TMI Tax Updates - e-Newsletter
October 29, 2016

Case Laws in this Newsletter:

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

TMI SMS

• Appeal before tribunal - Appellant is required to make fresh deposit of 10% of the demand without adjustment of deposit made earlier - Tri

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• Amount received from members as ‘transfer fees’ - co-operative society - the concept of mutuality cannot be applied - Tri

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• Relaxation of additional Fees and extension of last date of in filing AOC-4, AOC-4 (XBRL), AOC-4 (CFS) & MGT-7 eforms till 29-11-2016

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Articles

1. LIABILITY TO PAY TAX IN CERTAIN CASES – PART-3

   By: Dr. Sanjiv Agarwal

News

1. GSTN signs MoU with DGFT for sharing of foreign exchange realisation data

2. Prohibition of Benami Property Transactions Act, 1988 –reg.

3. RBI Reference Rate for US $

Notifications

Income Tax

1. 101/2016 - dated 27-10-2016 - IT

Section 10(46) of the Income-tax Act, 1961 – Central Government notifies Bihar Electricity Regulatory Commission, a body constituted by the State Government of Bihar, in respect of the specified income arising to that Commission

Circulars / Instructions / Orders

FEMA

1. 13 - dated 27-10-2016

External Commercial Borrowings (ECB) by Startups

Customs

2. 49/2016-Cus. - dated 27-10-2016

Transferability of goods imported/procured by debiting duty in SFIS scrips– reg.

Companies Law

3. 12/2016 - dated 27-10-2016

Relaxation of additional Fees and extension of last date of in filing AOC-4, AOC-4 (XBRL), AOC-4 (CFS) and MGT-7 e-forms under the Companies Act, 2013-regarding

4. 11/2016 - dated 15-9-2016

Constitution of Steering Committee for conducting 'National Corporate Social Responsibility Award' of Ministry of Corporate Affairs

Highlights / Catch Notes

Income Tax

• High Court Clarifies No Double Taxation in Income Additions u/ss 68 and 69; ITAT Missteps Highlighted.

  Case-Laws - HC : These are two different causes of action leading to addition against the income of two different persons u/s 68 and 69. There is as such no question of any double taxation. - Sorry to say that the tribunal (ITAT) has mixed up the matters - HC
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• No evidence found during search; additional depreciation issue u/s 153A of Income Tax Act unaddressed.

  Case-Laws - AT : Since no material whatsoever was found in the course of search, the question of allowing additional depreciation or not could not have been subject matter of proceedings u/s 153A of the Act. - AT
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• Reassessment Challenge: Dispute Over Unexplained Investment Already Taxed Under Hindu Undivided Family, Not Individual.

  Case-Laws - AT : Reopening of assessment - Once the alleged land was shown in the balance sheet of HUF, taxes were paid in the hands of HUF, and then how that very alleged unexplained investment can be considered in the hands of the individual? - AT
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• Co-operative Society's 'Transfer Fees' from Members Not Covered by Mutuality Principle, Transactions Taxable.

  Case-Laws - AT : Amount received from members as ‘transfer fees’ - co-operative society - assessee does not represent mutual concerns and to such activities the concept of mutuality cannot be applied. - AT
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• Anticipated Future Expenses in Construction Cannot Be Disallowed Under Mercantile Accounting System, Says Assessing Officer.

  Case-Laws - AT : Provision for direct expenses - AO observed that expenditure actually not incurred during the year - mercantile system of accounting - construction activity - expenditure cannot be be disallowed merely because expected future expenses kept into mind - AT
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• Section 40A(2)(b): Disallowance of Professional Fees Paid to Firm with Partner Interests Lacks Concrete Evidence.

  Case-Laws - AT : Disallowance u/s 40A(2)(b) in respect of professional fees - payment to a partnership firm whose partners are having substantial interest in the business of the assessee company - Revenue’s case is no more than an allegation or a surmise - AT
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• Denial of TCS Credit u/s 206C(1C) Equates to Confiscating Taxpayer Funds Already Included in Taxable Income.

  Case-Laws - AT : Denial of Tax Collected at Source (TCS) credit u/s 206C(1C) - denial of credit tantamount to confiscating assessee's tax for which corresponding income is included in its taxable income - AT
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Customs

• Customs Case: Tribunal Requires Fresh 10% Deposit for Appeals, Initial 7.5% Not Deductible.

  Case-Laws - AT : Waiver of pre-deposit - 7.5% was deposited before filing an appeal before Commissioner (Appeals) - Now whether appellant is required to deposit entire 10% amount in addition to deposit made earlier or only 2.5% after adjustment of the amount paid earlier, for filing an appeal before the tribunal - Fresh amount of 10% to be deposited - AT
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• Device for Automatic Inspection and Counting Classed Under Customs Tariff Heading 90318000.

  Case-Laws - AT : Classification of measuring or checking instruments - independent complete device which automatically inspect, count, process, stores and displaying the data - to be classified under Chapter Heading 90318000 of Customs Tariff - AT
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• Imported Goods Valuation Must Include Design and Engineering Charges Linked to Equipment Purchase Agreements.

  Case-Laws - AT : Valuation of import of goods - the agreement relating to purchase of equipment cannot be disassociated from other agreements and the authorities were right in loading the design and engineering charges - AT
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• Court Rules: Exemption on Customs Duties Doesn't Extend to Raw Materials for Cable Manufacturing in Refineries, Power Projects.

  Case-Laws - AT : Interpretation of notification - refineries and power projects - Cables were exempted from all duties of customs - import of raw material for manufacture of cables instead of cables? - appellant cannot claim unintended benefits by imported items which are not listed or included in the notification - AT
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• Customs Case: Deponent's Agreement on Fabric Composition Insufficient for Classification of Previous Consignments.

  Case-Laws - AT : Classification of fabric - Merely because the deponent of the statement has agreed before the Customs that the previous consignment may be of the same composition, by itself does not establish that the previous consignments were admittedly of the same composition. - AT
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FEMA

• New Guidelines Allow Startups to Raise Foreign Funds via ECBs Without Prior Approval; Check Eligibility and Limits Now.

  Circulars : External Commercial Borrowings (ECB) by Startups - Circular
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Corporate Law

• Deadline for Filing AOC-4 and MGT-7 Forms Extended to November 29, 2016; Late Fee Relaxation Announced.

  Circulars : Relaxation of additional Fees and extension of last date of in filing AOC-4, AOC-4 (XBRL), AOC-4 (CFS) and MGT-7 e-forms under the Companies Act, 2013 till 29-11-2016
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Service Tax

• Separate Billing for Transport Doesn't Make Suppliers Agents for Service Tax.

  Case-Laws - AT : Reimbursement of expenses - Just because the Nepalese suppliers had billed the appellants separately for transportation from Nepal border to factory premises alongwith other expenses, they do not become the agents of the appellants - AT
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• Goods Diversion Service by Respondent Not Taxable as Clearing and Forwarding Agent Activity per Company Instructions.

  Case-Laws - AT : Services of truck diversion agent - the main activity of the respondent is to divert the truck bearing the goods from M/s. Grasim for onward transportation as per the instruction of the Company officials - Not taxable as C&F agent services - AT
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• Rule 9(2) CENVAT Credit Validity: Authority to Accept Duty-Paying Documents Post-Verification by Assistant or Deputy Commissioner.

  Case-Laws - AT : CENVAT credit - validity of duty paying documents - Rule 9(2) of the CCR provides for such eventualities - The rule vests the jurisdictional AC/DC with the power to admit documents subject to verification - AT
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• Publicly Available Balance Sheet Data Invalidates Service Tax Demand Due to Limitation Period Violation.

  Case-Laws - AT : Balance sheet of company is a publically available document and therefore, the allegation that data stated in the balance sheet was suppressed from the department is not viable allegation and as such, demand of service tax is to fail on the ground of limitation itself. - AT
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• Graphic Animation Training Classified as Taxable "Franchise Service," Prohibiting Sharing with Others.

  Case-Laws - AT : Levy of tax - imparting training in graphic animation - obligation not to share the services provided by the appellant with any other person - service of the appellant clearly covered under the “Franchise Service”, hence the same is taxable - AT
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• Service Tax Exemption: Commission Earners Procuring Orders for Overseas Manufacturers Not Liable in India.

  Case-Laws - AT : Levy of service tax - mere procurement of order on behalf of overseas manufacturer is not taxable in India in the hands of the person who procures the orders and receives a commission - AT
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Central Excise

• Excise duty demand dismissed due to lack of evidence for manufactured and cleared stainless steel pattas/pattis under levy scheme.

  Case-Laws - AT : Compounded levy scheme - manufacture of stainless steel pattas/pattis - failure to file the requisite declaration under the scheme - In the absence of any evidence to show that any goods have been manufactured and cleared there can be no justification for demand of excise duty. - AT
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• Court Rules Allegations of Suppression Unfounded in Cenvat Credit Case on Structural Items.

  Case-Laws - AT : In the light of the fact that the availment of Cenvat credit on structural items has been in dispute for a long time, allegations of suppression cannot be made against the appellant. - AT
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VAT

• Refund Withholding Denied: Prima Facie Requirements Missing for Withholding Crystallized Refund Claim.

  Case-Laws - HC : Withholding of Refund claim, which is already crystallised - since prima facie requirements to invoke the power to withhold the amount of refund are not available on record, such action is not possible to be confirmed - HC
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Case Laws:

• Income Tax

• 2016 (10) TMI 982
  Transfer of cases - Power to transfer cases - transfer of the income-tax/assessment file of the appellant from Tamil Nadu to Kerala by HC [2015 (3) TMI 810 - MADRAS HIGH COURT] - Held that:- As the Income-tax/assessment file of the appellant assessee has been transferred from one Assessing Officer in Tamil Nadu to another Assessing Officer in Kerala and the two Assessing Officers are not subordinate to the same Director General or Chief Commissioner or Commissioner of Income Tax, under Section 127(2)(a) of the Act an agreement between the Director General, Chief Commissioner or Commissioner, as the case may be, of the two jurisdictions is necessary. The counter affidavit filed on behalf of the Revenue does not disclose that there was any such agreement. In fact, it has been consistently and repeatedly stated in the said counter affidavit that there is no disagreement between the two Commissioners. Absence of disagreement cannot tantamount to agreement as visualized under Section 127(2)(a) of the Act which contemplates a positive state of mind of the two jurisdictional Commissioners of Income Tax which is conspicuously absent. We will hold that the transfer of the Income-tax/assessment file of the appellant assessee from Assessing Officer, Tamil Nadu to Assessing Officer, Kerala is not justified and/or authorized under Section 127(2)(a) of the Act. The order of the High Court is, therefore, interfered with and the transfer is accordingly set aside.

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• 2016 (10) TMI 981
  Income chargeable to tax under Section 41(1) - whether excluded under clause (baa) of the Explanation to Section 80 HHC of the Act, for the purposes of computing the deduction allowable to the assessee under that section? - Held that:- We find no reason to entertain this Special Leave Petition, which is, accordingly, dismissed. HC order confirmed [2016 (1) TMI 809 - HIMACHAL PRADESH HIGH COURT] that while computing the interest under clause (baa) of the Explanation, the Assessing Officer will take into account the net interest i.e. gross interest as reduced by expenditure incurred for earning such interest. - Decided in favour of assessee.

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• 2016 (10) TMI 980
  Quantification of the losses - Held that:- The Tribunal while passing the impugned order has made an error, which is apparent on the face of the record because the Tribunal has accepted these losses to the extent of 10% for the previous years i.e. 1989-90. The order passed by the Tribunal for the assessment year-1989-90 is on record of this case at page 169 and in paragraph 20 thereof a chart has been reproduced, which shows that assessee had claimed a loss at the rate of 5.58% and 14.42%. In addition of the allowances made towards losses come to 17.9%. From this very paragraph it is clear that contention of the assessee that it was confined to 10% is correct. It was more than 10%. The matter requires reconsideration by the Tribunal on the quantification of the losses.

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• 2016 (10) TMI 979
  Validity of penalty u/s 271E - period of limitation - Held that:- Taking into consideration that under Section 275(1)(c) of the Act, it is no doubt that Commissioner is the competent authority and other contention that the notice was within limitation, in our view is misconceived inasmuch as AO on 30/12/2009 issued notice to the assessee and he was clear that no penalty proceedings required to be initiated. We ought to have held that the Department has taken advantage of any wrong. We are of the opinion that the issues are squarely covered therefore, in both the appeals we answer the question raised in favour of the assessee

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• 2016 (10) TMI 978
  Interest earned on money lending operation - “Profits and Gains from Business & Profession” OR “Income from Other Sources” - Held that:- We find that the two authorities have concurrently come to a finding of fact that the activity of money lending carried out by the respondent assessee is its business activity. This on account of its activity of money lending being in accordance with the object clause of the company, duly supported by the Resolution of its Board of Directors and on examination of entries made in the books of accounts as well as in the bank statement. This findings of fact by the CIT(A) and the Tribunal, are not shown to be perverse and / or arbitrary in any manner. The view taken is a possible view

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• 2016 (10) TMI 977
  Penalty under Section 271(1)(c) - area of flat being sold in excess of 1000 sq.ft. being concealed - non entitled to the benefit of Section 80IB(10) - Held that:- The Assessing Officer under the Act considered the Respondent-assessee's explanation in the context in which the penalty proceedings were initiated and did not rightly place any reliance upon the subsequent events. In an appeal from the order of the Assessing Officer, the CIT(A) could not have imposed penalty on a new ground which was not the basis for initiation of penalty. The appeal before the CIT(A) was with regard to issue of penalty under Section 271(1)(c) of the Act only on the ground on which the penalty proceedings were initiated in the assessment order. Although the powers of CIT(A) are coterminus with that of the Assessing Officer, the imposition of penalty could be only the ground on which it was initiated. This is not the case, where the CIT(A) had independently initiated penalty proceedings on a new ground in an order in quantum proceedings in appeal from the Assessment Order. This alone could lead to the imposition of penalty under Section 271(1)(c) of the Act on the new ground. The ground on which the penalty was initiated and penalty imposed by the Assessing Officer, namely, that the flat had been sold in the project which was in excess of 1000 sq.ft., the Tribunal has recorded a finding of fact that the flats were sold individually by two separate agreements individually to the purchasers in joint names. However, two flats were subsequently joined by the purchasers aggregating the size of two flats to 1000 sq.ft. built up purchased from the Respondent-assessee. This is finding of fact which has not been shown to be perverse or arbitrary.

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• 2016 (10) TMI 976
  Penalty u/s 271(1)(c) - inaccurate particulars intending to evade taxes by not adding back an amount u/s 43B - Held that:- We find that there are concurrent findings of fact by the CIT(A) as well as the Tribunal that the mistake in not adding back the interest not paid on advances and loans to the income during the subject assessment years was a bona fide mistake. This mistake, it held, was on account of the fact that the amendment to Section 43B(e) of the Act requiring the actual payment of interest on loans and advances came into force only w.e.f. 1st April, 2004. The Apex Court in Price Waterhouse Coopers (P) Ltd. Vs. Commissioner of Income Tax, (2012 (9) TMI 775 - SUPREME COURT ), held that the penalty should not be imposed where the error / mistake is bona fide, to which we are all susceptible.- Decided in favour of assessee

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• 2016 (10) TMI 975
  Income on protective assessment - Held that:- As conceded by the learned counsel for the parties that substantive assessment has since been made in respect of the income assessed by way of protective assessment as income in the hands of Dipesh Chandak. Therefore, we do not find any substantial question of law arises in respect of protective income as assessed by the Assessing Officer. However, if the substantive assessment is set aside in Appeal or otherwise, revenue would have liberty to seek revival of the present proceedings. The remaining amount of Rs. 15,45,000/-, which is the subject matter of appeal, is less than the monetary limit in respect of which the revenue has decided not to dispute the assessment in terms of Central Board of Direct Taxes Circular No. 21 of 2015 dated 10th December, 2015.

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• 2016 (10) TMI 974
  Addition u/s 68 - assessee could not prove the identity and creditworthiness of the alleged share subscribers and the genuineness of the share subscriptions - ITAT delted the addition - Held that:- In the case before us, there were 40 shareholders. 38 of them could not be found. Two of them stated that they had no connection with the company. They never applied for any share. They were drivers by profession. They did not give any money. Can the transaction resulting in contribution of a sum of Rs. 1,06,90,000/-, allegedly contributed by 40 applicants be said to have been proved genuine just because K.P.Kedia is said to have provided the funds ? The answer is no. That would on the contrary lead to a negative answer to all the three questions indicated above. As a result, addition under section 68 of the I.T.Act shall be perfectly justified. If K.P.Kedia has, in fact, provided any fund which is not accounted for in his Books of Accounts then it would attract addition to his income under section 69 of the I.T.Act. The addition to the income of Sri K.P.Kedia does not, in the least, diminish the liability of the assessee company under section 68. These are two different causes of action leading to addition against the income of two different persons. There is as such no question of any double taxation. We are sorry to say that the learned Tribunal has mixed up the matters. The addition in this case under Section 68 has nothing to do with any investment claimed or admitted to have been made by K. P. Kedia outside his books of accounts. In case that is found to have been done, that would attract addition under Section 69 against Shri K. P. Kedia. The addition in the case of the assessee is on account of the sum found credited in its books of accounts maintained for the previous year in respect whereof the assessee failed to offer any explanation and the Assessing Officer for justified reasons added the amount of Rs. 1,06,90,000/- to the income of the assessee. We may add that the right to offer explanation under Section 68 is that of the assessee. No third party has any right to offer such explanation. - Decided against assessee

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• 2016 (10) TMI 973
  Claim under Section 54-F denied - AO disallowed exemption holding that it is permissible only when residential house is purchased or constructed within stipulated period - Held that:- There was an agreement for purchase of land which was not carried out and matter was taken to Court, where parties entered into settlement for transfer of plot. Fact remains that no legal document having effect of transfer of immovable property was placed before Appellate Authority. Under the provisions of transfer of Transfer of Property Act, 1882 unless a registered sale deed is executed, title of immovable property can not pass. Agreement to sale is not a transaction of immovable property but only a promise to enter into another agreement relating to sale of immovable property. That is why Tribunal has recorded a finding that from order of Assessing Authority it is evident that there was no sale of property in dispute for the reason that no sale deed was placed before Revenue authorities so as to claim capital gain. In view thereof, finding of Tribunal that there was no capital gain since there was no sale of property, is neither perverse nor illegal - Decided against assessee.

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• 2016 (10) TMI 972
  Additions made during the course of assessment proceedings u/s.153A - Additional depreciation - Held that:- Section 153A of the Act, uses the expressing “pending assessment or reassessment". When a return is filed and acknowledgement or intimation issued u/s.143(1), the proceedings initiated by filing the return are closed, unless a notice u/s 143(2) of the Act is issued. In the present case, the period for issuing the notice u/s 143(2) elapsed. Therefore the process has attained the finality which can only be assailed u/s 148 or 263 of the Act. It can thus be concluded that making of an addition in an assessment under section 153A of the Act, without the backing of incriminating material, is unsustainable even in a case where the original assessment on the date of search stood completed under section 143(1) of the Act, thereby resulting in non-abatement of such assessment in terms of the Second Proviso to section 153A(1) of the Act. Additional depreciation could not and ought not to have been examined by the AO in the assessment proceedings u/s.153A of the Act as the said issue stood concluded with the assessee’s return of income being accepted u/s.143(1) of the Act prior to the date of search and no notice having been issued u/s.143(2) of the Act within the time limit laid down in that section which time limit as per the law prevailing on the date when the Assessee filed return of income i.e., 30.10.2007, would expire on 31.12.2008. Such assessment u/s.143(1) of the Act did not abate on the date of search which took place on 15.1.2009. In respect of assessments completed prior to the date of search that have not abated, the scope of proceedings u/s.153A of the Act has to be confined only to material found in the course of search. Since no material whatsoever was found in the course of search, the question of allowing additional depreciation or not could not have been subject matter of proceedings u/s 153A of the Act. Consequently, the CIT in exercise of his powers u/s.263 of the Act ought not to have or could not have directed examination of the said issue afresh by the AO. - Decided in favour of assessee.

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• 2016 (10) TMI 971
  Reopening of assessment - unexplained investment - Held that:- There was no material with the Revenue to say that unexplained investment was made by the assessee in his individual cases. The ADIT who has investigated the assessee has suggested for obtaining DVO’s report. The ld.AO ought to have first obtained report, then visualize in the light of that report. Thus, at the time when he has recorded reasons for reopening of the assessment he was not possessing any material in the individual cases of the assessee. The DVO has submitted his report on 5.12.2011 and valued the land at Rs. 19.12 lakhs for Block No.559/B at the time of purchases and Rs. 22.31 lakhs at the time of sale i.e. on 18.10.2005. In the case of HUF, the assessee has already shown value of investment at Rs. 55 lakhs. He has already paid tax of Rs. 4.70 lakhs in instalments. He has shown this land in HUF much prior to investigation started by the DDIT. He has paid taxes on account of alleged unexplained investment by way of revised computation. All these steps were taken by the assessee three years prior to the recording of reasons by the AO. Once the alleged land was shown in the balance sheet of HUF, taxes were paid in the hands of HUF, and then how that very alleged unexplained investment can be considered in the hands of the individual ? The AO has not verified any facts from the record, and he simply reproduced information came from the ADIT and issued notice under section 147. As observed earlier, even the ADIT was not sure about the quantum of alleged unexplained investment as well as in the status of the assessee in whose hand it is to be assessed. Quantum was apprehended at Rs. 7 crores, but was subject to verification from the DVO and a suggestion was made to this effect by the ADIT. In spite of that, ld.AO did not bother to collect information for harbouring a belief that income chargeable to tax has escaped assessment. On overall evaluation of the material available on record, we are of the view that a live link is totally missing between the material available with the AO for formation of a belief that income chargeable to tax has escaped. Therefore, we allow this ground of appeal in both the years and quash re-assessment orders. - Decided in favour of assessee

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• 2016 (10) TMI 970
  Validity of assessment u/s 153A r.w.s. 143(3) - time limit for issue of notice under Section 143(2) - Held that:- As the facts and circumstances in the instant case are parametric, respectfully following the order of the Tribunal having similar facts in case of other family members of the assessee, we do not find any merit in the order of lower authorities for making addition without finding and indicating any incriminating material and where time limit for issue of notice under Section 143(2) had already been expired much before the date of search. - Decided in favour of assessee

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• 2016 (10) TMI 969
  Disallowances of Commission, PF/ ESI , Fringe Benefit Tax u/s 40(a) and Bonus u/s 43B - search assessments framed u/s 153A - Held that: -Various disallowances made towards Commission, PF/ESI and FBT for the Asst Years 2006-07 to 2009-10 , which were unabated / concluded assessments, on the date of search, deserves to be undisturbed in the absence of any incriminating material found in the course of search and accordingly directed to be deleted. Hence we hold that the ld AO ought to have only followed the old assessed income u/s 143(3) for the aforesaid Asst Years 2006-07 to 2009-10. Since the issues are addressed on preliminary ground of absence of incriminating materials, we refrain to give our findings on the merits of the disallowances made towards Commission , PF/ESI and FBT for Asst Years 2006-07 to 2009-10. Accordingly the grounds raised by the assessee in this regard for those asst years are allowed. Disallowance of commission paid - Held that:- It is not in dispute that the commission @ 3% is paid to M/s Steel Crackers Pvt Ltd on sales made through them and in respect of Creators Corporation , commission was paid for policy decision resulting into sales of company’s products which varied from Rs. 450 to Rs. 2000 on sale of each product. All these facts are brought out clearly in the assessment order itself. We find that in addition to the above, the assessee had also provided the agreement copy , Ledger Account , TDS details on commission payments , Copy of bills raised by parties and IT return and accounts including balance sheet of recipient companies wherein the said commission income has been duly offered to tax by them. All these evidences clearly prove beyond doubt the claim of expenditure on account of commission. We find that the disallowance has been made merely based on wild allegation and on surmise and conjecture. In this regard, the support drawn by the ld AR by placing reliance on the decision of the Hon’ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd vs CIT reported in (1954 (10) TMI 12 - SUPREME Court ) is well founded. Hence in the facts and circumstances, we hold that there is absolutely no material brought on record to disallow 50% of the claim made by the assessee and accordingly the entire disallowance made on this account deserves to be deleted Disallowance made on account of employees contribution to PF / ESI - Held that:- It needs to be verified whether the employees contribution to PF / ESI have been remitted before the due date of filing the return of income by the assessee. Hence we deem it fit and appropriate to set aside this issue to the file of the ld AO to verify the said dates and if the same are remitted before the due date of filing return of income, deduction is to be granted to the assessee. - Decided in favour of assessee by way of remand Disallowance of bonus, leave salary u/s 43B - Held that:- We find that the matter requires to be verified by the ld AO with regard to the actual date of remittance of the aforesaid expenditure which would have a bearing on the allowability of the expenditure in terms of section 43B of the Act. We direct the ld AO to verify the same and decide the issue in accordance with law - Decided in favour of assessee by way of remand

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• 2016 (10) TMI 968
  Eligibility of exemption u/s 11-12 - whether the 'hostel facility' of the school provided exclusively to students of the dental college is not an integral part of "education" u/s 2(15) ? - maintain separate books of accounts for claiming exemption with respect to profits/income over expenditure earned from such activitiesHeld that:- CIT(Appeals) has given a categorical finding that no separate books of accounts for hostel activities were undertaken. Having relied upon the judgment of DIT(E) v. Willington Charitable Trust [ 2010 (10) TMI 153 - Madras High Court] he denied the benefit of exemption u/s. 11 of the Act with respect to hostel activities. Even during the course of hearing, these findings of CIT(Appeals) was not controverted and therefore, of the view that in the absence of separate books of accounts, the assessee is not entitled for benefit of exemption u/s. 11 of the Act with respect to hostel activities and in light of these facts, if any depreciation with respect to hostel activities are already allowed while calculating the income/other expenditure from the main activities of the assessee, the same may be disallowed in accordance with law. Therefore, no infirmity in the order of CIT(Appeals) and accordingly confirmed - Decided against assessee

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• 2016 (10) TMI 967
  Revision u/s 263 - addition u/s 68 - Held that:- Under section 68 assessee is required to establish the source of cash credit. Assessee is not required to prove source of source. In the present case assessee has established the source. What CIT is trying to do in 263 proceedings, is to ask assessee to establish source of source, which is not required under section 68. Moreover the issue which is arising is at best against the creditors and not against the assessee. The creditors having accepted and confirmed the deposit, having filed the return of income declaring capital gain in the year under consideration and being assessed under the same ward and has been accepted, no adverse view can be taken against the assessee. Further CIT in 263 proceedings cannot substitute his view upon the view of AO. Section 68 is about the satisfaction of AO. The AO being satisfied with the explanation given by the assessee, CIT cannot substitute his view. It is a case where creditors have duly reflected the transactions in their ITRs and has confirmed the amount advanced to the assessee. No adverse inference can be drawn against the assessee on the ground that assessee has failed to prove source of source. Assessee can't be asked to prove source of source. Thus we hold that the impugned order passed by the learned CIT u/s.263 of the I.T. Act is without jurisdiction and not sustainable in the eyes of law. - Decided in favour of assessee.

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• 2016 (10) TMI 966
  Disallowance of provision for direct expenses - AO observed that expenditure actually not incurred during the year - mercantile system of accounting - construction activity - Held that:- It remains undisputed that the provision was made by the assessee for certain expected expenditure. As such, the provision was made due to the arising of the possibility of the expenditure in futuro. This was what had prompted the estimation. Now, if the provision does not stand exhausted even four years from the end of the year in which it was made, this does not mean that the provision to that extent was ill conceived. The details of the expenditure intended were duly made available. That such incurrence of expenditure did not come about, cannot put to naught the provision which was made bonafide. The legal position remains that the amount unutilized would be available for being offered to tax in the next assessment year. The basis of the provision made has not been observed by the ld. CIT(A) to be irrational. In this regard, the decision of the Hon’ble Supreme Court in the case of ‘Bharat Earth Movers Vs CIT’, (2000 (8) TMI 4 - SUPREME Court ), which was followed by the Hon’ble Delhi High Court in the case of ‘Yum Restaurants (I)(P) Ltd.’(2015 (2) TMI 17 - DELHI HIGH COURT ), under similar circumstances, is directly attracted. Therefore, we are of the considered opinion that the ld. CIT(A) has gone wrong in sustaining the addition to the extent of Rs. 43,06,801/-. The same should also have been deleted. We order so now. Therefore, the addition of Rs. 5,11,50,000/- is deleted in toto. - Decided in favour of assessee

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• 2016 (10) TMI 965
  Rejection of Books of Account - GP addition - Held that:- Assessee’s Books of Account were rejected for valid reasons. In fact in the course of survey, AO did not verify all the vouchers and Books of Account and arrived excess stock as quantified in the survey at Rs. 47,05,008/-, for which assessee admitted that inventory was taken correctly. The Managing Partner in fact admitted additional income of Rs. 30 Lakhs in the course of survey. Keeping that in mind and also noticing that assessee has offered only an income of Rs. 6,467/- in the return of income, there is reasonable cause for rejection of Books of Account and estimating the gross profit. Coming to the issue of excess stock also, Ld. CIT(A) has examined the contentions viz-a-viz., various sale bills and tag prices and has reasonably estimated the reduction to be about 30%, which is reasonable on the given facts. In view of this, to the extent of estimation of gross profit and estimation of stock on the day of survey, I agree with the findings of the Ld. CIT(A). However, find that there cannot be two additions on the same issue. Therefore, the addition made viz-a-viz the gross profit can be telescoped to the addition which was made on excess stock. Accordingly, AO is directed to telescope the income added as gross profit addition to the excess stock determined after the order of CIT(A). Thus, assessee gets partial relief. Grounds are accordingly allowed partially.

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• 2016 (10) TMI 964
  Determination of head of income - amount received by the assessee as their share of sale consideration of plot of land - Held that:- Inspite of the AO allowing the assessee adequate opportunity and requiring it to furnish specific details in respect of all the 14 cooperative societies who were allotted land by the Bombay Housing Board vide agreement dated 26.04.1960, such as total area allotted to them to claim leasehold rights on the land, the number of plots allotted with specification, plot numbers, area in sq. yards, etc. the assessee was not able to furnish the same. Notices issued under section 133(6) of the Act by the AO to the 14 cooperative societies involved also could not elicit any suitable response from most of them. It is seen that even the six societies which responded could not specifically give proof of plot allotted to each of the 14 cooperative societies or documents/evidence which could specify the area allotted to them or that public utilities and public amenities as per Schedule-I and II were created by them thereon. In this factual matrix the case, we are of the considered view and agree with the findings of the learned CIT(A) that as per the submissions put forth by it, the assessee has not been able to controvert that factual findings of the AO in leading him to treat the receipt of money by the assessee from transfer of plot as business income. We, therefore, uphold the findings of the authorities below - Decided against assessee Amount received from members as ‘transfer fees’ - nature of income - Held that:- was received by the assessee society from the transaction of the structure on plot No. 26 by Prakash R. Tolat and Gautam R. Tolat to Mehta & Shah. This fact was not brought to the notice of the AO. On detection thereof, the AO brought the said transfer fee received by the assessee to tax in the assessee’s hands. In respect of the assessee’s claim that the said transfer fee received by it was not exigible to tax based on the concept of mutuality, we find that the learned CIT(A) on examination of the facts on the issue rightly concluded that the concept of mutuality did not operate in this transaction. Mehta & Shah who paid the said transfer fee were only nominal members of the assessee society and except for the structure purchased and occupied by them, had no voting rights or interest in the property of the society. Following the decision of the Coordinate Bench in the case Hatkesh Co-op Housing Society Ltd. (2013 (9) TMI 411 - ITAT MUMBAI) wherein after considering judicial pronouncements relied on by the assessee, which were on similar facts as those of the case on hand, we also hold that the assessee does not represent mutual concerns and to such activities the concept of mutuality cannot be applied. In this factual and legal matrix of the case, we concur with the findings of the authorities below that the said ‘transfer fee’ received by the assessee was to be taxed in its hands. - Decided against assessee

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• Customs

• 2016 (10) TMI 946
  Waiver of pre-deposit - 7.5% was deposited before filing an appeal before Commissioner (Appeals) - Now whether appellant is required to deposit entire 10% amount in addition to deposit made earlier or only 2.5% after adjustment of the amount paid earlier, for filing an appeal before the tribunal - Compliance of amended provision of Section 129E/35F of the Customs Act,1962/ Central Excise Act,1944 - interpretation of statute - Held that: - on reading of provisions it is found that the wordings employed there in is as clear as daylight. In clasue (iii) it is unambiguously prescribed that any person aggrieved by a decision or order referred to Clause (b) of sub- Section (1) of Sec 129A/35B of Customs Act/Central Excise Act, unless deposits 10% of the duty/penalty or duty and penalty, as the case may be, the appeal shall not be entertained. We do not find any reason to read the said provision in any other manner so as to come to the conclusion that the Appellants are required to deposit 2.5% and not 10% as prescribed under the said provision in view of the settled principle of statutory interpretation - reliance placed on the decision of Greatship(India) Pvt. Ltd. Vs. Commissioner of Service Tax, Mumbai-I [2015 (4) TMI 1006 - BOMBAY HIGH COURT] where it was held that it is settled position of law that in taxing statute, the Courts have to adhere to literal interpretation. At first instance, the Court is required to examine the language of the statute and make an attempt to derive its natural meaning. The Court interpreting the statute should not proceed to add the words which are not found in the statute. It is equally settled that a taxing statute is required to be strictly construed. Common sense approach, equity, logic, ethics and morality have no role to play while interpreting the taxing statute. It is equally settled that nothing is to be read in, nothing is to be implied and one is required to look fairly at the language used and nothing more and nothing less. We do not find substance in the argument that the amount paid under clause(i) of Sec.129E/35F which was paid at the time of filing Appeal before the first Appellate Authority can be adjusted against the amount of deposit required to be made under clause(iii) while filing the Appeal before this forum - appeal dismissed - decided against appellant.

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• 2016 (10) TMI 945
  Classification of measuring or checking instruments - independent complete device which automatically inspect, count, process, stores and displaying the data - HELIOS 11 SYS, 330MM WEB WIDTH 4K B AND W LCD CAMERA - A SINGLE 17INCH FLAT TFT MONITOR INSTALLATION AND TRAINING - classified under Chapter Heading 84714190 or under Chapter 90318000 - Held that: - From the descriptions of the chapter headings and the observations in Explanatory Notes to HSN for the respective chapter heading, it is clear that subject item cannot be covered under chapter heading 8471 and in any of its sub headings. From the description given for the chapter heading 9031, it is clear that checking instruments which are not covered elsewhere are covered here. The Explanatory Note to Chapter 9031 extracted above makes it further clear that measuring or checking instruments, whether or not optical are to be covered under Chapter Heading 9030 - Further Revenue produced a copy of the import data as an evidence that subject item is being classified by Customs at Air Cargo Bombay under Chapter 90318000, where the goods were imported from Israel and the date of clearance/reference has been given as 5th Jan. 2016. The subject item deserves classification under Chapter Heading 90318000 of Customs Tariff - appeal dismissed - decided against appellant.

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• 2016 (10) TMI 944
  Valuation - assessable value - design and engineering charges - whether design and engineering charges includible in the assessable value for calculation of duty? - Rule of 9(1)(b)(iv) of Customs Valuation (Determination of price of Imported Goods) Rules, 1988 - Held that: - reliance placed in the decision of Mahindra & Mahindra V Commissioner Customs [2011 (8) TMI 717 - CESTAT, MUMBAI] where it was held that the Tribunal was right in holding that the agreement relating to purchase of equipment cannot be disassociated from other agreements and the authorities were right in loading the design and engineering charges by Rs. 11.50 lakhs owe to the value of the imported equipment under Rule 9 read with Rule 4 of the Customs Valuation(Determination of the Price of Imported Goods) Rules, 1988. Appeal dismissed - design and engineering charges includible in the assessable value for calculation of duty - decided against appellant.

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• 2016 (10) TMI 943
  Interpretation of notification - refineries and power projects - Cables are exempted from all duties of customs under N/N. 23/1998-Cus dated 02.06.1998 - import of raw materials for manufacture of equipment required for refineries instead of cables - whether the appellant is eligible for benefit of exemption Notification No. 23/1998-Cus dated 02.06.1998 on import of raw material for manufacture of cables instead of cables? - Held that: - the appellants imported instead of cables, raw materials for manufacture of cables. On perusal of Sl.No. 17 of list 27(Sl. No. 164 of the Table) annexed to the said notification the item that is listed for benefit of duty concession are “goods specified in list 27 required for setting up crude petroleum refineries”. The list 27, Sl.No.17, interalia, covers “all types of cables”. However, nowhere in the aforesaid notification or lists/entries thereof, are raw materials for manufacture of cables included or permitted for duty exemption benefit. This being the case, the appellant cannot stretch the scope of the notification and argue that if cables are extended exemption therein, raw materials for manufacture of such cables would also come within the permissible ambit of exemption. This is definitely not the benefit intended by the said notification. It is settled law that exemption notification has to be strictly interpreted. Reliance placed on the decision of B.P.L. Ltd. Vs Commr. of C. Ex., Cochin-II [2015 (5) TMI 248 - SUPREME COURT] - appellant cannot claim unintended benefits by imported items which are not listed or included in the notification no. 23/98-Cus dated 02.06.1998. Whether interest liability will accrue in provisional assessments initated in July/August 1998, i.e. before 13.07.2006? - Held that: - the Tribunal in Sterlite Industries (India) Ltd. Vs CC, Trichy [2013 (11) TMI 999 - CESTAT CHENNAI] held that in respect of provisional assessment prior to 13-7-2006 interest would not be leviable by invoking Section 18 (3) of the Customs Act, 1962 - at the time of resorting to the provisional assessment there was no statutory provision authorizing imposing of interest on the differential duty, (the provision which was introduced w.e.f. 13-7-2006), hence we hold that there cannot be demand of interest liability. Premature demand - demand issued before finalization of provisional assessment - Held that: - while the notification 23/98-Cus extended duty concessions, interalia, to all types of cables required for setting up crude petroleum refinery, however the goods actually imported were raw materials for the manufacture of cables and the appellant attempted to obtain undue benefit not available to such items by wrongly claiming benefit of notification no.23/98 supra. This being so, in the peculiar facts of this case, the appellant could not have claimed benefit of notification in any case, thus non finalization of assessment is not material. Duty demand sustained - benefit of notification not available - demand of interest not sustainable - appeal disposed off - decided partly in favor of appellant.

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• 2016 (10) TMI 942
  Classification of fabric - Application of test reports of samples of present consignment to the goods of previous imports - Held that: - Admittedly, the change in the classification of the present import of fabrics is based upon the test result by the chemical examiner whereas it is not disputed that no such test results were carried out in respect of previous imports. The law on the issue is well settled. The test reports of the samples drawn from a particular consignment cannot be applied to the previous consignments. Merely because the deponent of the statement has agreed before the Customs that the previous consignment may be of the same composition, by itself does not establish that the previous consignments were admittedly of the same composition. The expression used by the deponent is 'may be' and he himself was not sure of the same fact. The composition of the fabrics may vary or change from the consignment to consignment inasmuch as there is not much difference in the wool content of the fabrics - appeal dismissed - decided against Appellant.

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• Service Tax

• 2016 (10) TMI 963
  Refund of service tax - N/N. 41/2007-ST dated 6.10.07 - export of goods - terminal handling charges - Bills of lading service - Denial on the ground that the documents issued in respect of services relating to activities at the port of export have not been issued by the port or any person authorized by the port and that the documents being debit notes, refund is not admissible - Held that: - the issue stand decided in the case of SRF Ltd. vs. CCE [2015 (9) TMI 1281 - CESTAT NEW DELHI] where it was held that appellants are entitled to refund of service tax paid on such services. Courier services - IEC code not mentioned - Held that: - The said defect is rectifiable defect and infact stand rectified by the appellant - appellant to be entitled to the refund claim. GTA services - lorry receipts not establishing the co-relation with the exported goods - Held that: - the containers mentioned in the lorry receipt itself are the one which were ultimately exported and this fact can be established so as to prove that the said GTA services were received by the appellant for the export of the goods - refund allowed. Matter remanded to the original authority for examining the documentary evidence - appeal allowed - decided partly in favor of appellant.

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• 2016 (10) TMI 962
  Reimbursement of expenses - Tax liability for expenses like transportation, clearance expenses, insurance charges, cartage handling and forwarding charges - reverse charge mechanism - import of Yarn - transportation from Nepal border - seperate billing for expenses like transportation, clearance expenses, insurance charges, cartage handling and forwarding charges - Held that: - identical orders were passed in respect of other appellants similarly situate. It was held that There is no evidence produced to show that Nepalese suppliers had acted as the agents of the appellants for arranging transportation from Nepal border to the factory premises of the appellants. Just because the Nepalese suppliers had billed the appellants separately for transportation from Nepal border to factory premises alongwith other expenses, they do not become the agents of the appellants. In view of this, the appellants cannot be treated as recipients of GTA services in terms of Notification No. 35/04-S.T. and hence liable to pay Service tax - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 961
  Services of truck diversion agent - whether the service would fall under the services of C&F agent? - CBEC Circular No. 543/7/97 TRU dated 11.7.97 - Held that: - the main activity of the respondent is to divert the truck bearing the goods from M/s. Grasim for onward transportation as per the instruction of the Company officials. It is obvious that the activity undertaken by the respondent is not covered under any of the 6 CBEC Circular No. 543/7/97 TRU dated 11.7.97 in which the primary functions of C&F agents are enumerated, which will bring the activities of the respondent within the service of C&F agents. Neither the show cause notice nor the order in original clearly gives any justification as to how the activities of the respondent will be covered by C&F agents - activities of the respondent would not be covered by the services of C&F agent - appeal dismissed - decided against Revenue.

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• 2016 (10) TMI 960
  Denial of CENVAT credit - validity of duty paying documents - fake invoices - some invoices in the name of other division of the company and some invoices do not have the name of the company or its location - Rule 9(2) of the Cenvat Credit Rules 2004 - Held that: - the appellants training division is housed along with several other divisions of the company in the same premises in New Delhi. Further, the training division has been transferred to M/s. GE India Pvt. Ltd. (appellant) w.e.f. February 2005 only. Consequently, many invoices based on which Cenvat Credit have been availed did not contain full details such as correct name of appellant. However, we find that the appellant is now in a position to satisfy the Revenue authorities about the genuineness of each and every invoice involved in the present proceedings. It is also submitted before us that such a reconciliation statement backed by a Certificate from Chartered Accountant has been produced before the Adjudicating authority. However, the same does not appear to have been considered. We find that Rule 9(2) of the Cenvat Credit Rules 2004 provides for such eventualities - The rule vests the jurisdictional Assistant Commissioner or Deputy Commissioner with the power to admit documents subject to verification. Similar issue decided in the case EUPEC-Welspun Coatings India Ltd. Vs. CCE [2008 (8) TMI 515 - CESTAT, AHMEDABAD] and the reliance placed in the decision where it was held that all the details are available except name and address of the factory on the bill of entry. The only omission is that instead of endorsing the bill of entry itself in the name of the assessee, the importer has issued separate certificate/declaration. It has to be seen in as part of the bill of entry and both of them cannot be segregated and seen isolation as done by the Department. It is quite clear that the credit has to be allowed in view of the provisions of Rule 9(2) in this case. Therefore appeal is allowed with consequential relief to appellants. Imposition of penalty u/s 77 of the Finance Act 1994 - Under the facts and circumstances of this case we find no justification for imposing such penalty and is hence vacated. The matter needs to be remanded to the original adjudicating authority for undertaking verification of the reconciliation chart along with supporting documents which the appellant is presently in a position to submit. The appellant is directed to produce all necessary details and facilitate quick and smooth verification of the same, after which the original adjudicating authority will pass a denovo order in the matter - appeal allowed.

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• 2016 (10) TMI 959
  Construction of individual residential units - demand of service tax services on the ground that the service would fall under the category of ‘construction of residential complex’ services - extended period of limitation - suppression of facts - Held that: - extended period would be available to the Revenue where the assessee suppressed or mis-stated any information, with an intent to evade payment of duty. In the present case, there is no such evidence on record and has rightly been observed by Commissioner (Appeals) that the entire facts along with remuneration received being a part of the balance sheet which is a public document, no allegation of suppression can be made against the assessee - the issue of limitation also set aside by observing that the assessee were under bonafide belief that they were not liable to pay service tax on ‘construction of residential complex’ services as many of the other identical contractors engaged in identical services of Rajasthan Housing Board were not paying any Service tax. This fact is sufficient for upholding the assessees’ stand of bonafide belief. Balance sheet of company is a publically available document and therefore, the allegation that data stated in the balance sheet was suppressed from the department is not viable allegation and as such, demand is to fail on the ground of limitation itself. Demand not sustainable - appeal dismissed - decided against Revenue.

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• 2016 (10) TMI 958
  Levy of tax - Franchise Service - imparting training in graphic animation - obligation not to share the services provided by the appellant with any other person - Held that: - the appellant has provided service to M/s Digital Puppet Animation Studio in regard to right to use of course material in imparting training in graphic animation for indicating computer education in training programme in Graphic Animation and Cinematics as per the agreement, the service recipient as per the agreement the “Franchise” i.e. service recipient is under an obligation not to share the services provided by the appellant with any other person, therefore the condition of the definition of “Franchise” also stand fulfilled. As regards the submission of the appellant that the said condition is not fulfills for the reason that the “Franchise” has liberty to provide the training in graphic animation for indicating computer education on their own. In this case it is clear that course material provided by the appellant is “Franchise” cannot be used for providing services to any other person on their own. The “Franchise” can provide service other than MAAC brand course materials this should not affect to “Franchiser”. Therefore in our considered view the service of the appellant clearly covered under the “Franchise Service”, hence the same is taxable. Imposition of penalty u/s 78 - Held that: - the data of the services value was taken from the Balance Sheet of the appellant which shows that the appellant has no intention to hide the service value. The issue involved is of interpretation of definition of the “Franchise Service”, therefore for this reason also malafide intention cannot be alleged. - the appellant has been able to show the reasonable cause for non-payment of Service Tax in time. - No penalty The appellant’s service is chargeable to Service Tax under the category of “Franchise Service” - However the quantification of Service Tax has been disputed by the appellant therefore the same needs to be examined by the adjudicating authority. The appeal is disposed of by way of remand to the adjudicating authority to reconsider the issue of re-quantification of Service Tax afresh, after following the principles of natural justice.

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• 2016 (10) TMI 957
  Levy of service tax - imposition of interest and penalties - technical and marketing support services - is the amount paid by the appellant to foreign supplier for providing technical and marketing support services for their products in foreign countries is liable to be taxed? - Reverse Charge Mechanism - Held that: - service tax liability arises under the provisions of Section 66A of the Finance Act, 1994 under Reverse Charge mechanism. Accordingly, we uphold the tax liability and interest thereof and also the penalties imposed on this point and reject the appeal of the appellant to that extent. Commission for the procurement of orders on behalf of the German company - Held that: - mere procurement of order on behalf of overseas manufacturer is not taxable in India in the hands of the person who procures the orders and receives a commission - reliance placed in the decision of M/s. Microsoft Corporation (I) (P) Ltd. Versus CST. New Delhi [2014 (10) TMI 200 - CESTAT NEW DELHI (LB)] - appeal allowed. Appeal disposed off - decided partly in favor of appellant.

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• Central Excise

• 2016 (10) TMI 956
  Delayed payment of central excise duty under Section 3A of the Central Excise Act, 1944 - Demand of Interest and penalty - Rules 96ZO, 96 ZP and 96 ZQ of the Central Excise Rules, 1994 - violative of Articles 14 and 19(1)(g) of the Constitution - Whether, mandatory quantum of penalty equal to the amount of duty prescribed under Rule 96ZO (3) (ii) of erstwhile Central Excise Rules, 1944, can be reduced? - Section 35-G of Central Excise Act, 1944 - Held that: - Reliance placed on the decision of case of Shree Bhagwati Steel Rolling Mills vs. Commissioner of Central Excise [2015 (11) TMI 1172 - SUPREME COURT] where it was held that when contrasted with the provisions of the Central Excise Act itself, the penalty provisions contained in Rules 96ZO, 96ZP and 96ZQ are both arbitrary and excessive. A penalty can only be levied by authority of statutory law, and Section 37 of the Act, as has been extracted above does not expressly authorise the Government to levy penalty higher than Rs. 5,000/-. Insofar as they impose a mandatory penalty equivalent to the amount of duty on the ground that these provisions are violative of Article 14, 19(1)(g) and are ultra vires the Central Excise Act. The sole question of law in this appeal is answered against the department and in favor of the assessee - appeal dismissed.

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• 2016 (10) TMI 955
  Whether in the light of the subsequent instructions issued by the Ministry, anything would survive in this appeal? - Held that: - the assessee had availed concessional rate of duty under Notification No.175/86. The assessee was not aware of the rates of excise duty taken in the tender and denied about awareness of preparation of tender papers on the basis of project report. The show cause notice itself alleges that the assessee has paid the central excise duty as per the manufacturing cost and that he has not compared the price with others. In the face of such an allegation in the show cause notice and when reliance is placed on a single piece of evidence, we do not think that in its further appellate jurisdiction this Court can enter into the domain of appreciation and appraisal of oral and documentary evidence. The documentary evidence having been appreciated and consistent with the case of the Revenue, there is no perversity in the order of the Tribunal. The appeal is, therefore, dismissed.

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• 2016 (10) TMI 954
  Demand of duty - Compounded levy scheme - manufacture of stainless steel pattas/pattis - N/N. 34/2001-CE dated 28/6/2001 - failure to file the requisite declaration under the scheme - Held that: - The levy of excise duty stands only when goods are manufactured and cleared from the factory. In the absence of any evidence to show that any goods have been manufactured and cleared there can be no justification for demand of excise duty. In terms of the provisions of the notification which are in the nature of concession, in exceptional circumstances (such as the one in the present cases in which the declaration regarding the number of machines has not been filed) the manufacturer will be liable to pay duty on the entire production. However, Revenue has failed to undertake any serious investigation to establish the manufacture, if any of the stainless steel patta/pattis under the circumstances, I have no option but to set aside the demands and allow the appeals - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 953
  Imposition of penalty - CENVAT credit reversed - structural items used for fabrication of support structures for capital goods such as overhead crane, wire drawing machinery etc - payment of duty with interest on demand - whether the imposition of penalty justified on the ground that wrongful CENVAT credit availed alleging suppression of facts and invoking the extended period of limitation? - Section 11A - Held that: - once the duty disputed is paid alongwith the interest payable under Section 11(AA), no show cause notice is to be served on the assessee, however, it is to be noted that this waiver of penalty is entitled only in those cases where there is no allegation of fraud, suppression or collusion. In the present case, I find that such allegations have been made in the show cause notice issued to the appellant. However, in the light of the fact that the availment of Cenvat credit on structural items has been in dispute for a long time, allegations of suppression cannot be made against the appellant. Under such circumstances, the benefit of waiver of penalty provided under Section 11A (2) is extendable to the appellant - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 952
  Denial of CENVAT credit - demand of duty along with interest and penalty - Stainless Steel Pipes - entries in RG-1 register - Held that: - The appellant has brought in duty paid pipes and availed the Cenvat credit of the duty paid thereon. However, they appeared to have made a procedural mistake in making entry directly in RG-1 instead of making entry in RG-23 Pt. I. From the elaborate reconciliation chart produced by the appellant of which some sample entries have been verified by me, it is seen that the pipes imported are subjected to further processes such as drawing, annealing, heat treatment etc. the resultant pipes of different dimensions have also been cleared on payment of duty. It also prima facie appears that keeping in view the value addition at the hands of the appellant, the duty paid at this stage of the finished product is likely to have been more than the duty for which credit was taken. But to come to a definite conclusion, it would be necessary to go through in detail the reconciliation chart prepared elaborately by the appellant which indicates disposal of inputs bill of entrywise. For the purposes of carrying out the detailed verifications, I remand the case back to the original Adjudicating Authority. The appellant is directed to render all necessary help and explanation to enable smooth verification of the same. The original Adjudicating Authority will pass orders denovo after considering the claim of the appellant. The appeal is disposed of by way of remand.

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• 2016 (10) TMI 951
  Clandestine removal of goods - shortage of goods - non-alloy steel ingots - cenvatable scrap - raw material - confiscation of currency - imposition of penalty - Held that: - it is clear that the law is well-settled that, in cases of clandestine manufacture and clearance, certain fundamental criteria have to be established by Revenue which mainly are the following : (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of: (a) Raw materials, in excess of that contained as per the statutory records; (b) Instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty; (c) Discovery of such finished goods outside the factory; (d) Instances of sale of such goods to identified parties; (e) Receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f) Use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) Statements of buyers with some details of illicit manufacture and clearance; (h) Proof of actual transportation of goods, cleared without payment of duty; (i) Links between the documents recovered during the search and activities being carried on in the factory of production; etc - nothing has been brought on record with corroborative evidence to allege clandestine removal against the appellant. Confiscation of currency - The seized currency during the course of investigation cannot be confiscated without proving that the said seized currency is the sale proceeds of excisable goods cleared clandestinely. Therefore, we hold that absolute confiscation of the seized currency of Rs. 47,00,000/- is not sustainable accordingly, the confiscation is set aside and the Adjudicating Authority is directed to release the said amount immediately to the appellants. The demands against the appellants not sustainable - penalty on all the appellants not sustainable - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 950
  Refund claim - Ayurvedic Medicaments(Pain Balm) - undue enrichment - Section 11B of the Act - rejection of refund mainly on the ground that the appellant had not provided any documentary proof to show that the provisional assessments for the earlier period 1985-1991 and have not provided the invoices for the period from March 1994 to April 1995 - Held that: - refund arising out of the finalization of provisional assessments during the period February 1985 to April 1995 need not pass the test of unjust enrichment as the amendment to Sub-rule 5 of Rule 9B came into force only w.e.f.25-06-1999. In the event, we are of the view that appellants are eligible for the refund of Rs. 2,86,39117/- for the period 3/85 to 4/91 and 3/94 to 4/95 as prayed for in their appeal - refund allowed - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 949
  Dis-allowance of benefit of exemption notification at concessional rate - removal of cement - denial on the ground the RSP was printed on the bags even though it was not required to be printed - Notification No.4/2006-CE, dated 01-03-2006 as amended. - the decision in the case of COMMISSIONER OF C. EX., HYDERABAD-III Versus SAGAR CEMENTS LTD. [2010 (4) TMI 418 - CESTAT, BANGALORE] referred - Held that: - the issue is squarely covered by the case and the decision of the case apply where it was held that requirement of not printing of retail sale price not applicable to the respondent as goods sold to Andhra Pradesh State Housing Corporation Ltd. By indicating the price at which it was contracted. No case of revenue that respondent not required to declare the retail sale price on the supplied bags. Cement bags manufactured by the respondent not out of the purview of Standards of Weights and Measure (packed Commodities) Rules, 1977, as they were required to declare the RSP on the product. Authorities under the Standards of Weights and Measures Act, informed all the respondents for mandatory declaration of retail sale price. Appeal dismissed - decided against Revenue.

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• 2016 (10) TMI 948
  Denial of CENVAT credit - purchase of inputs - MS billets - MS ingots - whether the denial of CENVAT credit on the ground that the credit availed without receiving the inputs, justified? - Held that: - The show cause notice have nowhere disclosed the source of several invoices (about 620 in number) purported to have been issued by Rathi Ispat Ltd, for sale of materials to the appellant on the basis of which the transporter-Pramod Sachdeva was confronted. Further, the said invoices are not part of the relied upon documents in the show cause notice. - As such, the appellant also did not have any opportunity to comment on those invoices, as admittedly the copy of such invoices was never made available to the appellants. We further find that the Ld. Commissioner have failed to exercise the jurisdiction vested on him by not ensuring the presence of the witnesses of the Revenue, whose statements have been relied upon, in raising the demand against the appellant. The Ld. Commissioner have also failed to examine the witnesses of the Revenue in the course of adjudication proceedings and to further offer the witnesses for cross-examination, which is in clear violation of provisions of Section 9D of the Central Excise Act, thus, vitiating the impugned order. The allegations of family concern on the appellant (company) viz-a-viz Rathi Ispat Ltd., is vague and no averment supporting the same have been made either in the SCN nor any findings recorded in the Order-in-Original. Under the facts and circumstances, there being no suppression of facts and/or contumacy conduct on the part of the appellant, the extended of limitation is not invokable, on this score also, the tax and penalty are fit to be set aside. The appellant entitled to take back the Cenvat Credit debited in their register by way of pre deposit during the pendency of this appeal with interest, as per Rules - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 947
  Clandestine removal of goods - 96 MT of MS bars - clearance from factory not recorded in daily stock account register - reliance on statement - Held that: - the decision in the case of Central Excise, Mumbai Vs. M/s. Kalvert Foods India Pvt. Ltd. [2011 (8) TMI 24 - SUPREME COURT OF INDIA] relied upon where it was held that the statement recorded by the Central Excise Officer can be relied upon. The statement of Shri Todarmal G. Mundada, partner of the appellants, admitting the clandestine clearance of 96 MT have never been retracted. Cross examination of witness cannot be claimed as a right and would depend on case to case basis. Nothing new will emerge in the cross examination when all facts are accepted and are on record. It is well settled position in law that what has been admitted need not be proved. In fact, the appellants have immediately deposited full duty on being pointed out that the invoices for impugned clearances were not in their record. Under the facts and circumstances for the case, there is no doubt that the appellants had cleared these consignments in a clandestine manner without the cover of invoices and without paying the central excise duty - appeal dismissed - decided against appellant.

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• CST, VAT & Sales Tax

• 2016 (10) TMI 941
  Withholding of Refund claim, which is already crystallised - whether the refund amount can be adjusted against the recoverable amount from the petitioner? - section 39 of the Gujarat Value Added Tax Act, 2003 - Power to withhold refund in certain cases - Held that: - A perusal of section 39(1) would show that refund payable to a dealer can be withheld if the order giving rise to such refund is subject matter of appeal or further proceeding or an other proceeding under the Act is pending and the Commissioner is of the opinion that grant of refund is likely to adversely affect the Revenue. It is true, that in the present case, for other period, the assessing authority has passed orders against the petitioners raising tax demands. However, such orders are challenged by the petitioner in appeal in which upon depositing Rs. 10 lacs, rest of the tax demand is stayed. When these tax demands are thus stayed, allowing the Commissioner to withhold the refund for such tax demand would frustrate the stay order. In effect the department would be recovering the amount in respect of which stay has been granted by the appellate authority against the recovery. Such indirect recovery in the guise of withholding of refund cannot be permitted. Power under section 39(1) of the Act would not empower the authority to frustrate stay order granted by the competent authority or Court. There appears to be a clear non application of mind on part of the authority just to withheld the amount which is lawfully payable to the petitioner. One may notice that this amount which has been determined by the authority is by way of provisional refund amount and the same is determined to the extent of 90% of the original amount which was to be payable and therefore, while passing the order and sanctioning the amount of refund, sufficiently the interest of revenue has been protected and, therefore, we are of the opinion that since prima facie requirements to invoke the power to withhold the amount of refund are not available on record, such action is not possible to be confirmed and, therefore, the stand taken by the counsel for the Revenue is not possible to be accepted. The respondent authority directed to release the amount of refund which has already been sanctioned in favour of the petitioners within a period of eight weeks - petition disposed off - decided in favor of petitioner.

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• 2016 (10) TMI 940
  Entitlement for deduction u/r 8(5) of the Act - production of Form-S Certificate - unless and until the Department produce the Form-S Certificate, petitioner cannot do so - the dealers with whom petitioners had transactions are all reputed dealers, who are registered before the various Assessment Circles in Chennai District and they are regularly filing their monthly returns and paying taxes - when section 13 of the Act has been held to be only procedural and Section 5 of the Act being the charging section for levy of tax on deemed sale of works contract, failure to discharge the alleged procedure under section 13 of the Act does not give a jurisdiction to the respondent to invoke its revisional powers under section 27 of the Act, moreso, when the sub-contractor had filed their return and paid tax under section 5 of the Act and the petitioner is entitled for deduction under Rule 8(5) of the Act. Completion of assessment solely on the instructions of the Audit Wing - Held that: - this should not be the sole reason for confirming the D-3 proposal and complete the assessment Held that: - matter is remanded to the respondent to conduct a thorough verification of the details through their official channel, as to the stand taken by the petitioner stating that all the contractors are registered dealers as on date and they have been regularly filing returns before their respective Assessing Officer and paying the tax, after due verification, the respondent shall afford an opportunity of personal hearing to the petitioner and redo the assessments in accordance with law - petition disposed off - matter on remand.

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• 2016 (10) TMI 939
  Power of revision of the assessment by the AO - Concessional rate of tax - delayed submission of forms under CST Act - Held that: - In the case of ARUL MURUGAN AND COMPANY[1982 (11) TMI 143) and the decision of the Hon'blel Supreme Court, in the case VIPRO FOUNDRY ENGINEERS LIMITED [1990 (12) TMI 302], the Commissioner of Commercial Taxes issued Circular dated 30.04.1993, as to how the Assessing Officer has to act when Declarations in Form-'E' and Form-'F' are produced after the assessment is completed - Decided in favor of the assessee.

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• 2016 (10) TMI 938
  Levy of tax u/s 5(2) of the KGST Act on sales turnover - sale of home appliances under the brand name “Sansui” - first sale or second sale? - Whether the appellant-Company is the holder of the brand name in respect of the “Sansui” products sold by it or not? - Held that: - the sale by the brand name holder or the trade mark holder shall be the first sale for the purposes of the KGST Act, if following conditions are satisfied: (i) Sale of manufactured goods other than tea; (ii) Sale of the said goods is under a trade mark or brand name; and (iii) The sale is by the brand name holder or the trade mark holder within the State. Applying the aforementioned conditions to the facts of the present case, it is an admitted fact that the goods sold by the appellant-Company are manufactured goods other than tea. The first condition is satisfied. The next condition to be satisfied is that the sale of goods is under a trade mark or brand name. It is an undisputed fact that the manufactured goods sold by the appellant-Company were home appliances under the brand name “Sansui”. Thus the second condition is also satisfied. Now the last condition to be satisfied in order to attract section 5(2) of the KGST Act is that the sale is by the brand name holder or trade mark holder within the State and whether the appellant-Company is a holder of the brand name “SANSUI” - when a product is marketed under a brand name, the Assessing Authority is entitled to assume that the sale is by the holder of the brand name or by a person, who is entitled to use the brand name in India. Apart from this, in this case, the marketing is actually done by fully owned subsidiary and/or a group company of the holding company, which was allowed to use the brand name “Sansui”. If the sale between the holding company and the subsidiary company, both having the right to use the same brand name, is at realistic price and the marketing company namely, the appellant-Company charged only usual margins in the trade, then there is no scope for ignoring the first sale, particularly, when the first seller was also the holder of the brand name and was free to market the products in the brand name. However, the evidence on record shows that the margin charged by the appellant-Company while making the further sale of product is unusually high. So the inter se sale between the groups of companies under the control of the same family was only to reduce tax liability and was rightly ignored by the assessing officer by levying tax under Section 5(2) of the KGST Act. The tax invoking Section 5(2) of the KGST Act was rightly levied on the appellant-Company for the relevant period as it is proved beyond reasonable doubt that the appellant-Company is the brand name holder of “Sansui” - appeal dismissed - decided against appellant.

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