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TMI Tax Updates - e-Newsletter
October 27, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Addition u/s 36 - the disallowance should be restricted to net interest paid on the overdraft amount in relation to payments made by the assessee on behalf of the specified persons under section 40A(2)(b) - AT
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Taxation on amount received on family settlement - accrual of income - entire property was in existence at the time of partition in which concerned family members were having their interest/shares, therefore, it was clearly a family settlement. Therefore, the family arrangement is not taxable - AT
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Penalty u/s 221(1) - outstanding demand on account of self assessment tax -the penalty imposed at 10% of the outstanding demand for both the assessment years u/s 221(1) of the Act read with Section 140A(3) of the Act was just and fair - AT
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Capital gains tax - whether the amount received by the assessee from the sale of property, the title of which was acquired by way of adverse possession and which did not involve any acquisition costs, can be subjected to the capital gains tax or not? - for want of acquisition cost, capital gains tax would not arise - AT
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Additional depreciation on wind mill - assessee had made a claim in the revised computation of income statement filed before completion of assessment proceedings - deduction allowed - AT
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Short term capital loss - sale of plant & machinery as scrap - the alleged short term capital loss as claimed by the assessee on sale of machineries cannot be allowed, as the machineries were never purchased for its use in the business of the assessee. - AT
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Registration u/s 12AA denied - Trust created for giving medical aid, social welfare, uplifting of poor members of the community and for giving financial and other help on the occasion of the marriage of the members of this community is for religious and charitable purposes - AT
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Exemption U/s. 10A - AO noticed that that invoice issued on 31st March 2010 was cleared by STPI authority on 6 May 2010, i.e. in FY 2010-11, hence, the same cannot be considered as an export turnover for the FY. 2009-10. - AO’s intention seems to be to restrict deduction U/s. 10A, which is not permissible - AT
Customs
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Goods not cleared on the basis of being hazardous – By not passing any orders on the petitioners application for provisional assessment or by not passing any orders on the application of the petitioner under Section 49 of the Act for storage of the imported goods in a warehouse pending clearance would amount to detention of the goods - Allowed to clear the goods without demurrage - HC
Service Tax
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Refund of CENVAT Credit - Export of Services - Revenue denied refund on grounds that it is specifically governed by Notification No.9/2009-ST and appellant should have chosen that route instead of submitting its claim under Rule 5 of Cenvat Credit Rules, 2004 - Refund allowed - AT
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Liability of Service Tax on deemed export of services rendered to sister concern which is 100% EOU – Appellant contends that services provided to sister concern are secondary services and same are not leviable to service tax as per CBEC circular No. 56/5/2003-ST – Demand set aside - AT
Central Excise
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Marketability - making of cream within their factory by mixing ingredients like sugar, Vanaspati, milk powder, flavour etc. to be used in the Manufacture of cream biscuits under Parle brand name on job works bases - Revenue failed to prove the test of marketability - demand set aside - AT
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Denial of CENVAT Credit - Credit on Coated Pipes (capital goods) used as replacements in a pipeline used for transportation of natural gas from Gail's take off point to Appellant s factory for the manufacture of finished goods - credit allowed - AT
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Demand of duty on goods manufactured by the Job worker - Assessee received goods under Notification No.214/86 and not returned the same - liability of payment of duty would fall within the suppler of the goods and not on the recipient - AT
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Clandestine removal of goods - pages / records seized during search - onus to prove - Only for the reason that M/s Arhat an unregistered unit issued few invoices under same serial number cannot be interpreted to the extent that the goods manufactured by M/s SUTPL were cleared under the invoice of M/s Arhat. - AT
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Confiscation of goods - Excess stock found which was not recorded in RG-1 Register - search was conducted as on 10/3/2011 - RG-1 Register was updated only till 28/2/2011 - Contention of the appellant that there is no intention to evade the payment of duty is not tenable - redemption fine and penalty confirmed but reduced - AT
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Denial of benefit of Notification - wrong mention of notification no. in the declaration - merely because the number of the Notification mentioned in the declaration was other than the number of the correct Notification, respondent could not be denied the benefit of the said Notification - HC
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Failure of the DGFT to pass the orders as per the directions of the Apex Court - No endeavour has been made to seek an extension and for passing an order or taking a decision in terms of the order of this Court referred above. - Cost of ₹ 1 lakh imposed - HC
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Benefit of SSI Exemption - Use of Brand name of others - German company, has assigned the trade mark 'BILZ' in favour of the assessee under Agreement dated 18.06.1996 with right to use the said trade mark in India exclusively. Because of the aforesaid assignment, the assessee is using the trade mark 'BILZ' in its own right as its own trade mark - Exemption allowed - SC
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Valuation of goods - Related person and favoured buyer - mutuality of interest - CESTAT was not right in holding that there was no mutuality of interest and, therefore, supplier on the one hand and the purchaser on the other hand were not related persons - SC
Case Laws:
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Income Tax
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2015 (10) TMI 2122
Disallowance of deduction of the write off of inventories - Whether the Tribunal was justified in law in not passing the reasoned order in respect of claim of the appellant on the facts and circumstances of the case? - Held that:- Since the appeal filed by the assessee for the assessment year 2002-03 on which reliance was placed was partly allowed by giving certain benefits to the assessee, the order passed by the Tribunal dismissing the appeal and the Miscellaneous petition filed by the assessee, relying upon the order made for the assessment year 2002-03 is not sustainable. Hence, the Tribunal is directed to reconsider the matter afresh for the assessment year 2004-05, in the light of the order made in [2009 (2) TMI 248 - ITAT, BANGALORE ] in accordance with law. Accordingly, without answering the substantial questions of law, this appeal is allowed and remanded to the Tribunal for considering the matter afresh, in accordance with law.
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2015 (10) TMI 2121
Addition under section 36 - amount utilized the borrowed funds for specified persons (related parties) - outstanding sundry debts against the persons namely Aayush Shah, Anika and Yugam who were the persons defined under section 40A(2)(b)on which no interest was charged - Held that:- Admittedly, the assessee, though, had surplus funds but from the facts on file it is clear that the assessee had used the overdraft funds for settlement of accounts of the persons specified under section 40A(2)(b) of the Act. However, the other facts remain that the assessee had also received interest from the FDR pledged with the bank in relation to the overdraft facility. Under the circumstances, the disallowance, if any, in our view, should be restricted to net interest paid on the overdraft amount in relation to payments made by the assessee on behalf of the specified persons under section 40A(2)(b). We accordingly restrict the disallowance to the extent of net interest paid by the assessee on overdraft account. Partly decided in favour of the assessee. Depreciation on stock exchange card - Held that:- Tribunal in the case of "Pavak Securities (P) Ltd. vs. ITO" [2013 (9) TMI 608 - ITAT MUMBAI] wherein held when the membership ceased to exist and in lieu of the card, new asset came into existence i.e. 1000 shares as well as rights to trade and clearing in the stock exchange and the acquisition of the cost of trade and clearing has been provided to be nil as per proviso to section 55(2)(ab) of the Act, then the entire cost of membership as stands in the books of accounts of the assessee would be treated as cost of acquisition of 1000 shares which is not a depreciable asset and hence the claim of the assessee to claim depreciation on demutualization or corporatization of the stock exchange card would not be justifiable. Thus it is held that the assessee is not entitled to depreciation on the BSE card. - Decided against assessee.
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2015 (10) TMI 2120
Taxation on amount received on family settlement - accrual of income - Held that:- Shares of M/s. Sea Princess Hotel and Properties ltd. were transferred lower than the book value and the impugned gift was not genuine is also not substantiated and also not borne out of facts, because unless and until the family members agree by way of family settlement, it cannot go through because there may be possibility of compensating the value in either terms of money or by providing equivalent share in another property but fact remains that the source of the impugned receipt has been duly explained. The family is consisting of businessmen/businesswomen and all the members are aware about the market value of the total property and how to safeguard their interest in a best manner, therefore, there is no question of understatement. Even, if it is presumed that the valuation was understated, it can be of the total property and not of the single property. Still fact remains that the entire property was in existence at the time of partition in which concerned family members were having their interest/shares, therefore, it was clearly a family settlement. Therefore, the family arrangement is not taxable and no addition was warranted on the income which never arose to the assessee. As discussed earlier, the entire property was already in existence having common shares and by way of the mutual settlement only the respective shares were determined. - Decided in favour of assessee.
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2015 (10) TMI 2119
Power of CIT(A) to enhance the assessment u/s. 251(2) - enhancement in the sale consideration for the computation of capital gain - Held that:- CIT(A) issued notice u/s. 251(2) regarding enhancement in the sale consideration for the computation of capital gain is based on the sale of another floor of the same property, i.e., second floor. The assessee has placed no material on record to substantiate the sale proceeds of basement declared by it and consequential capital loss. The value of property declared by the assessee is based on circle rate. The assessee also failed to substantiate its stand by any cogent evidence on record that the area in which the property was located, was a flooded area. No certificate or evidence from Municipal Corporation is available on record to justify stand of the assessee and the value declared by him. On the other hand, the ld. CIT(A) keeping in view the sale value of second floor of same property and ratio of utility between basement and second floor of the property, appears to have given reasonable rebate while determining the sale value of basement at ₹ 1,58,25,000/- and after deducting indexed cost of property of ₹ 27,32,360/- worked out the capital gains at ₹ 1,30,92,640/- as against ₹ 19,09,720/- computed by the Assessing Officer. Accordingly, we find no justification to disturb the enhancement made by the ld. CIT(A) of ₹ 1,20,82,920/- to the total income of the assessee. Decided against the assessee. Addition on cash deposit in the bank account of the assessee - Held that:- We find that the assessee has submitted cash deposit and withdrawals statement which shows that the assessee has shown to have withdrawn the cash by issuing cheques, but it is not clear from the statements that the amounts deposited by the assessee on various dates was the same as withdrawn. The assessee also could not unveil the purpose for which the cash was withdrawn and then the same was deposited with the same bank. We, therefore, find no justification to interfere with the finding of the ld. CIT(A) that it is absurd to believe that somebody will withdraw cash from the bank, keep it idle with him and then deposit the same in the bank, particularly when no purpose for withdrawal was declared by the assessee before the authorities below. - Decided against the assessee.
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2015 (10) TMI 2118
Addition on account of the share investment - It is the contention of the assessee is that if an opportunity is granted, the assessee would be able to satisfy the AO with regard to the source of the money - Held that:- After considering the totality of the facts and material placed before us, we are of the considered view that the assessee should be granted opportunity to prove the source of funds utilized for the purpose of making investments into the share transactions. To meet the ends of justice, we restore this issue back to the file of AO decision afresh. - Decided in favour of assessee for statistical purposes.
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2015 (10) TMI 2117
Estimation of income - method adopted by Assessing Officer of evaluating G.P. on the basis of G.P. ratio of the previous two years - AO rejecting the return of income filed by the assessee and disregarding the book result shown therein and estimating the income under the head 'business' at ₹ 57,95,266/- as against the loss of ₹ 18,74,33,043/- as shown by the assessee in the return of income filed - CIT(A) deleted the addition - Held that:- Details of party-wise sales and purchases made during the assessment year were also filed. Some confirmations of sales and purchases were also filed containing requisite particulars of the parties concerned i.e. name, complete address, PAN etc. The assessee also filed detailed note of justification for the loss suffered in business by the assessee during the year under appeal along with corroborative evidences and also citing the comparable case of other assessees having similar business and having suffered similar losses in the same year. In support of its claim of destruction of records due to water loging in the business premises caused by heavy rains on 8th July, 2009, the assessee filed affidavits and police complaint and copy of newspaper report. The Assessing Officer did not make verification of any of these documents, but disbelieved the same without bringing anything contrary on record. With regard to justification of the loss, the assessee had submitted evidences showing that the rate of Nickel (the main ingredient of non ferrous metal traded by the assessee), crashed consistently throughout the year and came down from ₹ 30,000/-per M.T. in April 2008 to ₹ 9,000/- per M.T. in March 2009, registering steep fall of more than 70%. The assessee had filed evidences in the form of quotations from London Metal Exchange, in support of his assertion. It was submitted that most of the sales have been shown by assessee out of the opening stock held, and all the purchases were made in the earlier years at higher rate prevailing at that time. Due to the aforesaid steep fall of more than 70% in the rate of goods traded by the assessee, gross loss was incurred by the assessee. The documentary evidences submitted, the details of which have been reproduced in this order above, would show that on the basis of these documentary evidences, the Assessing Officer could have very well satisfied himself to clear any doubts. During course of hearing, ld. D.R. could not bring anything contrary on record to controvert these facts, he could not point out anything wrong in the aforesaid documentary evidences submitted by the assessee before the Assessing Officer as well as before the CIT(A). In addition to that, assessee has also given justification for incurring loss during the year due to the reasons which were beyond his control i.e. a drastic crash in the global market, world over. None of these facts have been controverted by the Assessing Officer in the assessment proceedings or by Learned Departmental Representative at this stage. Thus ld. CIT(A) correctly deleted the addition made by the Assessing Officer. - Decided in favour of assessee.
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2015 (10) TMI 2116
Undisclosed investment in property purchased - addition confirmed purely on the basis of DVO report - Held that:- There was no evidence or material to suggest that the extra consideration has passed on from the assessee to the seller and no other material was available with the AO except DVO’s report for making addition under section 69B of the Act. Hence, respectfully following the judgments of the Hon’ble Jurisdictional High Court in the case of CIT Vs. Puneet Sabharwal (2010 (12) TMI 846 - Delhi High Court) and other decisions cited, we hold that no addition can be made in this case. - Decided in favour of assessee.
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2015 (10) TMI 2115
Transfer of capital asset - determination of capital gain - whether capital asset transferred by the assesses is not agricultural land but “assignment of right to obtain the conveyance” of the agricultural land - Held that:- We find the Ld.CIT(A) has rightly observed that the assessee in the instant case have transferred their right to obtain the conveyance of immovable property to the purchaser C&M Farming Ltd. Further, para 10 of the agreement between the assessees and C&M Farming Ltd. dated 13-07-2004 also shows that the assessees have undertaken to transfer land to the purchaser or to anyone named by the purchaser. Further, the right of receiving compensation from MHADA in case of acquisition of land has been granted to the purchaser company in accordance with para 11 of the agreement. Para 12 of the agreement says that the sellers have undertaken to transfer the land without any encumbrance. The assessees have also undertaken to comply with all the procedural requirement for getting the land transferred in the name of the purchaser for which he has paid full consideration of ₹ 2.75 crores to the respective parties. Under the aforementioned circumstances, we do not find any infirmity in the order of the CIT(A) holding that the capital asset transferred by the assesses is not agricultural land but “assignment of right to obtain the conveyance” of the agricultural land. The various decisions relied upon by Ld.CIT(A) also supports the case of the Revenue. Under these circumstances, we find no infirmity in the order of the CIT(A). We accordingly uphold the same. - Decided against assessee.
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2015 (10) TMI 2114
Disallowance of Commission - stand of the assessee is that in the earlier assessment years i.e. assessment years 2006-07, 2007-08 and 2008-09 the payment of commission has been allowed in scrutiny assessment proceedings - Held that:- The Commissioner of Income Tax (Appeals) in his order has given a finding that the assessee has inflated its brokerage expenses by paying commission to his sons. There is no evidence on record of rendering extra services by sons/nephew in sale of cotton bales to justify receipts of commission. The sale/purchase of cotton bales is effected through Adatiya to whom a reasonable commission/brokerage is given. In the interest of justice, we deem it appropriate to remit this issue back to the Assessing Officer for fresh adjudication. The assessee shall furnish documentary evidence in support of the contentions. - Decided in favor of assessee for statistical purposes. Disallowance u/s. 68 - Held that:- The assessee had shown credit balances in respect of certain persons/farmers from whom the assessee has allegedly purchased raw cotton. During the course of assessment proceedings the assessee was directed to produce the said creditors. However, none of the persons (alleged creditors) appeared before the Assessing Officer. The assessee filed confirmation letters without any corroborative evidence. Before the Tribunal, the assessee has placed on record photocopies of the transaction receipts to show that the assessee had dealt with the aforestated persons. In view of the additional documents placed on record, we deem it appropriate to send the file back to the Assessing Officer for verification of same.- Decided in favor of assessee for statistical purposes. Addition u/s. 40A(3) - making payments in excess of ₹ 20,000/- by bearer cheques - Held that:- The Commissioner of Income Tax (Appeals) in the impugned order has given a specific finding that the examination of the cheques revealed that the assessee’s sons Nirav Deepak Poldiya has signed on the back side of the cheque suggesting that he received the cash payments. The ld. AR has not been able to controvert this finding of the Commissioner of Income Tax (Appeals). The ld. AR of the assessee has not been able to show as to how the payment made to the persons named in the assessment order as well as the order of Commissioner of Income Tax (Appeals) to whom the alleged payments are made are covered under the exceptions given in Rule 6DD of the Income Tax Rules, 1961. We do not find any infirmity in the findings of the Commissioner of Income Tax (Appeals) in confirming the disallowance u/s. 40A(3) of the Act. - Decided against assessee.
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2015 (10) TMI 2113
Revision u/s 263 - no enquiry and no application of mind for allowing huge amount as exempted u/s 11 - an order which is erroneous as well as prejudicial to the interest of Revenue - Held that:- Assessing Officer himself has observed in the assessment order that the assessee’s entire income is not eligible for exemption u/s 11 and even after making this observation, he has allowed deduction of two huge amounts u/s 11 of the Act and under these facts, it was held by learned CIT that the order of Assessing Officer is erroneous as well as prejudicial to the interest of Revenue. Regarding merit of allowability of exemption, he has not decided the issue and has asked the Assessing Officer to pass a de novo assessment order after examining all aspects and after providing reasonable opportunity of being heard to the assessee. None of the judgments cited by Learned A.R. of the assessee is rendering any help to the assessee and we have also seen that that the assessment order is erroneous as well as prejudicial to the interest of Revenue because of the observation of the A.O. in the assessment order that the entire income of the assessee is not exempt and his action of allowing deduction u/s 11 of two huge amounts and therefore, we find no reason to interfere in the order of learned CIT. - Decided against assessee.
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2015 (10) TMI 2112
Reopening of assessment - undisclosed change in shareholding pattern - claim of set off of brought forward business loss and depreciation denied - Held that:- A perusal of the return of income in particular exhibit-5 shows that the details of share holders PAN was given by the assessee under the head other information. Under the head ‘Other information’ details of equity shares are provided and statement of set off of unabsorbed losses and allowances brought forward from earlier years is given. As mentioned elsewhere pertaining to details in relation to the change in shareholding pattern was specifically explained as mentioned at para 6.5 of the order. Thus, the very material fact was available at the time of the original assessment proceedings. Therefore, the second condition is also fulfilled by the assessee as it has made available the material facts necessary for making the assessment. In the light of the reasons for reopening of the assessment, in our considered opinion, there is no reference to any failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. There is not even a whisper of failure by the assessee to disclose material facts. Therefore, there is no valid ground for reopening the assessment. We, accordingly, set aside the notice issued u/s. 148 of the Act and also the impugned assessment order. - Decided in favour of assessee.
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2015 (10) TMI 2111
Assessment u/s 153C - Undisclosed investment in payment of consideration towards purchase of land at village Kharigaon, Taluka & Dist. Thane - Held that:- The assessee had filed explanation and its version regarding the first draft agreement which has not been disproved by the Assessing Officer. Once the assessee had explained that the first draft agreement was never executed and also the reasons as to why it was not executed and also proved that the second draft agreement was made which was further corrected and improved and was finally acted upon, the burden shifted upon the A.O. to disprove the explanation offered by the assessee, which the A.O. has failed to discharge. The another pertinent fact is that the second draft agreement was also found during the search action and cannot be said to be an afterthought of the assessee. The Assessing Officer has failed to prove that any cash transaction had been undertaken between the assessee and the sellers of the land in question. No such evidence has been brought on record before us by the authorities below. In our view, the addition on the basis of unsigned, undated draft agreement, the figures written on which had been struck off, cannot be a basis of addition in this case, especially in the absence of any other incriminating or corroborating evidence of exchange of cash. So far as the addition on the basis of loose paper in relation to payment made to Sh. Mukund keni is concerned, the notable fact is that it has been mentioned in the lose papers that ₹ 60 lakh was paid by cheque and the other figures mentioned were ₹ 20 lakh by cheque and ₹ 1.50 crore by cash. The stand of the Assessing Officer has been that the amount of ₹ 1.50 crore was paid in cash. However, the Assessing Officer even could not prove the payment of ₹ 20 lakh which was also mentioned to be paid by cheque. Whereas, the assessee has explained that the originally ₹ 60 lakh were paid by cheque and out of which ₹ 40 lakh was received back by the assessee from Shri Mukund Keni and that the deal has not been finalized till date. When there is no evidence about the payment of amount of ₹ 20 lakh by cheque about which the investigation wing /search party has made thorough investigations, then the presumption about the payment of cash cannot be drawn under such circumstances. The additions solely on the basis of suspicion, how strong it may be, in our view, are not sustainable in the eyes of law. We therefore set aside the impugned additions made by the lower authorities. - Decided in favour of assessee.
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2015 (10) TMI 2110
Entitlement to eduction U/s. 10B on the unit established in SEZ - manufacture - in earlier years, the deduction claimed U/s. 10B was not allowed - disallowance of 25% of expenditure on earth development expenses taking into account the non-verifiable nature of the expenditure. - Held that:- Explanation 4 of section 10B makes it clear that the term ‘manufacture and produce’ as contemplated under section 10B is inclusive and not exhaustive. Therefore, considering the facts of the assessee’s case in the context of provision contained u/s 10B as well as in the light of ratio laid down by the Hon’ble Supreme Court in the case of Sesa Goa Ltd. (2004 (11) TMI 14 - SUPREME Court) and Instruction issued by the CBDT, we are of the opinion that the CIT(A) was correct in allowing the claim of deduction u/s 10B of the Act. - Decided in favour of assessee.
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2015 (10) TMI 2109
Penalty u/s 221(1) - outstanding demand on account of self assessment tax - CIT(A) reducing the penalty from 50% to 10% - Held that:- The assessee has paid the entire demand along with interest thereon by 29.03.2012. We are aware that the payment of the entire tax with interest shall not absolve the assessee from penalty provided u/s 221(1) of the Act. However, the penalty imposed u/s 221(1) of the Act should be reasonable considering the facts and circumstances of each case. The CIT(A) has passed a detailed speaking order for reducing the penalty to 10% of the outstanding demand. We are of the view that in the facts and circumstances of the case of the assessee, the penalty imposed at 10% of the outstanding demand for both the assessment years u/s 221(1) of the Act read with Section 140A(3) of the Act was just and fair and no interference in the order of learned CIT(A) is called for. - Decided against revenue.
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2015 (10) TMI 2108
Penalty levied under S.271C - non deduction of TDS - CIT(A) deleted penalty levy - Held that:- The provisions of S.271C are subject to the provisions of S.273B of the Act. As per S.273B of the Act, no penalty shall be leviable under the sections mentioned therein, if the assessee proves that there was a reasonable cause for the failure under the said provisions. In the present case the assessee has submitted an explanation for the defaults alleged against it, and even a perusal of the orders under S.201(1) and 201(1A) make it clear that the Assessing Officer has summarily raised the demands. It appears that assessee's explanation was not called for or was not considered in detail. From the narration of the assessee's explanation as given above, as find that most of the expenses like lorry hire charges, truck operating expenses, business promotion expenses, postage expenses etc. are not subject to TDS provisions. As regards the other payments, the assessee's explanation that it bona-fidely believed that the TDS provisions are not applicable to the assessee seems to be reasonable. In view of the same, find no reason to interfere with the order of the CIT(A) on this issue, particularly, as also there is no loss to the Revenue, as observed by the CIT(A) since the assessee has remitted the TDS from its own sources and the payees have also not claimed the credit for the same. - Decided in favour of assessee.
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2015 (10) TMI 2107
Capital gains tax - whether the amount received by the assessee from the sale of property, the title of which was acquired by way of adverse possession and which did not involve any acquisition costs, can be subjected to the capital gains tax or not ? - Held that:- The issue is now squarely covered by the direct decision of in the case of CIT vs. Star Chemicals (Bombay) Pvt. Ltd. (2009 (8) TMI 1143 - BOMBAY HIGH COURT) wherein while answering the question of chargeability of capital gains in relation to an asset/title which was acquired by way of adverse possession, has held that the Tribunal was right in holding that for want of acquisition cost, capital gains tax would not arise. Since a direct decision of the Hon’ble jurisdictional Court in relation to the chargeability of capital gain on asset acquired by way of adverse possession is available, hence, the same is binding upon this Tribunal. We therefore hold that no capital gain are chargeable to tax in relation to the asset acquired by way of adverse possession. - Decided in favour of assessee.
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2015 (10) TMI 2106
Additional depreciation on wind mill - assessee had made a claim in the revised computation of income statement filed before completion of assessment proceedings - Held that:- Admittedly, the assessee had missed the bus in the opportunity provided to him by the statute by filing the revised return within the time limit prescribed u/s 139(5) of the Act. However, that does not prevent the assessee from making its legitimate claims and its doors are not completely shut. The decision in the case of Goetze India Limited [2006 (3) TMI 75 - SUPREME Court] clearly states that consideration of the valid claim of the assessee other than by way of a valid return can be entertained by the appellate authorities and more so the ITAT. The Hon’ble Supreme Court in the case of CIT vs Kanpur Coal Syndicate (1964 (4) TMI 18 - SUPREME Court) had held that the powers of CIT(A) is co-terminus with that of the AO; that the First Appellate Authority has wider powers, in that “he can do what the ITO can do and can also direct him to do what he failed to do. “ . The question of limitation on the ld. AO would have no relevance in view of the wider powers of the First Appellate Authority. Reliance in this regard is placed on the decision of the Hon’ble Allahabad High Court in the case of Smt. Raja Rani Gulati vs CIT reported in (2011 (10) TMI 78 - Allahabad High Court ). We also find that the veracity of the claim of additional depreciation on wind mill was never disputed by the ld. AO. It is also seen that there was a specific query raised by the ld. AO during the course of assessment proceedings on the depreciation issue. The addition was made on the sole ground that no plausible explanation was offered by the assessee regarding the fact why it had not claimed the same in the revised return filed by him. We find that this issue on merits is now settled in favour of the assessee by the following decisions of the Hon’ble Madras High Court in the case of CIT vs VTM Limited [2009 (9) TMI 35 - MADRAS HIGH COURT]. Thus we allow the claim of additional depreciation on wind mill to the assessee - Decided in favour of assessee.
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2015 (10) TMI 2105
Short term capital loss - sale of plant & machinery as scrap - whether the assessee could not prove its motive i.e. for what purpose the plant and machinery was purchased and in which circumstances the same was sold immediately, after bearing such huge loss? - CIT(A) treating the loss as loss incidental to trade - Held that:- Undisputedly the assessee is not engaged in any such business activities in which these machineries can be used. The assessee in fact was engaged in construction of building, flats, etc. Therefore, the factory building was purchased by the assessee only for construction of the building and flats. At the most, the cost of machineries can be added in the cost of land purchased for raising flats and building. The machineries never became the part of business asset of the assessee, as the assessee was never engaged in any manufacturing activity. Therefore, the alleged short term capital loss as claimed by the assessee on sale of machineries cannot be allowed, as the machineries were never purchased for its use in the business of the assessee. The total cost of land may be increased by the alleged loss suffered in sale of machineries. In the light of these facts, we do not subscribe the view of the ld. CIT(A) on this issue and accordingly we set aside his order in this regard and restore that of the Assessing Officer. - Decided against assessee. Disallowance of interest and finance charge - CIT(A) deleted disallowance - Held that:- In the absence of any finding of the Assessing Officer that the borrowed funds were diverted for advancing interest free loans, no disallowance of interest payment can be made. We accordingly find no merit in the Revenue’s contentions. We, therefore, confirm the order of the ld. CIT(A) in this regard.- Decided against revenue. Disallowance of repair expenses - Held that:- Assessing Officer has made ad hoc disallowance of 20% of the repair expenses on the ground that repair expenditures are not open for verification, as vouchers were not produced. The disallowance was restricted to 10% by the ld. CIT(A). We find no justification to disturb the findings of the ld. CIT(A) in this regard. Accordingly, we confirm the order of the ld. CIT(A) on this issue .- Decided against revenue.
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2015 (10) TMI 2104
Registration u/s 12AA denied - charitable activity - construction of Dharmshala - as per the provisions of the trust deed only persons belonging to the Agarwal Community/Caste could become members of the Trust - Held that:- Following the ratio of the judgment of the Hon’ble Apex Court in Ahmedabad Rana Caste Association Vs. CIT (1971 (9) TMI 8 - SUPREME Courta), the registration u/s 12AA cannot be rightly refused. In this case, the Hon’ble Apex Court has held that the object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose it is not necessary that the object should be to benefit the whole of mankind or all persons in a particular country or State. It is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present. Similarly in the case of CIT Vs. Surji Devi Kunji Lal Jaipuria Charitable Trust (1990 (8) TMI 132 - ALLAHABAD High Court) that to make a purpose charitable, it is not necessary that it should be beneficial to the poor only and what is required is benefit to a section of the public as distinguished from specified individuals. Trust created for giving medical aid, social welfare, uplifting of poor members of the community and for giving financial and other help on the occasion of the marriage of the members of this community is for religious and charitable purposes. Respectfully following these two judgments and on the facts and circumstances of the case, we hold that the assessee trust is entitled to grant of registration u/s 12AA of the Act. - Decided in favour of assessee.
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2015 (10) TMI 2103
Entitlement for the claim of tax holiday U/s. 10A - AO noticed that that invoice issued on 31st March 2010 was cleared by STPI authority on 6 May 2010, i.e. in FY 2010-11, hence, the same cannot be considered as an export turnover for the FY. 2009-10. - The only dispute is with reference to treatment of such value as pertaining to next year on the basis of Softex form submitted. Held that:- The only condition for software exported from India to be considered in an year is receipt of consideration of sales proceeds within six months from the end of previous year (or within period extended by RBI) in convertible foreign exchange. Importing of any other condition such as furnishing of SOFTEX Form or obtaining of STPI clearance in the definition of 'export turnover' by the Ld. AO is completely unwarranted and against the industry practice. The legislature in its wisdom has provided a period of six months from the end of previous year for such collection. Thus, the procedural compliance in the course of collection of such export proceeds i.e. furnishing of SOFTEX Form in accordance with Para 6.C.3.1 and certification by STPI authority in accordance with Para 6.C.3.2 of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 within the stipulated period six months from the end of the financial year should not result in revenue from export of software made in FY 2009-10 to be treated as 'export turnover' of the subsequent year i.e. FY 2010-11. Considering the above, we are of the opinion that exports made vide invoice dt. 31-03-2010 has to be considered as part of the turnover of this year and AO’s action in excluding the same cannot be supported either on facts or on law. As stated earlier the proceeds of this invoice was already received during the year as advance. So the furnishing of form under FEMA is only a formality. Therefore, AO is directed to include the turnover and allow the deduction accordingly. AO’s action in excluding only from export turn over cannot be supported on the reason that if assessee has not exported the goods as claimed then, the total turnover also should not include the about amount. AO cannot exclude a part of the turnover only from export turnover while including the same in the total turnover. He should have excluded the same on the same reasoning which he has adopted for excluding the above invoice from the export turnover. This was not done for the simple reason that AO’s intention seems to be to restrict deduction U/s. 10A. Therefore, action of the AO cannot be justified at all. Since we have already adjudicated that the invoice of 31-03-2010 has to be considered as part of export turnover of the year, there is no need to adjudicate on this contention. The principle that whatever amount is excluded from export turnover has to be excluded from total turn is approved by the Hon‘ble Bombay High Court in the case of CIT Vs. Gemplus Jewellery India Ltd., [2010 (6) TMI 65 - BOMBAY HIGH COURT ] and also by Special Bench of ITAT in ITO Vs. Saksoft Ltd [2009 (3) TMI 243 - ITAT MADRAS-D]. - Decided in favour of assessee.
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Customs
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2015 (10) TMI 2132
Smuggling of goods or not - foreign marked gold – Alleged that goods were seized from waste paper box into which Shri Mahendra Bahadur (employee of Appellant) has hastly dropped the packet containing gold bars – Appellant contends that gold biscuits have been procured by him legally from M/s. Anand Sales Pvt. Ltd. - Confiscation of goods under Section 111(b) and (d) and penalties imposed thereafter under Section 112 – Held That:- On investigation by Customs Officer it was found that Shri Nand Kishore Modi of M/s. Anand Sales Pvt. Ltd. has confirmed the sale of 22 pcs. of gold biscuits to Shri R.K. Damani and also that the same has been procured by him from ABN AMRO BANK, Russel Street Branch, Kolkata - Recovery of goods was conflictingly shown to be from the pocket of Shri Mahendra Bahadur and as well as from the waste paper box – Confiscation set aside and goods handed over to the owner – No penalties imposed – Appeal disposed in favour of Appellant with consequential relief.
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2015 (10) TMI 2131
Goods not cleared on the basis of being hazardous – Custom cargo Service Provider demanded demurrage charges for releasing goods - Petitioner contends that he is not liable to pay demurrage charges; should be paid by customs authorities - Regulation 6(1) of the Regulations of 2009 bars Respondent no.4 from demanding demurrage charges on goods that were detained by customs authorities - Respondent No. 4 states that demurrage charges are paid on goods within a period of 7 days; further contended that neither delivery order nor endorsed invoices have been placed before Respondent till date; goods as such cannot be delivered to petitioner. Held that:- Provision of Section 45 read with the Regulation 2(b), 5 and 6 of Regulations of 2009 states customs cargo service provider is responsible for providing storage facilities; is entitled to charge demurrage charges but not in case where goods are detained, seized or confiscated by customs department - Consequently, permitting the cargo to remain in the customs area for months on the pretext of seeking a clarification from the MOEF with regard to the nature of the goods being hazardous or not appears to unjustified and arbitrary, especially when the petitioner made a specific application for shifting the goods to a warehouse in terms of Section 49 of the Act. - By not passing any orders on the petitioners application for provisional assessment or by not passing any orders on the application of the petitioner under Section 49 of the Act for storage of the imported goods in a warehouse pending clearance would amount to detention of the goods. – Petitioner granted relief; - allowed to clear goods without payment of demurrage charges upto the period 15th January, 2015; handling or demurrage charges leviable subsequent to 15th January, 2015 till the actual clearance – Decided in favour of Petitioner.
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2015 (10) TMI 2130
Illegal possession and transport of 27 kgs of heroin - Whether accused convicted in year 2000 can be called upon to face sentence after 15 years of acquittal? - Appellant contends that search of baggage of accused and seizure of contraband took place in a public place; compliance of Section 42(2) not required, Section 43 is applicable - No breach of Section 57; with evidence of P.W.2 and P.W.5, substantial compliance with provisions of Section 57 - Held That:- Violation of Section 42(1) and (2) of NDPS Act; search and seizure have become suspicious - Accused found entitled to be acquitted – Decision made in the case of Koluttumottil Razak vs State Of Kerala [2000 (2) TMI 793 - SUPREME COURT OF INDIA] followed – Decided in favour of Revenue.
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2015 (10) TMI 2129
Grant of extension of export obligations – Improper application filed - Appellant contends that committee has failed to accede to the request of petitioner to club licences and request for correction of wrong reference number was rejected – No opportunity for personal hearing given – Respondent contends that opportunity was granted but no representations were made by petitioner as per Para 2.59 of FTP and no application was filed under Appendix 2K as per PH in ANF2E – Held That:- Request for hearing granted with condition of representation to be made in terms of Appendix 2K as per PH in ANF2E within 2 weeks – All grounds to be raised by Petitioner; personal hearing be granted within a period of 4 weeks thereafter – Speaking order to be passed after the hearing within 4 weeks – Decided partly in favour of Appellant.
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2015 (10) TMI 2128
Warehousing of goods for more than one year - Imported capital goods for installation of Power Plant exempted from Customs Duty till 15th January, 2017 – Extension of time limit preferred for goods retained in warehouse under Section 61 - Provisional mega power status certificate is given on 16th January, 2012 – Held That:- Warehoused goods in private warehouse with permission of Respondents under Section 58 is exempted from payment of customs duty; there is valid period of exemption upto 15th January, 2017 - Respondents directed not to seize the warehoused goods till the next date of hearing.
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2015 (10) TMI 2127
Whether the authorities under Customs have power to detain passport of a person against whom proceedings are initiated under Customs Act, 1962? – Petitioner granted bail on conditional surrender of passport while executing bond – Held That:- Customs Authorities have power to detain the passport only if it is relevant for any enquiry; reasons for detention have not been stated as such – If no reasons found for the detention, same shall be handed over to the assessee – Decided conditionally in favour of assessee.
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2015 (10) TMI 2126
Waiver of pre-deposit and stay of recovery - Appellant showed willingness to comply with the condition with submission of demand draft - Tribunal found the application hopelessly time barred - Whether Tribunal is justified in dismissing the appeal despite of the fact that thee is no time limit for restoration of appeal? - Held That:- Tribunal could have rendered substantial justice by giving an opportunity to Appellant and appeal could have been restored - Tribunal shall restore and revive the appeal after encashing the DD and if submission of costs quantified at ₹ 25,000/- done within two weeks - Decided conditionally in favour of assessee.
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2015 (10) TMI 2125
Waiver of pre-deposit and penalties - Appellant contends that there is no discussion of their cases for stay in the entire body of the order - Held That:- Reason behind the Tribunals requiring the appellant to make pre-depsit is not clear - Order set aside and matter remanded back to Tribunal to pass fresh order - Decided in favour of Assessee.
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2015 (10) TMI 2124
Release of Bank guarantee deposited under protest – Petitioner imported “shoulder type power weeder AHM200” - Quash two seizure mahazars and provisional release order – Sets of imported items were seized under mahazars – Respondent ordered provisional release subject to execution of bond for full value and furnishing of bank guarantee for ₹ 1.5 Crores. Held That:- Release of goods on fulfilment of conditions of the execution of bond, furnishing bank guarantee for Rupees One Crore, in three instalments and furnish bank guarantee for ₹ 50,00,000/- ; 50% of seized goods to be released - Bank guarantee for further sum of ₹ 25,00,000/-; 25% of goods to released and further bank guarantee for value of ₹ 25,00,000/-; remaining goods shall be released – Conditions are subject to final outcome of the proceedings and petitioner at liberty to avail remedy – Decided in favour of Revenue.
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2015 (10) TMI 2123
Release of goods confiscated under Section 114 - Delay in adjudication pursuant to SCN - Petitoner contends that inordinate delay by Customs in taking further action has caused grave prejudice and pleads for provisional unconditional release of goods - Respondents contend that its a case of over-invoicing and petitioner is seeking undue advantage by way of unjustified drawbacks - Held That:- Issue of SCN was delayed; goods were sought to be exported in February 2012, notice was issued on 13.12.2013 - CBEC circular is not universally applicable and same talks about genuine exports which itself is under dispute in this case - Respondents directed to adjudicate the matter as expeditiously as possible and in any event within three months - Decided partly in favour of Revenue.
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Service Tax
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2015 (10) TMI 2161
Delay in order - SCN issued on 23rd January, 2009 has been adjudicated by order-in-original dated 23rd May, 2014; inordinate and unexplained delay alone is enough to vitiate impugned order – Held That: - Impugned order is set aside and quashed - The show cause notice can be adjudicated afresh and in accordance with law within a period of 30 days from the date of appearance or date of conclusion of arguments. – Matter remanded back - Decided against Revenue.
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2015 (10) TMI 2160
Imposition of penalty under Section 76 – Services of commercial coaching or training centre – Whether the adjudicating authority has correctly dropped proceedings initiated by SCN for imposition of penalties for non-discharge of service tax liability by Respondent? – Held That:- Section 80 empowers adjudicating authority to set aside penalties for justifiable reason – Found justifiable reason for non-discharge of service tax liability – Reasoning given by adjudicating authority for non-imposition of penalties is correct and acceptable – appeal rejected and impugned order upheld – Decided in favour of assessee.
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2015 (10) TMI 2159
Liability of Service Tax – Management and Business Consultancy - Appellant discharged liability along with interest; penalties pleaded to be set aside – Further contended that appellant can avail CENVAT Credit and liability needs to be discharged under Reverse Charge Mechanism – Held That:- Services received by appellant from their associates was utilized for manufacturing of final products have been discharged off the central excise duty - Appellant could have taken credit of service tax paid under Reverse Charge Mechanism; penalties imposed are unwarranted and provisions of section 80 should have been invoked – Decision made in the case of Essar Steel Ltd. [2008 (11) TMI 105 - CESTAT, AHMEDABAD] followed – Decided in favour of Appellant.
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2015 (10) TMI 2158
Works Contract – Liability of service tax prior to 1.06.2007 – Appellant contends that execution of construction was undertaken under a works contract – Whether payments received after 01/06/2007 is in respect of continuing work contract or completed work contract? - Held That:- Service tax liability under works contract is leviable w.e.f. 01/06/2007 and the same cannot be vivisected into different services prior to 2007 – Decision made in case of Commissioner of Central Excise & Customs vs. Larsen &Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] followed – Matter remanded back to adjudicating authority for conclusion on payments – Decided partly in favour of assessee.
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2015 (10) TMI 2157
Liability of Service Tax on deemed export of services rendered to sister concern which is 100% EOU – Claimed exemption under Notification No. 21/2003-ST – Appellant contends that services provided to sister concern are secondary services and same are not leviable to service tax as per CBEC circular No. 56/5/2003-ST – Revenue contends that circular is not applicable in absence of any evidence – Held That:- Services rendered have been declared as export of services in cases such as SGS India Pvt. Ltd. [2011 (2) TMI 54 - CESTAT MUMBAI] and Repro India Ltd. Vs UOI [2007 (12) TMI 209 - BOMBAY HIGH COURT] and service tax is not leviable on them – Issue is no more res-integra; we hold that impugned order is unsustainable and liable to be set aside – Decided in favour of assessee.
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2015 (10) TMI 2156
Waiver of Pre-deposit - Failure to deposit the said amount resulted in dismissal of their Appeal without going into the merits of the case – Appellant contends that he is not in a position to pay the amount directed by the ld. Commissioner(Appeals) but still can deposit certain amount out of it – Held That:- Ld. Commissioner(Appeals) after recording compliance would proceed to hear the case on merits and reasonable opportunity of hearing be granted to the Appellant – Appellant allowed to deposit the reasonable amount pleaded by him.
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2015 (10) TMI 2155
Extension of period of stay – appeal was not taken up for hearing after passing of Stay Order and there is no negligence on his part for hearing of the appeal – Held That:- Appeal was not taken for hearing as there is huge pendency of the appeals - Extension of stay granted till the disposal of the appeal – Decided in favour of the Appellant.
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2015 (10) TMI 2154
Import of services - reverse charge - assessee paid the amount to foreign companies for providing service under the category of Intellectual Property Right - Held That:- Amount paid by assessee was as fees for services rendered by non-resident service provider - Services provided to assessee outside India become taxable service as per Section 66 A of the Finance Act, 1994 - Respondents are restrained from levying service tax for the period from 1-3-2002 till 17-4-2006 - Demand of tax and penalties not sustained - Appeal of revenue rejected - Decision made in the case of Indian National Ship-owners Association Vs Union of India [2008 (12) TMI 41 - BOMBAY HIGH COURT] followed - Decided in favour of assessee.
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2015 (10) TMI 2153
Demand of service tax - Appellant contends that it has paid the service tax on the actual receipt and duly submitted reconciliation statement with minor variations - Held That:- appellant did not submit any evidence to show that it had actually paid service tax on the proceeds actually received by them and that the receipt shown in the balance sheet did not represent the actual realisation. - The act of non-furnishing of information by the appellant amounts to suppression of facts - Demand confirmed - Decided against the assessee.
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2015 (10) TMI 2152
Waiver of Pre-deposit of penalty under Section 77 & 78 of Finance Act, 1994 – Petitioner contends that service tax liability was discharged before the issue of SCN and there was no intention whatsoever to evade payment of Service Tax – Further contends that there was a misunderstanding of the conditions mentioned in the contract on payment of Service Tax leading to a delay in payment of the same and offers to make some payment at this stage – Held That:- Deposit of certain amount at this stage seems reasonable and same would waive balance dues and its recovery stayed during the pendency of the Appeal – Stay granted conditionally.
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2015 (10) TMI 2151
Refund of CENVAT Credit - Export of Services - Revenue denied refund on grounds that it is specifically governed by Notification No.9/2009-ST and appellant should have chosen that route instead of submitting its claim under Rule 5 of Cenvat Credit Rules, 2004 - Appellant contended that such provision does not take away the right to get refund under Rule 5 of Cenvat Credit Rules, 2004 - Held That:- Rule 5 is an integral part of statute and thus supplemental provision does not override fundamental provision - Revenue ought not to deny the route of processing refund through section 11B of the Central Excise Act, 1944 - Refund is due to and admissible to appellant - Decided in favour of assessee.
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Central Excise
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2015 (10) TMI 2150
Valuation of goods - Related person and favoured buyer - mutuality of interest - Determination of transactional value - As far as M/s. Haldyn is concerned, it is owned by the Shetty group and the Mehta group who subscribe 52 per cent and 48 per cent shares respectively in the said company. On the other hand, M/s. Travin, one of the purchasers, is wholly owned by the Shetty group and other three firms are wholly owned by Mehta group. Thus, from the aforesaid, it is argued by Mr. Jaideep Gupta, learned senior counsel appearing for the Revenue, that since M/s. Haldyn on the one hand and the four purchasers on the other hand belong to same group(s), the mutuality test automatically stands satisfied. - where the two companies/firms etc., belong to the same group then the test of mutuality is established and satisfied. In a sense, the Court has torn the corporate veil thereby pointing out that such family concerns would be beneficiaries in the affairs of each other. Held that:- CESTAT was not right in holding that there was no mutuality of interest and, therefore, supplier on the one hand and the purchaser on the other hand were not related persons. Insofar as the price manipulation is concerned, i.e., sale of the goods by M/s. Haldyn to the aforesaid purchasers at a depressed price, the same has been established on record on the basis of plethora of evidence tendered by the Revenue which has been discussed in detail in the order of the Commissioner - Impugned order is set aside - Decision in the case of Collector of Central Excise, Ahmedabad v. ITEC (P)Ltd., Bombay [2002 (9) TMI 106 - SUPREME COURT OF INDIA] followed - Decided in favour of assessee.
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2015 (10) TMI 2149
Benefit of SSI Exemption - Use of Brand name of others - Notification No. 1/93 dated 28.02.1993 - Held that:- Respondent is using brand name 'BILZ' of a foreign company which makes the respondent ineligible to seek exemption under the aforesaid Notification. However, it has come on record that the foreign company, viz., M/s. Otto Bilz Wekzugfabrik GMPH & Co., a German company, has assigned the trade mark 'BILZ' in favour of the assessee under Agreement dated 18.06.1996 with right to use the said trade mark in India exclusively. Because of the aforesaid assignment, the assessee is using the trade mark 'BILZ' in its own right as its own trade mark and therefore, it cannot be said that it is using the trade mark of 'another person'. We, thus, are in agreement with the view taken by the Customs, Excise and Service Tax Appellate Tribunal that the assessee would be entitled to the aforesaid Exemption Notification. - show cause notice dated 31.03.1999 which pertained to the period July, 1997, to March, 1998, is held to be time barred by CESTAT and further holding that the Revenue could not avail the benefit of proviso to Section 11A of the Central Excise Act. Finding of the CESTAT on this issue is also without any blemish. - Decided against Revenue.
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2015 (10) TMI 2147
Denial of rebate claim - Suppression of production by the processor of textiles - Violation of principle of natural justice - Notification No.31/98, dated 16.2.1999 - Held that:- Appellate authority has nothing but dissected from its own earlier order, dated 01.8.2006 wherein, as already stated, having discussed the issue in detail by following the rulings of the Apex Court in the matter of audi alteram partem, directed the lower authority to provide an opportunity to the petitioner to peruse the relied upon documents/personal hearing. It shows that the authorities were fully satisfied than the aggrieved party. It is pertinent to note that there was no change in the circumstances between the first round of orders of the authorities and the present impugned orders and it appears that what are all left to be considered, were considered and passed the present orders when the petitioner approached on second time. Therefore, it is not fair and appropriate for the appellate authority to dissect from its own earlier order and come to contrary conclusion, that too at first stage, giving relief to the aggrieved party and at later stage, taking away such relief and if it is allowed, in my opinion it would certainly lead to travesty of justice as it amounts to violation of principles of natural justice. - Impugned order is set aside - Decided in favour of assessee.
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2015 (10) TMI 2145
Failure of the DGFT to pass the orders as per the directions of the Apex Court - No endeavour has been made to seek an extension and for passing an order or taking a decision in terms of the order of this Court referred above. - Held that:- Court do not countenance such state of affairs and particularly from the Directorate of Foreign Trade, the Director General of Foreign Trade or the Joint Director of Foreign Trade having his office at Mumbai. In the circumstances, we grant the time prayed but on the condition that the respondents shall pay costs, quantified at ₹ 1 lakh within four weeks from today to the petitioner. We refrain from imposing personal costs. The respondent No.1 – Union of India / Central Government is free to recover the costs from either the then Director General of Foreign Trade or the Joint Director then functioning for the lapses on their part in complying with the orders and directions of this Court and thereafter creating difficulties for the Union of India/ Central Government. - Petition disposed of.
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2015 (10) TMI 2144
Denial of benefit of Notification - wrong mention of notification no. in the declaration - conditional exemption under notification No. 49/2003, dated 10th June, 2003 - Held that:- Before first clearance, the respondent industry submitted a declaration with the appellant holding out that it is seeking to take advantage of the said Notification, but did not mention the number and date of the said Notification. Excise Department, on receipt of the said declaration, duly understood the purport thereof and proceeded on the basis that the said declaration has been submitted under the said Notification and before first clearance. In the declaration, the number of the said Notification and the date thereof was not mentioned, instead the number of some other Notification and date thereof crept in. - The fact remains that there is no dispute that the declaration was submitted before the first clearance. There is also no dispute that the purport of the declaration was to take benefit of the said Notification. The fact remains that even after receipt of the said declaration, Excise Department proceeded on the basis that the purport and intent of the said declaration was to take advantage of the said Notification. That being the situation, merely because the number of the Notification mentioned in the declaration was other than the number of the Notification mentioned above, respondent could not be denied the benefit of the said Notification. - Decided against Revenue.
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2015 (10) TMI 2143
Clandestine removal of goods - Penalty for abetment - Penalty under Rule 26 - Held that:- imposition of penalty under Rule 26 has been decided based upon the evidences available and the sufficiency of such evidences for imposition of penalty under Rule 26. - Penalty Imposed on 31 applicants is decided on the basis of evidences. - Appeal disposed of.
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2015 (10) TMI 2142
Denial of SSI Exemption - manufacture of welding electrodes - Clandestine removal of goods - Imposition of penalty - Held that:- It is an admitted fact that all the 12 companies had bank accounts and transactions were made through cheques/DDs. It is not coming out from the show cause notice or the impugned order whether any effort was made through the banks to find out the precise address and the persons behind them who has withdrawn the money given to these 12 companies/firms. We also note that all these firms were registered with the Sales Tax department and also had filed the sales tax return. It is stated in the show cause notice that these firms were mainly engaged in the trading of coal. In our view, if the department had been able to find out that these 12 companies were involved in the trading of coal, it should have been possible for the department to locate the companies and record the statements of the proprietors to find out from whom the said supplier companies have purchased the welding electrodes. Results of such investigation could have helped in arriving the correct and true factual position. No enquiries have been made with the buyers of welding electrodes of the three marketing companies. If enquiries were made at least with some buyers and it was found that the buyers have received the goods carrying the brand name of appellant No.1 alone, perhaps the case of the Revenue would have been on much stronger footing. - In the absence of these details, it cannot be concluded with certainty that all the goods that have been sold by the marketing companies were manufactured by appellant No.1 and appellant No.1 alone and were representing their unaccounted production. In the absence of details of procurement of these two critical inputs (wire rods and rutile) and input-output correlation as also the factors mentioned earlier, we are of the view that the Revenue has not discharged burden of proving the quantum of clandestine production and clearance of the final product. We may hasten to say here though we are of the view that there are pointers to indicate that the appellants have indeed indulged in the clandestine clearance of the goods without payment of duty, however, it is equally important to have a reasonable if not correct quantity and value of the goods clandestinely cleared. Sometimes it may be difficult to have the correct figures but in such cases the estimation has to be based upon a very very reasonable basis. In view of the above analysis, we are of the view that the demand raised in annexure-I of the demand notice does not survive and we accordingly set aside. In the absence of any proof of transportation or even admission in their statements, in our view, it will not be appropriate to assume that rutile/illmenite covered by the cases listed in the show cause notice had come to the factory of appellant No.1 and thereafter used in the production of welding electrodes which were cleared clandestinely. There are number of other raw materials and there are few evidences which indicate that some other raw materials had come to appellant No.1. However, these are few stray cases and do not account in substantial way to the clandestine clearance of quantity alleged in the show cause notice. These observations are applicable for demands covered by annexure-I as also annexure-V - welding electrodes manufactured by appellant No.1 were manufactured under the cover of documents of Vidarbha Enterprises and the said sale is not accounted for in the statutory records of appellant No.1. It was also observed that the documents of Vidarbha Enterprises were also having the same serial number and the said documents are also not recorded in the books of account of either Vidarbha Enterprises or appellant No.1. We also note that in the statements, the Directors have admitted that they had clandestinely cleared the goods in the name of marketing agency and as noted earlier, there are indications that the appellants had received the unaccounted raw material and manufactured and cleared the goods unaccounted. We are, therefore, of the view that the demand made in this annexure is required to be upheld. Revenue has gone by the statement of Shri T.K. Rajgopal who has stated that he has sold about 400 MT of rutile to appellant No.1. We find that the Revenue has not found the details from the bank account of Rhodonite that in how many cases the drafts were made by depositing the cash amount by Shri Sanjay Malu. Further, on number of occasions drafts have been made from the account of Orange City Traders for which the goods were supplied by Indian Rare Earths Ltd. to Rhodonite, Sanjhi Foodco and Ayush Enterprises. We find that no attempt has been made to find out which of these consignments of Rhodonite were sold to appellant No.1. Neither Shri T.K. Rajgopal has been asked these details. All that Shri Rajgopal stated that he sold about 400 MT of rutile to Shri Poonamchand Malu. We also note that Shri Poonamchand Malu in his statement has denied this part of the statement of Shri T.K. Rajgopal and he has stated that he has purchased few consignments through broker alone. Thus there is a vast difference between what is admitted purchase of rutile from Rhodonite as claimed by Shri Sanjay Malu or Shri Poonamchand Malu As far as the show cause notice dated 21.11.2003 is concerned, we set aside the demands covered by annexure-I, annexure-IV and annexure-V. The demands raised in annexure-II and annexure-III are upheld. Coming to the penalty amount, the penalty imposed under Section 11AC of the Central Excised Act, 1944 read with Rule 25 of the Central Excise Rules, 2002 is reduced to the duty amount covered by annexure-II and III - there is no evidence that the unit would have crossed SSI exemption limit, we reduce the fine in lieu of confiscation to ₹ 1,00,000/-. The unaccounted drawn wire rods were also not recorded in any books of account. The confiscation is in order and the fine imposed is not on the higher side and the same is upheld. As far as penalty under Rule 26 on appellant No.2 is concerned, in our view, without any evidence whether the turnover of appellant No.2 would cross the SSI exemption limit and also keeping in view the duty involved on the goods seized, we reduce the penalty imposed to ₹ 1,00,000/- under Rule 26. Penalties have also been imposed on appellant No.3 and 5 under Rule 26 read with Rule 209A of the Central Excise Rules, 1944. Keeping in view the overall facts of the modus operandi etc. and their active involvement, the penalty imposed on them is reasonable and is, therefore, upheld. - Decided partly in favour of assessees.
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2015 (10) TMI 2141
Confiscation of goods - Excess stock found which was not recorded in RG-1 Register - foremost contention of the appellant is that the goods confiscated were not finished goods - search was conducted as on 10/3/2011 - Imposition of redemption fine and penalty - Held that:- The fact of recovery of unaccounted finished goods and raw material and the fact that the RG-1 Register was updated only till 28/2/2011 together with the fact of recovery of loose papers containing accounts of clearance of finished goods, purchase of raw materials, together with the statements given are sufficient materials to arrive at a prima facie conclusion or reasonable belief that the goods are liable for confiscation. It is also contented that the respondents have not recorded that there is reasonable belief to confiscate the goods. - there was enough material to affirm a prima facie case for confiscation. Shri Deepak Maini in his statement has stated that the officers on the reasonable belief that the excisable goods have been manufactured and stored with an intention to remove the same clandestinely and without payment of duty seized the finished goods as mentioned in Annexure-B. The statement given by Shri Neeraj Khattar is also in similar lines admitting the discovery of unaccounted finished goods and raw material. On such score, the contention of the appellant that there was no reasonable belief for confiscation is unacceptable. The instant case is not a situation where there is mere non-accountal of finished goods. If the finished goods were not accounted in the register, the appellant should be able to give a plausible explanation for such non-accounting. In Pepsi Foods Vs. CCE-Chandigarh, (2001 (11) TMI 118 - CEGAT, NEW DELHI), the non-accountal was sufficiently explained by the assessee. The Tribunal therein observed that Rule 173Q cannot take in an accounting failure simplicitor and held in favour of the assessee. Failure to account goods or raw material may be due to different reasons. There may be instances where the person incharge of accounts is on leave or change of management etc. which may be valid reason for not updating the register. In the present case, the appellant has not been able to give any explanation for not updating the Register. - Further, entries of clearances of finished goods were found in loose papers. From the totality of facts and evidence presented by the case, the intention to evade payment of duty can be safely inferred. Contention of the appellant that there is no intention to evade the payment of duty is not tenable. The judgment rendered in Bhillai Conductors (P) Ltd. (2000 (1) TMI 105 - CEGAT, NEW DELHI) is thus distinguishable on facts. Therefore, I hold that the confiscation of goods and imposition of penalty is sustainable. - However, redemption fine and penalty is reduced - Decided partly in favour of assessee.
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2015 (10) TMI 2140
Duty demand - Clandestine removal of goods - pages / records seized during search - onus to prove - Held that:- Merely on the basis of these papers allegedly containing the production and dispatch and in absence of any corroborative evidence or statement of any employee/ director of Appellant company accepting such clandestine removal, it cannot be concluded that M/s SUPTL has removed these goods without payment of duty. I also find that no evidence has been shown that these goods were cleared to some person and how such alleged clandestine removal has been suppressed. Further I find that Shri Sunil Gandhi in his statement dt. 21.11.2006 refused those papers to be pertaining to any accounting. I am thus of the view that duty demand of ₹ 1,91,552/- is not sustainable. - charges of clandestine removal based merely note books maintained by the workers and other private accounts not sustainable unless supported by corroborative evidence with regard to purchase of raw material, manufacture of final goods, flow back of money or any seizure of statements from purchasers. - Decision in the case of M/s T.G.L.Poshak Corporation (2001 (9) TMI 683 - CEGAT, CHENNAI), followed. Only for the reason that M/s Arhat an unregistered unit issued few invoices under same serial number cannot be interpreted to the extent that the goods manufactured by M/s SUTPL were cleared under the invoice of M/s Arhat. No modus operandi has been brought on record. Further as regard second portion of demand that in the sheet prepared on the basis of papers allegedly containing details of raw material, production and dispatch wherever remarks no invoice issued was given are clearance of goods manufactured by SUTPL by M/s Arhat, I find that in absence of any evidence of any of the units, the allegation cannot sustain. There are no evidence that any of the units has forged their documents to show that the goods were manufactured by M/s Arhat. Thus it is only a farfetched assumption without any evidence and cannot be accepted. In the show cause notice it is nowhere coming as to from which place these documents were seized. No panchnama has been relied upon in the show cause notice. Further it is not known as to who is the author of such documents. I find from the stock statement that nowhere the statement shows as to which concern such statement belong. It is alleged that stock statement belong to M/s G.M.Trading company. However I find that the officers did not investigated about such stock statement from M/s G.M.Trading Co. Although the statement of Shri G.M. Mathur was recorded, however no question were asked to him regarding such statement. He was only asked question regarding sales register to which he refused. In absence of any corroboration of the said stock statement with the records of the M/s SUTPL and any other corroborative evidence, I am of the view that the demand cannot survive. Revenue did not bring any corroborative evidence such as excess receipt of raw material, employment of labour, receipt of goods by any consignee, transportation of goods to the buyers, receipt of sales proceedings by M/s Sunultra which can support the case of the revenue. Further Shri Sunil Gandhi or any employee of M/s SUTPL was neither questioned about removal of goods without payment of duty neither they accepted any clandestine removal - demand and penalty against M/s SUTPL is not sustainable. I further hold that penalty against Shri Sunil Gandhi and Shri Girish Mathur is also not sustainable. In view of my observations and findings, I thus set aside the impugned order - Decided in favour of assessee.
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2015 (10) TMI 2139
Demand of duty on goods manufactured by the Job worker - Assessee received goods under Notification No.214/86 and not returned the same - Held that:- On perusal of the Notification No.214/86, it is seen that para 2 of the said notification clearly lays down that it shall be the responsibility of the supplier of goods to ensure that the goods are used in the manner specified in the notification. The liability in respect of the goods produced out of, such inputs would be of the recipient of the goods. Thus if only duty has to be demanded on material sent for job work it has to be demanded from the supplier. Similarly, if any duty has to be demanded on products manufactured out of these materials it has to be demanded from the recipient of the goods, i.e. the job-worker. To that extent it is clear that in terms of Notification No.214/86, the liability of payment of duty would fall within the suppler of the goods and not on the recipient. - Notification No.214/86 clearly determines the liability of the sender and that of the receiver of the goods. - show-cause notice itself issued wrongly to the recipient of the goods instead of the supplier of the goods. Learned AR further argued that since the appellant have paid the duty they have assumed the liability and therefore, they cannot escape the responsibility of paying interest and penalty. Reliance on the decision of the Hon ble High Court of Madras in the case of Alstom T&D India Ltd., (2015 (6) TMI 300 - MADRAS HIGH COURT) is misplaced in so far as in that case, the liability of the appellant themselves was no doubt. In this case the liability itself does not exist. In this case, since there was no liability to pay duty, the liability to pay interest and penalty cannot arise. - Decided in favour of assessee.
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2015 (10) TMI 2138
Denial of CENVAT Credit - revenue came to the finding that since they have no facility to manufacture HDPE/PP Sacks at Pangaon they are not entitled for the credit of duty on inputs. - Held that:- Appellant made certain factual points which could not be considered by the lower Authority as no personal hearing could be conducted in spite of opportunities given to the appellant. Though the appellant pleads that they had compelling reasons for non-appearance the Original Authority is bound by the provisions of Section 33A and as such proceeded to adjudicate the case without a personal hearing. However, the fact remains that certain details which have direct bearing on the finding of the Original Authority ought to be considered for a fair decision. It is an admitted fact that the purchase of main raw material HDPE/PP Granules the movement of Granules and semi-finished/finished products like HDPE Woven Fabric and Printed Sacks are duly accounted for in statutory records by the appellant. Now the denial of credit is solely dependent on lack of capacity in the appellant unit to cut, print and to make the final HDPE Woven Sacks out of Woven fabric. Further, it is also seen that the appellants have questioned to the factual correctness of the findings of the learned Commissioner in para 4.3 (d) of the order. Correct appreciation of the factual position is required to arrive at the proper decision. The various accounts maintained by the appellant are to be cross-checked with the allegations made in the show cause notice. Apparently this could not have been done as the original order was passed ex-parte. As mentioned earlier the appellant did not avail the opportunity of personal hearing given by the Original Authority resulting in the present situation. However, in the interest of justice and to arrive at a fair decision we find that the matter has to be remanded back to the Original Authority to decide the case afresh. - Matter remanded back - Decided in favour of assessee.
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2015 (10) TMI 2137
Demand of differential duty - Whether or not the appellants are liable for differential duty on account of not following the provisions of Section 4 (1) (a) in respect of goods cleared by them - Held that:- Provisions as they existed during the relevant period for the purpose of valuation clearly state that the value shall be deemed to be normal price during the course of wholesale trade. The presumption made by the lower authority that depots are meant for wholesale trade and hence depot prices will be taken as normal price is neither factually nor legally tenable. The appellant strongly contended that the sale of one or two products at a time to the ultimate customer is nothing but retail sale and cannot be taken for Central Excise assessment purposes. - No infirmity in impugned order - Decided in favour of assessee.
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2015 (10) TMI 2136
Demand of differential duty - Refund claim - Finalization of provisional assessment - Held that:- The respondent viz. M/s. Vikrant Tyres Ltd. (now M/s. J.K. Tyres & Industries Ltd.) in letter Ref. No.C.Ex./09/PA2000-01 dt. 20/12/2012 addressed to the Superintendent of Central Excise, Metagalli West Range, Mysore has stated that they had cleared the goods to 10 depots from out of 14 depots and their assessments were finalized for the depots to which goods were cleared during that year; the said fact was mentioned in the Order-in-Appeal No.88/2004. The respondent further argues that the doctrine of unjust enrichment is not applicable to provisional assessment cases, when they are finalized and when any refund is due to the assessee. The respondent refers to the Board’s Circular No.744/60/2003-CX dt. 11/09/2003 mentioning that the Department’s appeal on the said issue was dismissed by the Hon’ble Supreme Court in the case of CCE, Chennai Vs. T.V.S. Suzuki Ltd. [2003 (8) TMI 42 - SUPREME COURT OF INDIA]. - Decided against Revenue.
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2015 (10) TMI 2135
Denial of CENVAT Credit - Capital goods - Held that:- Consultant for the Respondent has now placed a Chartered Engineer Certificate dated 18th March, 2015, wherein it is stated that the cenvat credit availed on capital goods by the Respondent in February, 2008 relating to their non-sheet metal division, which was not sold to M/s Caparo. In these circumstances, I am of the view that the said Certificate needs to be scrutinized by the adjudicating authority. Both sides agree that the matter may be remanded to the adjudicating authority for scrutiny of the said Certificate. In the result, the impugned order is set aside and the matter is remanded to the adjudicating authority about the admissibility of cenvat credit of ₹ 11,77,897/- on the capital goods availed in the month of February, 2008 in the light of the above certificate. After examination of the eligibility of the cenvat credit, the adjudicating authority would decide the other issues raised by the Revenue in their Appeal. - Appeal disposed of.
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2015 (10) TMI 2134
Marketability - making of cream within their factory by mixing ingredients like sugar, Vanaspati, milk powder, flavour etc. to be used in the Manufacture of cream biscuits under Parle brand name on job works bases - Captive consumption - Exemption under Notification No. 67/1995-CE - Held that:- In respect of the impugned goods it is necessary for the Department to establish the marketability (not necessarily actual sale of the very same goods made by the appellant). - No test has been carried out regarding the shelf-life, the capability of storage, the availability of market for such goods and evidence to the effect that such similar products are known in the market for trading. The reasoning of the learned Commissioner (Appeals) that the job charges for manufacture of cream of mass production and ultimately for biscuits has been separately fixed by the principal manufacturer (M/s Parle) itself proves that sugar cream is different goods and separately available at the price fixed is mis-leading. The fact that the job charges are fixed separately for cream/biscuits by itself does not establish the marketability of the product which are wholly consumed in the manufacture of cream biscuits as per the specifications provided by the principal manufacturer. - to charge excise levy on the cream captively consumed it is necessary to support the contention of the marketability of the product with evidence which may include the details of shelf-life, general availability of market for such product, market inquiry etc - matter remanded back - Decided in favour of assessee.
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2015 (10) TMI 2133
Denial of CENVAT Credit - Credit on Coated Pipes (capital goods) used as replacements in a pipeline used for transportation of natural gas from Gail s take off point to Appellant s factory for the manufacture of finished goods - Held that:- From the case law relied upon by the first appellate authority and the Learned Advocate during the course of hearing, it is observed that there were divergent views expressed on the issue. However, CESTAT Ahmedabad in the case of Torrent Pharmaceuticals Ltd. vs Commissioner of Central Excise & Service Tax, Ahmedabad-III (2014 (8) TMI 87 - CESTAT AHMEDABAD) vide order dated 04.07.2014 held the credit of pipes from bringing water from a far of source to the factory for use in or relation to the manufacture of finished excisable goods as admissible. - Decision in the case of Birla Corporation Ltd vs Commissioner of Central Excise [2005 (7) TMI 104 - SUPREME COURT OF INDIA] followed - Decided in favor of assessee.
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Indian Laws
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2015 (10) TMI 2148
Making of SPV for establishing SEZ - Whether the selection process done by the second respondent, namely the Government of Puducherry in selecting the strategic partner of SPV, was proper and in accordance with the minimum expected norms and procedures - Held that:- No comparative discussion of merits is available to discard their doubt. Unless a thorough analysis of comparative merits and abilities is made and set out in the selection proceedings in writing, the appellants cannot claim themselves as the most suitable persons for executing the project. Therefore, we are of the view that the merits and abilities of the appellants, as claimed by them, even assuming to be true, itself, cannot give rise to a cause of action for them to challenge the impugned proceedings, when the very inception of the appellants, itself is bad in the eye of law. Whether the Ministry of Home Affairs, Union of India, is justified in directing the Government of Puducherry to cancel the entire agreement with the strategic partner - Held that:- it is clear that the ex-post-facto approval was given for transfer of the lands by PIPDIC to SPV only. However, the PIPDIC and SPV have not chosen to challenge the subsequent impugned proceedings of the Ministry of Home Affairs and on the other hand, they returned the entire lands to the Government of Puducherry by abandoning the project itself. Under those circumstances, the appellants being only developers, cannot have any independent claim or right to challenge the cancellation, as admittedly they cannot act independently or parallely, that too against the interest of the PIPDIC or SPV. Whether the appellants are entitled to raise the grounds of "promissory estoppel" and "legitimate expectation" under the facts and circumstances of the case - Held that:- The appellant-Om Metal entered through backdoor, which was approved by the selectee just like a cake-walk. With all these lapses, irregularities and illegalities, if the selection is made, certainly the selected person, namely the appellants, can never be permitted to plead that the action of the respondents in cancelling the agreement subsequently, is hit by the principles of promissory estoppel and legitimate expectation. - Person who obtained such promise, cannot plead estoppel against the promisor. This is what the position in the case of the legitimate expectation also. Whether the appellants are entitled to insist upon issuance of the Notification under Section 4(1) of the SEZ Act, when the PIPDIC, the applicant for setting up of the SEZ, had returned the entire lands and abandoned the entire project - Held that:- the appellants who are not having any independent right more than what PIPDIC or SPV can have, cannot seek for issuance of the Notification under Section 4(1) of the SEZ Act. Whether the impugned actions have violated the principles of natural justice and whether following of such principle is warranted under the facts and circumstances of the present case - Held that:- objection or explanation must be in a position to make the authority concerned to take a different view also, other than the one proposed already. To put it in a nut-shell, there must be two views possible, one in favour and the other against the noticee. Only under such circumstances, the requirement of issuing notice and following the principles of natural justice arises. If no other view is possible or the explanation or objection to be made by such person cannot alter or have any bearing on the decision to be taken, there is no need to issue such notice. In those cases, issuance of notice would be only an empty formality. - Decided against Appellant.
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2015 (10) TMI 2146
Denial of FL-11 licence - establishing a Beer and Wine Parlour - NOC not taken within stipulated time - Held that:- Section 447 (3) of the Act prescribes a time limit of thirty days for the authorities to consider any application filed to obtain any licence to use a place for conducting a dangerous or offensive trade. Indeed, the authority has the power to refuse the licence or permission in the interest of the public, within the stipulated time - A deeming provision being a facet of legal fiction, it is required to be given full effect so as to subserve the statutory mandate. The Courts have often held that the deeming provision or the legal fiction has the impact of rendering things real and tangible, though, in fact, they are not. In that context, the deeming provision has the impact as if the petitioner had been granted licence. Once the said proposition is accepted, there cannot be any hindrance against the petitioner's approaching the excise authorities, as if he had those certificates, which it would have been otherwise compelled to produce before the licencing authorities. At any rate, it is to be further observed that though in terms of the deeming provision, the NOC and Sanitation Certificate are declared to have been given, for all practical purposes, in the petitioner's favour, the authorities, nevertheless, are not powerless to re-examine the issue in the course of time whether the petitioner has violated any statutory provision while the deemed NOC or licence has been in force. In such an event, after putting the petitioner on notice, the Municipal authorities can further determine the issue. - it is declared that the petitioner has the NOC, as well as the sanitation certificate, for the purpose of establishing a Beer and Wine Parlour. Consequently, the first and second respondents are directed to consider petitioner's application for Beer and Wine parlour licence treating as if the petitioner had the NOC and the sanitation certificate from the fourth respondent - Decided in favour of appellant.
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