TMI Tax Updates - e-Newsletter
October 25, 2016

Case Laws in this Newsletter:

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

TMI SMS

• Levy of penalty u/s 271 (1)(c) - Explanation 4 is clarificatory and not substantive and would apply even to AY prior to 1.4.2003 - HC

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• VAT - Items of the electronic gadgets or mobile or drinking water are required for the incidental activity - Input tax credit allowed - HC

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News

1. RBI Reference Rate for US $

Highlights / Catch Notes

Income Tax

• Interest u/s 234A Not Applicable if Tax Paid Exceeds Revenue's Acknowledged Amount, Court Rules on Seized Cash Case.

  Case-Laws - HC : Levy of interest u/s 234A - cash amount seized at the premises of assessee at the time of raid - If an assessee has deposited higher amount of tax than returned tax accepted by Revenue, the question of levy of interest u/s 234-A would not arise. - HC
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• Taxpayer's Interest-Free Loan to Related Company Raises Questions of Commercial Expediency and Business Use.

  Case-Laws - AT : Interest expense - The borrowed amount in question was not utilized by the assessee in its own business, but had been advanced as interest-free loan to its sister-concern and later converted into share capital. - What is relevant is whether the assessee advanced such amount to its sister-concern as a measure of commercial expediency. - AT
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• Director's Extra Service Commission Allowed as Expense, Not Tax Avoidance.

  Case-Laws - AT : Dis-allowance of amount paid as commission to one whole time working Direcotr who had rendered extra service to the company - payment in question was with respect to services rendered by the said Director, was not avoidance of payment of tax - expenditure allowed - AT
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• Bank Swipe Machine Charges Not Commission u/s 194H; No TDS Required on These Transactions.

  Case-Laws - AT : TDS u/s 194H - Commission - whether the charges deducted by the bank for use of swiping machines for sales through credit card is commission or not - No, not TDS u/s 194H is required - AT
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• Capital Gains Tax: Shareholders' Liability Must Be Proportional to Shareholding, No Deductions Allowed for Transfer Expenses.

  Case-Laws - AT : Computation of capital gains - Expenditure incurred in connection with transfer of shares - the entire tax liability of the companies cannot be fastened on a single shareholder. If at all the tax liability of private limited company is to be borne by shareholders, it has to be borne equally in the ratio of shares held - No deduction - AT
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Service Tax

• Court Denies Refund Claim for Service Tax; Amount Included in Offered Price, Not Refundable Post-Levy Withdrawal.

  Case-Laws - HC : Refund of service tax paid - Once the amount offered by the petitioner included all taxes and levies and subsequently, the levy of service tax was withdrawn by the Government, that amount being one of the component in the price offered by the petitioner, he is not entitled to claim that from the Municipal Corporation, as that amount was to be received and paid to the department concerned - HC
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• Scheduled Banks Acting as RBI Agents for Tax Collection Should Share RBI's Service Tax Exemption.

  Case-Laws - AT : Banking or Financial service - collection of taxes and remittance to RBI - services rendered by scheduled bank to RBI - if RBI is exempted from the service tax liability in respect of various services, its agent for doing such services also needs to be extended the same benefit. - AT
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• Painting Vehicle Contracts Exempt from Service Tax in Manpower Recruitment and Supply Category.

  Case-Laws - AT : Service tax liability - The bill statement indicates about painting of vehicles on lumpsum basis - not taxable as Manpower Recruitment and Supply Agency service - AT
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• Municipal Entity Wins Rental Income Dispute; Service Tax Demand Overturned Due to Limitation Period Expiry.

  Case-Laws - AT : Rental income - consideration from letting of spaces for advertisement - here is no element of fraud or suppression on the part of the appellant-Nagar Palika Praishad - Demand of service tax beyond normal period of limitation set aside - AT
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• Appellant Challenges Service Tax on Export Commission; Demand Based on Assumptions Without Solid Evidence.

  Case-Laws - AT : Taxability - whether the appellant is required to pay service tax on the amount of export commission appearing in their trial balance on the debit side (expenditure) - whole demand has been confirmed only on presumptions and assumptions which have got no legs to stand - AT
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Central Excise

• Denial of CENVAT Credit on Inputs for LoNa Manufacturing: No Simultaneous SSI Exemption and Credit Allowed.

  Case-Laws - AT : SSI exemption - Low Sodium Salt called LoNa - whether denial of CENVAT credit justified on the ground that the Cenvat credit has been taken on the inputs used in the manufacture of goods with brand name of others? - entitlement for both the benefits i.e. SSI exemption and Cenvat credit - Held no - AT
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VAT

• Court Rules Boat Engines Not Part of Plant, Affects Tax Rate Classification Between 12.5% and 4.

  Case-Laws - HC : Classification of goods - rate of tax @12.5% or @4% - Every piece of machinery whether part of a plant or not would come within its fold. When we hold that the boat is not a plant, an engine per-se which may be machine would not fit the description of said entry-58A. - HC
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• Son Continues Father's Business Without Notification, Court Reverses Input Credit Claim but Avoids Severe Penalties.

  Case-Laws - HC : Change of constitution of the firm - business of father carried on by son, when father died, without intimation to Department - input credit taken by son reversed - The mistake committed by the petitioner can be treated only as an illegality, for which, a capital punishment cannot be imposed on the dealer - HC
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Case Laws:

• Income Tax

• 2016 (10) TMI 811
  Deduction u/s 80IB - ascertaining first year of commencement of production - Held that:- The first sale bill was issued after 01.04.2006. The initial assessment year 2007-2008 is mentioned in form 10CCB of the assessee’s audit report and no objection had ever been raised in respect thereof. In that form, the date and year of commencement of operation was mentioned as 07.05.2006 which was accepted by the revenue. In fact, in the previous assessment year, the work had been shown as being in progress. Further, still even the power consumption bills for the six months period ending 16.03.2006 showed that only five units had been consumed. Based thereon, the Tribunal’s inference that there was no production activity till 31.03.2006 cannot be faulted. The excise returns submitted by the assessee for the year ending 31.03.2006 are of nil quantity manufactured and it was the excise returns for the month of May, 2006 that for the first time indicated the production - Decided against the revenue.

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• 2016 (10) TMI 810
  Levy of interest u/s 234A - petitioner submitted that cash amount seized at the premises of assessee at the time of raid should be treated as 'Tax Paid' by assessee - Held that:- Assessee himself had deposited tax which was more than ultimate amount found as Tax payable. If an assessee has deposited higher amount of tax than returned tax accepted by Revenue, the question of levy of interest under Section 234-A would not arise.

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• 2016 (10) TMI 809
  Genuineness of expenditure against professional receipts - 1/6th disallowance out of expenses claimed against professional receipt - Held that:- assessee has not maintained books of accounts and bills and vouchers in respect of the expenses claimed - the claim of the assessee that books of account in respect of expenses claimed against professional receipt were produced before the Assessing Officer is not tenable - the estimate of disallowance of 1/6th of the expenses by the Assessing Officer is reasonable irrespective of the fact whether the same was accepted by the assessee or not. Taking help from new section 44ADA - even after incorporating the disallowances made by the Assessing Officer the profit from profession arrives at around 40.35% of the professional receipt and which is even much below the 50% threshold adopted by the legislature for computing income in case of professional on presumptive basis, therefore, in the facts and circumstances of the case, according to us the disallowance of 1/6th of expenses made by the Assessing Officer is reasonable and no interference on our side is required - Decided against the assessee.

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• 2016 (10) TMI 808
  Reopening of assessment - validity of notice u/s 148 - income escaped assessment based on investigation wing information - Held that:- the reasons merely based on investigation wing information without surveillance of substantiation and without any statement being mentioned therein and without nature of transaction being narrated therein and without tangible material, and further without application of mind on amount of income escaping assessment, shows that the reopening is bad in law and needs to be quashed. - Decision in the case of Signature Hotels P. Ltd. vs. Income Tax Officer [2011 (7) TMI 361 - Delhi High Court] followed. - Decided in favor of assessee.

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• 2016 (10) TMI 807
  Nature of loss on sale of joint venture - allowability of the interest on borrowed funds - assessee borrowed the fund from the bank and lent it to its sister-concern, which is a wholly owned subsidiary - Held that:- The DRP for the assessment year 2008-09, held that loss arising out of transfer of 50% interest in the joint venture was a capital loss. Hence, subsequent reduction in this sale consideration from Rs. 13 crores to Rs. 9.5 crores would take the same character as capital loss only and it cannot take a different character to say it is a business loss in terms of sec.28(va) of the Act. It is true that the borrowed amount in question was not utilized by the assessee in its own business, but had been advanced as interest-free loan to its sister-concern and later converted into share capital. However, in our opinion, that fact is not really relevant. What is relevant is whether the assessee advanced such amount to its sister-concern as a measure of commercial expediency. The Delhi High Court in CIT vs. Dalmia Cement (Bharat) Ltd. [2001 (9) TMI 48 - DELHI High Court] is applicable to the facts of the present case, wherein it was held that once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the armchair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. If the money was borrowed for purchase of shares of subsidiary company for the purpose of acquiring controlling interest and acquisition of such controlling interest was of thebusiness of the assessee and it resulted in promote the business of the assessee as well as helpful to the assessee for having management control oversaid such subsidiary company, then the interest expenditure should be allowed u/s.36(1)(iii) of the Act.

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• 2016 (10) TMI 806
  Genuineness of expenditure - expense of dismantling, loading, unloading and assembling charges for movement of the crawler crane - Held that:- The background is that the said crane so acquired by the assessee was owned by Janak Cranes and was installed at Maithan Power Project at Jharkhand on hire to Simplex Infrastructure Limited vide work order dated 22/25-05-2009. The assessee acquired the crane as on where basis from Janak Cranes along with work order for hiring by Simplex Infrastructure Limited at the same site/location and continued with the said crane on hire to Simplex Infrastructure Limited on same terms and condition at the same site. There is no evidence on record to prove that the cranes were de-assembled , transported and re-assembled i.e. demobilized and mobilized at Kolkatta as initially claimed by the assessee or at different location at the same site at Maithan Power Project at Jharkhand which was subsequently claimed by the assessee. The assessee is not coming out with the true and correct facts to reflect the true character of the said transaction and payment thereof and in our view prima facie it appears that this payment of Rs. 25,00,000/- is connected with the purchase of the crane but the assessee is not coming out with the true and correct facts - matter remanded back for re-determination of the issue on merits - Decided partly in favor of assessee.

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• 2016 (10) TMI 805
  Dis-allowance of amount paid as commission to one whole time working Direcotr who had rendered extra service to the company - Held that:- Exceptional performance in profitability was due to the market boom and not otherwise. In case of assessee, high turnover and profits are have direct nexus with the efforts put in by the said Director - assessee did not pay commission when turnover and profits were both declining. In case of assessee, commission had been paid steadily over the years in a consistent manner since 1995-96, besides assessee s dividend policy. Thus, payment in question was with respect to services rendered by the said Director, was not avoidance of payment of tax. We find no avoidance of tax done. So, we direct the Assessing Officer to allow the same because same was paid to Director in proportion to the service rendered by him. - Decided in favor of assesssee.

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• 2016 (10) TMI 804
  TDS u/s 194H - Commission - whether the charges deducted by the bank for use of swiping machines for sales through credit card is commission or not - Held that:- credit card charges are nothing but charges charged on principal to principal basis for the reason that bank accepts the commitment of making all credit card payments after deducting its own charges, which are related to this commitment and does not fall u/s 194H of the Act in term of “commission”. We are of the view that the provisions of section 194H of the Act are applicable in those cases where element of agency is present. But, in the present case, there is no such element of agency between the assessee and the bank. The above payments represent the charges paid to the bank for facilitating the payments by the customers. This is the modern and easiest way of doing business, which has been internationally accepted all over the world. Since there is no existence of agency, we are of the view that the provisions of section 194H of the Act cannot be applied to the assessee. Decision in the case of ITO–TDS Vs. Jet Air Ways (India) Ltd. [2013 (8) TMI 586 - ITAT MUMBAI] followed - Decided in favor of assessee.

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• 2016 (10) TMI 803
  Revision u/s 263 - Computation of capital gains - Deduction u/s 48 - land vacation expenses - Held that:- There is no doubt that assessee has claimed the expenditure as part of cost of improvement and the proportionate expenditure was examined by the AO and allowed. Therefore, the observation of the CIT that AO has not verified all the details cannot be sustained. Moreover, we are unable to understand the view of CIT that the expenditures are not allowable under the provisions of Section 55(1)(b)(2) of the Act. As far as cancellation of development agreement with M/s. GPR Divya Sai Constructions is concerned, Ld. CIT’s observation that it is a capital loss and cannot be allowed is surprising. If it is a capital loss, then while computing the capital gains, such loss is certainly allowable and so, no prejudice is caused to the Revenue. - Deduction allowed - Decided in favor of assessee.

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• 2016 (10) TMI 802
  Computation of capital gains - Expenditure incurred in connection with transfer - deduction of payment of taxes as per the agreement - expenditure incurred wholly and exclusively in connection with transfer of such shares u/s 48 - Held that:- assessee and others are liable to reimburse company for all the taxes that may be levied on the company in respect of period up to the closing date and in the event of company receiving any refund of any tax in respect of period up to the closing date, the same shall be passed on to the seller by the companies. Thus, it is a future contingent liability as only future tax that may be levied up to the date of closing date is liable to be reimbursed to companies. Furthermore, there is no stipulation in the agreement that the assessee should alone discharge the tax liabilities of the companies. Further, the entire tax liability of the companies cannot be fastened on a single shareholder. If at all the tax liability of private limited company is to be borne by shareholders, it has to be borne equally in the ratio of shares held. Therefore the claim is not only untenable but also appears to be a device invented to reduce tax liability in the hands of assessee. Decided against the assessee.

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• Service Tax

• 2016 (10) TMI 801
  Refund of service tax paid - subsequent exemption - recovery of tax so paid from the Municipal corporation / service recipient - As per the condition in the contract (E-tender), the amount to be offered was to include all taxes and levies. - The notification having not come to the notice of the Municipal Corporation, the bills raised by the petitioner were cleared upto November, 2012, which included the amount of service tax as well, however, from December, 2012 onwards, the amount of service tax was reduced. The grievance of the petitioner is that he is entitled to be paid that amount as well. Held that: - we do not find any merit in the claim made. Once the amount offered by the petitioner included all taxes and levies and subsequently, the levy of service tax was withdrawn by the Government, that amount being one of the component in the price offered by the petitioner, he is not entitled to claim that from the Municipal Corporation, as that amount was to be received and paid to the department concerned. In case, the amount on account of tax is directed to be paid to the petitioner, he is not required to deposit the same with the department and will be unjustly enriched - appeal dismissed - decided against appellant.

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• 2016 (10) TMI 800
  Eligibility of exemption - N/N.22/2006-ST dated 31.05.2006 - Banking or Financial service - collection of taxes and remittance to RBI - services rendered by scheduled bank to RBI - whether qua N/N. 22/2006-ST dated 31.05.2006, the commission received from the Reserve Bank of India by a scheduled bank for rendition of Banking or Financial service is entitled to exemption from service tax on the ground that the banking company providing such taxable service is an agent of the Reserve Bank of India and thus entitled to exemptions specified in clause (i) of N/N. 22/2006-ST dated 31.3.2006? - Held that: - Drawing power from Section 45, RBI appoints various national banks/public sector banks for collection of various taxes and making payment of pension etc. This would mean that various national banks are agents of the RBI. The Central Govt. of India by N/N. 22/2006-ST has given exemption from the payment of service tax of any taxable services provided to or by RBI either in India or under Reverse Charge Mechanism. In our view as the respondent assessee is an agent of RBI, exemption granted by notification No. 22/2006-ST, needs to be extended to respondent - if RBI is exempted from the service tax liability in respect of various services, its agent for doing such services also needs to be extended the same benefit. Assessee means a person liable to pay service tax and includes his agent. RBI a person liable to pay tax as an assessee but for exemption, will include their agents viz. Banks appointed under Section 45 of RBI Act, to execute functions of RBI. Decision in the case of M/s. Canara Bank Versus CST, Bangalore [2012 (6) TMI 274 - CESTAT, AHMEDABAD] relied upon where it was held that appellant is held to be eligible for exemption as an agent of RBI. Appeal dismissed - decided in favor of respondent.

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• 2016 (10) TMI 799
  Service tax liability - Manpower Recruitment and Supply Agency service - whether job work undertaken in the premises of M/s. Chaphekar Engineering Pvt. Ltd. is a lumpsum contract, or are to be considered under Manpower Recruitment and Supply Agency service? - Held that: - We perused the random invoices which are annexed to the appeal memorandum and find that these invoices did not indicate that they were for supply of labour, though the invoices indicates it is for labour charges only; We find that the invoices indicate that the rate is for job work undertaken on lumpsum basis. The bill statement indicates about painting of vehicles on lumpsum basis and the bill has been settled also after reducing some rejections, which would in our view support the contention of appellant that they are undertaking lumpsum work. Decision in the case of Ritesh Enterprises Versus Commissioner of Central Excise [2009 (10) TMI 182 - CESTAT, BANGALORE] relied upon where on the same issue demand under Manpower Recruitment and Supply Agency service was set aside. Appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 798
  Extended period of limitation - the demand issued prior to October 2000 being period more than 5 years, barred by limitation - whether the appellant is justified in holding that in the absence of any suppression of facts, the extended period of limitation cannot be invoked in the present case even for the period after October 2000? - Held that: - I am of the view that the case needs to be remanded to the Ld. Commissioner (Appeals) to record reasons as to how the extended period of limitation would be applicable to the demand for the period after October 2000. In the result, the impugned order is set aside and the appeal is remanded to the Commissioner (Appeals) to address all the issues including applicability of extended period of limitation. Needless to mention that a reasonable opportunity of hearing be allowed to the appellant - matter remanded.

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• 2016 (10) TMI 797
  Rental income - consideration from letting of spaces for advertisement - Held that: - I find that the appellant is a Municipality, a Statutory body under the Control of the State Government. It is further evident that they have maintained proper records of their transactions. It is further evident that service tax was not paid in absence of advise from their competent Authority and/or from the side of Revenue from the date of imposition. It is further fact on record that after receipt of the show cause notice, in close proximity of that, the appellant took registration and have started paying the service tax both on renting of immovable property and sale of space for advertisements. It is further evident that the Ld. Commissioner (Appeals) have found that there is no element of fraud or suppression on the part of the appellant-Nagar Palika Praishad and accordingly have deleted the penalty under Section 76 & 78 of the Act. Extended period of limitation - once it is held that there was reasonable cause for failure to pay tax and the penalties have been deleted, as a corollary invocation of the extended period of limitation is equally and unjustified. The appellant-assessee is not liable to pay tax for the extended period and shall be liable to pay the tax only for the normal period with interest. decided partly in favor of assessee.

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• 2016 (10) TMI 796
  Taxability - export commission - whether the appellant is required to pay service tax on the amount of export commission appearing in their trial balance on the debit side (expenditure) for the Financial Years 2006-07, 2007-08 and 2008-09 respectively? - Held that: - the Adjudicating Authority have not recorded any categorical finding as to what documents he required to see, which were not produced by the appellant. He has simply alleged that the appellant could not prove to his satisfaction, which appears to be only surmises and conjectures for confirming the demand. It is not his case that he found the books of accounts to be unreliable or the certificate of the Chartered Accountant to be unreliable. Thus, brushing aside evidence produced without any cogent reason is undesirable and against the principles of natural justice. Accordingly, I hold that the appellant has sufficiently explained that the amounts appearing in their books of account, trial balance and final accounts are not expenditure made by them in foreign exchange and the whole demand has been confirmed only on presumptions and assumptions which have got no legs to stand - export commission not taxable - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 795
  Taxability - health services - service tax levied on the said service w.e.f. 1/7/2010 and exemption granted vide N/N.30/2011-ST dated 25/4/2011 w.e.f.1/5/2011 - whether the said service remained taxable for the period 1/7/2010 to 30/4/2011 and extended period of limitation invocable? - Held that: - I find that there is no element of suppression and or contumacious conduct on the part of the appellant. Rather it is evident from the record that upon information been received by the revenue from the insurance company of having paid consideration for health services to the respondent hospital and on further enquiry made from the appellant they have disclosed higher figure of turnover relating to such services. Under such facts and circumstances, I find that the learned Commissioner (Appeals) rightly deleted the penalties in question and no interference is called for. Extended period of limitation not invoked - appeal dismissed - decided against Revenue.

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• 2016 (10) TMI 794
  Valuation - commercial construction services - value of free supply of the goods to appellant by their customers for rendering output services - whether value of the materials supplied free of cost to be included in the taxable value or not? - the reliance placed in the decision of Bhayana Builders (P) Ltd v. Commissioner of Service Tax, Delhi [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] - Held that: - the decision in the case of Bhayana Builders is applicable to our case as the issue involved is similar. It was held in the case that The value of goods and materials supplied free of cost by a service recipient to the provider of the taxable construction service, being neither monetary or non-monetary consideration paid by or flowing from the service recipient, accruing to the benefit of service provider, would be outside the taxable value or the gross amount charged, within the meaning of the later expression in Section 67 of the Finance Act, 1994 - issue was decided in favor of appellant. Appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 793
  Denial of CENVAT credit - GTA Services - service tax on freight not paid by Supplier but is paid by respondent who is availing the CENVAT credit - whether the claiming of CENVAT credit by the respondent who is purchaser of goods, justified? - Held that: - as the Service Tax is to be paid under Rule 4(7) and challan is a document for taking credit under Rule 9 of CCR, and the Service Tax is payable for GTA Services under Rule 2 (1) (d) (v) of the Service Tax Rules,1994 by consignor/consignee being manufacturer. Thus, Cenvat credit has rightly been availed - appeal dismissed - decided against Revenue.

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• Central Excise

• 2016 (10) TMI 792
  CENVAT credit - Outdoor Catering Service - whether appellant is entitle to avail Cenvat Credit in respect of Outdoor Catering Service when charges of the same was recovered from their employees? - Held that: - decision in the case of Commissioner Vs. Ultratech Cement Ltd [2010 (10) TMI 13 - BOMBAY HIGH COURT] relied upon where it was held that where the cost of food is born by the worker and the service tax is borne by the ultimate consumer of the services, namely worker, the manufacturer cannot take credit of that part of the service tax. CENVAT credit not admissible as the fact that the cost of catering was recovered from the employees is not under dispute - appeal dismissed - decided against appellant.

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• 2016 (10) TMI 791
  CENVAT credit - Outdoor Catering Service - Employees Accident Insurance Service - Whether the appellant being manufacturer is entitled for Cenvat Credit in respect of Outdoor Catering Service and Employees Accident Insurance Service in terms of Rule 2(k)(i) of the Cenvat Credit Rules, 2004? - the case of The Commissioner of Central Excise, Chennai III Commissionerate Versus M/s. Visteon Powertrain Control Systems (P) Limited, Customs, Excise & Service Tax Appellate Tribunal [2015 (3) TMI 736 - MADRAS HIGH COURT] relied upon - Held that: - the decision of the case squarely applies to the present case where it was held that use of the outdoor catering services is integrally connected with the business of manufacturing cement and therefore, credit of service tax paid on outdoor catering services would be allowable. The decision in the case of COMMISSIONER OF C. EX., RAIPUR Versus MAHAMAYA STEEL INDUSTRIES [2010 (10) TMI 228 - CESTAT, NEW DELHI] also relied upon where it was held that The Insurance Policy for Workmen’s Compensation has been taken by the respondent to cover the risk of the workers who are involved in the manufacturing process of the final product - the respondents are entitled for Input Service Credit as per Rule 2(l) of the Cenvat Credit Rules. CENVAT Credit in respect of both the services admissible - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 790
  Imposition of penalty u/s 11AC and Rule 27 of the Act - short payment of duty - suppression of facts - N/N.54/2001 C.Ex.(N.T.) dt. 21.6.2001 - payment of duty by availing the notification even after its discontinuance - Held that: - the short payment of duty has been taken place in December 2003 and the due date for filing the return for December 2003 is in January 2004. The show cause notice was issued on 22.12.2004 i.e. well within one year. Since, the show cause notice was issued within one year, proviso to Section 11A is not applicable to the case. Consequently ingredients of the proviso to Section 11A and for invoking the penal provision under Section 11AC are same, penalty under Section 11AC is not imposable, I therefore waive the penalty under Section 11AC of the Central Excise Act, 1944. However, it is apparent on record that the appellant failed to file the return in time. Therefore they are liable for penalty under Rule 27 of the Central Excise Rules 2002. Hence, the penalty of Rs. 5,000/- imposed under Rule 27 is upheld - appeal partly allowed.

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• 2016 (10) TMI 789
  Maintainability of appeal - duty amount involved in the case is Rs. Rs. 15,000/- - 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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• 2016 (10) TMI 788
  Maintainability of appeal - duty amount involved in the case is Rs. 1,13,852/- 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 Rs. 2 Lakhs, the appeal is dismissed.

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• 2016 (10) TMI 787
  Denial of SSI exemption - N/N. 6/2002-C.E., dated 1-3-2002 - Low Sodium Salt called LoNa - whether denial of CENVAT credit justified on the ground that the Cenvat credit has been taken on the inputs used in the manufacture of goods with brand name of others? - entitlement for both the benefits i.e. SSI exemption and Cenvat credit - Held that: - reliance placed on the decision of Commissioner of Central Excise, Chennai v. Nebulae Health Care Ltd. [2015 (11) TMI 95 - SUPREME COURT] where it was held that manufacture of dutiable goods bearing a brand name is outside the scope and purview of the SSI exemption notification since the branded goods manufactured on job work basis is not covered by the said notification. Once excise duty is paid by the manufacturer on such branded goods manufactured, the brand name whereof belongs to another person, on job work basis, the SSI Unit would be entitled to Cenvat/Modvat credit on the inputs which were used for manufacture of such goods as on those inputs also excise duty was paid. SSI exemption cannot be denied - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2016 (10) TMI 786
  Classification of goods - Out Board Marine Engine - classified under residuary entry and taxed at 12.5% or would fall under entry-42A as agricultural inputs and taxed at 4% - Whether on the facts and circumstances of the case, the Tribunal has rightly held that, the goods 'Out Board Marine Engine' commonly known as “Oil Engines” falls U/e No.42A of Schedule II of the Gujarat Value Added Tax Act,2003? The assessee deals in Out Board Marine Engine of less than 15 HP capacity. Said engine is fitted on fishing boats and is used for the purpose of fishing. It is specially designed engine for such purpose - Held that: - the term 'agriculture' and the related terms have reference to cultivation of land. It would include floriculture, horticulture, the raising of crops, grass or garden produce, and grazing. All these activities would be in connection with the soil. By no stretch of imagination, activity of fishing would satisfy this definition. 11. A similar issue came up before the Supreme Court in case of Commissioner of Income-tax,West Bengal, Calcutta V/s. Benoy Kumar Sahas Roy [1957 (5) TMI 6 - SUPREME Court] where it was held that Nevertheless there is present all throughout the basic idea that there must be at the bottom of it cultivation of land in the sense of tilling of the land, sowing of the seeds, planting, and similar work done on the land itself. This basic conception is the essential sine qua non of any operation performed on the land constituting agricultural operation. If the basic operations are there, the rest of the operations found themselves upon the same. But if these basic operations are wanting the subsequent operations do not acquire the characteristic of the agricultural operations.” Whether the goods fall entry-58A which pertains to plant and machinery? - Held that: - The term 'plant' in common parlance has thus acquired a definite meaning and would normally mean a self-contained area, structure or building containing one or more units with infrastructure such as an administrative section or storage or a laboratory, a building machinery etc. taken together that are used in the unit of industrial production are also categorized as plant. The fishing boat would certainly not fall within this description. The entry-58A refers to plant and machinery and not plant or machinery. Accepting the contention of the assessee that the entry would include either plant or machinery would expand the scope beyond what the entry seeks to convey. Every piece of machinery whether part of a plant or not would come within its fold. When we hold that the boat is not a plant, an engine per-se which may be machine would not fit the description of said entry-58A. Shri Hemani however contended that such an interpretation would not be correct. He referred to definition of term 'capital goods' contained in Section 2(5) of the VAT Act which reads thus; “'Capital Goods' means plant and machinery (other than second hand plant and machinery) meant for use in manufacture of taxable goods and accounted as capital assets in the books of accounts.” He would submit that if same logic is applied here also, capital goods would include only machinery which part of a plant and not otherwise. We do not think so. This definition of term capital gods is worded as to mean plant and machinery used for manufacture of taxable goods. Word 'and' in this definition seems to have been used to convey the expression 'as well as'. A plant as well as machinery would therefore be capital goods if it is meant for manufacture of taxable goods. However, there are only passing remarks since we are not concerned with interpretation of definition of term 'capital goods.' The judgment of the Tribunal set aside - The question answered in favour of the revenue - Tax Appeals allowed and disposed off.

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• 2016 (10) TMI 785
  Tax liability - assessment proceedings - Entry tax - Best judgement assessment - tax evasion - survey of premises - rejection of books - discrepancies in the recorded quantities of raw material and finished products - entries in the RG-1 Register did not match with what was actually found during the course of the survey operations - Held that: - Section 28 of the Act empowers the assessing authority to reject the books of account of an assessee where it finds that the same are not worthy of credence. The provision when it empowers the assessing authority to reject the turnover of sales and purchases as declared casts a duty to come to a positive conclusion that the assessee is undertaking operations without all transactions being dutifully and faithfully recorded in the books of account. It is only when he comes to form an opinion that no credence at all can be laid upon the disclosures made by the assessee that the books of accounts are to be rejected - the authority must come to a conclusion that the books of accounts as maintained and as a whole cannot be relied upon or held worthy of confidence. The difference itself was of only 0.67 per cent. This, in the opinion of the Court, did not form sufficient ground to come to a conclusion that the books maintained by the assessee were not worthy of credence or that the transactions were not faithfully or dutifully recorded in the account books. Pausing here, it becomes relevant to clarify that this Court does not intend to lay down as a broad proposition that a singular transaction cannot in all situations be sufficient to reject the books of account. There may be a case where the singular discrepancy may be of such vital import that it cannot be brushed aside or ignored. What would have to be necessarily be borne in mind is the significance of the infraction and whether the same is indicative or evidence of a deliberate attempt to suppress and conceal turnover. Estimation of turnover - the Court finds that although the Tribunal accepts the submission of the revisionist that all the thirty eight machines were not functioning in May 2008, it has proceeded to estimate the escaped turnover to be Rs. 1,40,00,000/-. On what basis this figure has been arrived at is neither noted nor elaborated upon by the Tribunal. While it is true that a best judgment assessment would necessarily entail a certain degree of guess work, the guess itself which is arrived at by the authority must be fair, informed, intelligent and referable to some valid or cogent basis for arriving at the figure of escaped turnover. It can neither be arbitrary, fanciful or based wholly on conjecture. For the purposes of arriving at the figure of escaped turnover to be Rs. 1,40,00,000/-, the Tribunal neither refers to the scale of operations in the succeeding months nor does it rest its estimation upon any material or contemporaneous record which may have been found in the course of the survey operations. On both scores, therefore, this Court is unable to sustain the orders passed by the assessing authority as well as the Tribunal. The assessment under the Entry Tax enactment is based solely upon the assessment undertaken under the Act. For the reasons recorded above, the same must also necessarily fall. Revision allowed - decided in favor of assessee.

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• 2016 (10) TMI 784
  Courier service provider - logistics Agreement - inspection of premises - presence of various goods which had not entered the State of U.P on the strength of certain Forms 38/39 - seizure of goods - power of seizure - Held that: - The power to seize goods is not dependent upon the bonafides or characteristics of a past transaction or perceived course of business. It has to be necessarily exercised in the backdrop of whether the goods which are being seized fall within the mischief of Section 48 or not. Whether the sales were liable to be treated as inter-State sales? - Held that: - What appears to have weighed with the Tribunal is the fact that the payment for the goods was made within the State. What the Tribunal clearly lost sight of and unjustifiably chose to ignore was its own record wherein it was admitted that the goods in question had come from outside the State of U.P. The Tribunal in its entire order nowhere places reliance or refers to any material which may have cast a shadow of doubt on the said recital which stood recorded in the course of the initial seizure proceedings. Further, the view taken by the Tribunal to the effect that the sale would stand completed only upon the payment for the goods and that the payment of price would be determinative of the issue would also, in the opinion of this Court, appear to be an issue which may not be free from debate. This Court however refrains from commenting further on this aspect. The caveat which stands entered above is primarily on account of the fact that in the opinion of this Court there was no occasion for the Tribunal to have ruled upon this aspect of the matter at all, the proceedings themselves being confined to the validity of seizure. This Court therefore without commenting any further on this aspect refrains from returning or entering any finding which may prejudice the rights and contentions of either of the parties - seizure quashed - revision allowed - decided in favor of revisionist.

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• 2016 (10) TMI 783
  Assessment for the years 2005-06 and 2006-07 - dealer in iron and steel - goods purchased from Punjab and then consigned to U.P. - circular referable to the provisions of Section 8-C (3) (a) of the U.P. Trade Tax Act - the importers of steel to furnish security before obtaining the requisite import declaration forms - Held that: - While the order of assessment itself carries a recital to the effect that the statement of accounts and relevant books had been produced and upon enquiry it was found that the sales and purchases had been correctly reflected and accounted for therein, the assessing authority curiously then proceeded to record that only computerized accounts were produced for his consideration. Obviously, the two are self contradictory. The Tribunal has also proceeded on the basis that the assessing authority had not recorded any satisfaction in respect of the transactions having been duly accounted for in the relevant books of accounts. It is on this basis that it has proceeded to hold that the assessing authority was clearly justified in rejecting the books of accounts. The Court then further finds that in both the assessment years, the amount of escaped turnover has been increased without reference to any material or record in support thereof. While it is true that a best assessment judgment undertaken by the assessing authority would necessarily entail a certain degree of guess work, the same cannot be used as a licence by the assessing authority to not base his estimation on any material at all. The guess work which needs to be employed in such circumstances, must obviously be reasoned and referable to some empirical or contemporaneous material that exists or may be found by the assessing authority. The exercise, in the opinion of this Court, so undertaken by the assessing authority cannot depart from being one which is logical and fair - issue of rejection of books of account as well as estimation of actual turnover merits Remand - matter remanded. Levy of penalty - this court finds that the circular of the Commissioner by itself made a provision for situations like the present which stand raised in these revisions. The circular itself envisages a situation where an importing dealer incorrectly computes the security which was liable to be paid on the goods. It accordingly granted him the facility of depositing the balance amount due and payable at the time of entry of goods at the check post. The short fall if any in deposit of security was also liable to be taken into consideration while computing the ultimate tax liability of the assessee and while arriving at the correct figures of taxable turnover. The difference itself as has been pointed out by the learned counsel for the revisionist worked out to Rs. 200/- per metric ton and as per Sri Agrawal would have resulted in a liability of not more than Rs. 262/-. This being the only ground and reason which weighed with the assessing authority for levying penalty upon the revisionist cannot be sustained. The orders imposing penalty are therefore liable to be set aside. Revision allowed - assessment proceedings remanded - levy of penalty decided in favor of revisionist - decided partly in favor of revisionist.

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• 2016 (10) TMI 782
  Change of constitution of the firm - business of father carried on by son, when father died, without intimation to Department - input credit taken by son reversed and order of assessment made on son on the ground that the fact of father's death and business carried on by son was not intimated to Department and fresh registration not obtained - Held that: - the mistake committed by the dealer can be treated only as an irregularity and not an illegality. Rule 5(3) of the said Rules states that whenever there is a change in constitution of the business of the dealer, the said dealer, within 30 days from the date of change in constitution, shall furnish details of the change to the Registering Authority and the Registering Authority, on satisfying itself, shall amend the certificate of registration accordingly - As rightly pointed out by the learned counsel for the petitioner, the Rule does not contemplate the consequences for non furnishing of information pertaining to change in constitution. The question would be as to whether all the transactions done during the interregnum could be invalidated for such a reason. As non furnishing of information, as required under Rule 5(3) of the said Rules, does not contemplate a situation to disbelieve all transactions especially transactions as done in the present case, the impugned orders reversing the input tax credit are wholly unsustainable. The respondent does not take a stand that on account of the non intimation, the registration has been canceled nor any such step has been taken. The interpretation is that on the demise of the father of the present proprietor of the petitioner, the registration becomes infructuous. This Court is not convinced with such a stand taken by the respondent, especially when even prior to the demise of the father of the present proprietor of the petitioner, the business was reconstituted as a partnership firm and it was recognized by their principal - M/s.Indian Oil Corporation Limited. The mistake committed by the petitioner can be treated only as an illegality, for which, a capital punishment cannot be imposed on the dealer. Furthermore, it is stated that a fresh registration has been granted in the name of the present proprietor of the petitioner on 25.6.2015 and only for the two assessment years, this problem has arisen. Therefore, this Court, exercising its extraordinary jurisdiction, is convinced to state that the reason for reversing the input tax credit, as done in the impugned orders, is not sustainable - petition allowed - decided in favor of petitioner.

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