TMI Tax Updates - e-Newsletter
October 21, 2016

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. THE SCOPE OF POWERS OF DGCEI UNDER SECTION 91 READ WITH SECTIONS 90 AND 89 OF THE FINANCE ACT, 1994

   By: DR.MARIAPPAN GOVINDARAJAN

2. LIABILITY TO PAY TAX IN CERTAIN CASES – PART-1

   By: Dr. Sanjiv Agarwal

News

1. GST panel puts off rate decision to November

2. Exchange Rate of Foreign Currency relating to Imported and Export Goods Notified

3. Date for seeking comments from stakeholders and public on the Draft Financial Resolution and Deposit Insurance(FRDI) Bill extended till 31st October, 2016

4. RBI Reference Rate for US $

Notifications

Customs

1. 127/2016 - dated 20-10-2016 - Cus (NT)

Rate of exchange of conversion of the foreign currency with effect from 21st October, 2016

Income Tax

2. 95/2016 - dated 19-10-2016 - IT

U/s 138(1) of IT Act 1961 - Central Government specifies Director, Vigilance and Anti-Corruption Bureau, Kerala

Circulars / Instructions / Orders

FEMA

1. 11 [(1)/14(R) - dated 20-10-2016

Foreign Exchange Management (Manner of receipt and payment) Regulations, 2016

2. 6 - dated 20-10-2016

Review of sectoral caps and simplification of Foreign Direct Investment (FDI) Policy

3. 7 - dated 20-10-2016

Investment by a Foreign Venture Capital Investor (FVCI) registered under SEBI (FVCI) Regulations, 2000

4. 8 - dated 20-10-2016

Foreign investment in Other Financial Services

5. 9 - dated 20-10-2016

Rupee Drawing Arrangement - Trade related remittance limit

6. 10 - dated 20-10-2016

External Commercial Borrowings (ECB) – Extension and conversion

Customs

7. 87/2016 - dated 7-10-2016

Stuffing/loading of export goods in containers-reg.

8. 84/2016 - dated 3-10-2016

For facilitation of the trade and the Exporters, it has been decided to allow Transhipment of Export Cargo by Air from the Air Cargo Complex, Kolkata to other Air Cargo Complexes. The procedure for this purpose would be the following as provided in CBEC Circular No. 6/2007 dated 22.01.2007

9. 65/2016 - dated 3-8-2016

Recall of RMS B/E-reg.

10. 66/2016 - dated 3-8-2016

Recall of RMS Shipping Bill - reg.

Highlights / Catch Notes

Income Tax

• Former Partners Must Pay Capital Gains Tax on Firm's Net Assets Share u/s 45 of Income Tax Act.

  Case-Laws - SC : Partnership firm - Nature of the Certain considerations received after the dissolution of the firm - The appellants as erstwhile partners are liable to pay capital gain on the amount received by them towards the value of their share in the net assets of the firm are liable for payment of capital gains u/s 45 - SC
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• Tax Authority Confirms Income Estimation for Businesswoman Using 8% of Receipts, Avoiding Section 68 Cash Deposit Additions.

  Case-Laws - AT : Estimation of income - profit may be taken @8% of the total receipts/ deposits as against the addition made u/s. 68 on account of cash deposit - assesssee is a part time businesswoman and this is the first year of her business venture - order of CIT(A) confirmed - AT
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• Assessing Officer's failure to serve notice u/s 143(2) to legal heir is unrectifiable u/ss 292B and 292BB.

  Case-Laws - AT : Failure to Serve notice u/s 143(2)to the legal heir - failure of the AO to issue and serve notice u/s 143(2) of the Act to the legal heir in accordance with the law could not be cured u/s 292B and 292BB - AT
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• Income Tax Penalty u/s 271(1)(c) Overturned Due to Insufficient Evidence to Prove Necessary Facts.

  Case-Laws - AT : Penalty levied u/s. 271(1)(c) - as per rule of evidence there is distinction between set of facts not proved and facts disproved and facts proved - No penalty - AT
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• Eligibility for Deductions u/s 10AA: Export Sales by Supporting Manufacturers to EOUs and SEZs Qualify Without Own Export Requirement.

  Case-Laws - AT : Allowance of of deduction u/s.10AA - whether the export sales as supporting manufacturer, Sales to EOUs and SEZs are eligible for deduction u/s.10AA? - when as S.10AA does not provide for export of own goods or bringing in of foreign currency of the goods exported, deduction allowed - AT
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• Court Allows Insurance Premium for Directors as Key Persons; Revenue Fails to Provide Contrary Evidence.

  Case-Laws - AT : Keymen Insurance premium - in the absence of any contrary material placed by the Revenue that the 3 Directors are not the key persons, we are of the view that the insurance premium paid for the 3 Directors needs to be allowed. - AT
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• Company's TDS Non-Deduction Leads to Disallowance u/s 40(a)(ia), Authorities Confirm Additions Due to Lack of Evidence.

  Case-Laws - AT : Additions u/s 40(a)(ia) for non deduction of TDS - it was claimed that, these amounts were disallowed u/s 40a(ia) suo motu - assessee-company had not made any attempt to prove nexus between amount of provision created which was disallowed in earlier years and the amount of provision reversed during the year under consideration - additions confirmed - AT
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Customs

• Customs Tariff Dispute: Air Conditioner Resistors Misclassified Under Chapter 85334090 Instead of 84159000.

  Case-Laws - AT : Classification of goods - Air Conditioner Resistors - classified under Chapter 85334090 or classifed under Chapter heading 84159000 - there is no scope for classification of the product under Chapter 8533 as mere ‘Resistor' - AT
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• Customs House Agents can restore licenses with just an authority letter, no need for officer acknowledgment.

  Case-Laws - AT : Restoration of CHA licence - The Regulations do not require that each and every authorisation should be acknowledged by a customs officer. As long as authority letter is in possession of the agent, compliance with the Regulation cannot be disputed. - AT
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Service Tax

• Service Tax Clarification: Only Relevant Advertising Agency Services Taxed, Excludes Unrelated Services or Manufacturing Activities.

  Case-Laws - AT : Advertising agency services - The extended definition, cannot bring an entirely alien and unconnected services or a manufacturing activity within scheme of levy of service. - AT
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• Refund Granted for Service and Sales Tax on Fire Hydrant System Installation; No Erection Charges Found.

  Case-Laws - AT : Refund claim - payment of service tax and sales tax on supply and installation of the said Fire Hydrant System - no evidence to show charging of paid amounts for erection and commissioning, such activities have to be held as incidental to delivery of goods to the customers - refund allowed - AT
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• Show Cause Notice Delay Unjustified: Limitation Period Not Extended as Assessee's Activities Known to Revenue.

  Case-Laws - AT : Extended period of limitation - As such the assessee's activity were fully in the knowledge of the Revenue, in which case delayed issuance of the show cause notice in the year 2007 is not justified at all. - AT
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• Brokerage Commission for Export Cargo Booking Not Taxable as 'Business Auxiliary Services' for Relevant Period.

  Case-Laws - AT : Taxability of secondary services - the appellants are secondary service providers for the shipping lines, brokerage commission of 2% paid for booking of export cargo cannot be taxed under the category of 'Business Auxiliary Services' during the relevant period - AT
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Central Excise

• Support Structures Qualify as 'Capital Goods' u/r 2(a) of Cenvat Credit Rules, Eligible for Cenvat Credit.

  Case-Laws - AT : Applying the “User Test” to the facts in hand, the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit. - AT
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• Manufacturer Wins Right to CENVAT Credit for Input Services in Motor Vehicle Chassis Production.

  Case-Laws - AT : Denial of CENVAT credit - manufacture of motor vehicle chassis - availing various input services in or in relation to the manufacture of final products - credit allowed - AT
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• SEZ Units Can Reclaim Duty Credit on Returned Goods: Rule 16 of Central Excise Rules, 2002 Clarified.

  Case-Laws - AT : Taking credit of of duty paid by the SEZ unit on returned goods - the procedure of Rule 16 of Central Excise Rules, 2002 does not come in the way in denying the credit - AT
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• Returned Goods as Scrap u/r 16 Not Manufacturing; Credit Must Be Reversed Per Section 2(f) Definition.

  Case-Laws - AT : Returned goods cleared as scrap - Rule 16 it cannot be said that the process by which the defective goods are converted into scrap, should be considered as manufacture within the definition of manufacture as laid down u/s 2(f) - amount taken as credit to be reversed - AT
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VAT

• Market Committee Fee Excluded from Taxable Turnover; Not Subject to Tax, Clarifies Court Ruling.

  Case-Laws - HC : Scope of taxable turnover - the market committee acts as a facilitator for which a fee is collected - fee/cess paid by the petitioner to the market committee cannot form part of the taxable turn over nor made liable to tax - HC
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• Form "F" Mandatory for Inter-State Branch Transfers Under CST Act; No Substitutes Allowed for Proof.

  Case-Laws - HC : Branch transfers / stock transfer - form “F” of CST - the requirement of Form “F” in terms of CST Act cannot be substituted with other documents in support of proof of transactions from one branch to another branch in different state - If the law requires a particular thing to be done in a particular manner, it can be done in that manner alone - HC
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Case Laws:

• Income Tax

• 2016 (10) TMI 704
  Partnership firm - Nature of the Certain considerations received after the dissolution of the firm - Slump sale or not - capital gain - Goodwill - it was contended that at the time of dissolution of firm, capital gain was not taxable, hence not capital gain can be taxed on subsequent receipts - the assets which were sold ultimately on November 20, 1994 were of a dissolved partnership firm, though as a going concern. Held that:- The partnership firm had dissolved and thereafter winding up proceedings were taken up in the High Court. The result of those proceedings was to sell the assets of the firm and distribute the share thereof to the erstwhile partners. Thus, the 'transfer' of the assets triggered the provisions of Section 45 of the Act and making the capital gain subject to the payment of tax under the Act. The appellants as erstwhile partners are liable to pay capital gain on the amount received by them towards the value of their share in the net assets of the firm are liable for payment of capital gains u/s 45 of the Act. - Decision of High Court [2010 (12) TMI 754 - Karnataka High Court] in favor of revenue confirmed. Valuation of goodwill - Insofar as argument of the assessees that tax, if at all, should have been demanded from the partnership firm is concerned, we may only state that on the facts of this case that may not be the situation where the firm had dissolved much before the transfer of the assets of the firm and this transfer took place few years after the dissolution, that too under the orders of the High Court with clear stipulation that proceeds thereof shall be distributed among the partners. Insofar as the firm is concerned, after the dissolution on December 06, 1987, it had not filed any return as the same had ceased to exist. Even in the interregnum, it is the AOP which had been filing the return of income earned during the said period. Thus the arguments that valuation of goodwill was wrongly done may also not survive. In any case, we find that no such plea was taken by the assessees in the High Court or before the Tribunal or lower authorities. Allow the appeals partly only to the extent that business income/revenue income in the Assessment Year in question is to be assessed at the hands of AOP-3, in terms of the orders of the High Court, as AOP-3 retained the tax amount from the consideration which was payable to the assessees herein and it is AOP-3 which was supposed to file the return in that behalf and pay tax on the said revenue income. Insofar as the appeals preferred by the Revenue are concerned, they arise out of the protected assessment which was made at the hands of the partnership firm. As we have upheld the order of the Assessing Officer in respect of payment of capital gain tax by the assessees herein, these appeals are rendered otiose and are disposed of as such.

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• 2016 (10) TMI 703
  TDS u/s 194C OR 194J - payment of production charges - Held that:- The definition of 'work' as provided in the Explanation to Section 194C of the Act is itself inclusive. It include all work necessary for preparation / production of any programme so as to put it in a state fit for broadcasting and / or telecasting. In view of the self evident position in law, by virtue of the definition of “work” as provided in Section 194C of the Act, the view taken by the CIT(A) as well as the Tribunal is unexceptionable. No substantial question of law. Appeal admitted on following question of law: Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding on interpretation of the Agreements that the assessee was liable to deduct tax at source from the payment of production charges under Section 194C instead of under Section 194J of the Act as held by the Assessing Officer?

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• 2016 (10) TMI 702
  Entitlement to claim weighted deduction under Section 35B denied - Held that:- As noted whatever may have been the position under Section 35B as it existed prior to 1-4-1978, with effect from that day and till subsection (1A) remained on the statute book, the requirement of law to claim this deduction was that the assessee must be an exporter of goods or provider of technical knowhow to a person outside India and the expenditure must be incurred for such export of goods or provision of knowhow to a person outside India. The Supreme Court, in case of Stepwell Industries Ltd (1997 (8) TMI 5 - SUPREME Court ), had no occasion to deal with the provisions of Subsection (1A) introduced in the Act. The judgment in the case of Stepwell Industries Ltd, thus, offers no assistance to the assessee in the present case. The assessee's case clearly falls within the Assessment Year 1979-80 and it is covered by the provisions of subsection (1A). In the premises, there is no infirmity in the orders of the authorities below. Question of law as framed by the Tribunal is, accordingly, answered in the affirmative, that is to say, in favour of the Revenue and against the Assessee.

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• 2016 (10) TMI 701
  Disallowance of interest expenses - Held that:- The assessee had diverted its interest bearing funds for the purpose of its business. It was not mere lending without interest but involved engagement of the assesseee in a business of developing real estate.

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• 2016 (10) TMI 700
  GP addition @ 12.5% of the suspected purchases - Held that:- Sales account is undisturbed, presumption of purchase of goods outside the books and also without bills, procuring the purchase bills from the hawala bill providers etc. Undoubtedly, the assessee is engaged in the construction activity and GP rate 12.5% is not uncommon. In the cited judgment, the addition @ 12.5% of the suspected purchases was confirmed by the Hon’ble High Court in the case of CIT vs. Nikunj Eximp Enterprises Pvt [2013 (1) TMI 88 - BOMBAY HIGH COURT ] when the recorded profit of the assessee – Simit P Sheth (supra) is only @ 3.56%. Considering the above, we find, the CIT (A) is justified in adopting 12.5% of the suspected purchases for addition. Therefore, in our opinion, the order of the CIT (A) on this issue is fair and reasonable and it does not call for any interference.

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• 2016 (10) TMI 699
  Unexplained unaccounted cash - share application money - seizure of cash during search - assessee contended that, cash was being carried for payment of freight etc - Held that:- The assessee has to make the payment to the railway department through DD out of the cash withdrawn. This also proves that the assessee has made the payment for sugar transported from Latur between 01/04/2005 to 24/04/2006. Thus, there are contradiction in the finding given by the Assessing Officer. Even we noted that the voucher also has the same narration that the advance is given for making the draft for sugar trading at Latur. In his statement Shri Pradeep Kumar Gupta also stated that the money belongs to the company and is duly recorded in the books of the company. It is not a case where the money has been given by the company outside the books of account. Even no iota of evidence has been brought on record which may prove that the money has been given to Shri Pradeep Kumar Gupta by the company outside the books of account. In view of this fact, we are of the view that the nature and source of the said money is duly explained and it cannot be regarded to be an explained one. We, therefore, delete the addition of Rs. 25,40,000/- by setting aside the order of CIT(A). - Decided in favour of assessee Addition made u/s 68 - Held that:- Both the applicants have the PAN and, they are being assessed to income tax. This proves their identity. Both the companies have the shareholders funds. The payment has been made through cheque and banking channels. Copy of their bank accounts were placed on record. The share application money were ultimately returned by the assessee to the respective share applicants as the shares could not be allotted. The party confirmed receipt of the payment. This fact has not been denied. This is a case where the payments received by the company from these parties amounting to Rs. 57,60,000/- has duly been paid back. This fact is apparent not only from their respective confirmation but also from the bank statement. The fact remains that no share was allotted to these companies. In our opinion, the assessee has duly discharged the onus as lie before the assessee. This is not the case where the share applicants are the bogus one and the company has deposited its own money. Had it been the case, the company would have not refunded the money to both the applicants. In view of this fact, we set aside the order of CIT(A) and delete the addition made u/s 68 of the Act.- Decided in favour of assessee

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• 2016 (10) TMI 698
  Disallowance of expenditure u/s.14A - Held that:- It is an undisputed fact that the assessee is doing business of trading in shares and the shares at the end of the year are shown as stock-in-trade and the income from trading of shares has been shown as business income by the assessee. We find that the ld.CIT(A), after relying on the decision of Hon’ble Karnataka High Court in the case of CCI Ltd. [2012 (4) TMI 282 - KARNATAKA HIGH COURT ], has noted that where the dividend income was incidental to the business of sales of shares, no disallowance u/s.14A could be made. We further find that Coordinate Bench in the case of Anjalee Exim Private Limited vs. ACIT [2015 (11) TMI 110 - ITAT AHMEDABAD ] has similarly held that Rule 8D will have no application when the shares are held as stock-in-trade - Decide in favour of assessee

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• 2016 (10) TMI 697
  Estimation of income - profit may be taken @8% of the total receipts/ deposits as against the addition made u/s. 68 on account of cash deposit - Held that:- In the present case, the assessee has not disclosed the income from the business in her return of income filed for AY 2009-10 and it is only after the AO has unearthed the undisclosed bank accounts and confronted with the facts, that the assessee had disclosed it before the AO. But later in the assessment proceedings bills and vouchers were produced before the AO, although the bills/vouchers do not contain any names etc. Therefore, Ld. CIT(A) has rightly relied on the Hon'ble Gujarat High Court judgment in the case of CIT vs. President Industries [1999 (4) TMI 8 - GUJARAT High Court] and held that it was reasonable that the assessee is taxed at the rate of 8% of gross receipt under section 44AD of the Act. As further find that Ld. CIT(A) has taken into account the fact that the assesssee is a part time businesswoman and this is the first year of her business venture and bills/vouchers were produced. Accordingly, taxable income from business was rightly estimated at Rs. 2,89,150/ by the Ld. CIT(A) which does not need any interference on my part, hence, uphold the same and dismiss the ground raised by the Revenue.

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• 2016 (10) TMI 696
  Revision u/s 263 - not offering the sales income to tax - charging of interest u/s.220(2) - Held that:- In the present case, we find that during the course of assessment proceedings AO had raised a specific query wherein the assessee was asked to furnish the details of income from all operations alongwith the necessary evidences. The query was replied by the assessee . It is seen that on receipt of reply from Assessee, no adjustment to the sales was made by AO meaning thereby that the AO was satisfied with the reply of assessee. Thus, it can be seen that the issue of not offering the sales income to tax on which ld. CIT has resorted to revisionary proceedings u/s. 263 of the Act, had been examined by the AO. Before us, Revenue has not brought any material on record to demonstrate that the view taken by the A.O was an impermissible view, or was contrary to law or was upon wrong application of legal principles which required initiating the exercising of revisionary powers u/s. 263 of the Act. In view of it we are of the view that in the present case Ld. CIT was not justified in resorting to revisionary powers u/s. 263 of the Act, we therefore set aside the order of CIT cancelling the order dated 28/03/2013 passed u/s. 143(3) of the Act. Thus, the grounds of the Assessee are allowed.

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• 2016 (10) TMI 695
  Ex parte assessment u/s 144 - Held that:- it is required to make investigation by the department against the plaintiffs as to how cash amount of Rs. 50 lakhs was available with them which they claimed to have paid to the assessee. The department has not carried out any enquiry with the plaintiffs whether any sum was available with them which was said to have been paid to assessee. Therefore, in the absence of any such enquiry and since the department did not find any cash having been possessed with the plaintiffs, it cannot be presumed that the same was paid to the assessee. Therefore taking the totality of facts and circumstances into consideration we are of the considered view that this issue has to be restored to the file of the Assessing Officer for proper and thorough examination and the assessee shall co-operate with the proceedings. Thus, we restore the issue to the file of the Assessing Officer with a direction to examine the issue thoroughly and pass appropriate orders in accordance with law after giving adequate opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purpose.

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• 2016 (10) TMI 694
  Addition of unutilised CENVAT credit to the closing stock - exclusive method of accounting - Held that:- We find that the ld.CIT(A) while deciding the issue in favour of assessee has given a finding that assessee is following exclusive method of accounting whereby the excise duty is not included in the valuation of stock and raw-materials as the excise duty paid and collected is not made part and parcel of the Profit & Loss A/c. He has further given a finding that assessee has complied with the provisions of section 145A of the Act and the effect of including excise duty in valuation of closing stock does not affect the profit and is Revenue neutral. He has further relied on the decision of Hon’ble Gujarat High Court in the case of Narmada Chematur Petrochemicals Ltd.(2010 (8) TMI 263 - Gujarat High Court ) Before us, Revenue has neither controverted the finding of ld.CIT(A) nor has placed any contrary binding decision in its support. We further find that the Hon’ble Apex Court in the case of Indo Nippo Chemicals (2003 (1) TMI 8 - SUPREME Court) has held that unavailed MODVAT credit cannot be construed as income and there is no liability to pay tax on such unavailed MODVAT credit. In view of the aforesaid facts, we find no reason to interfere with the order of the ld.CIT(A). - Decided against revenue

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• 2016 (10) TMI 693
  TDS u/s 194A - disallowance of interest paid u/s. 40(A)(ia) - non deduction of tds - assessee in default - as per assessee the interest on Loans A/c has already been filed with the AO - Held that:- During the year in question the assessee TOP-UP his loan from another banker for which the processing fees was paid. That the loans were taken for his business. That the proportionate interest of housing at the rate of 15% was separately shown against the rental income. That a demand of Rs. 15,30,000/- has been credited U/s 143(3) of I.T. Act, 1961 for the above said assessment year. That the assessee has filed an appeal before the Higher Authorities against the said assessment order. However, the assessee directed to pay the above said demand within 30-days. In respect of which the assessee paid Rs. 4,00,000/- (i.e., more than 25% of the total demand) on 30-01-2015 in Corporation Bank Ltd. Challan. As no tax is liable to deduct on account of loan and interest payment to the bank. Therefore, the assessee has not deducted tax. In my view, this is exception as per sub-section III of section 3 of 194A of I.T. Act. Therefore, the assessee is not liable to treat as defaulter as per proviso 40(a) of I.T. Act and A.O. was in error in disallowing the interest payment to the bank without deduction tax CIT(A) after considering the submissions of the assesee as well as the findings of the Ld. AO, rightly inclined to agree with the contention of the assessee that no tax is liable to deduct on account of loan and interest payment to the bank. Therefore, the assessee has not deducted tax. This is exception as per sub-section III of section 3 of 194A of I.T. Act. Therefore, the assessee is not liable to treat as defaulter as per proviso 40(a) of I.T. Act and A.O. was not justified in disallowing the interest payment to the bank without deduction tax. Accordingly, the addition made on account of non deduction of TDS on account of interest paid on loan from banking concern of Rs. 35,06,062/- was rightly deleted by the Ld. CIT(A) - Decided in favour of assessee.

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• 2016 (10) TMI 692
  Deposits from unexplained sources addition u/s 68 - Held that:- The assessee does not maintain any books of account. Under these circumstances, no addition can be made u/s 68 of the Act. Even otherwise, the alternative contention of the assessee that the peak credit has to be taken into account by considering both the bank accounts has much force. On a perusal of the cash credit of the peak submitted by the assessee, the addition cannot be sustained. On this ground also the addition cannot be sustained. - Decided in favour of assessee

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• 2016 (10) TMI 691
  Failure to Serve notice under section 143(2)to the legal heir - Held that:- As per the order of the Hon’ble Supreme Court in the case of CIT & Another vs. M/s Hotel Blue Moon (2010 (2) TMI 1 - SUPREME COURT OF INDIA ) before completion of the assessment under section 143(3) of the Act the assessee has to be served with notice under section 143(2) of the Act, which is mandatory and failure to do so would vitiate the entire assessment proceedings completed under section 143(3) of the Act. We take note that despite the information given by the son of Shri Ramesh Chand Bajpai that his father i.e. Shri Ramesh Chand Bajpai was no more, still the AO issued notice under section 142(3) and 143(2) of the Act in the name of Shri Ramesh Chand Bajpai and not to the legal heir as per section 159 of the Act. The ld. CIT(A) has rightly held that failure of the AO to issue and serve notice under section 143(2) of the Act to the legal heir in accordance with the law could not be cured under section 292B and 292BB of the Act is also correct and therefore we are not inclined to interfere in the order passed by the ld. CIT(A) and we uphold the same.

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• 2016 (10) TMI 690
  Penalty levied u/s. 271(1)(c) - cash expenditure incurred - estimation of the profit rate -Held that:- Lower authorities have not made any addition on the basis of these cash expenditure but estimated the profit rate on gross receipts as the assessee is engaged in the business of the construction activity, i.e., the Civil Contractor. Even the Tribunal has accepted the estimation of income and reduced the profit rate from 25% to 23%. The observations of Tribunal in quantum appeal is reproduced in above para 5 of this order. In all, now the issue arises whether the estimate on penalty can be levied because assessment is finally made on estimating the profit rate. The lower authorities has initiated the penalty for the reason that the assessee has incurred cash expenditure and for this, evidences were found during the search proceedings on Chartered Accountant firm of the assessee. We also find that the profit rate applied on cost of sale as per the working of sale adopted by the Department can at the best be the basis for quantum addition but it cannot attract penalty for furnishing of inaccurate particulars of income because the assessment is made not on the issue of unaccounted cash expenditure but on estimate of profit rate. Accordingly, in our view, as per rule of evidence there is distinction between set of facts not proved and facts disproved and facts proved. Here we have to give benefit to the assessee because there is a doubt for the reason that mere non-satisfactory explanation furnished by the assessee cannot amount proof of falsity of explanation furnished. Accordingly, we are of the view that the lower authorities have erred in levying penalty for furnishing of inaccurate particulars of income on income estimated after applying profit rate. We delete the penalty and allow the appeal of the assessee.

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• 2016 (10) TMI 689
  Allowance of of deduction u/s.10AA - whether the export sales as supporting manufacturer, Sales to EOUs and SEZs are eligible for deduction u/s.10AA? - Held that:- In the present case, the goods have left India and consideration on sale of such goods having being received in India is not in dispute and in such a situation we are of the view that denial of deduction u/s 10AA of the Act is uncalled for more so, when as S.10AA of the Act does not provide for export of own goods or bringing in of foreign currency of the goods exported. We further find that Ld CIT(A) has relied on the decision of Hon'ble Kerala High Court in the case of Electronics Control and Discharge Systems Pvt. Ltd. [2011 (7) TMI 541 - KERALA HIGH COURT ] in coming to the conclusion that only direct exports where the assessee brings foreign convertible exchange into India qualifies for being eligible export turnover for the purpose of computing deduction u/s 10AA of the Act. We find that Hon'ble Kerala High Court in the aforesaid case was dealing with the provision of s. 10A and not with respect to s.10AA and in view of the difference in the definition of "export turnover" in both the sections, we are of the view that the aforesaid decision of Hon'ble Kerala High Court cannot be relied by the Revenue authorities for denying the deduction to assessee. Before us, Revenue has not placed any other direct decision where the issue related to provisions of S.10AA in its support. In view of the aforesaid facts, we set aside the order of Ld CIT(A) and thus allow the ground of Assessee.

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• 2016 (10) TMI 688
  Capital gain - distribution of capital assets on the dissolution of firm - whether capital gain arose to the assessee firm on transfer of assets to the outgoing partners cannot be taxed? - Held that:- The transfer of capital assets to the outgoing partners was made by way of book entries to the respective accounts of the outgoing partners and other formalities as required under the Registration Act was carried on from the period starting from 1.4.2008 to 31.3.2009 pertaining to A.Y 2009-10. Therefore, capital gain accrued to the firm on transfer of assets to the outgoing partners has to be taxed u/s 43(4) of the Act in A.Y 2008-09 and thus we cannot uphold the action of the AO as well as the impugned order. We are thus unable to see any valid reason to interfere with the assessment order wherein it has been held that capital gains accrued to the firm on transfer of capital gains assets to the outgoing partners is taxable in A.Y 2009-10. We are, therefore, inclined to hold that the grounds raised by the assessee are devoid of merits and hence we dismiss the same. Calculating the full value of consideration in respect of land and building transferred on dissolution in an arbitrary manner without referring the matter to the valuation officer u/s 55A r.w.s 142A - Held that:- AO by way of issuing show cause notice to the assessee showed his intention to calculate capital gains for A.Y 2009-10 and the assessee did not object to the applicability of the Collector rate in calculation of capital gains and the assessee only stressed upon to take collector’ prevailing market rate on or before 31.3.2008 which could have been applied to the case of A.Y 2008-09 and this action of the AO was correct and as per provisions of the Act. There was no need to refer the matter to the valuation officer u/s 55A of the assessee Act, as such. Accordingly, Ground being devoid of merits is dismissed. Capital gain on the shellar building - Held that:- CIT(A) upheld the addition merely by observing that the assessee had failed to cooperate in furnishing details as called by the AO, therefore, addition of Rs. 2 lakhs as capital gain on the shellar building is considered reasonable. From the orders of the authorities below and conclusion drawn by them, as noted above, we are of the considered opinion that this estimated adhoc addition has been made on the Nilokheri building for which addition on account of capital gain was estimated at Rs. 46,74,280/- as per para 4 of the assessment order. From para 5, we further note that the AO made addition of Rs. 2 lakhs by alleging that the assessee should have furnished details of measurement of the building and the assessee has failed to disclose the detai ls of value of construction which cannot be basis for making addition of Rs. 2 lakhs treating the same as capital gain on transfer of building for which capital gain has already been assessed in para 4 of the assessment order. Thus addition made by the AO is directed to be deleted

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• 2016 (10) TMI 687
  Revision u/s 263 - TDS liability u/s 194C - Held that:- In the present case, when the assessee is showing its modus operandi of business on two segments and making accounting entries accordingly, then, we are unable to see any reason to hold that the conclusion drawn by the AO or in accordance with the provisions of the Act or was unsustainable as per relevant provisions of the Act. In the present case, since the assessee firm is not owning any trucks or vehicles of its own and merely working as transportation commission agent, and it is running services without any oral or written agreement, then the provisions of section 194C of the Act do not apply to the transactions undertaken by the assessee. So far as difference between commission earned from pucca and kaccha arhatia is concerned, we are satisfied that for undertaking pucca arhatia services, the assessee requires number of staff members and it has to undertake the risk of receiving and paying cash whereas, in the kaccha arhatia working, the assessee requires no staff members and the risk factor is very less and thus the difference in the percentage commission earned from two different activities is quite justified which cannot be taken as an allegation to the conclusion drawn by the AO that the order is erroneous and prejudicial to the interest of the Revenue. The present case cannot be held as a lack of enquiry. Therefore, we are unable to agree with the conclusion drawn by the CIT, Hissar that the order of the AO passed u/s 143(3) of the Act dated 19.10.2010 is erroneous and prejudicial to the interest of the Revenue which requires invocation of revisional powers u/s 263 of the Act. - Decided in favour of assessee

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• 2016 (10) TMI 686
  Exclusion of income on sale of DEPB for the purpose of deduction u/s.80IB - Held that:- CIT(A) while deciding the issue and after placing the reliance on the decision in the case of Topman Exports vs. CIT (2012 (2) TMI 100 - SUPREME COURT OF INDIA ) has held that only the income on sale of DEPB is to be excluded and not the entire sale of DEPB for the purpose of calculation of deduction u/s.80IB of the Act. Before us, neither of the parties have placed any contrary binding decision in their support. We therefore find no reason to interfere with the order of the ld.CIT(A). Thus, this ground(s) of Revenue and Assessee are dismissed. Disallowance of interest expenditure - Held that:- The perusal of provisions of Section 251(1)(a) reveals that CIT(A) in an appeal against an order of assessment can confirm, reduce, enhance or annul the assessment. The power of setting aside which was available to CIT(A) is no more available to CIT(A) by virtue of amendment made by Finance Act 2001 with effect from 1.06.2001. Thus it can be seen that CIT(A) has set aside the issue to the file of A.O, the powers of which are not available to him at the relevant time. While deciding the issue, we find that ld.CIT(A) has noted that assessee could not substantiate that the amount used by the assessee for acquisition of shares of Banpal Agro Tech Pvt.Ltd. was on account of commercial expediency and that the argument of not utilizing the interest-free funds for making investments was made by assessee before AO. We find that on those issues apart from oral submissions, there is no material placed on record by assessee to substantiate its claim, at the same time Revenue has also not placed any material on record to controvert the observations of ld.CIT(A). In view of these facts, we are of the view that the matter needs to be restored to the file of AO for considering the submissions of the Assessee and thereafter deciding the issue on the basis of facts and circumstances of the case and in accordance with law. Needless to state that AO shall grant adequate opportunity of hearing to Assessee. Thus, this ground of Revenue and Assessee are allowed for statistical purposes. Disallowance of premium paid on Keymen Insurance - Held that:- As out of the premium paid for 5 policies, 3 persons namely Shri Yashwant Bachani, Shri Shantidan Thakor and Shri Arunbhai Desai are the Directors of the assessee-company whereas Shri Mukesh Gadhvi is Director’s son works in production department and Shri Jigar Bachani is Director’s son and works as helper. The object of the Keymen Insurance Policy is to enable business organization to insure the life of a Keyman in order to protect the business against financial loss which may occur in the likely event of premature death of the key person. Thus Keyman is an employee or a Director, whose services are perceived to have a significant effect on the profitability of the business. As far as the premium paid for 2 persons, who are not the Directors of assessee, assessee has not placed any material on record to show their nature of work, since how long they are associated with the assessee, whether assessee has paid for premium for other persons who work in assessee’s company in same capacity as that of these two persons and how these two persons can be considered to be the key persons to the assessee’s business. In such a situation, we are of the view that AO has rightly disallowed the expenses towards insurance premium (Rs.20 lacs) for these 2 persons. As far as payment of insurance premium for other 3 persons are concerned, it is an undisputed fact that they are the Directors of assessee-company. The Directors of the company, even by the Circular No.762 dated 18/02/1998 can be considered to be a key person. In such a situation, and in the absence of any contrary material placed by the Revenue that the 3 Directors are not the key persons, we are of the view that the insurance premium paid for the 3 Directors needs to be allowed. In view of the aforesaid facts, we direct the restricting the disallowance of Keymen Insurance Premium only to the extent of Rs. 40 lacs as against Rs. 1,00,00,000/- made by AO - Decided partly in favour of assessee.

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• 2016 (10) TMI 685
  Reopening of assessment - Additions u/s 40(a)(ia) for non deduction of TDS - contention of the assessee-company that there was no fresh information which enabled the AO to form opinion that income escaped assessment cannot be accepted, as information had come to the knowledge of AO that the provisions of section 10(23G) were omitted w.e.f. 1/4/2007 during the course of subsequent assessment proceedings - Held that:- Hon’ble Supreme Court in the case of Ess Kay Engineering P.Ltd. vs. CIT (1997 (7) TMI 114 - SUPREME Court ), Phool Chand Bajrang Law & another vs. CIT (1993 (7) TMI 1 - SUPREME Court ) held that information obtained in subsequent assessment proceedings could lead to a belief that income chargeable to tax has escaped assessment even though the transaction in question had been examined during the course of original assessment proceedings. Reliance placed by the learned counsel for assessee-company on the decision in the case of Kelvinator of India Ltd., (2010 (1) TMI 11 - SUPREME COURT OF INDIA ) is misplaced, as there is no opinion formed in the original assessment proceedings on the issue of claim of examination of tax free interest u/s 10(23G) of the Act. Therefore, we hold that initiation of re-assessment proceedings u/s 147 is valid in law. Additions u/s 40(a)(ia) for non deduction of TDS - provision for royalty, fees for technical service etc - reversal of provision for contractor and professional fee etc. - claim of the assessee-company that these amounts were disallowed u/s 40a(ia) suo motu for non-deduction of tax at source - Held that:- In the year under consider consideration, the very provision created was reversed and therefore the same should be allowed as a deduction. There is no quarrel on this proposition but the claim can be allowed only on satisfying the AO that the provision was reversed out of amount disallowed earlier. The CIT(A) has recorded a categorical finding that the assessee has failed to link provision reversed with the amount of provision originally created and disallowed. The CIT(A) also observed that the assesseecompany had expressed its helplessness to establish the link between original provision and reversal provision during the year under consideration. In the circumstances, the CIT(A) has confirmed the addition. Even before us, assessee-company had not made any attempt to prove nexus between amount of provision created which was disallowed in earlier years and the amount of provision reversed during the year under consideration. The onus of proving the claim always lies with the assessee. As in the case of CIT vs. Imperial Chemical Industries (India) Ltd., (1969 (2) TMI 15 - SUPREME Court )has unequivocally held that burden of providing that the claim is allowable lies on the assessee. Discharge of burden has to be effective and meaningful and not to cover up the book entries and paper work. In view of failure by the assessee-company to prove nexus between amount disallowed suo motu, provisions of section 40a(ia) and the amount reversed during the year under consideration, we have no option but to confirm the action of the AO making the addition on the same. - Decided against assessee.

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• Customs

• 2016 (10) TMI 669
  Release of containers lying in container freight station - export consignment of muriate of potash (MOP) - export in violation of provisions of customs law - Held that: - The problem has now arisen for the petitioner because the containers are being detained by the Directorate of Revenue Intelligence/ Customs Department in the respective container freight stations owned and established by the first respondent. Admittedly, the containers have not been confiscated, but only the goods were confiscated and the confiscation is absolute. In such circumstances, the Directorate of Revenue Intelligence/ Customs Department should take immediate steps for destuffing the containers and releasing the containers, especially when the Order in Original ordering confiscation has been passed as far back as on 29.2.2012. Direction to the Competent Authority of the Customs Department/Directorate of Revenue Intelligence to consider the petitioner's request and order for de-stuffing the cargo and deal with the same in the manner as decided by them and also for release of the containers within a period of twelve weeks. The containers have been lying in the premises for a long period of time and no rent has been paid so far. The learned counsel have got a working sheet to show the amount of rent due and payable - the Customs Department/Directorate of Revenue Intelligence shall also endeavour to assist the respective container freight stations for recovery of the rent due and payable. As the importer has been found guilty, they could be made liable for payment of rental dues. Petition disposed off - decided partly in favor of petitioner.

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• 2016 (10) TMI 668
  Import of Gold prohibited item / smuggling - import from Nepal - Offence triable by Magistrate Ist Class - offence bailable or non-bailable - Maximum punishment provided is 7 years imprisonment - Held that: - Keeping in view the maximum sentence provided in the offence and submission that possession of Gold, if not imported through Nepal, is not unauthorized, as the submission is, in the opinion of the Court, no useful purpose would be served by detaining the applicant in jail in any more, keeping in view the ratio of judgment given by Apex Court in the case of Sanjay Chandra v. C.B.I. [2011 (11) TMI 537 - SUPREME COURT]. Applicant-Vinod Kumar Verma involved in Complaint Crime No. 41/2015, Complaint No. 0000105 of 2016, under Sections 104, 110, 111, 135 of the Customs Act, 1962, Police Station D.R.I., Lucknow, is directed to be released on bail subject to the fulfillment of certain conditions.

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• 2016 (10) TMI 667
  Condonation of delay in filing appeal - appeal on rejection of refund claim - Section 130 of the Customs Act, 1962 - Held that: - the appellant had closed its business in December 2013, which fact is not seriously disputed, the Tribunal could have adopted a pragmatic approach. In cases of this nature, especially when the claim for refund is rejected, the assessee does not stand to lose by protracting the proceedings. Therefore, a pedantic approach is not what is warranted in this case - delay to be condoned - matter remitted to Tribunal to take up the appeal and dispose of the appeal on merits and in accordance with law.

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• 2016 (10) TMI 666
  Condonation of delay in filing appeal - Section 35G of the Central Excise Act - Held that: - the law of limitation is founded upon public policy. But, in the case on hand, another Director has already filed an appeal in time. It is pending consideration before the Tribunal. The appellant herein is the Managing Director of the company. Therefore, there is no reason for him to be so negligent as not to pursue a remedy, when one other Director has been prompt in pursuing. The Order-in-Original has allowed redemption of goods upon payment of Rs. 40 lakhs. The penalty imposed is Rs. 1.38 crores. Hence, in cases of this nature, the Tribunal cannot decide the case with pedantic approach especially when another appeal is pending. Delay condoned - the Tribunal may take up the application for waiver and the application for stay and decide in accordance with law.

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• 2016 (10) TMI 665
  Classification of goods - Air Conditioner Resistors - classified under Chapter 85334090 or classifed under Chapter heading 84159000 - benefit of N/N. 24/2005-Cus, dated 01.03.2005 - HSN Notes - Held that: - when the item in question is specific part of 'air conditioning system', there is no scope for classification of the product under Chapter 8533 as mere ‘Resistor'. Consequently, appropriate classification for the subject item is Chapter sub-Heading 84159000. Confiscation of goods with redemption option on payment of fine - imposition of penalty - Held that: - reliance placed on the decision of Prince Marine Transport Services Pvt. Ltd. vs C.C. [2014 (12) TMI 772 - CESTAT MUMBAI] where it was held that the confiscation of the goods under Section 111 (m) and penalty under Section 112(a) of Customs Act are not warranted. Consequently, confiscation, redemption fine and penalty imposed by the impugned orders are hereby set aside. Appeal disposed off - decided partly in favor of appellant.

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• 2016 (10) TMI 664
  Restoration of CHA licence - evasion of customs duty - imported goods ‘polyester woven dyed fabrics/viscose polyester blended fabrics’ or ‘viscose polyester blended fabric’ - Inquiry under regulation 22 of the Regulation - compliance of statutory procedure - Held that: - Customs House Agent are required to be proficient in the customs operation and procedure and to ensure that importer/exporter posses appropriate bona fides and act in conformity with the Customs Act, 1962. The said consignments cleared through appellant, as agent, were violative of the declaratory provisions under the Customs Act, 1962. There is, however, no evidence on record to show that appellant was aware of the intent or modus adopted by the customer. Nor is there any allegation that appellant had contributed in deceiving the customs authorities - The need to advice a client would arise only if the agent was aware of any intent to misdeclare. We note that there is no evidence or finding that the appellant was aware of such an intent on the part of the client. There was, therefore, be no reason for the appellant to believe that the client was in need to advice the client to desert from their proposed action. As to subletting, we find that the impugned order has merely proceeded on the concatenation of the request for withdrawal of ‘G’ certificate and the fact of employment elsewhere subsequently as evidence that such individual was not an employee when the bills were filed. The time-line, as seen from the application for ‘G’ certificate furnished by the Learned Counsel for appellant, would evidence otherwise. It appears that Shri Momayya has not been established to be a former employee of the appellant-agent. Consequently the charge of sub-letting/transfer, as well as failure to handle the consignment through an authorised employee or personally, fails. An authority letter was indeed obtained from the ostensible importer and its existence has been acknowledged as such by the Settlement Commission. The Regulations do not require that each and every authorisation should be acknowledged by a customs officer. As long as authority letter is in possession of the agent, compliance with the Regulation cannot be disputed. It must also be noted that no evidence has been brought on record to demonstrate that the acts of commission and omission on the part of the importer is attributable to the appellant - no fault on the part of appellant established - licence to be restored - decided in favor of appellant.

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• 2016 (10) TMI 663
  Imposition of ADD - 2 Ethyl Hexanon - import from EU, Indonesia, Korea RPI Malaysia, Saudi Arabia, China Taipei and USA - N/N.10/2016-Customs (ADD), dated 28.3.2016 of Ministry of Finance - improper fixation of normal value by the DA - Held that: - While determining the normal value, we note that the DA has discarded the sale of subject goods to related party in Indonesia and also sale to third country in China. We note that the related party transaction cannot be considered as sale in ordinary course of trade'. The sale being above cost price by itself does not make it sale in ordinary course of trade. Further, China being non-market economy will have impact on the export price to that country also. These factors have been analysed and we do not find any reason to differ with the conclusion of the DA. Error in the data submitted by the exporter - Held that: - data submitted by interested parties were considered due analyses was based on verification. If some party post disclosure denied certain data and claims error in earlier analyses, the same is not to be considered. Such course will call for further detailed verification post disclosure. It is neither viable nor admissible in view of time from within which the DA has to operate. Improper analyses of injury - Held that: - DI suffered injury due to other factors and not due to dumping of the subject goods. In other words, the shut-down of unit of DI is attributable to the disruption in raw material supply. DA calculated the production capacity utilization of Domestic Industry assuming that there was no shut down in order to isolate plant shut-down as factor of injury. It was recorded that even if raw material supplies were not affected, the DI had reached only 62% of the operation. There is healthy growth in demand. While cost has increased, the prices were suppressed due to presence of significant volume of dumped imports. On this ground also we find no merit in the argument of the appellant. DA concluded the price of DI is significantly depressed because of increasing volume of dumped imports at a price below the cost of production, preventing DI from realising remunerative price to remain in production/ sale. He established causal link between dumping and injury suffered by DI - ADD rightly imposed - appeal disposed off - decided against appellant.

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• 2016 (10) TMI 662
  Imposition of ADD - cold rolled flat products of stainless steel - import from China PR, Korea, EU, South Africa, Taiwan, Thailand and USA - sunset review - N/N.61/2015-Customs (ADD) dated 1 1.12.2015 of Ministry of Finance - Held that: - the subject goods continued to enter in the Indian market from the subject countries at substantially dumped price. Examination of the injury indicates that domestic industry continues to suffer injury on account of import at very low price from subject countries against which anti-dumping duties are in force. In terms of AD Rules, the DA is required to determine whether revocation of the AD duty would lead to continuation or recurrence of dumping and injury. One relevant factor noticed is that the subject goods of higher width above 1250 mm. has increased during the injury investigation period. The claim of the DI that higher width products are imported and are easily converted into lesser width product by simply slitting, has also been considered by the DI before the final finding. He concluded that the dumping and injury are continuing and are likely to continue or recur, if the duties are revoked. Accordingly, he recommended for continuation of AD duties on subject goods imported form sub-countries. The capacity of DI has increased by about 137% and the production increased by 84% in the POI compared to the base year. It was recorded that the capacity addition of the DI appears to be in consonance with the increase in demand of the subject goods. The DA noted that the cost of production has been duly normated to account for additional cost, if any, due to ramp up operation and under utilization of capacity while fixing NIP. It was concluded by the DA that the non-attribution analysis does not show any other factor that could have significantly contributed to the injury suffered by the DI - no interference required with the duty imposed. Improper fixation of export price in respect of the POSCO, Korea/Thailand, we find that the DA has taken into account the relationship between the group companies of POSCO before arriving at the decision - neither the determination nor the interests of the domestic industry have been affected due to non-participation of the so called related parties of the cooperating exporters in other countries. the objections of the domestic industry in this regard have not been accepted. ADD rightly imposed - appeal rejected - decided against appellant.

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• 2016 (10) TMI 661
  Imposition of ADD - purified terephthalic acid - import from China PR, EU, Korea RP and Thailand - N/N.23/2015 - CUS (ADD) dated 27/05/2015 - status of MCPI as domestic industry - 66% of shares of this unit is with Mitsubishi Chemical Corp., Japan who also hold 40% of Samnam Petrochemicals who is an exporter of subject goods to India - Held that: - During POI Samnam's export of subject goods to India is an exception and not a regular trading activity. Further, Mitsubishi Chemical Corp., Japan does not have controlling effect on the activities of Samnam Korea. We are in agreement with the DA that the facts of the case indicate that no undue benefit accrued MCPI out of the above share holding arrangement in case of levy of AD duty. After noting the detailed reasoning recorded by the DA we find that there is no justification for treating MCPI as not eligible for DI. Faulty analysis of material injury to DI with reference to IOCL pricing - Held that: - IOCL has neither supported nor opposed the application for anti-dumping investigation. The other 2 producers of subject goods in India account for more than 50% of production. Hence, the DA is correct in analyzing the data furnished to arrive at conclusion. The absence of support by IOCL is not relevant for the investigation. The sale price of IOCL being lesser than the DI has not been substantiated during investigation by the DA. On the impact of inter-se competition among domestic producers, the DA found that the injury to DI not attributable to the same as nothing relevant was brought before the authority during investigation. In appeal also we find no evidence to this effect. Principles of natural justice - Held that: - In the name of natural justice a situation cannot be created which will defeat the very process of intended investigation and remedy thereafter. If appellant's plea is accepted, it follows a second hearing is to be considered for all parties, who after oral hearing have to submit written note of their comments which has to be made available to all the other parties who will insist on further oral hearing and written comments on the issues raised which has to be made known to all interested parties and the cycle will continue indefinitely without any possible conclusion by the DA. The initiation of investigation for AD duty was notified with supporting applications. All interested parties give comments and were personally heard. Thereafter, upon analysis of all facts and comments after due verification the DA discloses the proposals. Again comments are called for. Finally, the DA notifies his Final Findings. This procedure has been followed by the DA. We find no legal infirmity or denial of natural justice by the DA in this case. Injury analysis being arbitrary and on use of excessive discretion by DA - Held that: - No specific instance of improper discretionary decision was brought to our notice. As a statutory authority vested with the power to analyse and arrive at a clear finding, the DA acted within his mandate. Adverse finding cannot be ipso-facto basis of allegation of discretionary excess. ADD rightly imposed - appeal rejected - decided against appellant.

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• Service Tax

• 2016 (10) TMI 684
  Opportunity of being heard - security agency - Ex-Serviceman - registration of father-in-law's house as place of business due to absence of his own proper address at the relevant time - demand of service tax against petitioner and notice sent to registered address of which no reply received from petitioner - two more opportunities given to petitioner of being heard and notice published in the notice board of the Commissioner of Service Tax, Service Tax-II, Commissionerate, Chennai-40 - Held that: - considering the quantum of demand which has been confirmed in the impugned order, which is an exparte order, this Court is of the view that the petitioner could be granted an opportunity to go before the respondent and place all materials including their Books of Accounts to establish their case. However, to be entitled to such an opportunity, the petitioner should be put on terms. The petitioner directed to pay a sum of Rs. 5,00,000/- towards the disputed service tax liability within a period of two weeks and if the same is done, then the petitioner is entitled to treat the impugned proceedings as a show cause notice, and re-adjudication will be done - petition disposed off - decided in favor of petitioner.

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• 2016 (10) TMI 683
  Advertising agency services - manufacture and trading of advertisement material including preparation of flex printed, backlit banners, flex board and unlit etc - making of advertisements - preparation of advertisements - whether the appellant was an advertising agency and the services rendered by the appellant part take of or include the services in the nature of designing, conceptualizing, visualizing, normally rendered by the Advertising Agency and is appellant liable to service tax? - Held that: - neither appellant is having receipt for the activity namely display or exhibition nor the appellant have provided such service of display or exhibition under the facts and circumstances. The appellant is not liable to Service Tax under the classification Advertising Agency and/or providing a taxable service as an Advertising Agency in relation to advertisement in any manner. The decision in the case of Ajanta Fabrication Vs. CCE [2006 (10) TMI 1 - CESTAT, NEW DELHI] where it was held that the appellant is not equipped for functioning as an advertising agency and thus, the services rendered by the appellant did not part take of or include the services in the nature of designing, conceptualizing, visualizing, normally rendered by the Advertising Agency. The extended definition, cannot bring an entirely alien and unconnected services or a manufacturing activity within scheme of levy of service. And accordingly held that Ajanta Fabrication was not covered within the ambit of Service Tax under the classification Advertising Agency. Appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 682
  Refund claim - payment of service tax and sales tax on supply and installation of the said Fire Hydrant System - whether the refund clim justified on the ground that the sales tax has been paid by the assessee on the total amounts of the invoice clearly establishing that no services have been rendered by them - deposit made under the pressure of Revenue - non-existant entry - specified service under Section 65 (105) of the Finance Act, 1994 - Held that: - the decision in the case of Allengers Medical Systems Ltd. vs. CCE, Chandigarh [] relied upon where it was held that where a person the goods and erection, commissioning and installation of the said sold equipments is treated as a part of the sale of excisable goods and when there is no evidence to show charging of paid amounts for erection and commissioning, such activities have to be held as incidental to delivery of goods to the customers. The appellant has paid sales tax on the entire value of the goods sold by them and the invoice raised by them also reveals only the sale of goods. In the purchase order also the reference is only to supply of goods and no part of the contract, requires the assessee to undertake the job of erection and commissioning etc. No value of the said services stand separately mentioned in the purchase order. N/N. 2/2003-ST - the value of the goods has to be taken out for the purpose of arriving at the value of services, if any. If the entire value of the goods stands taken out from the total contract value, nothing survives for the services, alleged to be supplied by the assessee. Rejection of refund claim not justified - appeal rejected - decided against Revenue.

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• 2016 (10) TMI 681
  Classification of service - works contract for "bagging of urea and loading the same in wagons and trucks in the bagging plant" - man power supply services w.e.f. 16.06.2005 or cargo handling services w.e.f. 16.08.2002 - Extended period of limitation - Held that: - board's clarification issued vide F. No. 8-11/1/2002-TRU dated 01.08.2002 clarifying that if someone hires labour / labourers for loading and unloading of goods in their individual capacity, such activities will not come under the purview of service tax as a cargo handling services. The issue gets covered in the decision of the case of Renu Singh & Co. vs. CCE Hyderabad [2007 (3) TMI 63 - CESTAT,BANGALORE] where it was held that the identical services will not get covered under the cargo handling services. The respondent got themselves registered with the service tax department w.e.f. 16.06.2005 under the category of man power supply agency and were discharging their duty liability accordingly. As such the assessee's activity were fully in the knowledge of the Revenue, in which case delayed issuance of the show cause notice in the year 2007 is not justified at all. No suppression or malafide with an intent to evade payment of duty can be attributed to the assessee. Appeal rejected - decided against Revenue.

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• 2016 (10) TMI 680
  Levy of service tax - taxability of secondary services - commission received for booking of cargo space in various airlines as well as shipping lines - Business Auxiliary Services - Section 65 (19) of the Finance Act, 1994 - whether appellant is justified in holding that no service tax will be liable on the brokerage/commission received by them in the light of the CBEC Circular No. 56/5/2003-ST dated 25th April, 2003? - Held that: - if the secondary services gets consumed with the services that are being exported, no service tax will be liable on such secondary services. It is not being disputed that the activity undertaken by the appellant is a secondary service rendered to the primary service provider namely the airlines towards export of cargo services. To this extent, the CBEC Circular covers the issue in favor of the appellant. The decision in the case of Lee & Muir Head Pvt. Ltd. vs. CST, Bangalore [2008 (10) TMI 131 - CESTAT, BANGALORE] relied upon where it was held that the appellants are secondary service providers for the shipping lines, brokerage commission of 2% paid for booking of export cargo cannot be taxed under the category of 'Business Auxiliary Services'. Demand not sustainable - interest and penalty also fails - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2016 (10) TMI 679
  Returned goods cleared as scrap - Applicability of Rule 16 of CER, 2002 - CENVAT credit - similar issue for the same assessee for another unit[2016 (10) TMI 71 - CESTAT AHMEDABAD] stand decided - Held that: - the decision in the case apply where it was held that the Appellant had received in their factory the defective duty paid goods for remaking, refining, reconditioning etc. It is not in dispute that the certain quantity of such defective goods were remade/reconditioned and cleared on payment of appropriate duty. However, the major portion of the returned goods was scrapped and cleared from the factory after payment of duty on the transaction value of the scrap. It is the contention of the Department that the conversion of printed/unprinted corrugated boxes into scrap cannot be considered as a process of manufacture. Hence, the credit availed under Rule 16(1) is required to be reversed. I do not find any discrepancy in the observation of the learned Commissioner (Appeals) in this regard, in as much as the provisions of the said Rules are specific. In the present case, it cannot be said that the process by which the defective goods are converted into scrap, should be considered as manufacture within the definition of manufacture as laid down under Section 2(f) of Central Excise Act, 1944. Therefore, on merit, the Appellant has no case. Period of limitation - Held that: - all the facts are disclosed to the Department. therefore, no merit in the impugned order on the aspect of limitation. The demand for extended period of limitation is not sustainable and hence set aside. However, the matter needs to remanded to ascertain the duty involved for the normal period of limitation. Accordingly, the matter is remanded to the adjudicating authority to re-determine the demand amount for the normal period of limitation - Appeal disposed off - decided partly in favor of appellant.

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• 2016 (10) TMI 678
  Taking credit of of duty paid by the SEZ unit on returned goods - CENVAT credit - whether the appellant manufacturer who cleared finished goods to M/s DLF Ltd (SEZ Developer) under bond without payment of duty and the same were again returned to the appellant by M/s DLF Ltd (SEZ Developer) under bonded Challan for replacement, and on failure of the appellant to replace in the time permitted M/s DLF Ltd. (SEZ Developer) deposited the Excise duty, and claimed reimbursement from appellant, the same was taken credit of by the appellant, whether the said credit was rightly taken by the appellant? - Held that: - the duty was paid by the SEZ Developer on non-fulfillment of the condition of the bond, as the appellant could not return the goods within the stipulated time. Such duty was admittedly paid, although under wrong head (Customs duty) and the same have been accepted by the appellant. Accordingly, I hold that the procedure of Rule 16 of Central Excise Rules, 2002 does not come in the way in denying the credit. I hold that the appellant is entitled to take credit under Rule 3 of the Cenvat Credit Rules as they have admittedly received the goods under proper documents reflecting the duty involved and the said duty have been admittedly paid on the removal of the goods, being the SEZ Developer, to the appellant - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 677
  Suppression of facts - clandestine removal of finished products - demand of duty along with interest and penalty - documents seized on search of premises did not tally with facts supplied - Held that: - the Commissioner (Appeals) has erred in taking the view that there is not enough evidence of clandestine removal of goods. Even though the statement of Shri Sanjay Kejriwal, who is said to be the author of the private records recovered has not been recorded, it stands admitted by Shri Tekriwal, Director about the truth of the contents of the private notebooks. Consequently, I find no reason to disallow this piece of evidence. The evidence of clandestine clearance has been brought on record only as a result of investigation undertaken by the department. The evidences unearthed by the department are not statutory documents and would have gone undetected but for the investigation. Therefore this is a clear case of suppression of facts from the department and certainly the extended period of limitation is invocable in this case and hence the demand cannot be held to be time barred. The Commissioner (Appeals) order setting aside the demand is not proper. The demand is based on evidence which stands admitted by Director on records recovered from the assesses factory. There is nothing on record to the effect that statements relied upon have been extracted under duress. The Director also has voluntarily stated that he is satisfied with the manner of stock taking and search - in present case the demand is on the basis of private records seized in search and which have been admitted by the Director himself as pertaining to clandestine clearances. I also find that duty also stands demanded only on those clearances which are not covered by invoices. Demand justified - appeal allowed - decided in favor of Revenue.

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• 2016 (10) TMI 676
  Denial of CENVAT credit - manufacture of motor vehicle chassis - availing various input services in or in relation to the manufacture of final products - whether the appellant eligible for credit of these input services? - Held that: - the decision taken in the appellant's own case M/s Eicher Motors Limited Versus CCE, Indore [2016 (8) TMI 7 - CESTAT NEW DELHI] have been relied where it was held that the denial of credit on these services is not justifiable. The Hon’ble Bombay High Court in M/s. Coca Cola India Pvt. Ltd. Versus The Commissioner of Central Excise, Pune-III [2009 (8) TMI 50 - BOMBAY HIGH COURT] broadly laid down the principles for allowing credit on input services. There is no reason to deny the credit on such input service availed by the appellant as a principal manufacturer. Admittedly, service tax on such services have been remitted by the appellant and the final products value are in terms of the Rule 10 A of the Valuation Rules. However, no credits shall be eligible for the services rendered beyond the place of removal (depot) as these Business Support Services are basically for movement of excisable goods as submitted by the appellants. Denial of CENVAT credit not justified - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 675
  Denial of CENVAT credit - demand of duty with equal amount of penalties - CTD bars, TMT bars - whether these goods were inputs or capital goods? - whether the appellant is eligibile for cenvat credit of duty paid on CTD bars, TMT bars, etc. used in the manufacture of fabrication of various structures inside their factory? - Held that: - similar issue stands decided in the case of M/s. Singhal Enterprises Private Limited Versus The Commissioner Customs & Central Excise, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI] where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit. CTD bars, TMT bars held as capital goods - CENVAT credit allowed - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 674
  Denial of CENVAT credit - structural items like joints, rails, angles, channel plates, etc. - Held that: - the subject steel items have been used for manufacturing of crane gentry, slag pots and metal pouring fixtures; all these items are established as capital goods; Rule 2(k) of Cenvat Credit Rules, 2004 (CCR) and its explanation 2 makes clear that any input items used for manufacture of capital goods, which are further used in the factory for manufacture would be covered as inputs under Rule 2(k) of the CCRs. The yardstick of user test has been evolved clarifying that user of the subject items will determine whether the Cenvat credit could be claimed with reference to the said items. After applying the user test , I am of the considered view that the subject items namely, angle, channel, plate, joist, rail, etc., which have been used for manufacturing various capital goods are eligible for the Cenvat credit - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 673
  100% EOU - procurement of cement without payment of duty under the authority of CT 3 certificate in terms of N/N.22/2003 CE dated 31.3.2003 - The said cement was used for treatment and disposal of hazardous waste generated during the zinc smelting operations - whether the denial of exemption on the ground that the cement is not required in the manufacturing activity of final products of the appellant? - Held that: - Without controlled disposal of hazardous effluent no manufacture of zinc is possible/permitted. The lower authorities held the view that once the zinc/ lead is manufactured, the treatment of effluent is nothing to do with such manufacture. Such view is factually and legally unsustainable. Cement helps to stabilize the material and prevents leaching when dumped in landfill. We note that under clause (a) (i) of Notification No.22/2003-CE the exemption from duty is available to all goods specified in Annexure 1 to the notification when brought in in connection with manufacture or packaging of articles or for export of goods. There is no dispute in the proceedings before lower authorities about cement being covered by Annexure 1. The only dispute is that cement is not brought in connection with manufacture of zinc. We find such interpretation is too restrictive and untenable in the factual context of the usage of cement in present case. The decision in the case of INDIAN FARMERS FERTILISER COOP. LTD. Versus CCE., AHMEDABAD [1996 (7) TMI 141 - SUPREME COURT OF INDIA] relied upon. where it was held that that use of ammonia in the effluent treatment plant was a necessary part of manufacture of urea. Denial of exemption not justified - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 672
  Denial of CENVAT credit - Rule 16 of Central Excise Rules, 2002 - manufacture of Colour Picture Tubes (CPT) - return of defective CPT - whether the denial of cenvat credit availed on returned defective CPTs mainly on the ground that no co-relation could be made between the originally cleared CPTs and the returned CPTs as also there is no proper duty paid document based on which the credit can be availed by the appellant is justified? Held that: - there is no evidence to the effect that the appellants received defective picture tubes manufactured by other persons. Even such situation is covered for credit as clarified by the Board. The duty paid nature of CPTs or their identity are to be established based on the documents. Here, when the defective CPTs are returned by the service centres of the TV manufacturers the invoices under which the picture tubes were cleared by the original manufacturer were indicated. In any case, the picture tubes which were received for reconditioning are to be eventually cleared and accounted for in terms of the aforesaid rules. There is no double benefit as the credit availed by the manufacturer of TV is forming part of duty paid on the whole TV. As such the picture tube credit availed by the manufacture of TV is duly accounted for. When the defective picture tubes are received back by the appellant, they are entitled for the credit as the challan under which the same are received has got cross reference to the original clearance documents. The credit availed by the appellant in terms of Rule 16 of Central Excise Rules, 2002 cannot be denied - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 671
  Contravention of Rule 3(5) read with Section 3(4)(c) of Cenvat Credit Rules, 2004 - removal of goods without reversal of CENVAT credit - demand of excise duty - imposition of penalties in terms of provisions of Rule 15 of the Rules of 2004 read with Section 78 of the FA, 1994 - appeal preferred by the appellant and was directed to discharge the assessed liability pursuant to the adjudication order dated 30.12.10, confirmed by the appellate order dated 12/14.12.12, within four weeks - appellant did not deposit the assessed amount in compliance of the order dated 9.9.13 passed by the Appellate Tribunal and therefore, the appeal preferred was dismissed for default in compliance of the order dated 9.9.13, ignoring that the application preferred by the appellant for recalling/modification of order dated 9.9.13 was pending consideration - Whether the Appellate Tribunal was justified in dismissing the appeal preferred by the assessee for alleged non-compliance of order dated 9.9.13, without considering the application preferred by the assessee for recalling/modification of the said order, rejecting the stay petition preferred for non-prosecution? Held that: - the appellant having preferred the application as aforesaid, the Appellate Tribunal was reasonably expected to consider the said application first and could not have dismissed the appeal straight away for non compliance of the order directing pre-deposit of the assessed liability. A bare perusal of the order impugned reveals that the factum of pendency of the application preferred by the appellant for recalling/modification of the order dated 9.9.13 was brought to the notice of the Appellate Tribunal yet, ignoring the same, the Appellate Tribunal proceeded to dismiss the appeal. The order impugned passed by the Appellate Tribunal dismissing the appeal for non compliance of the order directing pre-deposit of the assessed liability without deciding the application preferred by the appellant as aforesaid, is not justified and deserves to be set aside - appeal allowed - matter remitted to the Appellate Tribunal for consideration afresh.

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• 2016 (10) TMI 670
  Cenvat/Modvat on inputs - Held that: - the legal issue was decided in favour of the respondent by the Commissioner of Central Excise (Appeals) while referring to the order passed by the Tribunal in the case of MARUTI UDYOG LTD. Versus COMMISSIONER OF C. EX., DELHI-III [2004 (6) TMI 155 - CESTAT, NEW DELHI]. The case was found to be fit for filing appeal before the Tribunal only for the reason that the appeal against the order passed by the Tribunal in M/s Maruti Udyog Ltd. case was pending before Hon'ble the Supreme Court at that time, however, the same has now been dismissed. As the legal issue involved in the case has already been decided in favour of the assessee, we do not find any reason to go into the issue as to whether the appeal filed by the revenue before the Tribunal was competent in view of alleged irregularity in the approval granted by the Committee of Commissioners - appeal dismissed - decided in favor of assessee.

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• CST, VAT & Sales Tax

• 2016 (10) TMI 660
  Scope of taxable turnover - whether the market fee or cess which is paid by the petitioner is in the nature of compensation for the special services rendered by the market committee and there must be quid pro quo for the services rendered by the Government or local body and such pre-expenses levied in rendering service by the market committee forms part of the taxable turnover for the purpose of levying tax and as such expenses are liable to be deducted from the total turn over? - Madras Sugar Factories Control Act, 1949 - Held that: - the nature and incidence of cess was not intended to form part of the consideration for the purchase of sugar by the assessee therein. The said principle could very well be applied to the case on hand, since the petitioner had paid the fee or cess to the regulated market committee which renders certain services to the seller and the purchaser. In other words, the market committee acts as a facilitator for which a fee is collected - fee/cess paid by the petitioner to the market committee cannot form part of the taxable turn over nor made liable to tax - petition allowed - decided in favor of petitioner.

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• 2016 (10) TMI 659
  Power of Designated Officer, Tamil Nadu Food Protection and Drugs, Administration Department, Karur District to lock and seal a premise - search of premises and taking of samples without consent without any prior notice and due opportunity to petitioner - petitioner, a valid holder of licence to trade edible, non edible oil, fatty acids, waste gum, soap oils, rice brand oil, glycerin and rice brand oil gum - Section 38(1) to (6) of the Food Safety and Standards Act, 2006 - Held that: - Rule 2.1.3(4) speaks of Powers and Duties of the Food Safety Rules, in and by which, where the Food Safety Officer is of the opinion or he has reason to be recorded in writing, in the given situation, it is not possible to comply with the provision of section 38(1)(c) or the proviso to section 38(1) for reasons like non availability of the Food Business Operator, the Food Safety Officers may seize the adulterant or food, which is unsafe or sub-standard or mis-branded or containing extraneous matter, may seal the premises for investigation after taking a sample of such adulterant or food for analysis. The Designated Officer, Tamil Nadu Food Safety and Drugs, Administration Department had issued a notice to the petitioner on 31.03.2016 to produced the purchase and sales bills of raw materials purchased and the same was received by the petitioner on 02.04.2016 and till date, the petitioner/company had not produced the relevant documents to establish or to prove their Bonafide Transaction/action, the Court is of the considered view that the present writ petition filed by the writ petitioner is a premature and otiose one - petition disposed off - Designated Officer, Tamil Nadu Food Safety and Drugs, Administration Department, Karur, allowed to carry on necessary proceedings - decided against petitioner.

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• 2016 (10) TMI 658
  Exemption from payment of tax - Bihar Vat - Branch transfers / stock transfer - form “F” - whether in the absence of Form "F", the petitioner can be given credit on the basis of other documents of transaction which may support the transfer of the goods from State of Bihar to State of Jharkhand? - Held that: - the requirement of Form “F” in terms of CST Act cannot be substituted with other documents in support of proof of transactions from one branch of the petitioner in the State of Bihar to the State of Jharkhand. If the law requires a particular thing to be done in a particular manner, it can be done in that manner alone. The requirement is that such transfer will be exempt from payment of tax on furnishing of Form "F". Therefore, unless the Form “F” is furnished, the petitioner would not be entitled to any tax credit. The petitioner cannot rely upon other documents of transactions in support of its plea of Branch transfer - petition dismissed - decided against petitioner.

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