TMI Tax Updates - e-Newsletter
October 24, 2016

Case Laws in this Newsletter:

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

Articles

1. Equity oriented Derivatives are not shares of companies , trading loss cannot be deemed speculative loss by invoking Explanation to S.73- a study

   By: DEVKUMAR KOTHARI

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

   By: Dr. Sanjiv Agarwal

News

1. Government Approves Four (4) Proposals of Foreign Direct Investment (FDI)

2. Repurchase of Government Securities through reverse auction for an aggregate amount of ₹ 20,000 crore (face value)

3. NBCC OFS gets oversubscribed 1.54 times in non-retail category and 1.50 times in retail category.

4. India Signs Guarantee Agreement with the World Bank For IBRD direct lending of US$ 650 million to the Dedicated Freight Corridor Corporation of India Ltd. (DFCCIL) for Eastern Dedicated Freight Corridor-III (EDFC-III) Project

5. FM: Investment in irrigation projects essential to double the farmers income by 2022; NABARD sanctions loan worth ₹ 19,702 crore to National Water Development Agency (NWDA) for 50 irrigation projects from 11 States under Long Term Irrigation Fund (LTIF)]

Highlights / Catch Notes

Income Tax

• High Court Quashes Notice for Reopening Land Purchase Case Over On-Money for Assessment Year 2013-14.

  Case-Laws - HC : Acceptance of on-money in purchase of landed property, is relatable to the period relevant to the AY 2013-14. Perhaps only on account of fact that the sale deed was registered during the period relevant for the AY 2009-10 and the amount involved was considerable, AO has issued the notice of reopening - Notice is not valid, quashed - HC
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• High Court Clarifies Explanation 4 of Section 271(1)(c) is Clarificatory, Applies to Pre-2003 Assessments.

  Case-Laws - HC : Levy of penalty u/s 271 (1)(c) - Explanation 4 to section 271(1)(c) is clarificatory and not substantive and would apply even to assessment year prior to April 1, 2003, the date on which the amendment was brought into force. - HC
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• Court Rules AO and Commission Cannot Issue Separate Orders for Same Assessment Period, Avoiding Overlapping Jurisdictions.

  Case-Laws - HC : There cannot be one order of assessment by AO for the same period for which the Commission would also pass the order of settlement. Accepting the contention that even if the order of assessment has been passed by the AO, his case may still be deemed to be pending since such order was not dispatched or served, would lead to a conflicting situation - HC
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• Court Rejects Petitioner's Challenge to Case Transfer u/s 127 of Income Tax Act; Participation Argument Dismissed.

  Case-Laws - HC : Challenge to the transfer of case u/s 127 - the contention of the Petitioner that it had not participated in the assessment proceedings, consequent to the impugned order order of transfer under Section 127(2) of the Act, cannot be accepted. - HC
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• Court Quashes Reassessment Notice u/s 148, Citing Change of Opinion on Income Tax Exemption Grant.

  Case-Laws - HC : Reopening of assessment - claiming exemption u/s 11 - assessment came to be reopened by giving notice u/s 148 by the very same officer, who executed the scrutiny assessment and granted exemption - It is a case of change of opinion - Notice quashed - HC
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• Industrial Unit's Stay Request Denied for Failing TDS Payment, Petition Dismissed for Lack of Substantiated Injury Claims.

  Case-Laws - HC : Seeking stay of recovery proceedings - sick industrial unit - seeking protection - failure to discharge TDS liability - the actual injury or alleged threat to the infringement of right also, is not substantiated. - Petition dismissed - HC
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Customs

• DGFT Cannot Alter Focus Product Scheme Entries Through Clarifications; Only Government Can Amend Provisions.

  Case-Laws - HC : Recovery of benefit Focus Product Scheme (FPS) - DGFT has powers to issue a circular / clarificatrion - However, a clarification cannot run counter to the plain interpretation of the provision and in guise of clarification, an entry cannot be amended. The power to amend an entry would be with the Government of India. - HC
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Service Tax

• No Service Tax Demand on Works Contract Services for Tank Transport and Installation Before June 2007.

  Case-Laws - AT : Composite services - job of transportation of storage tank and other material, loading and unloading work, excavation of earth and other hard rocks and civil work of excavation brick masonry, etc. and installation of tanks and mono pumps etc - to be classified as works contract services - for the period upto 31.5.07, no demand of service tax survives - AT
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• Service Tax Refundable on Transporting Empty Containers for Export Under Notification 17/2009.

  Case-Laws - AT : The amount of service tax paid on the transportation of the empty containers from yard to factory for stuffing of the export goods and return of the empty container is refundable in terms of notification number 17/2009 - AT
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Central Excise

• Exemption Denied: Appellant's Claim Rejected Due to Misrepresented Production Date Under Notification No. 50/2003. Demand and Penalty Confirmed.

  Case-Laws - AT : Area based exemption - Eligibility of benefit of N/N.50/2003 - e claim made by the appellant about commercial production on 31.3.2010 was found to be on the basis of mis-represented facts - demand and penalty confirmed - AT
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• Principal Manufacturer Liable for Duty Under Notifications 83/94 & 84/94, Not Job Worker, in Central Excise Context.

  Case-Laws - AT : Liability to duty - principal manufacturer or job worker - the principal manufacturer i.e. who furnished the undertaking under notification 83/94 and 84/94 is liable to duty - AT
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• Tribunal's Discretion on Appeals: Monetary Thresholds for Duty, Fine, or Penalty Set at Rs. 50K/2 Lakhs.

  Case-Laws - AT : An appeal by the assessee - Tribunal has discretion to refuse or to admit the appeal in respect of order referred to clause (b) or Clause (c) or clause (d) where amount of duty, amount of fine or penalty determined by such order does not exceed ₹ 50,000/-(before 6/8/2014) and ₹ 2 Lakhs (on or after 6/8/2014). - AT
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• ARE-1 Form Mandatory for Export; H-Form Not Accepted as Valid Export Proof u/r 18 Notification.

  Case-Laws - CGOVT : Proof of export - ARE-1 application is the basic essential document for export. Filing of ARE-1 having been specifically contemplated under notification issued under Rule 18 ibid, same was mandatory and not directory - As such, H-Form is not a valid document as proof of export - CGOVT
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VAT

• Input Tax Credit Approved for Gadgets and Water Essential to Manufacturing and Related Activities.

  Case-Laws - HC : Input tax credit - Items of the electronic gadgets or mobile or drinking water are required for the incidental activity of the principle object of manufacture or trading or production or processing or assembling or repairing or reconditioning or reengineering or packing - ITC allowed - HC
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Case Laws:

• Income Tax

• 2016 (10) TMI 781
  TDS on wheeling and transmission charges - payment made by the assessee to entities like Maharashtra State Electricity Transmission Company Limited (MSETCL) and Power Grid Corporation of India Limited (PGCIL) for the use of transmission lines or other infrastructure i.e. plant, machinery and equipment - whether payment could not be termed as rent under the provisions of section 194I and consequently the provisions of sections 201 and 201(1A) could not be applied? Apex court dismissed the revenue appeal against the decision of HC (2015 (5) TMI 396 - BOMBAY HIGH COURT).

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• 2016 (10) TMI 780
  Reopening of assessment - original assessment was accepted without scrutiny u/s 143(1) - registration of the property in subsequent year whereas the consideration was received many years before - Held that:- the attempt on the part of Assessing Officer to reopen the assessment for the Assessment Year 2009-10 was by way of abundant caution. Even the materials on record would prima facie suggest that the ground of payment and acceptance of on- money in purchase of landed property, is relatable to the period relevant to the Assessment Year 2013-14. Perhaps only on account of fact that the sale deed was registered during the period relevant for the Assessment Year 2009-10 and the amount involved was considerable, the Assessing Officer has issued the notice of reopening also in relation to the assessment year 2009-10. On such ground, though the original assessment was framed without scrutiny, we are inclined to quash the notice of reopening in connection with Assessment Year 2009-10. When we come to the notice of reopening for the Assessment Year 2013-14, the situation is vastly different. This notice has been issued within a period of 4 years from the end of relevant assessment year. There is nothing on record to suggest that the issues referred to in the reasons recorded by the Assessing Officer came up for consideration during such scrutiny assessment. It is not even the case of the petitioner that any addition on such count would be based on change of opinion. - Notice us/ 148 for the AY 2013-14 sustained. - Decided partly in favor of assessee.

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• 2016 (10) TMI 779
  Levy of penalty u/s 271 (1)(c) - Effect of amendment to clause 3 (iii) and Explanation 4 to section 271(1)(c) of the Income Tax Act by the Finance Act, 2002 - Prospective or retrospective amendment - Held that:- in view of the law laid down by the Apex Court in the case of Commissioner of Income Tax versus Gold Coin Health Food P.Ltd. [2008 (8) TMI 5 - SUPREME COURT] wherein the Apex Court has come to the conclusion that Explanation 4 to section 271(1)(c) of the Act is clarificatory and not substantive and would apply even to assessment year prior to April 1, 2003, the date on which the amendment was brought into force. Levy of penalty @100% confirmed as against @150% as levied by the AO - Decided partly in favor of revenue.

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• 2016 (10) TMI 778
  Rejection of application for settlement of the case by the Settlement Commission - as per the revenue, AO passed the assessment orders for five assessment years in question. - Orders were passed as on 15.3.2016 - Refusal of hand delivery through inspector - On 16.3.2016, the assessee filed application for settlement before the Settlement Commission. Held that:- No sooner an application for settlement is filed under subsection( 1) of section 245C of the Act, the Assessing Officer would be divested of his jurisdiction to assess the return further. The jurisdiction would vest solely and exclusively in the Settlement Commission. - There cannot be one order of assessment by Assessing Officer for the same period for which the Commission would also pass the order of settlement. Accepting the contention of the petitioner that even if the order of assessment has been passed by the Assessing Officer, his case may still be deemed to be pending since such order was not dispatched or served, would lead to a conflicting situation. For the purpose of application under section 245C(1) of the Act, a case would be pending only as long as the order of assessment is not passed. Once the assessment is made by the Assessing Officer by passing the order of assessment, the case can no longer be stated to be pending. Application for settlement would be maintainable only if filed before the said date. Date of dispatch of service of the order on the assessee would not be material for such purpose. Petition dismissed - Decided against the petitioner.

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• 2016 (10) TMI 777
  Reopening of assessment - cash deposit in the bank account is much more than the amount of sales shown the return - income escaping assessment - AIR information - Held that:- The fact that the petitioner had made sizable cash deposits in the bank accounts was known to the Assessing Officer. There was no failure on the part of the assessee to disclose these material facts called upon by the Assessing Officer. In fact, the Assessing Officer appears to have been convinced that the assessee who was in the business of trading of Gutakha and other provisional items would deal in cash receipts. He would deposit such cash received by him in savings and current accounts and would issue cheques to the creditors. When the scrutiny assessment took into account all such facts, it would be simply not permissible for the department to reopen the issue in the guise that certain cash deposits were unexplained. - Notice issued u/s 148 quashed - Decided in favor of assessee.

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• 2016 (10) TMI 776
  Challenge to the transfer of case u/s 127 - initially assessee participated in the assessment proceedings and subsequently challenged the transfer orders - period of limitation for passing assessment u/s 153A - Held that:- if the Petitioner were aggrieved by the order dated 9 December, 2013, it ought to have challenged the same immediately before the Assessing Officer at Raipur exercised his jurisdiction consequent to the transfer. In fact, in this case, the Petitioner not only failed to challenge the impugned orders dated 9 December 2013 and 23 January 2014 immediately after they were passed but in fact, let the Assessing Officer at Raipur act upon the transfer by responding to the notices issued by the Assessing Officer at Raipur. This is evident from filing of return of income consequent to the notice dated 31 December 2013 under Section 153A of the Act, filing a reply on merits to notice dated 14 August 2014 under Section 142(1) read with Section 153A and 143(2) of the Act and also particularly in penalty proceedings by challenging the same under the Act before the CIT(A). Therefore, the contention of the Petitioner that it had not participated in the assessment proceedings, consequent to the impugned order order of transfer under Section 127(2) of the Act, cannot be accepted. It is also to be noted that it is an admitted position between the parties that time to pass an Assessment Order under Section 153A of the Act would have normally expired on 31 March 2015. However, in view of the adinterim stay granted by the High Court of Chhattisgarh pending admission, the period between 3 March 2015 to 14 September 2016 would stand excluded. Decided against the assessee.

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• 2016 (10) TMI 775
  Reopening of assessment - claiming exemption u/s 11 - assessment came to be reopened by giving notice u/s 148 by the very same officer, who executed the scrutiny assessment and granted exemption - change of opinion - Held that:- in the present proceedings, the exemption issue generated by the authority has already been thoroughly examined and therefore, it would not be proper on the part of the respondent-authority to reopen the said issue and further there is not remote indication that petitioner has not truly and fully disclosed all material facts. It is a case of change of opinion - Notice quashed - Decided in favor of assessee.

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• 2016 (10) TMI 774
  Withdrawal of relief in levy of penalty - rectification of order u/s 154 - relief of 50% of penalty under Section 271(1)(c) - scope of Section 273A(1) as well as 273A(4) - availing benefit of KVSS - Held that:- As clarified by the Circular dated 7th October, 1998 issued under Section 96 of Samadhan Scheme, a mere initiation of criminal proceedings would by itself not be a bar, if the assessee concerned has been discharged. The only exclusion is of pending proceedings for conviction or conviction prior to filing of the declaration. The Circular dated 7th October, 1998 clarifies that where an assessee has been discharged before the filing of the declaration, then, he is entitled to avail of the Samadhan Scheme. Without considering the other contentions raised by the petitioner, we set aside the order dated 30th November, 1998 passed by the designated Authority under the Samadhan Scheme and restore the issue for fresh consideration, to include satisfaction of all other requirements. In terms of Section 90 of the Finance No.2 Act, the designated Authority is required to dispose of an application under the Samadhan Scheme within 60 days from the date of its receipt. - Decided partly in favor of assessee.

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• 2016 (10) TMI 773
  Seeking stay of recovery proceedings - sick industrial unit - seeking protection - failure to discharge TDS liability - petitioner/appellant had deducted at source with respect to certain payments and not paid - Held that:- No material has been placed before this Court, as to whether, the appellant has given a cheque for Rs. 25,00,000/-, as stated in E-Mail, dated 20.01.2016 and thereafter, sent the amount, by RTGS. There are no materials, to indicate, as to whether, the respondent has taken any further proceedings, after 20.01.2016, notwithstanding the pendency of the proceedings, under the SICA Act, which is stated to have been communicated on 21.09.2015, which according to the appellant, is an infringement of right, available under the provisions of the SICA Act and that no tax could be coercively collected. For the abovesaid reasons, the actual injury or alleged threat to the infringement of right also, is not substantiated. - Petition dismissed - Decided against the assessee.

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• Customs

• 2016 (10) TMI 754
  Permission to direct export or in the alternative permission/facilitation for canalised export - crude oil extracted from the Rajasthan Block RJ-0N-90/1 - maintainability of petition - contractual matters - Held that: - the present writ petition is maintainable as a writ court is empowered to entertain a writ petition even in contractual matters when the contract has been executed in pursuance to a constitutional provision and the issues involved are alleged to have a public law character. Merely because the product ‘crude oil’ is mentioned as STE and Export through Indian Oil Corporation Limited, it does not create a legal vested right in anyone to export crude oil. The said paragraph and Chapter provide that if STE itself wants to export/import, it can do so and if 'any other person' intends to import/export, it will have to apply to IOC, who will consider the same in its wisdom and after consulting anyone it deems appropriate. The ultimate decision to permit export/import is always a decision to be taken by the STE which is, of course, justiciable. Consequently, in the present case, it is for the IOC to allow or refuse permission for export on germane grounds - The other option to a party wanting to export crude oil is to apply under para 2.20(c) for an authorisation from DGFT and if so authorised, then to export it directly. The reasons given by the Empowered Committee of Secretaries are legal, germane and valid grounds to decline the request for export of crude oil. In fact, the policy prohibiting export of crude oil has concurrence of all the departments of the Union of India and has nexus with the energy security of the country. It is pertinent to mention that the respondent-UOI's argument with regard to mismatch between indigenously produced oil and the energy demand within the country is not denied by the petitioners. The petitioners' argument of loss to the exchequer is presumptuous and a disputed question of fact as according to the respondent- UOI the crude generated by the petitioners is Dated Brent and not Bonny Light. This is all the more relevant as it is an admitted position that the crude oil generated by the petitioners is of very heavy quality, high viscosity and wax with high pour point and residues. Even the petitioners during arguments admitted that the only way to ascertain the international price is to allow export of the crude generated. Consequently, it cannot be said with certainty today that the petitioners and UOI are suffering a loss on account of non-export of crude oil - The allegation that the respondents have denied permission to the petitioners to export crude oil only to benefit Reliance and Essar cannot be examined behind their back. Despite this fact being pointed out during the hearing, the petitioners did not implead Reliance and Essar to the present writ petition. Petition dismissed with liberty to invoke the dispute resolution mechanism in the contract, but with no order as to costs.

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• 2016 (10) TMI 753
  Exports of valves for industrial uses - Recovery of benefit Focus Product Scheme (FPS) - Denial of benefit of Merchandise Exports from India Scheme (MEIS) under the new policy - legislative intention - Validity of trade notice issued by DGFT - Held that:- The scheme(FPS) came to an end on 31.03.2015. Long after that, DGFT issued the impugned clarificatory circular, in which, it is provided that the intention all along had been to grant the incentives to bicycle parts only. The other items, which are not parts of bicycle appearing in the said description, are not eligible for the benefit. Strictly speaking, though the new policy may not provide a safe guide to interpret the old policy, we may take note of the contents of the new policy also. This is for the reason that if the Government of India noted a mismatch between the heading and the contents of an entry, the reasonable way to resolve the discrepancy would be to delete that portion which was unintentional. DGFT has powers to issue a circular / clarificatrion - However, a clarification cannot run counter to the plain interpretation of the provision and in guise of clarification, an entry cannot be amended. The power to amend an entry would be with the Government of India. Quite apart from the nature of the impugned trade notice, in any case, the respondents could not have stalled processing of the petitioners' applications for export benefits flowing from the MEIS which would stand on entirely different footing. Even if the petitioners were to refund the benefits already received under FPS, the respondents would have to follow the procedure for ensuring recoveries. Merely stalling the petitioners' applications for grant of export benefits flowing under a fresh scheme would simply not be permissible. The impugned trade notice dated 14.12.2015 is quashed. The respondents shall not seek any recoveries of the export incentives granted to the petitioners under FPS and shall process further their applications for export benefits under MEIS in accordance with the provisions made therein. - Decided in favor of petitioners.

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• 2016 (10) TMI 752
  Imposition of ADD - clear float glass - import from Pakistan, Saudi Arabia and UAE - N/N.48/2014 - CUS (ADD) dated 11/12/2014 - Non-disclosure of relied up on data, especially sourced from DGCI&S - Held that: - while disclosing the details of import, the particulars of importers are kept confidential. Here the DA considered the data for subject goods (irrespective of their varying customs classifications at 8 digit level) for analysis. Summary of such data has been made available to the interested parties. Non-consideration of adjustment for start up cost - Held that: - such adjustments are made only in exceptional cases with strong and valid reasons. We note that the appellant’s plea on this is only on certain legal provisions without any supporting evidence. In spite of increased production and sales during POI, as compared to the base year, the DI's performance has declined in the POI - injury suffered by the DI is due to dumped imports. Cost of subject goods cannot be accepted on its face value as the producers in Saudi Arabia and UAE enjoy undue advantage regarding energy price due to Government intervention - Held that: - in terms Section 9A (1) (c) to ascertain normal value questionnaires were sent to known exporters of these countries. Where responses were filed, the DA determined individual dumping margin in respect of those companies. If the domestic sale value is representative and viable for permitting determination of normal values, the same is considered. When the ordinary course of trade test was not satisfied, the cost of production was considered after verification and adding 5% for profit for arriving normal value. The DA has followed the provisions of Rule 6 (8) of AD Rules in cases where producers/exporters not cooperated. The normal value was arrived at based on available facts. We note that the DA determined normal value, export price and dumping margin for each producer/exporter accordingly. Regarding additional information provided during verification visit, we note the disclosure by DA contained all relevant information. Due opportunity has been given to all interested parties to give their comments. These were examined and thereafter final conclusion arrived. No specific instance of denial of information has been brought to our notice. In the name of principles of natural justice we, apparently, cannot create a situation of indefinite cycle of disclosure, comments, counter comments, further disclosure, again comments etc. We note that the DA followed the procedure set out in the AD Rules and there is no instance of serious procedural breach brought to our notice with evidence. ADD rightly imposed - appeal rejected - decided against appellant.

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• Service Tax

• 2016 (10) TMI 772
  Taxability - composite services - classification of services - job of transportation of storage tank and other material, loading and unloading work, excavation of earth and other hard rocks and civil work of excavation brick masonry, etc. and installation of tanks and mono pumps etc. - classified under the head erection, commissioning and installation services falling u/s 65 (39a) or under the head of Works contract service? - Held that: - The classification of the composite services which involve supply of goods as well as rendering of services has been decided by the Apex Court in the case of Commissioner of Central Excise, Kerala vs Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT]. It was held that any contract which is of composite nature involving supply of goods and rendering of services, has to be necessarily classified under work contract with effect from 1.6.2007 the date on which the work contract service was introduced in the statute. The Apex Court further held that for the period prior to this date, such composite contract cannot be charged to service tax under any other services also. The right classification for the services rendered would be work contract services with effect from 1.6.2007. Consequently for the period upto 31.5.07, no demand of service tax survives in the present case. For the period with effect from 1.6.2007 services will be classifiable under works contract services - appeal disposed off - matter remanded to the original adjudicating authority to re-decide the matter in the light of the nature of service and the pronouncement of law by Apex Court in the Larsen and Toubro case.

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• 2016 (10) TMI 771
  Rejection of refund claim - transportation of empty containers from yard to factory for stuffing of the export goods - N/N. 17/2009 - Held that: - decision in the assessee's own case Vippy Industries Ltd. Vs. CCE Indore [2014 (8) TMI 377 - CESTAT NEW DELHI] relied upon where it was held that the amount of service tax paid on the transportation of the empty containers from yard to factory for stuffing of the export goods and return of the empty container is refundable in terms of notification number 17/2009. In as much as the issue stands decided in the appellants own case we find no merits in the impugned orders of the authorities below. Rejection of refund claim on the ground that ARE-2s and shipping bills have not been enclosed with the reply of the show cause notice - Held that: - the said amount may be rejected on the ground of non production of documents in as much as amount is inconsequential - rejection upheld. Appeal disposed off - decided partly in favor of appellant.

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• 2016 (10) TMI 770
  Classification of services - Intellectual property service or Consulting Engineer’s Service - payment towards transfer of technical know how - Held that: - A perusal of the overall agreement reveals that the hand holding for rendering assistance is incident to the main service, i.e. transfer of technical knowhow. Since the intellectual property right service has been included in the statute book only from 10/9/04, the same service cannot be charged to service tax for the period prior to 10/9/04. In any case, the service rendered is not covered within the definition of consulting engineer service. The decision in the case of Duraline Corporation vs. CCE & CUS., Goa [2014 (10) TMI 343 - CESTAT MUMBAI] relied upon - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 769
  Recovery of service tax - levy of interest and penalties u/s 77 and 78 of FA, 1994 - security services - decision of Central Government Industrial Tribunal in the case of New Industrial Security Force 2006 [2005 (9) TMI 657 - CESTAT NEW DELHI] relied upon - Held that: - the decision of Central Government Industrial Tribunal may be relevant and the facts mentioned therein need to be verified and examined by the original adjudicating authority. The said decision was passed after the Order-in-Original was issued and therefore, the same has not been examined by the original adjudicating authority. Matter remanded to the original adjudicating authority to decide the case afresh - appeal disposed off.

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• 2016 (10) TMI 768
  Stay petition - grant of early hearing - huge Govt. revenue involved and it is a technical matter with recurring impact on levy of penalty under Section 78 of Finance Act - Held that: - Considering the facts and the submissions of both sides stay petition is dismissed and early hearing is granted. The appeal is to come up for final hearing on 14th October 2016

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• 2016 (10) TMI 767
  Rejection of refund claim - terminal handling charges utilized for exporting the product - N/N.41/2007-ST - whether the denial of refund on technical grounds, like the documents produced by the assessee are not carrying the correct registration number, are without pan card number of the service provider, only the debit notes stands produced by the assessee and there is no evidence that service provider has deposited the dues with the revenue, justified? - Held that: - N/N. 41/2007-ST dated 06.10.2007 provides exemption to exporters from payment of service tax on the services utilized for export purpose. Said exemption is available by way of refund of service tax originally paid by the exporter. As such the fact which is required to be examined by the authorities below being such refund claim is to be emphasized in the nature of the services have not been utilized for export purpose. As long as the assessee produces the documentary evidence (in whatever shape it may be) and have passed upon such documentary evidence the fact of procurement of services and their utilization in export of the goods is established the refund become due. There is no requirement in the notification to the effect that the assessee must produce the evidence to show that the services provider has deposited the service tax with the Revenue. As long as he has paid the service tax to the service provider along with consideration of the services and as long as the services stand availed by him and utilized in the export of the goods the refund would be allowable. Appeal disposed off - matter remanded to the original Adjudicating Authority for fresh examination of the documents produced by the assessee and to decide upon their refund claim accordingly within a period of three months.

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• 2016 (10) TMI 766
  Restoration of withdrawn refund claim - withdrawal of claim on the pressure of jurisdictional Superintendent - services used for export - N/N.41/2007- ST - Held that: - It is clear that refund claim was originally filed to the extent of Rs. 2,14,155/- and was reduced by the appellant to Rs. 94,348/-, by withdrawing the excess claim of Rs. 1,19,807/-. The appellant contention that the said claim was withdrawn under the Jurisdictional Superintendent, and Service Tax authorities have to adjudicate the full claim, may be true but cannot be appreciated inasmuch as the appellants never revised their claim subsequently. As such, the original adjudicating authority admittedly could not have adjudicated the withdrawal claim. He has considered the claim as staked by the appellant and have already allowed it. The arguments of the learned advocate that they are entitled to the balance claim in terms of notification issued under Service Tax has no merits, inasmuch the applicability of the notification can be examined only in respect of the claim so filed by the assessee. Appeal disposed off - decided against appellant.

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• 2016 (10) TMI 765
  Rejection of refund claim - terminal handling charges - Bill of lading charges - origin haulage charges - repo charges - CHA services - N/N. 41/07-ST dated 6.10.07 - whether the rejection justified on the ground that the services cannot be considered as port services? - Held that: - the issue stand decided in the case SRF Ltd. vs. CCE, Jaipur I [2015 (9) TMI 1281 - CESTAT NEW DELHI] and the decision relied upon where it was held that exporter should not be unduly burdened with a condition to establish that the service provider was registered under port services and the disputed issue is settled in favour of the assessee. Proper invoices not submitted and it is only the debit notes on the basis of which, the refund of Service Tax claimed - Held that: - the Revenue's allegation that nothing was produced on record to show the proof of payment of service tax by the service provider, cannot be appreciated inasmuch as it is not the obligation of the service recipient to deposit the service tax and having paid to the service provider and it is for the service provider to show the proof of payment of service tax. No such requirement stands specified in the notification in question and Board has also clarified that it is sufficient to show that the amount of service tax stand paid to the service provider. Air services - not covered in the notification - Held that: - the same were actually not air services but courier services. The said services obtained by them were courier services, which at further intimation, transported through air. Courier services being specified as one of the service inputs is admissible to the assessee. The fact whether the service tax was relatable to courier service or not is required to be examined and for the purpose I remand the matter in respect of M/s. Johari Digital Health Care Ltd. on the said issue only for examining the aspect. Appeal dismissed - decided in favor of appellant - matter remanded for M/s. Johari Digital Health Care Ltd.

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• Central Excise

• 2016 (10) TMI 764
  Regular bail - Section 439 of the Code of Criminal Procedure - offences punishable under Sections 9(1) (b), (bb), (bbb) and Section 9(1)(c) of the Central Excise Act, 1994 - Held that: - considering the nature and gravity of accusation made against the applicant in the First Information Report and other papers as also considering the fact that the applicant is ready and willing to deposit Rs. 50,00,000/-, at this stage, without prejudice to his rights and contentions, before the concerned the Central Excise Department towards the duty leviable under the Central Excise Act, this Court is of the view that discretion is required to be exercised in favor of the applicant for grant of bail. Moreover, the applicant assures that he will abide by the terms and conditions that may be imposed by the Court and shall not commit any breach. Hence, the present application is allowed and the applicant is ordered to be released on regular bail in connection with Investigation No. INV/DGCEI/VRU/33/2016-17 conducted by DGCEI, Vadodara and registered with the Gorva Police Station, Dist: Vadodara on his executing a personal bond of Rs. 10,000/- (Rupees Ten Thousand Only) with one surety of the like amount to the satisfaction of the learned Trial Court, and subject to some conditions imposed. The authorities will release the applicant only if he is not required in connection with any other offence for the time being. If breach of any of the conditions imposed is committed, the Sessions Judge concerned will be free to issue warrant or take appropriate action in the matter - application disposed off - decided in favor of applicant.

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• 2016 (10) TMI 763
  Evasion of excise duty - clandestine removal of goods - alloys and non-alloy steel ingots - demand of duty with imposition of penalties - norms as per Rule 173E - serious inconsistencies in the entries as well as the purported meter reading for electricity. The meter reading as on 27.04.1999 was shown higher than the meter reading later given by the electricity department in their monthly bill as on 30.04.2016 - Held that: - production based on estimation basis without any corroboration cannot be the basis for duty demand. In the present case, the purported production as per the private records for the period of 27 days in April 1999 was projected for demand period of 4 years in respect of two respondents and for about two years in respect of the third respondent. Such extrapolation of small base data (even if such data is considered authentic) is not legally sustainable. When the case of manufacturer suppliers of ingots itself has not been supported with adequate evidence further demand based on such purported excess production of raw material cannot stand. Further, we also note that average consumption of electricity was worked out in respect of M/s Magnum Steels Limited based on the consumption of particular period. The respondents contended that if average has to be worked out of the consumption the data should be taken for the entire year. In that case the average consumption will get altered and the calculation of alleged excess production will not be sustainable. The demand of duty of such substantial nature cannot be sustained on piecemeal evidence which are uncorroborated. The case of the Revenue has serious infirmities both in law and in fact. Even considering the general principle that in the case of clandestine removal cannot be established by precise and mathematical corroborative evidence, the minimum legal requirement is a preponderance of probability atleast to sustain the allegation. On careful analysis, we find that the case of Revenue against the assessee is full of presumptions and projection with unexplained gaps in analysis of facts which are too many too gloss over. We find that to arrive at a contrary conclusion other than the one arrived by original authority we are not presented with sufficient supportive evidence in the appeals by the Revenue - appeals dismissed.

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• 2016 (10) TMI 762
  Area based exemption - Eligibility of benefit of N/N.50/2003-CE dated 10.6.2003 - whether the appellant did not commence commercial production on or before 31.3.2010 and benefit of notification can be denied to him? - Held that: - construction activity in the factory was not in progress. It was found not fit even to keep the machines therein. This will indicate that whatever production shown to have happened on 30/31-3-2010 cannot be considered as commercial production as the machine was not fit enough for such operation. Even after 3 weeks of commencing commercial production, the physical condition of the manufacturing unit was found to be in incomplete status. The windows, walls, floor were in unfinished condition. This aspect is not contested by the appellant also. Such being the position even after three weeks of the cut off date, it will test the reason to conclude that commercial production and activity on the Three Layer Blow Film machine was in stream before 31.3.2010. The plant itself is of substantial size and is not in complete state . It is without roof and not apparently ready for commercial production with such new machinery. The appellant claim to have produced 750 kgs. of poly film on 31.3.2010, quarterly return for the period ending on 31.3.2010 indicated only production of 117 kgs. Such contradiction in the statutory records raised a serious doubts about authenticity of commercial production. The original authority recorded that three layer blow film plant was not at all even in functional stage as on 31.3.2010. The said plant had to be completely dismantled by the supplier later. Time bar - Held that: - the claim made by the appellant about commercial production on 31.3.2010 was found to be on the basis of mis-represented facts. In such situation, notice issued to demand duty as a consequence of such mis-representation is to be issued within five years in terms of Section 11A(1) of the Act. Accordingly, no infirmity found on this ground. Appeal dismissed - benefit of notification denied - decided against appellant.

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• 2016 (10) TMI 761
  Liability to duty - principal manufacturer or job worker - N/N.83/94 and 84/94 - whether demand of duty from respondent justified on the ground that principal manufacturer Rajni Timbers P. Ltd did not use the goods supplied by the respondent for further manufacture of the goods but sold them as such in the open market? - Held that: - The fact that the respondent is functioning under notification 83/94 read with notification 84/94 would mean that the respondent has not undertaken any responsibility for discharging the excise duty on the manufacture of goods; which incidentally passes to the raw material supplier as he gives a declaration to their Jurisdictional Divisional Office as also the respondent s central excise office. In the case in hand, there is no dispute that such declarations were given. If it is so, we find that the first appellate authority has correctly relied upon the Board s circular no. B-32/1/94-TRU dated 18.4.1994 to hold that the principal manufacturer i.e. who furnished the undertaking under notification 83/94 and 84/94 is liable to duty - appeal dismissed - decided against appellant.

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• 2016 (10) TMI 760
  Denial of CENVAT credit u/r 9(10(b) of the CENVAT Credit Rules, 2004 - payment of duty on detection of the fact of under-valuation of imported goods - amount paid by reason of fraud, collusion, suppression of facts with the intention to evade payment of duty - whether denial of CENVAT credit on the ground that the non-levy or short levy of duty was occasioned by fraud, collision, wilful mis-statement, which falls under the restricted provisions of Rule 9(1)(b) of CENVAT Credit Rules, 2004 justified? - Held that: - the decision in the case of BOSCH CHASSIS SYSTEMS INDIA LTD. Versus CCE., DELHI-III, GURGAON [2008 (9) TMI 106 - CESTAT NEW DELHI] relied upon where it was held that mere filing of application before Settlement Commission for waiver of interest, penalty and immunity from prosecution and suo motu payment of duty, not amounts to admission of guilt, fraud, collusion etc. Since the appellant himself paid the differential duty into the Govt. exchequer and availed the CENVAT credit on the strength of the challans duly certified by the DRI officials, the restriction provided in Rule 9(1)(b) is not applicable and the appellant is eligible to avail the CENVAT credit - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 759
  Modvat credit - whether the appellant is required to reverse the Modvat credit in respect of input lying in the stock on the date when the final product became exempted by the Notification No. 15/96 dated 22/7/1996 from whole of duty during the period? – Held that: - at the relevant time i.e 22/7/1996 when the final product namely Vanaspati was exempted, there was no provision for reversal of Cenvat credit on the stock of input lying as on date on which exempted notification was issued. The specific provision was introduced under Rule 11(3) of Cenvat Credit Rules, 2004 w.e.f. 1/3/2007 only. That specific provision was brought in the statute which clearly shows that for the previous period there was no requirement of reversal of credit on the input. When the credit was availed, final product was dutiable and subsequently got exempted. Reliance placed in the decision of Ashok Iron & Steel Fabricators Vs. CCE [2002 (1) TMI 91 - CEGAT, NEW DELHI]where it was held that Modvat credit need not to be reversed on the stock of input lying in stock when the final product became exempted. As regard the specific provision brought under Rule 11(3) of Cenvat Credit Rules, 2004, the same was observed by the Hon’ble Madras High Court in case of Tractor and Farm Equipment Ltd Vs. CCE [2016 (1) TMI 1006 - SUPREME COURT] wherein it was held that The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available. Reversal of Modvat credit not justified – appeal allowed – decided in favor of appellant.

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• 2016 (10) TMI 758
  Monetary limit for filing appeal - limit increased from Rs. 5,00,000/- to Rs. 10,00,000/- - Keeping in view the fact that the amount involved is less than Rs. 10,00,000/- and as per the litigation policy of the Government vide Board’s letter F.No. 390/Misc./163/2010-JC dated 17.8.2011 as clarified vide Instruction No. 390/Misc/163/2010-JC dated 1.1.2016 read with Hon’ble Gujarat High Court’s judgments in the case of CCE, Surat-I vs. Shreenath Fabrics [2012 (8) TMI 865 - GUJARAT HIGH COURT] the appeal is dismissed - decided against Revenue.

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• 2016 (10) TMI 757
  Rectification of mistake application - Section 35C(2) of the Central Excise Act, 1944 - principles of natural justice - Held that: - the appeal before the Hon’ble High Court also includes all these grounds mentioned in the present ROM and that appeal was filed much earlier to this application and the matter is sub judice before the Hon’ble High Court. Further, we are of the opinion that the grounds on which ROM is sought is nothing but touching the merits of the case and the same cannot be gone into while deciding the ROM. Secondly, when the applicant has already challenged the decision of the Tribunal before Hon’ble High Court there is no justification for filing the present ROM. In view of these facts and circumstances, we are of the opinion that there is no error apparent on face of the records - ROM application dismissed being devoid of merits - decided against applicant.

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• 2016 (10) TMI 756
  CENVAT credit on service tax paid on transport services - Goods Transport Agency service - outward transportation - input service - demand of duty and imposition of penalty - whether the Goods Transport Agency service fall within the definition of input service as contained in Rule 2(l) of the CENVAT Credit Rules, 2004? - Held that: - the decision in the case of ABB LTD. Versus COMMISSIONER OF C. EX. & ST., BANGALORE [2009 (5) TMI 48 - CESTAT, BANGALORE] relied upon where it was held that services availed by a manufacturer for outward transportation of final products from the place of removal be treated as an input service in terms of Rule 2(1)(ii) of the CENVAT Credit Rules, 2004 and thereby enabling the manufacturer to take credit of the service tax paid on the value of such services. CENVAT Credit of input service on Goods Transport Agency service allowed - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 755
  Maintainability of appeal - duty amount involved in the case is Rs. 16,756 /- and interest thereon - Tribunal has discretion either to refuse or to admit the appeal under Second proviso to Section 35B of Central Excise Act, 1944 - Held that: - the impugned order was passed by the Commissioner(Appeals) under Section 35A which is specified under Clause (b) of sub-section (1) of Section 35B. In view of Second proviso to Section 35B (1), this Tribunal has discretion to refuse or to admit the appeal in respect of order referred to clause (b) or Clause (c) or clause (d) where amount of duty, amount of fine or penalty determined by such order does not exceed Rs. 50,000/-(before 6/8/2014) and Rs. 2 Lakhs (on or after 6/8/2014). As the amount involved is below threshold limit of Rs. 50,000/-, the appeal is dismissed.

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• CST, VAT & Sales Tax

• 2016 (10) TMI 751
  Offences punishable under Sections 406, 409, 420, 467, 468, 471, 474 and 120(B) of the Indian Penal Code and Sections 85(1)(b)(c) (e)(f)(g), 85(2)(g), 85(4) and 85(6) of the Gujarat Value Added Tax Act, 2003 - scope of application - refusal/grant of protection to applicants - Held that: - Since the scope of these applications is grant / refusal of protection to these two applicants, wider issues are not gone into by this Court. It is left only by observing that - on one hand, there is very serious narration in the complaint against the Company viz. Dharmpal Satyapal Ltd., quantifying the alleged fraud to the tune of approximately two hundred crores of rupees, the Directors and other responsible persons of the said company are accused Nos.1 to 9 in the FIR in question and still, not only there is no motivation on the part of the State to bring them to justice, but there is complete facilitation qua them at their terms. It is for the State to take a call. Suffice it to hold that the present applicants need to be protected against this exercise of powers by the State and the investigating agency. These applications therefore need to be allowed. It is also noted that, pursuant to the interim order of this Court, the questioning of these applicants is already done by the Authorities. Considering the totality this Court finds that, custodial interrogation of the applicants is not required. Their judicial custody would also not be required in the facts of the case. These applicants therefore need to be granted anticipatory bail by this Court. Application allowed - applicants released on bail on furnishing personal bonds of Rs. 10,000/- each and one surety of the like amount subject to some conditions.

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• 2016 (10) TMI 750
  Restoration of appeal - pre-deposit to hear the appeal - refund of amount by petitioner - 31.78 crores after giving credit to the tax amounts already deposited by the petitioner - Held that: - There may be some minor adjustment or a computation error in the authority arriving at such a figure. Nevertheless, it would not be possible to undertake entire assessment exercise to arrive at a figure with mathematical precession, nor would it be necessary. When the Tribunal has granted benefit of setting aside of assessment leading to tax demands worth hundreds of crores, least that was accepted of the petitioner was to refund that sum, which primafacie, the petitioner had received by way of refund of tax which was based on fake invoices. The Tribunal was perfectly justified in discarding the petitioner's defense that it was the employees of the firm who had carried out such fraud for which they were punished. The Tribunal noted that the firm received the refund based on such fake invoices and input tax credit. Fresh assessment may proceed. The same however cannot be by allowing the petitioner to retain the refund amount. When the Tribunal has imposed a condition of predeposit of Rs. 10 crores by way of condition to hear the Tax Appeal on merits and when the Tribunal had also granted sufficient time to deposit such amounts in installments, in facts of the present case, we see no reason to interfere - We had adjourned this petition on few occasions to enable the counsel for the petitioner to take instructions and to show in what manner the petitioner can even now deposit such sum. Barring pointing out that the department has attached petitioner's shares, of which the current value comes to Rs. 5.02 crores which the department may sell, the petitioner was unable to offer any further amount by way of predeposit. - petition dismissed.

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• 2016 (10) TMI 749
  Eligibility for refund of tax paid on the purchase of inputs - items required for the establishment of the plant and for its incidental purpose - connection of electronic gadgets or drinking water with the development activity of the unit concerned - Rule 130- A of the Rules - Held that: - the Tribunal has taken note of only clause (b) of sub-rule (1) of Rule 130-A namely that; setting up, operation or maintenance. Apart from the said aspect as already reproduced earlier clause (c) of Rule 130-A (1) speaks for all such inputs which are purchased for use in manufacture, trading, production, processing, assembling, repairing, reconditioning, reengineering or packing any unit located in the area of Special Economic Zone. In our view, aforesaid clause (c) of Rule 130-A (1) is wide enough for all activity of manufacture or trading or production or processing or assembling or repairing or packing and all such incidental purchases for the principal object of manufacture or trading or production or processing or assembling or repairing or reconditioning or reengineering or packing would get included for the purpose of input tax credit or refund of tax, as the case may be. When the rule itself is clear, coupled with the observations made by the Tribunal under the impugned order, we do not find any question of law would arise for consideration as sought to be canvassed. Items of the electronic gadgets or mobile or drinking water are required for the incidental activity of the principle object of manufacture or trading or production or processing or assembling or repairing or reconditioning or reengineering or packing. Hence, such would fall in the category of availability of input tax credit under Rule 130 –A of the Rules. Matter remanded to the assessing authority - petition dismissed.

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• 2016 (10) TMI 748
  Recovery of input tax credit - imposition of penalty u/s.27[4][a] of the TNVAT Act, 2006 - denial of input tax credit on the goods purchased from M/s.AMI Enterprises on the ground that M/s.AMI Enterprises have filed NIL returns, thereby alleging that no sales made by M/s.AMI Enterprises - petitioner while producing prove presented original purchase documents and also stated that M/s.AMI Enterprises have filed revised return and also enclosed copies of the revised returns submitted by the Selling Dealer to his Assessing Officer - whether denial of input tax credit on the ground that selling dealer filed NIL returns valid? - Held that: - decision in the case of Althaf Shoes (P) Ltd. Versus Assistant Commissioner (CT), Valluvarkottam Assessment Circle, Chennai-6 [2011 (10) TMI 567 - Madras High Court] relied upon where it was held that if the Selling Dealer has not collected tax, that liability has to be fastened on the Selling Dealer. That apart, merely because the Selling Dealer had filed incorrect particulars, will not be a reason to reverse the ITC availed by the Purchasing Dealer. Opportunity of being heard - in the notice dated 08.07.2016, the respondent stated that the petitioner can file objections to the notice and they will be heard in person at his office at 11.30 a.m. on any working days from within 15 days from the date of receipt of the notice. This Court is of the view that the wordings mentioned in the notice dated 08.07.2016 is not proper since after the objection is received, there may be cases where the Assessing Officer will be fully convinced with the objections and he may even drop the proposal. - Held that: - the proper thing for the officer would be to specifically fix the date for personal hearing after receipt of the objections and after going through the same. Rejection of the revised return filed by the Selling Dealer before his Assessing Officer - Held that: - the respondent is not the Assessing Officer of the Selling Dealer. Therefore, he has no jurisdiction to reject the revised return filed by the Selling Dealer as an after-thought. If at all it can be done only by the Assessing Officer of the Selling Dealer. Petition allowed - matter remanded to the respondent for fresh consideration who shall ascertain full particulars from the Assessing Officer of the Selling Dealer, viz., M/s.AMI Enterprises, and thereafter, put the petitioner on notice, invite their objections, hear them in person and re-do the assessment in accordance with law.

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• 2016 (10) TMI 747
  Validity of assessment order - TNVAT Act, 2006 - CST Act - inspection of premises of petitioner by the officials of the Enforcement Wing - It is not a case where the petitioner is not able to furnish details. But, the petitioner has furnished the details which have been brushed aside by the respondent while completing the assessment. This is evident from the stand taken in the counter affidavit - Held that: - the petitioner has produced the relevant documents at the time of personal hearing but, the respondent has stated that the records produced by the petitioner are insufficient to establish the genuineness of the transactions. If that is the stand taken by the respondent, then, there was a duty cast upon the respondent to discuss about the nature of the documents produced by the petitioner and how he proposes to disbelieve those documents as to whether all the documents are liable to be rejected, etc. At one point of time, part of the transactions have been recognised by the respondent Department. The transaction made by the petitioner to a company at Sriperumbudur is not disbelieved at the hands of the purchasing dealer. In such circumstances, the respondent appears to have not conducted a thorough enquiry in to the matter, as it appears that the documents are voluminous and in a summary manner, the assessment was done for the 7 assessment years. With regard to the turn over omission, which appears for all the assessment years, the petitioner has stated before the Enforcement Wing Officials themselves that they are unable to cull out the details from bare perusal of the figures. Therefore, even after the issuance of show cause notice, while submitting their reply they sought for details such as Bill number etc - Even this request has been rejected by the Assessment officer, as an after thought. Since, the respondent has already initiated action, he is bound to conduct a thorough and complete enquiry into the matter and any slipshot or cursory perusal of the documents cannot be appreciated since, the proceedings are under a taxation statue. The impugned assessment has to be done in a proper manner after considering all the documents to be submitted by the petitioner. The petitioner shall be furnished the documents sought for and the petitioner is also entitled to produce the books of accounts, etc. - petition allowed - matter remanded.

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