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TMI Tax Updates - e-Newsletter
October 20, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
TMI Short Notes
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Due date for filing Income-tax return and reports of audit extended for taxpayers in the state of Jammu & Kashmir - Order-Instruction
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RELATIONSHIP BETWEEN THE PRINCIPAL AND PROFESSIONAL – TREATMENT UNDER INCOME TAX PROVISIONS
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Penalty u/s.271D - violation of Section 269SS - adjustments through journal entries - Since there was no payment in cash either by the assessee or on its behalf it could not be said that there was any violation of Section 269SS - No penalty - HC
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Deduction u/s 54F - whether the assessee owns more than one residential house - when one considers the gain or exclusion from the set off of the gain it should be related to the capital assets. When the property was not shown as capital assets but was shown as stock in trade, it should not be considered for the purpose of exemption u/s 54F - HC
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TDS u/s 195 - AO could not establish that the impugned payments made by the assessee to non residents outside India were chargeable to tax in India and in this situation, TDS provisions are not applicable to the payments made by the assessee - AT
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Depreciation on plastic mould - two wheeler manufacturer - it is immaterial whether the plastic /rubber moulds were used in the factory premises of the assessee or vendors - depreciation allowed at higher rate - AT
Customs
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Renewal of Customs Broker Licence - The CESTAT, rightly set aside the order of suspension and such orders were confirmed by the HC - Therefore, it would be wholly untenable on the part of the respondent to state that they will once again rely on the unsubstantiated allegations for refusing to renew the petitioner's licence. - HC
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Imposition of ADD - Hot Rolled Flat Products of Stainless steel - when the import during POI gave a fair indication about quantum being above 3% there is no need to look into post POI data for investigation. - AT
Service Tax
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Refund of service tax paid - Rejection would, certainly, have to be articulated in a speaking order with reasoned substantiation for that course of action. The rejection on grounds of being ‘pre-mature’ reflects either ignorance or unwillingness to act with responsibility - AT
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Refund claim of service tax paid - classification of services - Claiming a refund of the amount paid as tax as per their understanding of law cannot be disputed now - refund claim rejected - AT
Central Excise
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Deduction of Trade discount from Assessable value - commission (claimed as ‘trade discount') paid to agents/dealers for arranged sales to third parties will not be eligible for deduction. - AT
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CENVAT credit - capital goods - manufacturing of health products - installation of bulk milk coolers (BMC) and DG sets at milk collection centres to store the milk collected at a specific temperature - Credit allowed - AT
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Cenvat Credit - The service tax paid towards accommodation to the experts are rightly covered by the ‘input service' in terms of Rule 2(l) of Cenvat Credit Rules, 2004 - AT
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Demand of CENVAT credit availed - classification of goods - non-woven textile fabrics falling under CETA 56.03 or classified under 39231090 - The HSN clearly recognize non-woven textile manufactured by thermal/mechanical bonding of yarn as textile falling under Chapter 56 - demand not justified - AT
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Levy of penalty - Manipulation of account current (PLA) - although there may be mistake of the appellants but the appellants cannot take the benefit of the same as they have taken the credit in the PLA without making payment - penalty confirmed at reduced rate - AT
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Valuation - related person - The price charged by the trading company includes various services charges, their profit and cost alongwith machines, in that circumstance, it cannot be said that the price of trading company is the influenced price of the goods sold by the appellant - AT
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Valuation - related person - it is routine practice in the business that buyers of the goods give certain advances to the suppliers, therefore, it cannot be said that by giving mere advances to the suppliers are having interest in the business of others. - AT
Case Laws:
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Income Tax
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2016 (10) TMI 636
Penalty u/s.271D - violation of Section 269SS - adjustments through journal entries - Held that:- The assessee filed copies of account of three companies as appearing in the books to demonstrate that the amounts, which were transferred to these three companies were transferred by way of account payee cheques and, therefore, the Tribunal came to the conclusion that it could not be said that the assessee had accepted loan or deposit in contravention of the provisions of Section 269SS as no cash had been accepted by the assessee. Since there was no payment in cash either by the assessee or on its behalf it could not be said that there was any violation of Section 269SS of the Act. Therefore, the penalty has rightly been deleted by the Tribunal. See Commissioner of Income-Tax Versus Noida Toll Bridge Co. Ltd.[2003 (1) TMI 46 - DELHI High Court] - Decided in favour of assessee.
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2016 (10) TMI 635
Deduction under Section 54F - whether the assessee owns more than one residential house other than the new asset on the date of transfer of the original asset? - Held that:- Any stock in trade by profession is excluded from the definition of capital asset and in these circumstances the contention of the Revenue is that stock in trade is also included for applicability of Section 54F of the Act, in our view, cannot be accepted. We may also add that under the heading of Capital gains, Section 45 of the Act provides that any profits or gains arising from the transfer of capital asset can be considered as capital gain. Therefore, when one considers the gain or exclusion from the set off of the gain it should be related to the capital assets. When the property was not shown as capital assets but was shown as stock in trade, naturally the view taken by the Tribunal cannot be said to be erroneous. No substantial questions of law .
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2016 (10) TMI 634
Depreciation on plastic mould - higher rate of depreciation on moulds in case of two wheeler manufacturer - use of moulds at vendor's premises - Held that:- We are inclined to hold that the conclusion arrived by the ld. CIT(A) in para 5.2 of the impugned order is quite correct and justified and we are unable to see any valid reason to interfere with the impugned order on this issue as admittedly and undisputedly the assessee is owner of the plastic mould which were used in the premises of various vendors for manufacturing of plastic and rubber goods for use of assessee. In our considered opinion, it is immaterial whether the plastic /rubber moulds were used in the factory premises of the assessee or vendors. Prime requirement is that moulds should be owned by the assessee, the same should be part of block assets shown by the assessee and these were put to use for the purpose of business of the assessee and the three requisite conditions have been fulfilled by the assessee in the present case and thus it is entitled to claim depreciation @ 30% which was rightly allowed by the ld. CIT(A) - Decided against revenue. Payment in the nature of reimbursement of expenses - AO made disallowance on the allegation that the assessee has not made tax deduction at source on the payments made to non resident outside India whereas the CIT(A) granted part relief to the assessee by observing that since payments have been made outside India in the form of reimbursement of expenses, thus they are not chargeable to tax in India and the AO should not have made disallowance in this regard - Held that:- CIT(A) was quite justified and passed a balanced order while upholding the addition under three heads and granting relief to the assessee by following the order of the DRP for A.Y 2006-07. It is well accepted proposition that the Rule of Consistency should be followed by the revenue authorities unless there is substantial change in the facts and circumstances. In the present case, the CIT(A) followed the order of DRP for earlier A.Y 2006-07 wherein claim of the assessee regarding payment in the nature of reimbursement of expenses was allowed. We are unable to see any valid reason to interfere with the conclusion of the CIT(A) especially when the AO could not establish that the impugned payments made by the assessee to non residents outside India were chargeable to tax in India and in this situation, TDS provisions are not applicable to the payments made by the assessee and hence we are unable to see any ambiguity or perversity in the order of the CIT(A) and thus we uphold the same. Accordingly, Ground No. 2 of the Revenue being devoid of merits stands dismissed. Allowability of expenses - liability regarding Excise duty and additional Excise duty - Held that:- When a company is out outsourcing manufacturing activity to the various vendors, contract manufacturers, then any liability regarding Excise duty and additional Excise duty has to be borne by the contractee as per excise laws and the same has to be held for the purpose of business of the assessee, because excise duty or additional excise duty was paid as per mandatory taxation legislation which cannot be avoided. In the present case, payment of sales tools expenses was not under legal obligation or liability and same has been incurred without any agreement. At the risk of repetition, we may point out that as per clause 11.2 of agreement between the assessee and the dealer, all expenses have to be borne by the dealers in regard to advertisement support services, which includes sales tools expenses also. Thus we are unable to accept the reasons recorded by the CIT(A) for granting relief to the assessee on this count and we set aside the same and order of the AO is restored. Allowability of trial run expenses - Held that:- In the present case, we find that the expenses were essential expenses incurred on purchase of spare parts for their trial and indigenisation in India. The assessee has neither set up a new plant nor purchased any capital asset. Accordingly, in view of the above decision of the Hon'ble Supreme Courtin the case of Empire Jute Company Limited [1980 (5) TMI 1 - SUPREME Court ]we find no merit in the order of the AO nor in the impugned order of the CIT(A) holding the above expenses to be capital in nature
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2016 (10) TMI 633
Claim of deduction u/s 80IB(10) - housing property - Revenue contended that the project which was approved in 2003 was the same as was approved in 19th January, 2005. Therefore, the CIT(A) as well as the Tribunal were not correct in holding that the two projects were different and that the approval obtained on 19th January, 2005 was the approval obtained on a project different from that obtained on 2nd November, 2003 Held that:- We find that this Court in Commissioner of Income Tax Vs. Vandana Properties [2012 (4) TMI 54 - BOMBAY HIGH COURT ] has specifically held that the Explanation to Section 80IB(10)(a) of the Act refers to approval granted to the same housing project more than once and the said Explanation would not apply where the approval is granted to different housing projects. In view of the concurrent finding of fact by two Authorities, which is not shown to be perverse and the application of law as settled by this Court on those facts, the question of law as framed does not give rise to any substantial question of law. Thus, not entertained.
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2016 (10) TMI 632
Profit on sale of the plot of land - to be assessed under the head of “Capital Gains” OR "business receipts” - Held that:- We find that the impugned order of the Tribunal has rendered a finding of fact to the effect that the plot of land is owned by the respondent assessee. This plot was a subject matter of sale during the previous year relevant to the subject assessment year and had always been shown as a fixed asset in its balancesheet. Further, the Tribunal records the fact that the business of the respondent assessee was not of trading in plots of land and, therefore, the amounts received on sale of plot of land which was originally purchased for construction of administrative building could never be taxed as a business income. The impugned order of the Tribunal is unexceptionable in its reasoning. The grievance of the Revenue by placing reliance upon the Goetze (India) Ltd. (2006 (3) TMI 75 - SUPREME Court) is that no fault can be found with the order of the Assessing Officer in not entertaining a claim in the absence of a Revised return of income. However, this submission overlooks the fact that in Goetze (India) Ltd. (supra), it was clarified that the same does not deal with the power of Appellate Authority to consider a new point of law. In any case, this Court in Commissioner of Income Tax Vs. Pruthvi Brokers and Shareholders P. Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT], on consideration of the Apex Court's decisions in Goetze (India) Ltd.(supra) and National Thermal Power Co. Ltd. Vs. Commissioner of Income Tax, [1996 (12) TMI 7 - SUPREME Court], held that the assessee is entitled to raise additional grounds before the Appellate Authority which may not have been raised before the Assessing Officer. Thus, the grievance of the Revenue is unsustainable in view of the decision of this Court in Pruthvi Brokers and Shareholders P. Ltd. (supra). No substantial question of law.
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2016 (10) TMI 631
Penalty levied u/s 271(1)(c) - concealment of particulars of income - Held that:- None of the Authorities under the Act have held that there was any concealment of particulars of income or that the details supplied by the respondent assessee were incorrect / erroneous / false while making a claim of a revenue expenditure while making a payment to National Pharmaceutical Pricing Authority. The Apex Court in Commissioner of Income Tax Vs. Reliance Petroproducts Pvt. Ltd., [2010 (3) TMI 80 - SUPREME COURT], has held that mere making of a incorrect claim by itself would not warrant any imposition of penalty. The sine qua non for imposition of penalty would be suppressing details and / or supplying erroneous / false details. A mere making of a claim which may be found on examination to be not sustainable in law by itself will not amount to furnishing inaccurate particulars of the assessee's income. Moreover, in the facts of this case even a merits of the claim made in quantum proceedings is debatable. This is evident from the fact that the Tribunal in quantum proceedings upheld the claim made by the respondent assessee. - Decided in favour of assessee
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2016 (10) TMI 630
Reopening of assessment - reasons to believe - Held that:- A notice of reopening, the Assessing Officer does not have to “establish” that any income has escaped assessment. He must simply be shown to have formed an opinion, which, in turn, is supported by reasons. The reasons themselves must be based on some material. A minimum requirement one would expect in the face of this scheme of things is that the material used by the Assessing Officer for forming his opinion must have some bearing or nexus with escapement of income. If not, the reopening notice would be clearly without jurisdiction. In the present case, the material used by the Assessing Officer for purportedly forming this opinion is the description of the assessee of itself as “a supplier” of the equipment in an EPC contract, which inter alia required it to take offshore delivery of the equipment from a foreign vendor and supply and install the same onshore. Mere description as a “supplier” in a suit by the assessee against the insurance company claiming an insurance claim for loss of equipment, when the assessee insured the equipment jointly with the purchaser, can possibly have no connection with the escapement of any income arising out of sale of the equipment. Since that was the only material used by the Assessing Officer for issuance of the reopening notice, the notice is without any legal basis or justification. The authorities below were clearly, therefore, right in setting aside the notice. One more fact to be noted is that for the Assessment Year 1999-2000 and 2002-03, a coordinate bench of the Tribunal had taken a view that the Respondent Assessee has not sold any equipment. In these circumstances, the order of the coordinate bench for Assessment Years 1999-2000 and 2002-2003 also supports the Respondent's contention that they were not suppliers of the equipment and no income assessable to tax has escaped assessment. It's obligation was to insure the goods/equipment during transit done by it either on its own or through a subcontractor.
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2016 (10) TMI 629
Addition of 'Mark to Market' Loss - disallowance of loss on foreign exchange forward contract loss - Held that:- The impugned order of the Tribunal has, while upholding the finding of the CIT (Appeals), independently come to the conclusion that the transaction entered into by the Respondent assessee is not in the nature of speculative activities. Further the hedging transactions were entered into so as to cover variation in foreign exchange rate which would impact its business of import and export of diamonds. These concurrent finding of facts are not shown to be perverse in any manner. In fact, the Assessing Officer also in the Assessment Order does not find that the transaction entered into by the Respondent assessee was speculative in nature. It further holds that at no point of time did Revenue challenge the assertion of the Respondent assessee that the activity of entering into forward contract was in the regular course of its business only to safeguard against the loss on account of foreign exchange variation. Even before the Tribunal, we find that there was no submission recorded on behalf of the Revenue that the Respondent assessee should be called upon to explain the nature of its transactions. Thus, the submission now being made is without any foundation as the stand of the assessee on facts was never disputed So far as the reliance on Accounting Standard11 is concerned, it would not by itself determine whether the activity was a part of the Respondent assessee's regular business transaction or it was a speculative transaction. On present facts, it was never the Revenue's contention that the transaction was speculative but only disallowed on the ground that it was notional. Tribunal was justified in deleting the addition of 'Mark to Market' Loss made by the Assessing Officer on account of disallowance of loss on foreign exchange forward contract loss. - Decided in favour of assessee
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2016 (10) TMI 628
Allowability of amount of interest and financial charges under Section 36(i)(iii) - Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that amount of interest and financial charges is allowable under Section 36(i)(iii) of the Act ? - Held that:- Question is covered by judgment of Commissioner of Income Tax, Moradabad and another Vs. M/s Radico Khaitan Ltd., Bareilly Road, Rampur [2015 (9) TMI 1479 - ALLAHABAD HIGH COURT] wherein it has been held that Department cannot be permitted to question issues which were accepted by it in the previous years and stood answerd in favour of Assessee against Department by relying on the decision in DCIT Vs. Core Health Ltd.,(2008 (2) TMI 8 - SUPREME COURT OF INDIA ).
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2016 (10) TMI 627
Disallowance of commission expenditure - Tribunal confirming disallowance - Held that:- The entire issue is based on factual aspects and upon appreciation of materials on record. The assessee does not dispute having earned commission income but claims that he had incurred expenditure of ₹ 4.85 lacs in earning such income. The assessee failed to produce evidence of such expenditure. Significantly, none of the payments were made through cheque. The assessee also could not produce the nature of service rendered by the recipients of the payments. No substantial question of law - Decided against assessee.
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2016 (10) TMI 626
Validity of assessment u/s 153C - Held that:- Two documents stated to have been recovered during the search which did not belong to the Assessee and, therefore, could not form the basis for initiating proceedings against the Assessee under Section 153 C of the Act. Even in the satisfaction note recorded by the AO, the said documents were stated to “pertain” to the Assessee and not belong to it. It is further pointed out by Mr. Arvind Kumar, and rightly, that the amendment to Section 153C which replaced the words “belong or belongs to” with the words “pertain or pertains to” was made only with effect from 1st June, 2015 whereas the search in the present case took place on 9th September 2010 and the notice under Section 153C was issued on 12th April, 2012.Consequently, the ITAT cannot be said to have erred in holding the assessment to be unsustainable in law. - Decided in favour of assessee
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2016 (10) TMI 625
Accrual of income - Addition to income made on the basis of AIR information received by the AO - it is assessee’s submission that the amount was received by the assessee in AY 2010-11 and has also been offered to tax in AY 2010-11 as the cheque was received in subsequent years and the amount was received as advance payment and therefore the income did not accrue to the assessee in AY 2009-10 - Held that:- We find force in the contention of the assessee but however apart from the oral contentions, assessee has not placed any material on record to demonstrate that the amount has been offered to tax in subsequent years. In view of these facts, we are of the view that the matter needs to be re-examined at the end of AO. We therefore set aside the issue to the file of AO to verify and see that the same amount is not taxed twice, i.e. in AY 2009-10 and in AY 2010-11. In case, the amount is found to be taxable in AY 2010-11, then suitable credit of TDS be given to the assessee in accordance with law but in case the amount is found to be taxable in AY 2010-11, then AO is directed to give the credit of the TDS in AY 2010-11. The assessee is also directed to furnish all the required details promptly to the AO. - Decided in favour of assessee for statistical purposes.
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2016 (10) TMI 624
Treatment to notional loss on account of foreign exchange fluctuation as revenue loss - section 43A applicability - Held that:- The assessee during the year had claimed the loss on account of foreign exchange fluctuation in respect of loan which was used for the purpose of capital asset as revenue loss which claim was consistent with the department’s stand in earlier years. However, surprisingly for the year under consideration, the AO treated the said loss as capital loss in complete contradiction to his earlier stand. However, as observed above while adjudicating the issue for the earlier years, we have already allowed the claim of the assessee to claim adjustments of notional loss/gain as per the provisions of section 43A of the Act. We, therefore, dismiss this appeal of the assessee with the direction that the assessee will be eligible to claim the adjustments under section 43A of the Act in the light of the observations made above while deciding the assessee’s appeal for A.Y. 2004-05.
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2016 (10) TMI 623
Disallowance of purchase on adhoc basis - gp determination - Held that:- We find that the ld.CIT(A) while granting partial relief to the assessee has noted that assessee is trader of wastepaper and purchaser of waster-paper and assessee purchases it from small time vendors and in turn the waste-paper is supplied to the paper-mills. He has further given a finding that the purchase price of waste-paper is fixed by the Gujarat Paper Mills Association and the waste-paper traders have VAT registration and other required permissions and it files the details of turnover, etc. through the VAT returns before the VAT authorities. He has further noted that AO has not doubted the purchases made by the assessee nor has got on record any instance of waste-paper purchases made by the assessee found to be bogus or inflated. He has further noted that assessee had furnished quantitative details of purchase and stock alongwith tax audit report and had shown a GP of 7% and that in similar cases, the Central Circle Surat had estimated the Gross Profit and enhanced the rate between 0.5% to 0.75%. Considering the totality of the facts, he has given a finding that 15% margin in the trading business is not possible and thereafter he considered that the Net Profit rate could be between 2 to 3% and thereafter estimated the Net Profit rate at 3% as against 2.68% shown by the assessee. Before us, neither the Revenue nor the assessee has placed any material on record to controvert the findings of ld.CIT(A).
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Customs
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2016 (10) TMI 643
Renewal of Customs Broker Licence under Regulation 7(1) of the Customs Broker Licence Regulation 2013 - the order of suspension and continuation of suspension were set aside by the Tribunal, and affirmed by the Hon'ble Division Bench and for the same set of reasons, the petitioners' applications for renewal of customs broker licence was rejected - whether the petitioners can be penalised twice for the same reason? - Held that: - The respondents had complied with the procedure under Regulation 22(1) and placed the petitioners' licences under suspension with immediate effect. When these orders of immediate suspension was put to challenge by filing Writ Petitions, the Court directed the respondent to follow the procedure under Regulation 22(2). This was not followed resultantly the orders of continuation of suspension dated 23.05.2012 were quashed by the CESTAT. Thus, the allegations, which were the basis for suspending the licence continuous to remain as an allegation and has not been substantiated by the Department by conducting an enquiry as required to be done under the Regulations by following the procedure contemplated under Regulation 22(2) to 22(7). The CESTAT, rightly set aside the order of suspension and such orders were confirmed by the Hon'ble Division Bench of this Court. Therefore, it would be wholly untenable on the part of the respondent to state that they will once again rely on the unsubstantiated allegations for refusing to renew the petitioner's licence. No person can be vexed twice on the same set of facts, which remain unsubstantiated. Therefore, on the allegations set out in the impugned order, the petitioners' applications for renewal of licence could not have been rejected. However, it is a different matter, if there are any other allegations duly substantiated, then the authority while considering the applications for renewal can exercise jurisdiction and while doing so, should strictly adhere to the procedure under CBLR. Petition allowed - matter remanded to the respondent for fresh consideration with a direction to consider the petitioners' applications for renewal of customs broker licence - decided in favor of petitioner.
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2016 (10) TMI 642
Clearance of Chemical-Ethanol without any condition including insisting on any state excise license - issuance of writ of mandamus - goods brought in this country so as to meet a contractual obligation - Held that: - in matters of import of consignments/goods attracting the customs duty and liability to pay the same, the release of such goods for home consumption are all matters within the preview of the customs and once they take the precautionary measures and satisfy themselves about the compliances under the Customs Act and Rules framed thereunder, then, the consignments deserve to be released. Merely because they are released on passing on an assessment order does not mean that the powers under the Maharashtra Prohibition Act, 1949 cannot be exercised by the State Excise - Petitions disposed of with a direction that the Respondent shall pass the requisite orders within a period of one week.
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2016 (10) TMI 641
Smuggling of gold bars - concealment of gold bars in the baggage - non-declaration of value - concealment of gold bars in order to avoid duty - confiscation of gold bars - imposition of penalty u/s 112(a) and (b) and 114AA of the Customs Act 1962 - The plea to reduce the penalty u/s 112 and to set aside the penalty u/s 114AA on the ground that the appellant is a poor, uneducated and unemployed labour who has gone to Riyadh with a purpose of earning money for improving the financial condition of his family justified? - Held that: - The gold in question was purchased by the appellant and was brought to India for the purpose of marriage of his sister. The evidences leading to the facts that marriage ceremony was to take place in near future stands placed on record by him. Though the fact is that he violated the law of the land by trying to smuggle gold into the land, I am of the view that penalties imposed upon him needs some interference on account of the fact that the gold in question stands absolutely confiscated. Reliance placed in the decision of the case Zainuddin Vs. CCE Hyderabad [2015 (11) TMI 32 - CESTAT BANGALORE]. Penalties u/s 112 reduced on account of the fact of absolute confiscation of the goods and penalty u/s 114AA set aside in as much as there cannot be said to have been any short levy on account of absolute confiscation. As such by following the said decision of the Tribunal, penalty imposed u/s 112(a) and (b) reduced to ₹ 1 lakh and penalty imposed u/s 114AA set aside. Appeal dismissed - decided partly in favor of appellant.
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2016 (10) TMI 640
Imposition of ADD - Butanol - imported from European Union (EU), Malaysia, Singapore, South Africa and USA - the injury suffered by the DI is not on account of dumped imports but was on account of other factors like long closure of unit due to non-availability of main raw materials, etc - the cost of construction to arrive at the NIP was not disclosed to the appellants to make fair defence - Held that: - the Domestic Industry suffered production loss due to disruption in raw materials supplied by HPCL. It is also a fact noted by the DA that the DI curtailed production due to un-remunerative price of its product. It is not a situation where entirety of production loss was due to raw material non-availability. There is no substance in the plea made by the appellants regarding improper comparison of subject goods due to nature of trade (bulk or non-bulk) as explained by the Counsel for the DA and the Advisor to the DA. The comparison has been kept to similar items as per the data submitted during investigation. No contrary evidences have been submitted. ADD rightly imposed - appeal dismissed - decided against appellant.
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2016 (10) TMI 639
Imposition of ADD - Hot Rolled Flat Products of Stainless steel - import from Malaysia - N/N.28/2015-Cus ADD dated 5.6.2015 - volume of imports from Malaysia - Held that: - in terms of Rule 14 (d) of, the DA shall terminate the investigation if the value of import from particular country accounts for less than 3% of the total import of subject goods. In the present case, admittedly during POI the imports from Malaysia is above 3%. Correctness of the import data - Held that: - the issue regarding the 'country of origin' has been examined at length by the DA. It is seen from ASEAN-India FTA Agreement provides for concessional customs duty leviable on imports from Malaysia. It is noted that the DA specifically pointed out the possible misdeclaration of country of origin in order to avail preferential duty on imports. As per data analysed by the DA the subject goods coming from Malaysia covered by the ‘certificate of origin’ issued by the concerned authorities in Malaysia are considered for volume analysis. The argument of the appellant has been rejected by the DA who recorded that the appellant cannot be treated as producer of the subject goods and individual treatment cannot be granted to them for determination of their dumping margin. For the purpose of construction the normal value in Malaysia the international price of major raw material and most efficient conversion of goods has been considered along with reasonable profit. The decision in the case of Kumho Petrochemicals Co. Ltd. vs. Designated Authority [2015 (9) TMI 715 - CESTAT DELHI] not applicable as it was held that DA should disclose the international price which form the basis for construction of normal value. In the present case, the normal value has been arrived at by keeping the data furnished by the DI due to non-cooperation of Malaysian exporter. In such situation, DA is justified in examining the best available data in arriving at the constructed value. POI data - Held that: - when the import during POI gave a fair indication about quantum being above 3% there is no need to look into post POI data for investigation. Appeal rejected - ADD rightly imposed - decided against appellant.
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Service Tax
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2016 (10) TMI 657
Rectification of mistake - benefit of reduction in service tax liability not extended based upon calculation of cum-tax amounts received towards mess charges, hostel charges and amount received for supply of laptops and service tax liability confirmed - Held that: - this is an apparent error on the face of the records and is rectified accordingly - application for rectification of mistake allowed - decided in favor of appellant.
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2016 (10) TMI 656
Scope of exemption available to ‘commission agents’ - section 65(105)(zzb) - section 65(19) of Finance Act, 1994 - service of distribution of mutual fund - Held that: - It would appear that the service of distribution of mutual fund was not liable to tax before 9th July 2004 when the exemption available to ‘commission agents’ dealing in anything other than ‘agriculture produce’ was rescinded. The attempt to take the activity of agents of mutual funds out of the purview of the exemption notification that was available till then by issue of circular had been invalidated by various judgements. In these circumstances, the taxability of brokerage of mutual funds was left to quasi-judicial determination. The appellant had paid taxes due till July 2004, along with interest, in two tranches to cover the entire receipts from Asset Management Companies but sought refund of thee amount paid as second installment. Refund of earlier installment had been remanded by the first appellate authority for disposal on merits. The authority empowered to decide on the refund application has chosen to use the investigation initiated by the Directorate General of Central Excise Intelligence to refrain from exercising its obligation under the Finance Act, 1994 read with section 11B of the Central Excise Act, 1944. This casual disposal is prone to further intervention by attempt to reclassify the nature of the service through the disposal of refund claim, in a manner that is contrary to the principles of natural justice and in direct contravention of the circular of Department of Revenue issued in 2007. A plain reading of section 11B of Central Excise Act, 1944, made applicable to Finance Act, 1994, indicates that refund claims had to be filed within one year of payment of tax. The statutory provisions allow only for two outcomes: sanction or rejection and, in the event of the former, to either release the sanctioned amount to the applicant or to credit to the Fund if evidence of unjust enrichment could be presumed. Rejection would, certainly, have to be articulated in a speaking order with reasoned substantiation for that course of action. The rejection on grounds of being ‘pre-mature’ reflects either ignorance or unwillingness to act with responsibility. The impropriety of the original authority can be remedied only by remand back to that official to consider the refund application on merit without awaiting the outcome of the notice issued by Directorate of Central Excise Intelligence. Lest that authority be tempted to deny the refund on ground of unjust enrichment, it is also clarified at this stage that, tax having been paid well after the rendering of service and receipt of consideration, it is not acceptable as a ground for denial. The original authority shall either sanction the refund or reject it by a speaking order within four weeks. The appeal is allowed by way of remand for strict compliance.
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2016 (10) TMI 655
Levy of service tax - commercial or industrial construction service - works contract - whether such an activity would fall under ‘works contract’ or any other service prior to 01/06/2007? - Held that: - the decision in the case of Commissioner of Central Excise & Customs vs. Larsen & Toubro Ltd [] relied upon. The ratio of the judgment is that prior to 01/06/2007, if an assessee is operating under works contract no service tax is payable under any other head and since works contract service came to statute w.e.f. 01/06/2007 the tax liability arises from that date. Taxability for the period after 01/06/2007 - Held that: - the appellant is liable to discharge service tax under the category of ‘works contract service’; with all the consequent relief available to them under works contract service like composition scheme, etc. We uphold the liability to discharge service tax under works contract service post 01/06/2007 with interest. Levy of penalty - Held that: - the appellant was under bonafide belief and no fraudulent intention involved - provisions of Section 80 of the Finance Act, 1994 attracted - penalty not levied. Appeal dismissed - decided partly in favor of appellant.
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2016 (10) TMI 654
Refund claim of service tax paid - classification of services - “Business Support Service” or “Business Auxiliary Service” - whether the appellant justified in claiming refund of tax paid under the head “Business Support Service” as now he believes the service to be classified under the head “Business Auxiliary Service”? - the decision in the case of Pagariya Auto Centre Vs. Commissioner of Central Excise, Aurangabad [2014 (2) TMI 98 - CESTAT NEW DELHI (LB)] relied upon - Held that: - appellant himself has classified the services, discharged tax on the commission received from financial institution under the category of “Business Support Service”. The issue is no more res integra the tax liability arises on these services under “Business Auxiliary Service” as per Larger Bench decision, appellants classification of services as per his knowledge, under a category cannot be held to be as misunderstanding of law as the tax liability arised on the commission, cannot be disputed. Claiming a refund of the amount paid as tax as per their understanding of law cannot be disputed now - refund claim rejected - appeal dismissed - decided against appellant.
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Central Excise
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2016 (10) TMI 653
Whether the appellant is liable to discharge Central Excise duty on the excess amount received by them as transportation costs of final products transported from their sugar factory to their purchasers? - the decision in the case of Mercedes Benz India private Limited Vs. CCE, Pune-I [2010 (8) TMI 790 - CESTAT MUMBAI] referred - Held that: - the issue of the case Mercedes Benz India private Limited is similar to the present case, the decision of the case apply. The period involved is March, 2003 to December, 2003 during which period the valuation rules were to be considered for inclusion of transportation costs - appeal allowed - decided in favor of appellant.
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2016 (10) TMI 652
CENVAT credit - search of premises - whether denial of CENVAT credit justified on the ground that respondents received only the cevatable invoices without receiving the goods in question? - allegation based on the statement of certain drivers/transporter - Held that: - The said statements of drivers has been controverted by the respondent by producing various vouchers which certified that the respondent have received the inputs but in specific instances like vehicle no. HR-38N-1285 and HR-38M-2282 due to the truck being refrigerator, input not transported - denial was confirmed to M/s Novice Polymer. For vehicle no. RJ14-1G-7077, that vehicle was carrying the goods from Yamuna Nagar to Jaipur through Harsh Roadlines, Yamuna Nagar who has brought GR issued by Harsh Roadlines as a evidence for movement of the vehicle. The said GR has not been controverted by the respondent with any tangible evidence - the cenvat credit denied. For vehicle no. DL 1M-1360, the vehicle is a dumper which can only be used for lifting debris, inputs not transported - credit rightly denied. In the case of Airvision India Pvt. Ltd., no contrary evidence produced - cenvat credit cannot be denied to Airvision India Pvt. Ltd.. CENVAT credit denied to M/s Novice Polymers and CENVAT credit to M/s Airvision India Pvt. Ltd. allowed. Appeal allowed - decided partly in favor of appellant.
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2016 (10) TMI 651
Reversal of CENVAT credit on exempted as well as dutiable goods under rule 6 - Demand of CENVAT credit with interest and penalty u/R 6(3)(b) read with Rule 14 of Cenvat Credit Rules, 2004 - manufacture of sponge iron falling under heading 7203 of the Schedule to the Central Excise Tariff Act, 1985 - another product Iron Ore Fines produced on manufacture of iron ore is cleared without payment of duty as there is exemption from payment of excise duty - CENVAT credit availed on GTA services paid for the transportation of iron ore to their factory - no separate accounts were maintained and the common input service (GTA) credit has been taken and used for dutiable final product (sponge iron) and exempted final product (iron ore fines) - whether reversal justified? - Held that: - the decision in the case of Union of India Vs. Hindustan Zinc Ltd. [2014 (5) TMI 253 - SUPREME COURT] relied upon where it was held that a distinction has to be made between final product as well as by-products. It was held that by-products cannot be held to be main final products. The court was examining the question of reversal in the context of Rule 57CC as well as Rule 6 of the Cenvat Credit Rules, 2004 and decided that for clearance of exempted by-products there will be no need for reversal of 8%/10% of the value of the exempted products. Generation of electricity in the captive power plant situated within the factory - A part of the electricity generated in the power plant was wheeled out to the Electricity Board. Electricity is classified under 27160000 against which no central excise duty is indicated in the tariff. Demand has been made under Rule 6 (3) of the Cenvat Credit Rules, 2004 at the rate of 10% of the value of the exempted goods - whether reversal justified? - Held that: - the appellant has reversed the entire credit taken on input services, namely, GTA services in respect of transportation of coal, even though part of the coal was used in the manufacture of dutiable sponge iron. If the credit originally availed is reversed subsequently it would amount to the effect as if no credit has been availed. - no justification found to demand 10% of the value of electricity wheeled out. The appellant has availed Cenvat credit not only on GTA service but also on various other services such as cargo handling service, consulting engineering service, security service, telephone service, etc. It is easily seen that credit availed on service tax on transportation of coal is the only service on which credit can be said to have been taken where it is used for generation of electricity and the same has been reversed - reversal of CENVAT credit not justified - appeal allowed - decided in favor of appellant.
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2016 (10) TMI 650
Deduction of Trade discount from Assessable value - Eligibility of Trade discount - three type of discounts : (a) declared discounts to the dealers on goods sold to such dealers; (b) declared discounts to the dealers by way of credit note on sales arranged by such dealers; and (c) commission paid to consignment agents on sales made by them to independent buyers - Held that: - these are transactions of sale by the appellants to the appointed dealers and discount on such sale, which was pre-declared in terms of the agreement, is clearly eligible for deduction. It is a fact that the said dealers also acted as agents in respect of arranged sales from the appellants to independent buyers for which the dealers were paid percentage as incentive. This apparently is an ‘agency commission' not to be considered as trade discount on sale of excisable goods. It is clear that such ‘commission' cannot be considered for discount in terms of legal provisions of Section 4 of the Central Excise Act - commission (claimed as ‘trade discount') paid to such agents/dealers for arranged sales to third parties will not be eligible for deduction. Time limitation - Appellants did not respond for certain queries and certain declarations now produced by the appellants did not bear the stamp of the office - the present notices were issued on scrutiny of records maintained by the appellants which included the declarations and returns filed by the appellants with the Department from time to time - Appeal is disposed of.
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2016 (10) TMI 649
CENVAT credit - capital goods - manufacturing of health products - installation of bulk milk coolers (BMC) and DG sets at milk collection centres to store the milk collected at a specific temperature - whether denial of CENVAT credit justified on the ground that BMC and DG sets installed at milk collection centers have not been used in the factory of the appellant? - Held that: - bulk milk coolers and DG sets have been installed by the appellant in the premises which has been leased out to the appellant and which is ultimately use by the appellant for manufacturing their final product which has been cleared on payment of duty - the appellant has correctly availed the credit on capital goods i.e. bulk milk coolers and DG sets - appeal allowed - decided in favor of appellant.
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2016 (10) TMI 648
Denial of CENVAT credit - construction service - input service - Rule 2(l) of the Cenvat Credit Rules, 2004 - Held that: - reliance placed on the decision of Suzuki Motorcycle (I) Pvt. Ltd Versus Commissioner Central Excise [2011 (2) TMI 56 - CESTAT NEW DELHI] - the denial of credit on construction service to the appellant is not legally sustainable as the period involved is prior to amendment in Rule 2(l) made on 01.04.2011. Architect service availed by them in connection with project planning, designing, consultancy etc - Held that: - the said services are covered within the definition of service' under Rule 2(l) of the Cenvat Credit Rules, 2004. Denial of credit is not justifiable - the decision in the case of BHARAT FRITZ WERNER LTD. Versus COMMISSIONER OF C. EX., BANGALORE [2011 (2) TMI 1276 - CESTAT, BANGALORE] relied upon. Insurance service - no statutory obligation for such cover and it is for personal consumption of the employee - Held that: - Statutory obligation is only an indicator to show the legal necessity of such insurance to the employees. In terms of the contractual arrangement, the appellant have to take such insurance cover for the Japanese employees. Prior to amendment of the cenvat credit Rules in 2011 there is no specific bar/exclusion in the definition. Accordingly, the appellants are entitled for credit on service tax paid on life insurance during the material period. However, such credit shall not be available in respect of medical claim for family members as held by the tribunal in the case of SUNDARAM BRAKE LININGS Versus COMMISSIONER OF C. EX., CHENNAI-II [2014 (9) TMI 877 - CESTAT CHENNAI] where denial of such credit is upheld. Club or association service in respect to membership taken by directors - Held that: - the park extended/charged for the directors is part of their employment benefit as such has no direct nexus with the manufacturing activity of the appellant. Such services are far removed from the activities of the appellants and cannot be considered heaving any nexus to sustain their eligibility. Such employment benefit not having nexus with the activities of the appellant and cannot be covered under the category of input services. Reliance placed on the decision of Mahindra & Mahindra Ltd Versus Commissioner of Central Excise [2015 (6) TMI 407 - CESTAT MUMBAI]. Time bar - Held that: - as all credits taken have been recorded and reported in the prescribed returns, the appellants are correct in contesting the case for extended period. There is no merit in invoking extended period and imposing penalty in the facts and circumstances at the present case. Service tax credit allowed on 'renting of immovable property service' - The appellant/assessee has provided boarding/lodging to the experts from parent company in Japan during their stay here for supervision of installation of machinery and other projects - Held that: - the contributions of these personnel has direct nexus to the manufacture and sale of the final products by the appellant/assessee. The service tax paid towards accommodation of these experts are rightly covered by the ‘input service' in terms of Rule 2(l) of Cenvat Credit Rules, 2004 - credit eligible. CENVAT credit allowed on all services except on family insurance and club services availed by Directors - The demand on these credits is restricted to normal period - penalties set aside - appeal dismissed - decided against Revenue.
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2016 (10) TMI 647
Denial of SSI exemption - manufacture of own branded goods as well as the products which are to be marketed by some other person - use of other's brand name - N/N.8/05-CE dated 1.3.2005 - the decision in the case of COMMISSIONER OF CENTRAL EXCISE, TRICHY Versus GRASIM INDUSTRIES LTD. [2005 (4) TMI 64 - SUPREME COURT OF INDIA] relied upon - Held that: - the issue in the case of Grasim Industries Ltd. is that the assessee was using the brand name of M/s. Grasim Industries Ltd. with the purpose of indicating a connection between the product i.e. the cement manufactured by them, and M/s. Grasim Industries Ltd. which is a well known cement manufacture. It is contended is that the words "M/s. Grasim Industries Ltd." are neither a brand name nor a trade name. It is contended that mere use of the name of a company does not amount to using a brand name or trade name of some other company - the facts of the case is entirely different, and not applicable for the present case. The decision in the case of COMMISSIONER OF C. EX., KOLKATA-III Versus PAUL AQUOMIN & FOOD (P) LTD [2009 (6) TMI 299 - CESTAT, KOLKATA] covers similar issue and is relied upon where it was held that it is not necessary that the name or the writing must always be a brand name or a trade name in the sense that it is normally understood. The exemption is only to such parties who do not associate their products with some other person. The label merely indicates the party who is merely marketing the product and hence exemption available. Appellant entitled to avail SSI exemption of Notification No.8/05-CE dated 1.3.2005 - demand of duty not sustainable - appeal allowed - decided in favor of appellant.
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2016 (10) TMI 646
Demand of CENVAT credit availed - classification of goods - non-woven textile fabrics falling under CETA 56.03 or classified under 39231090 - reliance placed in the decision of case of PORRITTS & SPENCER (ASIA) LTD. Versus STATE OF HARYANA [1978 (9) TMI 72 - SUPREME COURT OF INDIA] - Held that: - The judgement was given while interpreting classified under Punjab General Sales Tax. While the manner of classification in the Punjab General Sales Tax Act was not the same as the manner of classification adopted in the Central Excise Tariff. The said Central Excise tariff is a very advanced scientific method of classification. The said tariff is backed by the explanatory notes which is explain the scope of each heading. The HSN explanatory notes to Chapter Heading 5603 specifically covers non-woven fabrics. The heading 5602 of the Central Excise Tariff specifically covers felt. The decision in the case of Porritts & Spencer (Asia) Ltd. was given in respect of felt. Felt is clearly classifiable under heading 5602. Thus, the reliance placed on the said decision in the show-cause notice is totally irrelevant. The HSN clearly recognize non-woven textile manufactured by thermal/mechanical bonding of yarn as textile falling under Chapter 56 - demand not justified - appeal allowed - decided in favor of appellant.
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2016 (10) TMI 645
Demand of duty - Rule 8 of Central Excise Rules, 2001 - the facility of fortnightly payment of duty and payment through RG 23A Part II for a period two months or till the deposit of defaulted amount which ever later was withdrawn - appellant took credit in their PLA account without actually deposit of the same through TR-6 challan – manipulation of account current and misleading – Held that: - the appellant has paid whole of the defaulted amount alongwith interest on 17.10.2001. These facts are evident from RT-12 returns and the same has not been disputed by the adjudicating authority. In that circumstance, as the appellant has made the whole of dues within one month, therefore, the appellant is entitled to utilize their cenvat credit account for payment of duty with effect from 24.11.2001 - the appellant started utilising the account current with effect from 18.1.2002, in that circumstance, the appellant has not contravened the provisions of Rule 8(3A) of the Central Excise Rules, 2001 by utilizing the credit account for payment of duty with effect from 18.1.2002, therefore, the demand of ₹ 1,69,38,241/- is not sustainable - Demand set aside - no penalty imposable. Manipulation of account current - fraudulent credit taken in account current on TR-6 challan and an amount of ₹ 1,69,38,241 has been utilized by the appellant from their cenvat credit account for payment of duty – demand of said amount along with interest and imposition of penalty – Held that: - the appellants were receiving the communication from their head office with regard to the payment of duty through TR-6 challan telephonically wrongly and therefore, they have taken the credit i.e .due to mistake of the concerned official - although there may be mistake of the appellants but the appellants cannot take the benefit of the same as they have taken the credit in the PLA without making payment. In the circumstances, the penalties are imposable on the appellants. Further, the whole of the amount in dispute was paid alongwith interest before issuance of show cause notice, thus, the penalty is reduced to 25% of ₹ 1,63,00,000/- Imposition of penalties on co-appellants – Held that: - co-appellants are the responsible officials of the appellant company. They have admitted their mistake, in that circumstance, the imposition of nominal penalty on both the appellants shall meet the end of justice - the penalties on both the appellants confirmed for their mistake to the tune of ₹ 50,000/- Appeal disposed off – decided partly in favor of appellants.
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2016 (10) TMI 644
Valuation - related person u/s 4 (4) (c) of Central Excise Act, 1944 - assessable value - extended period of limitation - demand of duty with interest - imposition of penalty - constitution of firm referred - Held that: - constitutions of the firms states that the appellant M/s.Glory Hitech is company and M/s.Countech Systems is partnership firm and the trading company is also private limited company. From the constitution, it is clear that the appellants and the trading company are not related to each other in terms 4 (4) (c) of Central Excise Act, 1944. The decision in the case of Reliance Industries Products vs. CCE [2011 (3) TMI 704 - CESTAT, MUMBAI] relied upon where it was held that The three conditions are to be satisfied before it can be inferred the existing relationship namely, (i) there should be mutuality of interest, (ii) alleged related person should be related to the assessee as per Section 4(4)(e) even in the Act and (iii) importantly the price charged from the related person was not the normal price but a price lower than the normal price and because of extra commercial consideration, the price charged was less than the normal value - the appellants are not related persons in terms 4 (4) (c) of Central Excise Act, 1944 Certain advances given by trading company to the appellants - Held that: - it is routine practice in the business that buyers of the goods give certain advances to the suppliers, therefore, it cannot be said that by giving mere advances to the suppliers are having interest in the business of others. Appellants have sold the goods to the trading company at lower price and the trading company has sold the goods on a higher price - Held that: - the appellants are selling the goods to the trading company at a agreed price and no additional benefit has been provided by the appellants to trading company. On the other hand while the goods were sold by the trading company to various banks, the additional benefits were given on the goods such as warranty, installation, commissioning, testing, after sale services, maintenance, etc. The price charged by the trading company includes these services charges, their profit and cost alongwith machines, in that circumstance, it cannot be said that the price of trading company is the influenced price of the goods sold by the appellant. Appellant and trading company not related to each other - demand not sustainable - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2016 (10) TMI 638
Demand of arrears of sales tax - TNGST Act, 1959 - CST Act, 1956 - sick industrial company - protection u/s 22(1) of the SICA - principles of natural justice - Held that: - the Special Tribunal took into consideration of the submissions of the petitioner and shifted the burden on the petitioner to produce proof to the Department that proceedings are pending before BIFR and also to show the proof as to whether any Scheme has been framed and if the petitioner was not successful in doing so, liberty was granted to the Department to Act in accordance with law. It is not known as to the outcome of the direction issued by the Special Tribunal and as to whether any orders were passed subsequently or whether the order of the Tribunal was challenged. The petitioner has a duty to bring it to the notice of the AO about the pendency of any proceedings before the BIFR. Therefore, at this juncture, the impugned notice cannot be quashed. However, with a view to afford an opportunity to the petitioner, the respondent is directed to keep the notice impugned in this Writ Petition in abeyance for a period of six weeks - petition disposed off.
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2016 (10) TMI 637
Levy of penalty at 30% of the value of goods u/s 77(8) of RST Act - survey - compliance of Rule 50 - whether DC(A) was justified in deleting the penalty on the ground that compliance under Rule 50 has not been made? - compliance under rule 50 mandatory or otherwise - Held that: - The rule envisages that the Authorized Officers who carries out search u/Sec. 77 of the Act, shall adopt the procedure prescribed under Rule 50 and the word used is 'shall' therefore, it should be followed in letter and in spirit. Admittedly, on perusal of the two appellate orders, it transpires that there was no witnesses present and only statement of the Director was recorded and therefore since there is no compliance of Rule 50, the penalty was rightly deleted by the DC(A) and upheld by the Tax Board. The goods were excisable and not only the excise duty but the sales tax @ 4% was also charged in the bill - no reason to interfere with the order of deletion of penalty - petition dismissed - decided in favor of respondent-assessee.
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