acknowledged under the relevant Indian law and, thereby, within the ambit of the definition in section 65(55a). This is a critical flaw. The decision in the case of Tata Consultancy Services Ltd. v. Commissioner of Service Tax, Mumbai [2015 (11) TMI 236 - CESTAT MUMBAI] relied upon - the demand for the period after 18-4-2006 also not tenable. Demand not sustainable - appeal allowed - decided in favor of appellant.
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2016 (10) TMI 618
Imposition of penalty u/s 77 & 78 of the Finance Act, 1994 - construction of complex - benefit of doubt and bonafide belief- applicability of section 80 of the act - Held that: - the issue of taxability of construction of complex was under doubt right from beginning and various circulars were issued to clarify the position on taxability of the said services. On the taxability of the services, the bonafide belief of the appellant in non payment of service tax in time, is established. It is not disputed that the appellant have recorded the entire transaction of their services in their books of accounts. The appellant have shown the reasonable cause for waiver of penalties invoking under Section 80 of the Finance Act - penalty waived - appeal allowed - decided in favor of appellant.
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Central Excise
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2016 (10) TMI 617
Valuation (Central Excise) - Captive consumption - Departmental Clarifications - Apex court dismissed the appeal against the decision of tribunal [2005 (3) TMI 186 - CESTAT, NEW DELHI] wherein the demand was set aside by holding that, " It would be wholly incorrect to apply old circulars without considering the modifications brought about by the latest circular, particularly when, as noted already, it is well settled that assessees are not bound by any circular, though at liberty to seek the benefit of circulars and a Court has to allow such a claim while Revenue is bound by its own circulars."
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2016 (10) TMI 616
CENVAT credit - manpower recruitment services - outward transportation of one of the exempted goods press mud - whether during the period October 2005 to June 2010, the appellant having paid the service tax on outward transportation of one of the exempted goods press mud, is eligible to avail the service tax credit and use the same for discharging central excise duty on service tax liability? - Held that: - reliance placed on the decision of Commissioner of Central Excise, Kolhapur Versus M/s. Shree Chh Shahu Ssk Ltd.[2015 (2) TMI 265 - CESTAT MUMBAI] where it was held that manpower also consumed for the purpose of handling waste and compost etc. is an essential part of manufacture of the product being excisable goods, etc. and accordingly, the same is fully allowable. The issue is similar as decided in the case of M/s. Shree Chh Shahu Ssk Ltd. - denial of CENVAT credit not justified - appeal allowed - decided in favor of appellant.
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2016 (10) TMI 615
Denial of CENVAT credit - imposition of penalty - manufacture of cement liable to Central Excise Duty - duty paid on various steel items like TMT bars, Coil, Steel tubes and pipes, modified armor plate, rectangular bar, PCC Chequred plate, chain conveyor etc. falling under Chapter 72 and 73 of the Central Excise Tariff Act, 1985 - eligibility of iron steel structure items for cenvat credit either as an input or as a capital goods - Held that: - the decision in the case of Commissioner vs. Rajasthan Spinning & Weaving Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT OF INDIA] relied upon where it was held that the steel items when they are used in fabrication of capital goods and their accessories inside the manufacturer premises are eligible for credit by applying user test - CENVAT credit allowed - appeal allowed - decided in favor of appellant.
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2016 (10) TMI 614
Valuation - interconnected undertakings u/s 2(g) of MRTP Act, 1969 - related party transaction - Valuation Rules, 2000 - demand of differential duty - imposition of penalties u/r 26 of Central Excise Rules, 2001/2002 - Held that: - there is financial flow back or mutuality of interest among the legal entities. It is apparent that when the affairs of these 3 units were managed by overall control, the benefit accrue to the closely connected family member. There is no need to show, demonstratively, cash flow or a specific monetary consideration from one entity to another entity. The arrangements are so, that ultimately the monetary benefit should accrue to a closed group of people in a family. The arrangement is beneficial to the persons while adversely affected the proper valuation and duty payment by the manufacturing unit. The issue whether the transaction value adopted by the main appellant is acceptable or not has been decided after detailed verification by the Department. The investigation brought out facts which have direct bearing on the valuation. The declarations filed by the main appellant, as claimed, does not throw light on any of these aspects. The extended period is rightly invoked - demand of duty and penalty rightly imposed - appeal rejected - decided against assessee.
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2016 (10) TMI 613
Interest on delayed refund of pre-deposit u/s 35 F of the Central Excise Act 1944 - Circular No. 802/35/2004-cx date 8/12/2014 issued from File No. 387/5/2001-JC - Held that: - circular clarified that Delay beyond the period of three months will be viewed adversely and appropriate disciplinary action will be initiated against the concerned defaulting officers. All concerned are requested to note that default will entail an interest liability, if such liability accrues by reason of any orders of the CESTAT/ Court, such orders will have to be complied with and it may be recoverable from the concerned officers. Circulars issued by CBEC are binding on the field formations - interest on delayed payment allowed. Interest on interest - the decision in the case of Sandvik Asia Ltd. Vs CIT-I Pune [2006 (1) TMI 55 - SUPREME Court] referred - Held that: - the decision in the case not applicable as there was an inordinate delay of 12-17 years in payment of interest on refunds which is not the factual matrix in the present proceedings - interest on interest not allowed. Interest on delayed refund allowed - the relevant date for calculating the interest will be 3 months from CESTAT order dated 3/6/02 as per Para- 4 of CBEC Circular dated 8/12/2004 - appeal allowed - decided partly in favor of appellant.
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2016 (10) TMI 612
Manufacture - repacking of oil from bulk packs to smaller packs - Whether the repacking of RBB Palmolien Oil received in tanker in bulk and repacking them into smaller packs will amount to manufacture and liable to duty or otherwise? - Held that: - The issue is no more res integra. The Tribunal in a similar set of facts, in the case of CCE Pune II v. Anwar Oils [2015 (12) TMI 1348 - CESTAT MUMBAI] held the decision in favour of the assessee stating that the activity of packing refined edible oil received in tankers into small containers cannot be treated as manufacturing activity in terms of Note 4 of Chapter 15 of Central Excise Tariff Act, 1985. Manufacture not taking place - appeal allowed - decided in favor of appellant.
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2016 (10) TMI 611
Denial of CENVAT credit - demand of duty with interest - imposition of penalties - dealer found to be non-existent at the time of investigation - Held that: - the cenvat credit cannot be denied to the assessee merely, on the ground that at the time of investigation, the dealer was non-existent. In fact when the goods were procured by the assessee, the dealer was registered with the department. CENVAT credit on the basis of investigation conducted at the third party cannot be denied to the appellants - appeal allowed - decided in favor of appellant.
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2016 (10) TMI 610
Manufacture - Intermediate products - captive consumption - marketability - nature of preparation of Additive mixture for manufacturing of branded chewing tobacco - notification No. 52/02-C.E. issued on 17-10-02 - Demand of duty and NCCD - Held that: - By going through the entire process of manufacture at no stage the goods can be called captively consumed. Moreover, there is no allegation in the show cause notices that additive mixture is marketed or has been transferred or sold by the respondents, in that circumstance, the test of excisability fails in the light of decision of the Apex Court in the case of Ambalal Sarabhai Enterprises [1989 (8) TMI 72 - SUPREME Court] - as the alleged additive mixture is not capable of marketing, the additive mixture is not excisable to duty. The Revenue has sought to demand duty on additive mixture without alleging additive mixture is preparation containing chewing tobacco. Therefore, the demand sought to be demanded only on the basis of assumption and presumption. The additive mixture arose only as an intermediate product in the course of manufacture of finished chewing tobacco. As chewing tobacco has not been manufactured till the stage of final manufactured chewing tobacco, therefore, additive mixture cannot be called as chewing tobacco or preparation of chewing tobacco. As it is not chewing tobacco therefore, the respondents are not liable to pay duty thereon. Whether the exemption under Notification No.121/94-CE dated is available to NCCD during the period 1.3.2001 to 16.10.2002? - Held that: - no basic excise duty and AED & GIS was payable on intermediate product and if NCCD is paid on intermediate product on which the duty is paid, the same is available as credit e to the respondent at subsequent stage. - the respondents are not liable to pay NCCD. Exemption on NCCD was granted vide Notification No. 52/02 dated 17.10.2002. The policy intention was that as in the case the basic excise duty and AED after the imposition of NCCD also, there would be no additional burden of NCCD for captive use of compound. Otherwise it would be anomalous that if the use is outside the factory, the impact is nil by virtue of Cenvat Credit being admissible from 1.3.2001 but for use within the factory, NCCD is payable. - no NCCD payable on the additive mixture for the earlier period even though notification no. 52/02 has been issued only on 17/10/2002. Whether the revenue neutral situation comes in the instant case and consequently, the entire exercise is academic? - Held that: - if the respondents paid duty on additive mixtures, the same is available as credit to them immediately - revenue neutral situation arises - entire exercise is of academic in nature. Whether the show cause notices were issued to the respondents are sustainable or not having patent error and when no specific value and quantity of the goods have mentioned? - Held that: - in the show cause notice, the value/qunatity of the goods has been taken as approximate basis which is patent error in the show cause notice and on the basis of assumption and presumption, the duty cannot be demanded from the assesssee. - the show cause notices issued to the respondents are defective. Appeal dismissed - decided against Revenue.
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2016 (10) TMI 609
Denial of refund of AED - correlation of the unutilised credit to the quantum of export of the goods - whether the Revenue's contention of denial of refund is justified on the ground that credit availed will remain unutilised even if goods are not exported? - Held that: - identical issue in respect of the very same assessee was decided where it was held that refund has to be granted of the unutilized credit. Appeal dismissed - impugned order upheld - decided against Revenue.
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2016 (10) TMI 608
100% EOU - denial of eligibility for concession - demand of duty - imposition of penalties appellant and three officers - cotton yarn and blended yarn - N/N. 8/97-CE date 01/3/97 - goods should have been cleared from raw materials produced or manufactured in India - whether appellant is eligible for concessional rate of duty and does the appellant has fulfilled the conditions for availing concession? - Held that: - all details were maintained by the assessee in computerised form. The elaborate computerized documentation maintained by the assesse during the relevant time has not been examined in correct prospective by the Adjudicating authority before confirming the demand. Commissioner failed to appreciate that they are using domestic cotton also for manufacture and export of yarn. The reliance placed by the Commissioner on the E-mails without any corroboration is not sustainable. Even after recording that these evidences do not necessarily mean that all other domestic clearances were also made from imported cotton, it was not established by any record that all raw materials were not of Indian origin. The impugned order are arbitrary and without sound legal basis - appellant eligible to claim exemption - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2016 (10) TMI 603
Provisional attachment of bank account - section 45(1) of the GVAT Act, 2005 - entry tax - whether the Entry Tax Act, 2004 vest power of provisional attachment on the respondents? - Held that: - The Entry Tax Act does not contain any provision for provisional attachment. Section 45(1) of the VAT Act, of course, authorizes the competent authority to exercise the power of provisional attachment pending the proceedings for assessment or reassessment of turnover escaping assessment to protect the interest of Revenue. Such power obviously cannot be imported for the purpose of the Entry Tax Act. The petitioner has already deposited a sum of ₹ 11 lakhs towards the initial estimated tax penalty and interest liability of ₹ 20 lakhs, which in any case, includes substantial portion of disputed entry tax - the authorities not permitted to provisionally attach the petitioner's bank account - petition allowed - decided in favor of petitioner.
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2016 (10) TMI 602
Demand of tax - printed digital photo albums - the issue had already been decided as per clarification issued by the Commissioner - non-consideration of clarification by the AO when considering the issue - whether the demand can be set aside by this Court bypassing the alternate remedy available under the statute? - order of demand passed without reference to the clarification sustainable? - Held that: - it is apparent that when a clarification had been issued under Section 94 of the Act, the Officer is bound to comply with the same. Merely for the reason that the petitioner had submitted an application for compounding which had been allowed, does not deprive the right of the petitioner to take a contention based on a clarification issued by the Commissioner. Under such circumstances, the Assessing Officer had committed serious error of law in coming to the aforesaid finding and for that reason itself, the impugned order is liable to be set aside - demand of tax set aside - AO to consider the matter afresh after taking note of the consideration and after hearing the petitioner - petition disposed off - decided in favor of petitioner.
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2016 (10) TMI 601
Levy of penalty u/s 27[3] of the TNVAT Act, 2006 - evasion of sales tax on purchase of earth - Held that: - the decision in the case of Commissioner of Income-Tax, West Bengal And Another Versus Anwar Ali [1970 (4) TMI 1 - SUPREME Court] relied upon where it was held that the true nature of penalty is understood to provide for a deterrent element against possible recurrence of default on the part of the assessees and hence, any order imposing penalty is the end result of a quasi-criminal proceedings. Section 27[3] enables a penalty to be levied wherever a revision of assessment has taken place, pursuant to detection of a portion of turnover that has escaped taxation - there is no dispute on the factual ground that the payment made is in fact reflected in the books of accounts maintained by the respondent dealer in the ordinary course of business, and thus, there is no wilful suppression of any such expenditure, indulged in by the dealer. At the first round of assessment, in fact it has escaped the attention of the AO. In other words, no serious exception has been taken thereto at the first instance. But, it is subsequent thereto, the scrutiny has been undertaken. There should have been a specific finding recorded by the AO that the turnover that has escaped in the first and initial round of assessment, is the result of wilful non-disclosure or suppression by the dealer. There is no such finding recorded in the Revised Assessment Order dated 30.11.2012. A proper and careful quasi-criminal exercise of imposition of penalty has not been carried out by the AO. The finding of wilful non-disclosure/suppression of turnover is the condition precedent, which alone fetches the imposition of penalty is conspicuous by its absence in the order of reassessment. In the absence of any such finding, imposition of penalty could not be lawfully carried out. Petition dismissed - deletion of penalty justified - decided in favor of respondent-assessee.
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