TMI Tax Updates - e-Newsletter
October 3, 2018

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy FEMA PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. ITAT- practical aspect: Apply for grounds of appeal of Revenue, if not received with notice of filing of appeal/ first notice for hearing of appeal, as the case may be.

   By: DEVKUMAR KOTHARI

News

1. GST Revenue collection for September 2018 crossed ₹ 94,000 crore

2. Auction for Sale (Re-issue) of Government Stocks (GS)

3. Government in public interest moved NCLT to supersede Management of IL&FS on grounds of mismanagement

4. Index of Eight Core Industries (Base: 2011-12=100) August, 2018

5. Firm and Decisive Government Action taken to preserve value and assets of IL& FS

6. Fourth Bi-monthly Monetary Policy Statement, 2018-19

7. Government constitutes Competition Law Review Committee to review the Competition Act

Notifications

Customs

1. 21/2018-Customs (N.T./CAA/DRI) - dated 1-10-2018 - Cus (NT)

Appointment of Common Adjudicating Authority by DGRI

GST - States

2. ERTS (T) 65/2017/Pt. I/241-51/2018-State Tax - dated 13-9-2018 - Meghalaya SGST

Government of Meghalaya appoints the 1st day of October, 2018, as the date on which the provisions of section 52 of the Meghalaya Goods and Services Tax Act, 2017 shall come into force

3. ERTS (T) 65/2017/Pt. I/240 - dated 13-9-2018 - Meghalaya SGST

Supercession Notification No. ERTS (T) 65/2017/Pt/26, dated the November, 2017

4. ERTS (T) 65/2017/Pt. I/239 - dated 13-9-2018 - Meghalaya SGST

Meghalaya Goods and Services Tax (Tenth Amendment) Rules, 2018

5. ERTS (T) 65/2017/Pt. I/238 - dated 10-9-2018 - Meghalaya SGST

Meghalaya Goods and Services Tax (Ninth Amendment) Rules, 2018

6. ERTS (T) 65/2017/Pt. I/237 - dated 10-9-2018 - Meghalaya SGST

Amendment in Notification No. ERTS(T) 65/2017/Pt/304 - State Tax dated the 10th August, 2018

7. ERTS (T) 65/2017/Pt. I/236 - dated 10-9-2018 - Meghalaya SGST

Amendment in Notification No. ERTS (T) 65/2017/Pt/28 - State Tax dated the 1st November, 2017 and ERTS(T) 79/2017/546 - State Tax dated the 23rd March, 2018

8. ERTS (T) 65/2017/Pt. I/235 - dated 10-9-2018 - Meghalaya SGST

Amendments in the Notification number ERTS(T) 65/2017/92 - State Tax dated the 21st September, 2017 and ERTS(T) 65/2017/Pt/55 - State Tax dated the 15th November, 2017

9. ERTS (T) 65/2017/Pt. I/234 - dated 10-9-2018 - Meghalaya SGST

Seeks to extend the due date for filing of FORM GSTR - 1 for taxpayers having aggregate turnover up to ₹ 1.5 crores.

10. ERTS (T) 65/2017/Pt. I/186 - dated 4-9-2018 - Meghalaya SGST

Waives the late fee payable on FORM GSTR-3B, FORM GSTR-4, FORM GSTR-6

11. ERTS (T) 65/2017/Pt. I/185 - dated 4-9-2018 - Meghalaya SGST

Meghalaya Goods and Services Tax (Eighth Amendment) Rules, 2018

12. 51/2018-State Tax - dated 25-9-2018 - Mizoram SGST

Seeks to bring section 52 of the CGST Act (provisions related to TCS) into force w.e.f 01.10.2018

13. 50/2018-State Tax - dated 25-9-2018 - Mizoram SGST

Seeks to bring section 51 of the MGST Act (provisions related to TDS) into force w.e.f 01.10.2018.

14. 49/2018-State Tax - dated 25-9-2018 - Mizoram SGST

The Mizoram Goods and Services Tax (Tenth Amendment) Rules, 2018.

15. FIN/REV-3/GST/1/08 (Pt-1) (Vol.1)/264 - dated 20-9-2018 - Nagaland SGST

Seeks to insert explanation in an entry in notification No F.NO.FIN/REV3/GST/1/(Pt-1) “O”,30th June,2017.

16. FIN/REV-3/GST/1/08 (Pt-1) (Vol.1)/263 - dated 20-9-2018 - Nagaland SGST

Seeks to notify the rate of tax collection at source TCS to be collected by every e-commerce operator

17. FIN/REV-3/GST/1/08 (Pt-1) (Vol. 1)/262 - dated 13-9-2018 - Nagaland SGST

Seeks to bring section 51 of the NGST Act provisions related to TDS into force w.e.f 1st Oct,2018

18. FIN/REV-3/GST/1/08 (Pt-1) (Vol. 1)/261 - dated 13-9-2018 - Nagaland SGST

Seeks to bring section 52 of the CGST Act provisions related to TCS into force w.e.f 1st Oct,2018

19. 30194-FIN-CT1-TAX- 0043/2017/FIN-S.R.O. No. 395/2018 - dated 20-9-2018 - Orissa SGST

Clarifying the scope and applicability of the notification of the Government of Odisha in the Finance Department No.19873-FIN-CT1-TAX-0022/2017,dated the 29th June, 2017 bearing S.R.O. No 306/2017.

20. 29898-FIN-CT1-TAX-0034-2017/FIN-S.R.O. No. 393/2018 - dated 18-9-2018 - Orissa SGST

The Odisha Goods and Services Tax (Tenth Amendment) Rules, 2018.

21. 29894-FIN-CT1-TAX-0043-2017/FIN-S.R.O. No. 392/2018 - dated 18-9-2018 - Orissa SGST

Seeks to bring section 52 of the OGST Act provisions related to TCS into force w.e.f 1st Oct,2018

22. 29890-FIN-CT1-TAX-0043/2017/FIN-S.R.O. No. 391/2018 - dated 18-9-2018 - Orissa SGST

Seeks to bring section 51 of the OGST Act provisions related to TDS into force w.e.f 1st Oct,2018.

Circulars / Instructions / Orders

GST - States

1. FIN-CT1-TAX-0045-2017/30797/F - dated 25-9-2018

Guidelines for Deductions and Deposits of TDS by the DDO under GST.

GST

2. 67/41/2018-DOR - dated 28-9-2018

Modification to the Guidelines for Deductions and Deposits of TDS by the DDO under GST as clarified in Circular No. 65/39/2018-DOR dated 14.09.2018 - reg

Customs

3. 35/2018 - dated 1-10-2018

Advisory circular for registration of beneficiaries on ICEGATE - regarding

Highlights / Catch Notes

GST

• TDS Deduction and Deposit Rules Updated for DDOs under GST as per Circular No. 65/39/2018-DOR.

  Circulars : Modification to the Guidelines for Deductions and Deposits of TDS by the DDO under GST as clarified in Circular No. 65/39/2018-DOR dated 14.09.2018 - reg
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Income Tax

• Notice Invalidated: Authority Exceeds Three-Year Limit, Violating Petitioner's Rights u/r 68B(1).

  Case-Laws - HC : Recovery of dues - attachment of property - Period of limitation - The incompetent authority, therefore, cannot prejudice legal rights of petitioner flowing from statutory provisions or eclipse the same in any manner. Notice is, therefore, beyond period of three years and, therefore, hit by Rule 68B( 1).
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• Payments to banks for credit card facilities are bank charges, not commissions, exempting them from TDS u/s 194H.

  Case-Laws - AT : TDS u/s 194H - credit card commission expenses - payments to banks on account of utilization of credit card facilities would be in the nature of bank charge and not in the nature of commission within the meaning of sec. l94H.
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• Court Rejects Income Diversion Scheme for Tax Avoidance; Upholds Adherence to Established Tax Laws and Regulations.

  Case-Laws - HC : Diversion of income by overriding title at source - This is where we feel the tax avoidance effort has been made by the parties and we cannot uphold the same in the overall analysis of the facts and legal position applicable to the facts of the present case.
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• Decline in Gross Profit Ratio Alone Insufficient for Rejecting Books and Best Judgment Assessment.

  Case-Laws - HC : Rejection of books of accounts - GP estimation - Fall in gross profit ratio could be due to various reasons, and cannot be the sole and only ground to reject the book results in entirety and frame best judgment assessment
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• Advance Land Premium Taxed as Revenue Receipt, Treated Like Annual Rent from Leasing Plots Under Same Tax Rules.

  Case-Laws - HC : A land premium is nothing but a revenue receipt in the form of advance rent which has loosely been named as land premium. Since the assessee is showing annual rent on account of such leasing of the plots, there is no reason why the advance rent received should be taxed accordingly.
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• Section 68 Additions Upheld: No Justification for Companies' High-Premium Investment in Assessee Shares.

  Case-Laws - AT : Addition u/s 68 - undisclosed cash credit - accommodation entries - The surrounding circumstances and test of Human probabilities also shows that there is no reason to invest those companies in the shares of the assessee company at such a huge premium - additions confirmed.
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• Set-Off Allowed for Loss in Export Oriented Unit Against Another Division's Profit u/s 10B Exemption.

  Case-Laws - AT : Rejection of claim of set off of loss incurred by the appellant in 100% Export Oriented Unit as eligible for exemption u/s 10B - alleged loss was claimed as set off against the profit of other Division of the assessee - set off allowed.
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• Court Examines Genuineness of Educational Society's Charitable Objects in Section 12AA Registration Denial Case.

  Case-Laws - AT : Denial of registration u/s 12AA - proof of charitable objects of society - imparting of education - genuine trust - while granting registration u/s 12A only genuineness of trust is to be examined and no examination of application of funds or ethical background of settlors called for at that stage.
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• Assessee's Request for 40% Depreciation on Machinery Denied; Correct Rate of 15% Applied According to Appendix.

  Case-Laws - AT : Depreciation on the alleged life saving equipments - @40% OR 15% - The machinery on which depreciation has been claimed by the assessee at 40% is not being provided in the Appendix. - the depreciation on such machinery is at 15% which has rightly allowed.
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• Penalty u/s 271E Scrutinized: Loan Settled Using Journal Entries Deemed Reasonable Cause by Assessee.

  Case-Laws - AT : Levy of penalty u/s 271E r.w.s. 269T - reasonable cause - the assessee’s decision in favour of squiring up of the loans account through passing of journal entries, shall constitute a reasonable cause on the facts of the present case.
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• Companies Claiming Section 10A Deductions Must Still Pay Minimum Alternate Tax u/s 115JB.

  Case-Laws - AT : The companies eligible for claiming deduction u/s 10A are continued to remain liable to Minimum Alternate Tax (MAT) made u/s 115JB of the Act. - assessee company is liable to pay MAT.
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Customs

• Authorities Must Specify Offenses u/s 112(a) & (b) of Customs Act Before Penalizing Individuals.

  Case-Laws - AT : Penalty u/s subsections (a) and (b) of Section 112 of Customs Act, 1962 - It was incumbent on the part of the adjudicating authority to clearly satisfy the offence of each of the persons involved and then to apply the penalty provisions as the commissions or omissions by the respective persons may invite.
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• Import Violation: Misuse of Inputs Under Advance Authorization by Job-Worker Breaches Regulations in Export Promotion Scheme.

  Case-Laws - AT : Violation of import conditions - Import against ‘advance authorization’ as per the export promotion scheme - even if utilised by a job-worker for conversion, transfer of the imported inputs is not permissible.
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• Court Allows CBI to Prosecute Customs Officers u/s 155 of Customs Act for Alleged Import Undervaluation.

  Case-Laws - HC : Prosecution proceedings against the customs officers - protection u/s 155 of the customs act - Jurisdiction of CBI to prosecute the petitioners based on the inference that there is under valuation in the import and loss to the revenue - No relief to the petitioners.
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Service Tax

• CENVAT Credit Reversal Overturned: No Demand Sustained Due to No Credit Use on Inputs and Capital Goods.

  Case-Laws - AT : Reversal of CENVAT Credit - providing services at concessional rate of service tax / abatement - the appellant has not taken any CENVAT credit on inputs and capital goods. Further there is no restriction with respect to availment of CENVAT credit on input services - No demand can sustain
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• Transport of Export Goods Includes Moving Empty Containers for Export Stuffing in GTA Services.

  Case-Laws - AT : GTA Services - the words “in relation to transport of export goods” cover even bringing the empty containers to the factory for the purpose of stuffing the export goods.
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• Interest on Installments for Club/Association Services Not Taxable Under Current Tax Rules; Seen as Financial Arrangement.

  Case-Laws - AT : Classification of services - Club/Association Service or not - interest on instalments is only a financial arrangement for the deferred payment which is only to set-off any financial loss on account of deferred payment and that this kind of interest is not a taxable entity under the tax net.
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• Courier Agency's 'Crossing Over Charges' Not Subject to Service Tax for Internal Network Services.

  Case-Laws - AT : Courier agency - they were collecting certain charges as ‘crossing over charges’, raised on their sub-franchisee agencies - the impugned services within the TPC network is nothing but a continuation or culmination of courier services only. It then cannot be alleged that TPC receiving or giving of services within its own network of the assessee will render them liable to service tax levy.
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Central Excise

• Assessee's Value Addition Miscalculation Affects Compliance with Central Excise Area-Based Exemption Norms.

  Case-Laws - AT : Calculation of value addition norms - Area based exemption - entire excise duty is required to be deducted which does not appear to have been done by the assessee at the time of projecting the value addition.
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• Demand Documents Must Be Shared with Assessee for Fair Proceedings and Transparency in Departmental Cases.

  Case-Laws - AT : When the departments relied upon document on the basis of which demand is raised, without such documents made available to the assessee, no proceeding can be concluded.
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• Assessee Must Prove SSI Exemption Eligibility; Extended Limitation Period Applies for Claim Substantiation.

  Case-Laws - HC : Extended period of limitation - SSI Exemption - The burden is on the assessee to establish that the goods manufactured by them will come within the ambit of the exemption notification and the burden of proof is on the assessee to establish on facts that they are entitled for exemption.
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• Court Nullifies Contested Order Due to Authority Misconduct; Recommends Exemplary Costs on Three Officials Involved.

  Case-Laws - HC : The present case is a glaring example of such misuse of power by the authorities below. The impugned order therefore deserves to be set aside by imposing exemplary personal costs on all the three authorities below
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Case Laws:

• GST

• 2018 (10) TMI 48
  Unable to file TRAN-01 Form - transitional credit - Though credit of VAT is being shown on GST Portal, the credit not being reflected in his account - migration to GST Regime - Held that:- The Government has also issued a Circular No.39/13/2018- GST dated 3.4.2018 to approach the Redressal Committee concerned for redressal of issues relating to filing of Form TRAN-01 - the present petition is disposed off by granting liberty to the petitioner to file a detailed and comprehensive representation raising all the pleas, as raised in the present writ petition before the Nodal Officer within a period of five days from the date of receipt of certified copy of the order.

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• Income Tax

• 2018 (10) TMI 73
  Reopening of assessment - reasons to believe - scrutiny assessment on book profits - Held that:- The petitioner underwent a scrutiny assessment where, the order passed by the Assessing Officer dealt with the issue of book profits. He arrived at a figure after working on the materials provided to him. However, according to the Assessing Officer in the proceeding under Section 147, the calculation of book profits is incorrect and that, the book profits claimed should be treated in a different way. According to the Assessing Officer, the computation done in the order of assessment is incorrect, resulting in escapement of income for assessment. The same, to my understanding, will constitute change of opinion. He had all the materials at the time of scrutiny assessment to form an opinion. He had done so as appearing in the order of assessment. There is no new material on record to suggest that, the assessee is guilty of suppression. Therefore, it cannot be said that, there are reasons for the Assessing Officer to arrive at a finding that, income has escaped assessment. The Assessing Officer, is trying to review his order of scrutiny assessment. In the facts of the present case, he is seeking to have a different opinion than that expressed in the order of scrutiny assessment, on the basis of the same materials. The same is not permissible. - decided in favour of assessee

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• 2018 (10) TMI 72
  Declare the provisions of Section 40(a)(ia)as unconstitutional - set aside the Notice issued for rectification - Held that:- The respective counsel have produced before us an order to withdraw with liberty to prosecute the remedies available under the Act. In this situation, keeping all contentions open and with liberty to the petitioner to raise the same before appropriate forum and also with leave to file Appeal before the CIT(A), we dispose of the present writ petition.

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• 2018 (10) TMI 71
  Recovery of dues - attachment of property - Period of limitation - Restraining respondents from proceeding to sell the attached agricultural land by auction - notice for auction barred by limitation because of Rule 68B of Second Schedule of Income Tax Act, 1961 - Held that:- The steps are initiated by department in present matter on 18.11.2004 i.e. after expiry of period of three years but before expiry of period of four years. The judgment of Apex Court in S.V. GOPALA RAO & ORS. [2017 (9) TMI 589 - SUPREME COURT] which endorses reasoning of Andhra Pradesh High Court on lack of authority in CBDT to increase the period from three years to four years. The incompetent authority, therefore, cannot prejudice legal rights of petitioner flowing from statutory provisions or eclipse the same in any manner. Notice dated 18.11.2004 is, therefore, beyond period of three years and, therefore, hit by Rule 68B( 1). Similarly, Advocate Parchure has attempted to urge that notice dated 18.11.2004 impugned before this Court is a resale. Again material on record does not show that it is a resale. In this situation, we find the notice dated 18.11.2004 unsustainable. It is accordingly quashed and set aside. Consequently, in view of mandate of Rule 68B(4), attachment of properties which formed subject matter of said notice dated 18.11.2004 is also set aside.

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• 2018 (10) TMI 70
  TPA - ALP determination - MAM Selection - comparable selection - Functional profile of company - Held that:- Functional profile of the assessee has remained unchanged from past year and the assessee continues to be a development centre undertaking contract R&D activities with insignificant risk as per Circular 6/2013. The above discussion brings us to an irresistible conclusion that the assessee is a contract R&D service provider, thus removal of companies from final list as functionally different and failed the service income filter along with diversified operations and non-availability of segmental data. Working capital adjustment - Held that:- We direct the A.O./TPO to allow working capital adjustment after due verification of the claim, whether it goes for or against it, and also recompute the assessee’s PLI from this international transaction by reducing operating expenses in relation to the earning of rental income from the overall operating expenses to be bifurcated amongst all the sources of the revenues of the assessee from operations including the instant international transaction.

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• 2018 (10) TMI 69
  Addition u/s 68 as unexplained investment - Treatment to the profit arising from the sale of shares as long term and short term capital gains - assessee stated that earlier also the assessee had received gift from his mother which has been accepted by the Revenue - Held that:- Contention of the assessee is not acceptable in the present case because the principle of re judicata is not applicable in the Income-tax Proceedings and each assessment year is a separate unit. In the impugned order, the Assessing Officer has doubted the creditworthiness of the donor and it was not proved beyond doubt as to from where, the impugned amount of gift was remitted to the assessee. The AR of the assessee has not rebutted the objections raised by the Assessing Officer in this regard. The assessee has prepared statement of affairs as on 31.03.2005 & 31.03.2006 and the opening and closing balance of assets and liabilities have been shown by the assessee. Without maintaining the books of account, it is not possible to prepare statement of affairs and opening and closing balances are shown of the assets and liability, which is placed on record. Therefore, the plea of the assessee that he does not maintain any books of account is not correct. Assessee was also unable to prove the basic requirement that the impugned amount of the alleged gift was received from assessee’s mother, as no bank statement of his mother was filed by the assessee at any stage to justify the genuineness of the gift. Therefore, the ld. CIT(A) has rightly confirmed the addition made by the ld. Assessing Officer of the impugned amount as unexplained investment. - Decided against assessee.

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• 2018 (10) TMI 68
  TDS u/s 194H - credit card commission expenses - Held that:- The issue has already been decided by the Tribunal in assessee’s own case in AY 2011-12 by following the decision of the Tribunal Bangalore Bench in the case of TATA TELESERVICES LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX (TDS) CIRCLE 18(1). BANGALORE [2013 (1) TMI 480 - ITAT BANGALORE] facts and circumstances remain the same in the present assessment year there is no merit in the appeal filed by the revenue The sale made on the basis of a credit card is clearly a transaction of the merchants establishment only and the credit card company only facilitates the electronic payment, for a certain charge. The commission retained by the credit card company is therefore in the nature of normal bank charges and not in the nature of commission/ brokerage for acting on behalf of the merchant establishment - payments to banks on account of utilization of credit card facilities would be in the nature of bank charge and not in the nature of commission within the meaning of sec. l94H. The fact that the revenue has preferred an appeal against the order of Tribunal in Tata Tele Services (supra) cannot be the basis not to follow the order of the coordinate Bench of the Tribunal, so long as the said decision has not been reversed by any higher judicial forum. We therefore dismiss the appeal of the revenue. Disallowance of interest paid on delayed remittances of service tax - Held that:- There remains no doubt that the interest expense on the delayed payment of service tax is allowable deduction. The above principles can be applied to the interest expenses levied on account of delayed payment of TDS as it relates to the expenses claimed by the assessee which are subject to the TDS provisions. The assessee claims the specified expenses of certain amount in its profit & loss account and thereafter the assessee from the payment to the party deducts certain percentage as specified under the Act as TDS and pays to the Government Exchequer. The amount of TDS represents the amount of income tax of the party on whose behalf the payment was deducted & paid to the Government Exchequer. TDS amount does not represent the tax of the assessee but it is the tax of the party which has been paid by the assessee. Thus any delay in the payment of TDS by the assessee cannot be linked to the income tax of the assessee and consequently the principles laid down in the case of Bharat Commerce Industries Ltd. Vs. CIT (1998 (3) TMI 2 - SUPREME COURT) reported in cannot be applied to the case on hand. Interest paid u/s. 201(1A) on delayed remittances of TDS - Held that:- Though the decision of the Tribunal is later in point of time, judicial discipline demands that the decision of the Hon'ble Madras High Court is to be followed. It is also worthwhile to mention that the Kolkata Bench of Tribunal in the case of Narayani Ispat Pvt. Ltd. [2017 (10) TMI 67 - ITAT KOLKATA] which was cited for the assessee, did not consider or did not have an occasion to consider the decision of the Hon'ble Madras High Court in the case of Chennai Properties and Investment Ltd. (supra). In these circumstances, we follow the decision of the Hon'ble Madras High Court and uphold the order of the CIT(A) insofar as it relates to disallowance of interest on delayed remittance of tax deducted at source u/s. 201(1A) of the Act.

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• 2018 (10) TMI 67
  Disallowing deduction u/s 54EC - AO disallowed the claim of the assessee for the investment made in NHAI bonds which was invested in the second time for Rs. 50,00,000/- - no investment in these bonds within the time prescribed - Held that:- We find that in the identical facts and circumstance this tribunal in the case of Aspi Ginwala, Shree Ram Engg. & Mfg. Industries vs. ACIT [2012 (4) TMI 195 - ITAT AHMEDABAD] held that there is no dispute about the fact that subscription of eligible bonds was closed during this period till 26-52008 and on the 1st day of the reopening of the subscription, the assessee made this investment. Under the circumstances, the assessee was prevented by sufficient cause which was beyond his control in making investment in these bonds within the time prescribed. Further various judicial authorities have taken a view that exemption should be granted in such cases where there is a delay in making investment due to non-availability of the bonds and have held that it is a reasonable cause and the exemption should be granted. - Decided in favour of assessee Deduction u/s 54F denied - non deposit any amount under the capital gain account scheme - Held that:- there was no need to deposit any amount under the capital gain account scheme. In holding so we find support & guidance from the judgment of Hon’ble Karanatka High Court in the case of CIT Vs. K. Ramachandra Rao [2015 (4) TMI 620 - KARNATAKA HIGH COURT] - No disallowance u/s 54F can be made in the instant case on account of non-deposit of money in capital gain account scheme. Therefore, we have no hesitation in reversing the order of authorities below. Hence ground of appeal of the assessee is allowed.

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• 2018 (10) TMI 66
  Addition u/s 68 - Held that:- Though section 68 of the Act was rightly invoked considering the failure of the assessee to give the identity of its customers, who gave advance in cash, and purchased in cash, such addition has to be restricted to the extent it is not reflected in sales. Taxing the credits in bullion margin money account and sales, would be equivalent to taxing the same amount two times. Hence, section 68 of the Act, in our opinion can be invoked only for those amounts which are not reflected in sales. Thus, while holding that the learned Commissioner of Income-tax (Appeals) was justified in confirming the addition for credits in the bullion margin money account, we direct the learned Assessing Officer to rework such addition by exclud ing margin money credits, to the extent accounted in sales, in the same financial years. In the result, ground of the assessee is partly allowed. Addition for suppression of sales and rejection of loss - cash sale of bullion at a rate below the association rates for the impugned assessment years - Held that:- We upheld the order of the learned Commissioner of Income-tax (Appeals) deleting the addition for suppression in cash sales. Since the credits in bullion margin money account were transferred as sales, the learned Commissioner of Income-tax (Appeals) directed the Assessing Officer to reduce the peak credit considered for addition under section 68 of the Act from sales accounted by the assessee. As mentioned by us it is an undisputed position that credits in bullion margin money account were generally transferred to sales account. Addition of credit in bullion margin money account has been sustained by us, only to the extent not transferred/ accounted in the sales. Otherwise, it will result in double addition of the same amount. In such circumstances, we are of the opinion that the learned Commissioner of Income-tax (Appeals) was justified in giving direction to set off of credit in bullion margin money account with sales accounted by the assessee, so that double addition was avoided. Addition made for diversion of interest bearing funds - Held that:- CIT-A has given a clear finding that the assessee had more than sufficient own funds for giving the interest-free advances. When the assessee was having sufficient own funds, we cannot say that any interest bearing funds were diverted for giving interest-free advances. That apart, the learned Departmental representative was unable to show what were the interest bearing funds that were held by the assessee which were diverted. We do not find any reason to interfere with the finding of the learned Commissioner of Income-tax (Appeals) in this regard. Disallowance made for personal use of car despite the assessee admitting such use - Held that:- Commissioner of Income-tax (Appeals) had deleted this disallowance with a finding that the business of the assessee was vast. The learned Assessing Officer on the other hand had made the disallowance for personal use of cars based on the admission of the assessee. We are of the opinion that the learned Assessing Officer was justified in making such disallowance since it was made on an admission of the assessee. Order of the learned Commissioner of Income-tax (Appeals) on this issue is set aside and the disallowance made by the learned Assessing Officer is reinstated - decided in favour of revenue Additions made for credit/debit notes and differences in reconciliation with M/s. Metals and Minerals Trading Corporation - Held that:- he assessee could not have been saddled with the onus of reconciling the differences in accounts. No way, it can be said that credit notes were the assessee's income or debit notes, were the assessee's expenses. The outcome of the arbitration proceedings, in our opinion will have a great bearing on the quantum of reconciliation difference for which the assessee, if at all is liable. In such circumstances, we are of the opinion an addition for difference in accounting credit and debit notes could not have been made for the impugned assessment years. Even if there is some income arising to the assessee, it will crystallised only in the year in which the arbitration proceedings reach a finality. The Revenue may, if it choose, take cognizance of the arbitral award, in the year in which the arbitration is complete and proceed according to law. We therefore set aside the additions made for credit/debit notes and differences in reconciliation with M/s. Metals and Minerals Trading Corporation for the impugned assessment year - decided in favour of assessee. Addition for difference in M/s. State Trading Corporation (M/s. STC) account - Held that:- Nothing to show what was the nature of the income sought to be added as from State Trading Corporation. Discussion in the assessment order for the assessment year 2011-12 is only on difference with regard to M/s. Metals and Minerals Trading Corporation credit/debit notes and reconciliation. The order of the learned Commissioner of Income-tax (Appeals), also does not deal with any issue regarding addition made by the learned Assessing Officer for income from M/s. State Trading Corporation. Only conclusion we can reach is that the addition made by the learned Assessing Officer was purely on a surmises. The said addition stands deleted. Addition for exchange rate fluctuation debited in its account based on alleged instructions from M/s. Metals and Minerals Trading Corporation - Held that:- If M/s. Metals and Minerals Trading Corporation had charged on the assessee, exchange fluctuation loss of Rs. 7,53,46,987, it would definitely appear in the account of the assessee with M/s. Metals and Minerals Trading Corporation. We have already held that the learned Assessing Officer can take a wholesome view considering the reconciliation differences, if any, between the assessee and the M/s. Metals and Minerals Trading Corporation, once the Arbitral Tribunal reaches its conclusion, in the year which such proceedings are complete. The assessee in our opinion could not have claimed such amount in the impugned assessment year when all along its argument was that credit/debit notes issued by M/s. Metals and Minerals Trading Corporation were fraudulent. The lower authorities were in our opinion, justified in disallowing the claim. Ground of the assessee is dismissed. Addition for want of confirmation from a creditor, named Duraikannau - Held that:- We find that the assessee was given a number of opportunity during the course of assessment proceedings and also in the remand proceedings for substantiating the credit. It seems, the assessee could not produce any evidence before the learned Assessing Officer. In such situation, we are of the opinion that the learned Commissioner of Income-tax (Appeals) was justified in confirming the addition. Addition for difference in closing stock - Held that:- The assessee could not file any confirmation letters either before the Assessing Officer or before the learned Commissioner of Income-tax (Appeals). Even during the remand proceedings the assessee failed to substantiate the credit. The contention of the learned authorised representative before us is that balances in such creditors account was trans ferred to sales and hence addition ought not have been done. We are unable to appreciate this argument. The assessee having introduced credits in the name of these three persons in its accounts, was obliged to provide confirmation and substantiate orders. At no point of time, the assessee claimed it as part of advance received for any cash sales and similar to bullion margin money. Thus, the onus resting on the assessee, was not discharged. Addition for unaccounted investments in a property at Tiruporur - Held that:- It is clearly noted by the learned Assessing Officer that balance-sheet of the assessee's proprietorship business tallied with its bank account with ICICI Bank. Obviously, the assessee had shown payments made for three out of four plots, as utilised for some purpose other than acquisition of the plots. Ex consequenti payments made for three plots stood unexplained. We are therefore, of the opinion that lower authorities were justified in considering the cost equivalent of three plots as unexplained investment of the assessee. Addition made for credit balance in sundry debtors account - Held that:- The transactions ought not have been disbelieved just for the delay in supplying the goods. The assessee having shown that sales were effected to clear the credit in the debtors account, in our opinion, an addition ought not have been made. Such addition stands deleted. Addition for a credit balance in the account of one Mrs. Pista Bai - Held that:- ommissioner of Income-tax (Appeals) has noted that the amounts received from Mrs. Pista Bai were repayment of earlier advance of Rs. 30 lakhs given by Mr. Naresh Prasad Agarwal, when the business was run as a proprietorship concern. The latter transactions were reflected in the accounts of the proprietorship concern. Hence, it was only a repayment of a debt by a debtor. Once the business was taken over by the assessee company, any repayment of debt by a debtor will not create a fresh credit but will only square off the debt. We do not find any reason to interfere with the order of the Commissioner of Income-tax (Appeals).

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• 2018 (10) TMI 65
  Allowable expenditure u/s 37 - Distributable Surplus payment - ‘application of income’ OR ‘allowable expenditure’ - diversion of income by overriding title at source - taxable income of the assessee from the business under section 10(1) - Held that:- In the present case, the entire income from manufacture and sale of Liquor in the present case by CHAMUNDI was taxable in the hands of the Assessee CHAMUNDI and the application of income in the form of “distribution of surplus” from CHAMUNDI to DIAGEO was neither an “allowable expenditure” under Section 37 of the Act nor as a “trade loss” under Section 28/29 of the Act, and only after payment of income tax by CHAMUNDI on the entire profits earned from such business, such “distribution of surplus” could be made by CHAMUNDI to DIAGEO by way of application of income under the Agreement dated 30/10/2007. Thus upon the overall reading of the Agreement dated 30/10/2007 in para 17 defining DIAGEO INDIA’s entitlements before deducting entitlements of CHAMUNDI under Clause 16, the said Agreement in the correct perspective of applicability of Indian Tax laws on the income and profits of CHAMUNDI, ought to have provided for deduction of Income-tax payable on its profits and gains taxable in the hands of CHAMUNDI and thereafter from the net balance after deducting entitlements of CHAMUNDI under Clause 16, the balance surplus could only be taken as entitlement of DIAGEO INDIA Pvt.Ltd. Book entries and Method of Accounting is not determinative and conclusive for deciding the computation of ‘taxable income’ in the hands of the Assessee though they may be relevant to be considered. This is where we feel the tax avoidance effort has been made by the parties and we cannot uphold the same in the overall analysis of the facts and legal position applicable to the facts of the present case. The “diversion of income by transfer of overriding title at source” should normally have the support of the statutory requirements or some decretal binding character of Courts of law and even though the private contractual obligations can also bring about such “diversion of income at source” but in this last sphere of private contractual obligations, the Courts and the Income Tax Authorities have to examine such aspects carefully in comparison to the above two other categories of statutory requirements and the Court decrees and then examine the real purport and object of such private arrangements and Contracts. Besides the issues of the legality of the Agreement, the real intention of the parties should be ascertained as to see whether such arrangements and contracts have been entered into to deflect and divert the applicability of Income-Tax laws on the Assessee who has really earned the “real income”, profits and gains under such Contract or whether such diversion is only an arrangement to suit the purposes of tax avoidance in such cases. Therefore, we reiterate that it will depend upon the facts and circumstances of each and individual case whether in those circumstances, it would amount to a “diversion of income by overriding title at source” or an arrangement to serve the purposes of tax avoidance, as is the case before us. - Decided in favour of revenue

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• 2018 (10) TMI 64
  Revision u/s 263 - disallowance under Section 40(a)(ia) on royalty - Held that:- We find that there is no discussion on the said aspect in the order passed by the Tribual, except one line finding or conclusion that the question of royalty was examined by the Assessing Officer. We also find that the Tribunal has not discussed and gone into the question of disallowance under Section 40(a)(ia) of the Act on royalty, an aspect/question mentioned and referred to by the Commissioner of Income Tax in his order under Section 263. Assessee fairly states that the order of the Tribunal to this extent may be set aside and remanded for fresh consideration. We accept the said statement. It is directed that the Tribunal would re-examine the issue of royalty and disallowance under Section 40(a)(ia) of the Act afresh in view of the observations and findings recorded by the Commissioner of Income Tax in his order under Section 263 of the Act and submission of the respondent-assessee.

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• 2018 (10) TMI 63
  Rejection of books of accounts - GP estimation - difference in net loss of Rs. 16.41 lacs as compared to net profit of Rs. 1.34 crores in the Assessment Year 2006-07. Held that:- Reasons given by the Assessing Officer for rejecting the book results have not been accepted by the appellate authorities. Reasons and explanation given by the respondent-assessee regarding opening/closing stock, amount written back etc. have been accepted. It is not the case that the method of accounting deployed was not regularly followed or it was not possible to deduce profit and gains from the method deployed. The Assessment Order is silent and does not comment and state that the books of accounts were incomplete, incorrect or unreliable. If there is fall in the gross profit ratio, reasons and grounds given by the respondent/assessee have to be examined objectively, fairly and in a non-partisan manner. Past results could be a good reason to conduct detailed verification, albeit would not be the only ground and reason to make addition by rejecting the books of accounts. Good and cogent reason why the financial results should be rejected has to be given. Books of accounts cannot be rejected as the assessee has suffered losses, where as in the immediate earlier year profit was made. Fall in gross profit ratio could be due to various reasons, and cannot be the sole and only ground to reject the book results in entirety and frame best judgment assessment [see Commissioner of Income Tax-XII v. Poonam Rani 2010 (5) TMI 57 - DELHI HIGH COURT], Action Electricals v. Deputy Commissioner of Income Tax [2002 (7) TMI 64 - DELHI HIGH COURT]. The reasoning given in the assessment order to compute income on hypothetical basis by applying gross profit ratio of 4% is completely fallacious, wrong and is contrary to well-settled law, as expounded vide judgments reported as Commissioner of Income Tax, West Bengal v. Calcutta Discount Co. Ltd. [1973 (4) TMI 6 - SUPREME COURT]

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• 2018 (10) TMI 62
  Lase rent / land premium received by the assessee Nigam - business receipt or capital receipt - Nature of income - assessee company is in the business of Industrial and Infrastructure development - Held that:- The assessee has been acting independent / equivalent to the owner of the land which is clear from the Clause 22 of the Memorandum where it is clearly brought out that the object of the MPAKVN and SEZ shall be to sell, improve, manage, develop, exchange, lease, mortgage, dispose off, deal with all or any part of property and rights of the company. Moreover, there is no denial on the part of any transaction, the same has to be taxed under the Income Tax Act, 1961 unless the same is exempted by a particular provision of the Act. Assessee company is involved in the business of Industrial and Infrastructure development and thus the land premium and other lease charges so received are part and parcel of its business receipt and hence the land premium and lease rent received is not a liability in the hands of the assessee company but a taxable revenue receipt. The company debits all the expenses incurred on development of plots in Profit and Loss account and hence the land premium being the consideration of leasing out of plot needs to be given the same treatment ie., treated as revenue receipt. The submission of the appellant – assessee that the land premium is in the nature of liability onwed by the appellant to the State Government is not acceptable. The assessee company is doing the business of Contractor and therefore, cannot take the shelter under Article 289(1) or 289(3) of the Constitution of India. There has to be a clear distinction between sovereign function and a function carried out as trader or a businessman. If the function carried out falls under the ambit of sovereign function, certainly any receipt arising there from cannot be subject to tax but where the function is being carried out as a contractor, in that event, such receipt is taxable and as per the directives of the State of M.P., the entire receipt remains with the assessee – company. A careful perusal of the Memorandum and Article of Association makes it crystal clear that the assessee's main object is to develop, promote, encourage, assist in growth and establishment of industries etc. with ancillary/incidental objects of carrying out of business. A reference to objects as specified under B9 to B12 makes it clear that the assessee is in the business with a motive to earning the profit. The perusal of above Clauses of Memorandum reveals that the assessee is in the business of leasing out of the land and getting rental income as well as the premium. Therefore, a land premium is nothing but a revenue receipt in the form of advance rent which has loosely been named as land premium. Since the assessee is showing annual rent on account of such leasing of the plots, there is no reason why the advance rent received should be taxed accordingly.

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• 2018 (10) TMI 61
  Addition u/s 68 - undisclosed cash credit - accommodation entries - CIT (A) deleted the addition as held that since the identity and existence of the share applicants are true the share application money and the share capital have been routed through banking channel cannot be added in the hands of the assessee - Held that:- In the present case assessee before lower authorities could not rebut the relationship of the assessee, a private limited company with Shri Tarun Goyal and his accomplices in making investment at such a huge premium. The surrounding circumstances and test of Human probabilities also shows that there is no reason to invest those companies in the shares of the assessee company at such a huge premium. Therefore the ratio laid down by the Hon Supreme court squarely applies in the case of assessee. Based on above, we are of the opinion that the ld CIT (A) has deleted the addition based on irrelevant documents, which does not prove the identity, creditworthiness, and genuineness of the shareholders/transactions. Therefore in view of above facts we reverse the order of the ld CIT (A) deleting the addition u/s 68 of the act of Rs. 1,94,00,000/- from 8 companies whose creditworthiness and genuineness of the transaction of issue of shares at a high premium and restore the order of the ld AO. - decided in favour of revenue Addition on account of commission paid on accommodation entries from undisclosed sources - Held that:- As the accommodation entries are taken from Mr Tarun Goyal, CA, who has confirmed the rates of accommodation entries, we find no infirmity in the order of the ld AO in making addition on that basis where the assessee could not prove that no such expenditure is incurred. Accordingly, addition of Rs. 97,000/- of unaccounted expenditure is also confirmed. Ground No 2 of the appeal is allowed.

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• 2018 (10) TMI 60
  Capital gain computation - difference between the valuation made by the DVO and the sale consideration shown by the assessee - Held that:- Where the alleged difference between the valuation made by the Ld. DVO and the sale consideration shown by the assessee is only 4.33%, Ld. CIT(A) erred in sustaining the addition of Rs. 8,89,882/-. We therefore direct the A.O to compute the Long Term Capital Gain on the basis of sale consideration of Rs. 2,07,00,000/- disclosed by the assessee. In the result Ground No.1, 2 & 3 of assessee’s appeal are allowed to the extent of deletion of addition of Rs. 8,89,882/-. Restriction of claim of benefit under section 54F to the extent of 33.33% - Held that:- In cases where for the purpose of claiming deduction u/s 54/54F/54B the investment in purchase of residential house/ agriculture land etc is made in the name of his wife or legal heir the benefit should not be denied because the persons are not strangers to the assessee. However in the instant case the other co-owners are not the relatives of the assessee but are partners in the partnership firm. Therefore A.O has rightly limited the benefit to 33.33% of the amount invested in purchase of residential house at Rs. 71,46,348/-. We find no reason to interfere in the findings of Ld.CIT(A). Ground No.4 of the assessee is dismissed. Allowing the benefit u/s 54F only to the extent of amount deposited till the date of filing of return - whether required amount was deposited within the statutory time limit of two years as contemplated u/s 54F? - Held that:- One cannot have any other opinion except that the assessee has to either apply the net consideration for purchase of construction before the due date of filing of return of income or in the alternative deposit the same in the capital gain account. We can understand this provision with an example. For instance if during the financial year 2012-13, sale of immovable property i.e. the capital asset take place on 1.4.2012 and the due date of filing of return of income is 30.9.2013, then the assessee will have 18 months to utilize the net consideration. If for instance the assessee sells capital assets on 31.3.2013 then the assessee will have only 6 months to utilize the consideration for purchase or construction of the property and if the assessee want to claim the benefit u/s 54F of the Act then the remaining unutilized amount to be deposited with the capital gain account with a statutory Bank. We therefore held that the amount eligible for benefit u/s 54F of the Act in the case of the assessee will be to the extent of Rs. 71,46,348/- and the assessee will get the benefit of 33.33% on this amount. - Decided partly in favour of assessee.

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• 2018 (10) TMI 59
  Rejection of claim of set off of loss incurred by the appellant in 100% Export Oriented Unit as eligible for exemption u/s 10B - alleged loss was claimed as set off against the profit of other Division of the assessee - Held that:- From perusal of the CBDT Circular No.7/DV/2013 dated 16.7.2013 as well as the judgments referred and relied by the Ld. Counsel for the assessee, we find force in the contention of the assessee. Hon'ble Bombay High Court in the case of DCIT V Hindustan Unilever 2010 (4) TMI 206 - BOMBAY HIGH COURT] dealing with the same issue has allowed the claim of set off of loss incurred in one of the EOU units eligible for exemption u/s 10B of the Act against the profits of other units run by the same assessee. - Decided in favour of assessee Marked to market loss - Disallowance of claim of foreign currency fluctuation loss as suffered by the assessee on account of forward market contract of forex derivatives outstanding at the year end - Held that:- Co-ordinate Bench, Mumbai in the case of ACIT V M/s. D. Dipak & Co [2013 (7) TMI 255 - ITAT MUMBAI] dealing with the same issue of “marked to market” loss of notional nature, allowed the issue in favour of the assessee by relying on the Special Bench decision in the case of DCIT V Bank of Bahrain & Kuwait [2010 (8) TMI 578 - ITAT, MUMBAI]concluded that a liability is said to have crystallized when a pending obligation on the balance sheet date is determinable with reasonable certainty. - Decided in favour of assessee

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• 2018 (10) TMI 58
  Calculation of capital gain - CIT(A) rejection of the market value rate adopted by the Sub-Registrar relatable to the superstructure as consideration for calculating Long term capital gains - JDA - Held that:- There is no finding by any of the Courts that vide JDA, there is no transfer of property u/s 2(47)(v). In fact, in lieu of parting of a portion of its land, the assessee is receiving the consideration in kind (i.e. by way of superstructure on the land retained by it) in future and is therefore, a transfer within the meaning of section 2(47)(v) of the Act. As regards the quantification of the consideration received by the assessee, we find that the capital gains has arisen to the assessee on account of the execution of the joint development agreement. The cost of construction should include only the amount of Rs. 60.00 lakhs which was actually paid and not the entire amount which was agreed to be paid. Further, cost of construction also varies due to duration of construction and also other circumstances. Therefore, at the time of filing of the ROI it is difficult to estimate and consider the cost of construction to the builder as the consideration for the land. When the assessee is offering the capital gains, it can only do so, on the basis of material available before it at that point of time and cannot presume about the events in future. Therefore, the assessee had adopted the SRO value, but as rightly pointed out by the AO and the CIT (A), the same cannot be relied upon in the case as the description of the nature of the building in the SRO certificate did not match with the description of assessee’s building. The quality of construction would also differ between building-to-building. SRO value can at best be a guiding factor but cannot be a substitute. Therefore, we reject the assessee’s contention that the SRO value should be accepted as the value of the property receivable by the assessee - the cost of construction of the building alone is the right choice, as at the time of assessment proceedings, the cost of construction was available. AO has taken into consideration certain expenditure incurred by the builder which is not part of the cost of construction of the building. The assessee’s contention that certain part of consideration has already been offered to tax in the hands of its sister concern also has not been verified by the AO/CIT (A) - remand the issue to the file of the AO with a direction to re-compute the capital gain again by considering only elements which are necessary for the construction of the building as the cost of construction, and not the entire expenditure of the builder, including the compensation agreed to be paid to Kohli Constructions and also the finance charges etc., which are not relevant for computing the cost of the construction - assessee’s appeal is partly allowed for statistical purposes.

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• 2018 (10) TMI 57
  Revision u/s 263 - proceedings initiated by holding that Assessing Officer has not verified applicability of section 2 (22) (e) - deemed dividend addition - Held that:- Amount received by assessee from M/s AMQ Agro India Pvt. Ltd. does not amount to loans and advances and Provisions of Sec.2(22)(e) of the Act cannot be applied. In our considered opinion, the order passed by Ld.AO cannot be treated as erroneous. It is a settled law that S.263 proceedings can be upheld, if twin conditions of assessment order being erroneous, as well as prejudicial to the interest of Revenue, stands satisfied. In the present facts of the case assessee received share application money during the year under consideration and shares have been allotted during A.Y. 2014-15 to M/s AMQ Agro, therefore, in our considered opinion as Sec.2(22)(e) of the Act is not applicable to this transaction, the order passed by Ld.AO cannot be treated as erroneous, and therefore, order passed u/s 263 of the Act cannot be upheld. - Decided in favour of assessee

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• 2018 (10) TMI 56
  Claim of exemption u/s 54F denied - addition on the ground that assessee has not utilized the capital gain amount within the time prescribed u/s 139 (1) - due date mentioned in section 54 (2) would be the due date of return of income u/s 139 (1) or the date by which the assessee filed the return u/s 139 (4) - Held that:- The assessee vehemently stated that the assessee had made substantial investment towards the purchase of new property and because builder could not complete the construction of the residential house, therefore, the claim of exemption cannot be denied as per CBDT Circular No.471 dated 15.10.1986 and 672 dated 16.12.1993. Per contra the DR strongly supported the findings of the CIT(A). The undisputed fact is that the assessee has made substantial investment towards the purchase of new residential house. The Assessing Officer himself has given exemption to the extent of Rs. 38.49 lacs as against the claim of Rs. 53.34 lacs. A similar issue arose before the coordinate bench in the case of Seema Sabharwal [2018 (2) TMI 863 - ITAT CHANDIGARH]rovisions of section 54(2) are almost identically worded as in section 54F(4) of the Act. Admittedly, in this case, the assessee has invested the amount for the purchase / construction of the house within the stipulated period as also observed above while deciding the first issue. The assessee has proved such investment during the assessment proceedings and, thus, the assessee has complied with the requirement of substantive provisions and, thus, is entitled to the claim of exemption u/s 54F of the Act. In view of this, we direct the Assessing officer to grant exemption to the assessee as permissible under the provisions of section 54 - Decided in favour of assessee

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• 2018 (10) TMI 55
  Denial of registration u/s 12AA - proof of charitable objects of society - imparting of education - genuine trust - Held that:- Careful perusal of the objects reveals that the objects of the Society primarily are of imparting education to all the classes of the Society. The order impugned is absolutely silent in respect of this material aspect of the matter. The law is fairly well settled that while granting Registration the Ld CIT is entitled to conduct enquiry and get himself satisfied with the objects stated in the memorandum of objects, at this stage any enquiry with regard to the source of income or application thereof is beyond the scope of enquiry contemplated under the Act as per by the law evolved. It is an undisputed fact that the Society is running and maintaining a school upto Intermediate classes and is affiliated by the Government of U.P. Hon’ble Karnataka High Court in the case of CIT vs. A.S. Kupparaju Brothers Charitable Foundation Trust [2011 (9) TMI 590 - KARNATAKA HIGH COURT] has held that once it is admitted that in pursuance of the trust deed and in terms of the objects set out therein, schools and colleges are being run and educational institution are being run, nothing more requires to be established to show that the trust in question is a genuine trust. The registration under section 12AA is only fait accompli to the objects of the institution. The activities of an institution though genuine at the time of grant of registration may not remain so during its life span and the registration granted to it cannot be life time guarantee that it would remain so, that is why the law prescribes procedure for withdrawal of registration once granted. Various findings as demonstrated by the Ld Counsel too were recorded in total ignorance of facts available on records. - Decided in favour of assessee

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• 2018 (10) TMI 54
  Allowable busniss expenditure - Gift Expenses, Business promotion expenses and Entertainment Expenses "wholly and exclusively” - Held that:- Looking to the nature of expenditure and nature of business activity of the assessee, it would reveal that these expenditures were not wholly required, in a sense, for the purpose of business or could it be termed that these expenses were exclusively incurred for the purpose of business. The ld.CIT(A) has examined this aspect in details and made reference to the decision in CONFEDERATION OF INDIAN PHARMACEUTICAL INDUSTRY (SSI) VERSUS CENTRAL BOARD OF DIRECT TAXES AND UNION OF INDIA [2013 (7) TMI 387 - HIMACHAL PRADESH HIGH COURT], and thereafter held that these expenses were not incurred for the promotion of the business. As pointed out by assessee, similar expenses were disallowed to it in earlier assessment years upto the level of the Tribunal, though order of the Tribunal has not been placed on record by either parties. But statement made at the Bar is sufficient for holding that such expenditure has been disallowed in the past also. Thus, in order to maintain consistency, these grounds of appeals are rejected in both the assessment years. Depreciation required to be granted to the assessee on the alleged life saving equipments - @40% OR 15% - Held that:- We find that a list of life saving medical equipments has been given in this Appendix on which deprecation at the rate of 40% is permissible. Where rate of depreciation has been provided on specific machinery, it is not to be granted on each and every machinery installed at the hospital. Thus, the ld.CIT(A) has rightly rejected the stand of the assessee. The depreciation is to be granted on the basis of rate provided in the table given in the Income Tax Rules. The machinery on which depreciation has been claimed by the assessee at 40% is not being provided in the Appendix. Therefore, the depreciation on such machinery is at 15% which has rightly been upheld by the ld.CIT(A). This ground of appeal is rejected in both years. Depreciation on certain electrical installation at 15% which has been restricted by the AO to 10% - Held that:- We find that depreciation has been restricted at the rate of 10% by the ld.AO because the assessee failed to demonstrate that electrical panel installed by it was part of the machinery. He considered electrical installation as independent asset than the medical equipments. CIT(A) has considered all these aspects in right perspective and no interference is called on this issue. Hence, this ground of appeal is also rejected.

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• 2018 (10) TMI 53
  Addition u/s 68 - bogus long term capital gain addition - assessee has derived his long term capital gain under issue from a dubious route of rigging in value of his shares in the two scrips - Held that:- My attention is invited time and again to the fact that DIT(Investigation) has found some entry operators spread throughout the country to be indulged in such kind of business by rigging scrips’ prices. Find no merit in all these contentions raised at the Revenue’s behest. The fact remains that there is not even a single evidence or material against the assessee apart from mere assumptions and presumptions hereinabove. As decided in Navneet Agarwal vs ITO [2018 (8) TMI 509 - ITAT KOLKATA] held that we are bound to consider and rely on the evidence produced by the assessee in support of its claim and base our decision on such evidence and not on suspicion or preponderance of probabilities. No material was brought on record by the AO to controvert the evidence furnished by the assessee. Under these circumstances, we accept the evidence filed by the assessee and allow the claim that the income in question is a bonafide Long Term Capital Gain arising from the sale of shares and hence exempt from income tax. - Decided in favour of assessee.

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• 2018 (10) TMI 52
  Levy of penalty u/s 271E r.w.s. 269T - reasonable cause - proper year for levy of said penalty qua the year of book entries - reasonable cause for such book entries and subsequent allotment of 9% Redeemable Preference Shares - method of repayment of loans - Held that:- The entries in the books of the assessee and the VSK are not in sync in this regard. Therefore, we find the reason given by the CIT(A) has merits. Therefore, we dismiss relevant arguments of Ld. Counsel for the assessee. Squiring up of loans by way of book entries constitutes violation The reason of lack of funds caused by the act of utilisation of it for the business purposes of the assessee, shall constitute reasonable cause in this case. Raising the funds by sale of lands or borrowing from other parties to repay to VSK is an unnecessary exercise when the funds so paid to VSK is destined to return to the assessee’s bank account. On this reasoning, the assessee’s decision in favour of squiring up of the loans account through passing of journal entries, shall constitute a reasonable cause on the facts of the present case. The same reasoning has the strength of the binding jurisdictional High Court judgment in the case of CIT Vs. Triumph International Finance (I) Ltd. [2012 (6) TMI 358 - BOMBAY HIGH COURT]. In this case, the amount was to come back to that assessee towards the sale price of the shares. Therefore, on the ground of reasonable case, as envisaged in the provisions of section 273B of the Act, we are of the opinion that the levy of penalty is not sustainable. - Decided in favour of assessee.

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• 2018 (10) TMI 51
  TPA - ALP determination - upward transfer pricing adjustment - comparable selection - Held that:- The net profit margin earned by the Assessee from the controlled international transaction was 22.96% in comparison to the average net profit margin earned by the comparables chosen by the Assessee at 12.78%. If one were to proceed on the basis of the comparable selected by the assessee and apply its profit margin of 12.78%, the Assessee’s profit margin of 22.96% is higher. Hence the comparison of the net profit margin of the international transaction of the Assessee in comparison to the net profit margin of the comparables is much better and the addition so made by the TPO & AO is wholly wrong and incorrect and therefore, we delete both the upward transfer pricing adjustment made by TPO/AO Availability of exemption u/s 10A to the assessee is no bar to applicability of sections 92C and 92CA. To conclude, we are of the view that since we accept the comparable companies selected by the assessee ( Zenith Exports and Eastern Silk Ind Ltd)as even though the assessee has got a higher RPT and, however, since the TPO has accepted these comparable for AY 2010-11, we agree with the Ld. CIT(A) that this company should not be excluded as a comparable. We also accept the profit level indicators (PLI) computed by the assessee and we reject the seven comparables selected by the Ld TPO. Therefore, we delete the transfer pricing adjustment made by the TPO in assessment year 2008-09 and 2009-10. Liability to pay MAT u/s 115JB of companies eligible for claiming deduction u/s 10A - Held that:- Up to assessment year 2007-08, the 10A, & 10B units were not supposed to pay minimum alternate tax (MAT) under section 115JB of the Act. However, on or after assessment year 2008-09 these 10A & 10B companies should pay minimum alternate tax (MAT) under section 115JB of the Act. Therefore, we note that the companies eligible for claiming deduction u/s 10A are continued to remain liable to Minimum Alternate Tax (MAT) made u/s 115JB of the Act. The issue before us is relating to A.Y. 2008-09 and A.Y. 2009-10, therefore, we are of the view that assessee company is liable to pay MAT. Therefore, we allow this ground raised by the Revenue. Addition u/s 14A - Held that:- As relying on the judgment of Hon’ble Bombay High Court in the case of CIT vs. Reliance Utilities Power Limited [2009 (1) TMI 4 - BOMBAY HIGH COURT] and CIT vs. HDFC Pvt. Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT], we delete the addition under Rule 8D (2) (ii). As regards the disallowance made by the Assessing Officer u/s 14A r.w.r 8D(2)(iii) we direct the Assessing Officer to compute the disallowance in line of the judgment of jurisdictional Tribunal in the case of REI Agro India [2013 (5) TMI 582 - ITAT KOLKATA] and therefore, Assessing Officer is directed to consider only those shares and investments in respect of dividend income has been earned during the year. Disallowance of depreciation - Held that:- The assets on which the company has claimed the depreciation was being used by the Company for keeping records and books of accounts of the company. Therefore, the flat was being used for the purpose of business, hence, the depreciation should be allowed to the assessee company. We note that the same issue of depreciation has been allowed to the assessee in the preceding years hence, to maintain the rule of consistency such depreciation has to be allowed in this year as well especially in the light of the fact that the Assessing Officer has not brought any material on record to prove that such flat was used for the purpose other than the business. That being so, we decline to interfere in the order passed by the ld. CIT(A) Addition on account of unexplained investment - AO disallowed an amount on account of information available in the AIR data, which was treated to be unexplained investment - Held that:- This matter has been duly explained by the assessee before the AO and the Assessing Officer had overlooked the explanation submitted by the assessee. CIT(A) has co-terminus power as the Assessing Officer has, that is, the CIT(A) has all the powers as the Assessing Officer has, and in the assessee’s case ld CIT(A) had examined the documents. Since the said issue had been explained before the Assessing Officer by the assessee and the CIT(A) accepted the same evidence in continuous of the explanation submitted by the assessee before the Assessing Officer, and the fact that the ld. CIT(A) has co-terminus power, therefore, we do not find any infirmity in the order passed by the ld. CIT(A) and his order on this issue is hereby confirmed.

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• 2018 (10) TMI 50
  Assessment u/s 153A - addition on account of share application money, treating the same as unexplained cash credit u/s 68 - proof of incriminating material found as result of search - Held that:- As decided in the case of M/s Brahmaputra Finlease (P) Ltd. Vs DCIT [2018 (3) TMI 1598 - ITAT DELHI] as relying on the case of best infrastructure (India) private limited [2017 (8) TMI 250 - DELHI HIGH COURT], despite the admission of accommodation entry in statements under section 132(4) of the Act, the court held that the statement do not constitute as incriminating material. In the instant case, neither is there any statement of any accommodation entry operator claiming that any entry was not provided nor any director has admitted that assessee obtained accommodation entry. Thus, the case of the assessee is on better footing then the case of Best Infrastructure (I) P. Ltd (supra). We do not have any hesitation to hold that the statement under section 132(4) of Sh. Sampat Sharma cannot be treated as incriminating material found during the course of search. In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search. Both the conditions as completed assessment and no incriminating material, have been satisfied in the case, thus,no addition could have been made in the instant assessment year in view of the finding of the Hon’ble Delhi High Court in the case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] - decided in favour of assessee.

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• 2018 (10) TMI 49
  TPA - comparables selection criteria - Held that:- In the present case, the fact that the product manufactured by the tested party i.e. the Assessee viz., laboratory and processing equipment thus companies functionally dissimilar with that of assessee need to be deselected from final list. Benefit of a working capital adjustment - TPO/AO is directed to consider the claim of the assessee and allow adjustment to profit margins towards working capital adjustment in accordance with the law, after affording assessee the opportunity of being heard. TPA - CIT(A) for considering the entire sales in manufactured finished goods segment for determination of ALP - Held that:- Presumption of the CIT(Appeals) is without any basis. He has not demonstrated with actual figures as to how there would be impact on profit margin on sale of finished products to AE because of purchases of some components from AE. He has given examples which are imaginary figures. Apart from this, the TPO has accepted that purchase of raw material and components by the assessee from its AE is at arm’s length. Therefore, the basis on which the CIT(A) proceeded to apply the ALP test for transactions with non-AE is neither correct on facts nor permissible in law. As rightly contended by the assessee, section 92 of the Act can be applied only in respect of international transactions i.e., transactions with AE. Thus we hold that the transfer pricing adjustment should be restricted only to the AE related transactions of the assessee. Determining the operating expenses - Held that:- On the first aspect of allocation of foreign exchange gain on proportionate basis, we are of the view that the same has to be on actuals. With regard to considering bad debts as operating expense, we are of the view that it is only the bad debts in manufacturing segment that should be considered as expenses of manufacturing segment for working out the OP/OC. We hold and direct accordingly on the aforesaid additional grounds. Benefit of MAT credit u/s 115JAA - Held that:- Would be just and appropriate to direct the AO to verify the claim of assessee and allow the claim for MAT credit in accordance with the law.

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• Customs

• 2018 (10) TMI 46
  Principles of Natural Justice - cross-examination of witnesses not allowed - Held that:- Admittedly, the petitioner was not allowed to cross-examine the witness of the prosecution. According to the department, the request was made late and after the conclusion of the second date of hearing. According to the petitioner, even if that be so, the adjudicating authority was obliged to deal with the request for cross-examination in the impugned order - Principles of natural justice require the adjudicating authority to allow a respondent in a proceeding to cross-examine the witness produced by the prosecution. In the present case, a request was made by the petitioner before the adjudicating authority for cross-examining the witness of the prosecution. Such request was made on May 28, 2018 - Such request was received on such date at 4.20 p.m. The hearing was concluded before such request was made. However, the adjudicating authority did not deal with such request in the impugned order. The impugned order in original is set aside - the adjudicating authority will consider and decide the application dated May 28, 2018 made by the petitioner for grant of an opportunity to cross-examine the witness of the prosecution.

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• 2018 (10) TMI 45
  Whether the Tribunal is right in law in remanding the matter to the appellate authority with a direction to pass appropriate order on the basis of the outcome of the decision of the Hon'ble Apex Court in the case of Aman Medical Products Ltd. [2010 (4) TMI 1049 - SUPREME COURT], where it was held that refund granted subject to the condition that assessee will have to file an undertaking in this Court, within four weeks from today. Held that:- The impugned order has restored the issue to the Commissioner (Appeals) to decide the matter, after the Supreme Court takes a decision on an appeal field by the Revenue from the order of the Delhi High Court in the case of Aman Medical Products Ltd., v/s. Commissioner of Customs [2009 (9) TMI 41 - DELHI HIGH COURT] which has been admitted by the Apex Court on 1st April, 2010. The impugned order of the Tribunal remanding the matter of the Commissioner (Appeals), is without considering the applicability of the law laid down in the case of Flock (India) Pvt. Ltd. [2000 (8) TMI 88 - SUPREME COURT OF INDIA]. Appeal is restored to the Tribunal for fresh disposal.

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• 2018 (10) TMI 44
  Prosecution proceedings against the customs officers - protection u/s 155 of the customs act - Jurisdiction - whether CBI officer is not proper officer to decide about under valuation? - Jurisdiction of CBI to prosecute the petitioners based on the inference that there is under valuation in the import and loss to the revenue. Held that:- It is the responsibility of the proper officer as defined under Section 2 (3A) of the customs Act to assess the invoice value declared by the importers. At the first instance is the DC/AC of customs and Central Exercise Department. To exercise power under Section 28 AAA the proper officer are the Superintendent of customs and Central Exercise and Appraisers for exercising function under Section 28(1) of the Act. The 13 Bills of Entry under scanner, admittedly assessed and value fixed by the proper officers. The prosecution against importer A4 and A5 is for under valuing the goods imported and for evading duty. As against A1 to A3 is for suppressing the reference made by the assessing group about undervaluation, to the controlling officer. Issuing UO letters on their own without the knowledge of the Commissioner thereby to facilitate the importer to clear the goods showing lesser value than the prevailing market value caused unlawful pecuniary advantage - The UO letters issued by A1 to A3 were not part of their duty but created falsely to cheat the exchequer. No element of duty is found in issuing a misleading, false document under the capture UO letter. Hence, Section 155 (2) of the Customs Act have no relevance. Issuing UO letters contrary to Act, rules and Regulations containing falsehood does not attract Section 155 of the Act, to claim protection. Hence, the orders of the trial court dismissing the discharge petitions are liable to be confirmed. Criminal Revision Petitions are dismissed.

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• 2018 (10) TMI 43
  Violation of import conditions - N/N. 93/2004-Cus dated 10th September 2004 - Import against advance authorization as per the export promotion scheme - recovery on the ground that the said goods had been diverted to another manufacturer under the guise of job-work without receiving back the goods, as such or after processing. Held that:- Notification states that the goods should not have been sent to any other factory for any kind of process and that such conversion by a job-worker was permissible only after the redemption of the bond. Though Learned Counsel asserts that the some of the imports were effected after completion of the exports, it is not evident that these imports took place after the redemption of the bond and that the transfer to job-worker thereby permissible - A harmonious reading of the proviso introduced later and the main provision would lead to the inevitable conclusion that, even if utilised by a job-worker for conversion, transfer of the imported inputs is not permissible. Demand u/s 28 - Held that:- As there is no evidence on record of existence of the pre-requisite warranting invoking of the extended period, though the lower authorities have held that there was misdeclaration/ suppression of fact at the time of import and, therefore, the demand under section 28 was not warranted. Confiscation - redemption fine - Held that:- The failure to comply with the conditions of a notification which are to be fulfilled after the import is completed may be visited with confiscation under section 111(o) for failure to comply with the post-importation conditions - In the present instance, that is of no relevance because provisions of section 112 has not been invoked for imposition of penalty. The redemption fine has been set aside by the first appellate authority on the ground that the goods are not available for confiscation. Extended period of limitation - Held that:- Considering the failure on the part of the lower authorities to establish that the appellant had suppressed relevant facts at the time of import, the lower authorities has travelled beyond the normal period of limitation and is, therefore, not correct in law - In the absence of valid grounds for invoking the extended period, the recovery itself is jeopardized and for which reason we set aside the impugned order. Appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 42
  Penalty u/s subsections (a) and (b) of Section 112 of Customs Act, 1962 - Smuggling - Confiscation - Penalty - Held that:- A reading of the provisions indicates very clearly that they are under different domains. Whereas subsection (a) envisages an action of commission or omission in relation to the goods which would render the goods liable for confiscation under Section 112 of Customs Act, 1962; Subsection of (b) of Section 112 envisages certain act concerning the goods, therefore, it has to be understood that both the provisions are in a different spheres of operation. The learned Commissioner has erred in putting both the subsections together while imposing penalty. It was incumbent on the part of the adjudicating authority to clearly satisfy the offence of each of the persons involved and then to apply the penalty provisions as the commissions or omissions by the respective persons may invite - the matter has to go back to the original authority for appreciating the facts vis-à-vis penal provisions and to pass a suitable order. Imposition of penalty on truck owners/drivers - Held that:- As the case itself is remanded back for a fresh consideration on the issue of imposition of penalties, it would not be proper at this juncture to pass a judgment on part of the order. Appeal allowed by way of remand.

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• 2018 (10) TMI 41
  Permission to re-export the impugned vehicle on nominal fine and penalty - import of 10 seated SUV vehicle from Sri Lanka - It appeared to the investigating agency that the vehicle was imported by mis-declaring the description, value, country of origin - Confiscation alongwith redemption fine and penalty. Held that:- True, there are allegations in the SCN that appellant has committed misdeclaration of country of origin, value of goods and classification of the goods. However for these infractions, the SCN already proposes in paras 17 & 19 (d), confiscation under Section 111 (d) and (m) of the Customs Act, 1962 and imposition of penalty under Section 112A of the Customs Act, 1962. These proposals have been acted upon by the original authority who has ordered confiscation of the vehicle under Section 111 (d) of the Customs Act for the reason that “as country of origin, value of goods along with confiscation of goods has been misdeclared in the Bill of Entry”. While appropriation towards “duty” amount has been made, the provisions of Customs Act under which such appropriation has been made has not been indicated by any of the lower authorities. In any case, when the importer is accepting the option to re-export the imported vehicle, and the said are not cleared for home consumption into the DTA area, the question of imposition of import duties of Customs will not arise. When the permission for re-export has been made, sufficient justification has not been given by any of the lower authorities for imposition of penalty under Section 114AA of the Act and also for appropriation for the amount paid by the appellant towards duty amount. Penalty imposed under Section 114AA of the Customs Act, 1962 and also the appropriation of an amount of Rs. 57,40,501/- paid by the appellant during investigation towards “duty”, cannot then be sustained and will require to be set aside. Appeal allowed in part.

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• 2018 (10) TMI 40
  Condonation of delay of 15 days in filing appeal - Appeals to Commissioner (Appeals) u/s 35 of Central Excise Act - Held that:- Appeals to Commissioner (Appeals) can be filed under Section 35 of Central Excise Act that too within 60 days from the date of communication of the decision/Order to the appellant. The provision gives a discretion to Commissioner (Appeals) for allowing the Appeal to be presented within a further period of 30 days provided a sufficient cause for not presenting the Appeal within the aforesaid period of 60 days is shown. In the present case, the Order-in-Original was announced on 11.03.2014. The Appeal was filed on 23.12.2015. It becomes clear that Appeal before Commissioner (Appeals) was filed after the delay of one year nine months - there is no infirmity in the Order of Commissioner(Appeals) irrespective of the appellant’s pleading that he received the impugned order on 17.12.2015. Otherwise also, the appellant was apparently appearing in person before the original Adjudicating Authority. Plea of no knowledge is irrelevant specially when there is evidence on record that the Order-in-Original was sent to the appellant through registered post. The Commissioner (Appeals) has committed no error while dismissing the Appeal on the sole ground of limitation - Appeal dismissed.

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• Insolvency & Bankruptcy

• 2018 (10) TMI 47
  Insolvency Resolution Process - outstanding debt - Held that:- A record of default is available with the Credit Information Bureau (India) Limited (CIBIL) as per its commercial credit information report of the Corporate applicant based on report dated 07.02.2018 (at pgs. 208-256). Certificate of registration of charge issued by ROC has also been placed on record as Annexure-H. Details given in the preceding paras would establish beyond doubt that the Corporate Applicant has furnished information relating to its books of account and all documents as per the requirement of Section 10 the Code. It has also proposed the name of Interim Resolution Professional. There is no impediment to reject the application. It is infact found complete in all respects. Petition is admitted

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• FEMA

• 2018 (10) TMI 39
  Jurisdiction of concerned authorities - Held that:- Respondent nos. 2 and 3 are located in Bangalore and there is a possibility that issue has been examined by the concerned authorities having jurisdiction in respect of Banglore. He, nonetheless, states that the averments made in the petition would be considered by respondent no.1 and if any inquiry or investigation is warranted, steps in this regard would be taken by the concerned authorities. No further orders are required to be passed in this petition, the same is, accordingly, disposed of.

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• PMLA

• 2018 (10) TMI 38
  Maintainability of show cause notice - adjudicating authority jurisdiction to issue a show cause notice or list the matter for final hearing - Held that:- The parties agreed that the issue of jurisdiction having been raised by the respondent before the adjudicating authority, the same be decided in the first instance by the adjudicating authority before deciding the penalty on merits. Ordered accordingly. The respondent states that since the respondent had filed the appeal limited to the extent of jurisdiction of the adjudicating authority, the respondent will withdraw its appeal before the Tribunal and urge the jurisdictional issues before the learned adjudicating authority with liberty to challenge the order passed by the adjudicating authority, if need arises and if so advised. Petitioner states that this order of consent, on instructions from the competent authority, may not be treated as a precedent and is on the peculiar facts of this case. It is clarified that since the parties consented to the adjudicating authority hearing the jurisdictional issues in the first instance this Court has not given any finding on merits or the questions raised by the parties in the present appeal or the appeal before the Tribunal. Parties are further directed to appear before the adjudicating authority on 10th September, 2018 who will decide the preliminary issues and the objections qua jurisdiction raised by the respondent in the first instance.

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• 2018 (10) TMI 37
  Offence under PMLA - attachment orders - property owned and in possession - Held that:- Enforcement Director has verified the facts, as stated in the affidavit, and nineteen shops belonging to DAPL are vacant and available. There is also no dispute that the applicability of the impugned orders has to be restricted to the properties owned and in possession of DAPL. In view of the above, the orders dated 30.09.2016 and 14.03.2017 are modified to the extent of directing that the said orders will not be applicable in respect of the immovable property forming a part of Jalsa Mall except the nineteen shops as identified in the additional affidavit affirmed on 09.07.2018. Consequently, the eviction order dated 24.03.2017 shall also not be operative in respect of any property forming a part of the Jalsa Mall other than the nineteen shops as indicated above. It is also to be noted that the said attachment insofar as Jalsa Mall is concerned, is limited to a sum of `2,78,87,000/- as expressly indicated in the impugned order dated 30.09.2016.

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• Service Tax

• 2018 (10) TMI 36
  Business Auxiliary Services (BAS) / Business Support Service (BSS) - appellants were engaged in Courier activity, later on investigation it emerged that they were collecting certain charges as crossing over charges , raised on their sub-franchisee agencies located in other parts of Tamil Nadu for the purpose of enabling further movement of documents, which originated from their sub-franchisees end. Held that:- It is but evident that the various franchisees spread over Tamil Nadu and the assessees based in Chennai, are operating in the hub-and-spoke business model. The documents from each of these TPC franchisees may be sent to the TPC hub at Chennai wherefrom they will be further sent onwards to various other TPC hubs in other parts of the country for further distribution. This being the case, crossing over charges are being collected only for the intra-movement of courier packages within the hub-and- spoke arrangement, namely with the TPC network in Tamil Nadu. In the present case the impugned services within the TPC network is nothing but a continuation or culmination of courier services only. It then cannot be alleged that TPC receiving or giving of services within its own network of the assessee will render them liable to service tax levy. Appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 35
  Classification of services - Club/Association Service or not - holiday resorts - case of the appellant is that there will be an agreement with its members who would be availing ‘time share’ facilities at the appellant’s resorts at various places and it is, according to the appellant, essentially in the nature of providing short term residential accommodation within the meaning of Section 65(105)(zzzzw) w.e.f. 01.05.2011. Applicability of Notification No. 04/2006-ST - Held that:- There is no difference between a member being upfront and a member availing instalment facility and there is no finding from the lower authority that the benefits of membership accruing to either of the aforesaid members vary. We thus find that the interest on instalments is only a financial arrangement for the deferred payment which is only to set-off any financial loss on account of deferred payment and that this kind of interest is not a taxable entity under the tax net - the denial and the reason attributed for denying applicability of Notification No. 04/2006-ST is not sound and proper - The exclusion as provided under the said Notification is applicable irrespective of the category. This very Bench has considered a similar situation in the case of Karur Vysya Bank Ltd. Vs. Commissioner of Central Excise, Trichy [2015 (2) TMI 525 - CESTAT CHENNAI] held that interest on instalment is not includible as it cannot partake the character of consideration for the services provided - demand withheld. Securitization income - Held that:- An amount showed in the balance sheet could neither be an income nor a consideration nor a payment or the gross amount charged in terms of Section 67(a) and (c) and hence, it is nothing but a financial adjustment in the nature of book entry - Further, when a member cancels membership, there is nothing for the appellant to claim as receivable and hence, the same gets adjusted by this notional amount since there is nothing on record to suggest that the appellant received any amount towards cancellation fees. Hence, the securitization income is not liable under service tax. Rental Income - Held that:- The adjudicating authority/Commissioner (Appeals) records that the assessee-appellant has not submitted any document with regard to its claim that the rentals were collected only from non-members - appellant directed to furnish all such details that are relevant before the lower authority for the lower authority to arrive at a proper finding after appreciating such documents furnished by the appellant - appeal allowed by way of remand. Exchange Services - Held that:- The service of facilitation could be availed only by virtue of being a member and not if such person is an outsider. Hence, this activity tantamounts to an activity of service provided to a member under mutuality concept and hence, not taxable. Provision of service of telephone and fax - Held that:- Though we hold that the revenue from telephone and fax could not be equated to ‘any other amount’, we are of the considered view that the appellant should prove with supporting documents to establish that it has not collected anything over and above the actuals charged by the operator for facilitating such telephone and fax services, before the lower authority - matter on remand. Penalties - Held that:- The benefit of Section 80 of the Act could be extended for the reason that the appellant acted in a bona fide manner and there was reasonable cause for their failure to discharge service tax liability in the situations where it was otherwise required to - penalty set aside. Appeal allowed in part - part matter on remand.

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• 2018 (10) TMI 34
  Business Auxiliary Service - it appeared to the department that appellants are involved in the activity of production of goods on behalf of the clients on which service tax is required to be paid - N/N. 8/2005-ST dt. 1.3.2005 - Held that:- It is evident that till verification done on 11.09.2006 by the department, the appellants were not discharging any duty or tax liability on the activities carried out by them. It is not disputed that they were doing job work such as machining, drilling, milling etc. on the goods received under cenvat challans from Magna Electro Castings Ltd. It is also evident that only after the verification action by the department started, the appellant had filed the first return on 24.10.2006 claiming exemption under Notification No.8/2005-ST dt.01.03.2005. Mere allegation against Magna Electro Castings Ltd., that too in passing, in para 10.5 of the SCN dt.15.05.2008 and in para-2 of the SCN dt. 16.10.2008 cannot be taken as a bulwark for initiating proceedings against their job workers, the appellants herein. The activities carried out by the appellant will indeed amount to manufacture for the purpose of Section 2(f) of the Central Excise Act,1994 and in consequence, the same will not be a Business Auxiliary Service under Section 65 (19) of the Finance Act, 1994 and therefore no service tax liability will arise in consequence - Appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 33
  Refund claim - GTA Services - N/N. 41/2007-ST, dated 06.10.2007 as amended and subsequent N/N. 17/2009-ST, dated 07.07.2009 - reverse charge mechanism - whether during the relevant periods i.e., 01.04.2008 to 31.12.2008, the Goods Transport Agency services availed by the appellant were covered by the aforesaid exemption notifications or not? Held that:- All periods are prior to 19.02.2008 i.e., the date on which the N/N. 3/2008-ST was issued amending N/N. 41/2007. This exemption notification exempted goods transport agency services provided by the exporter “in relation to transport of export goods”. It does not say Goods Transport Agency services for transport of export goods. Therefore, the question is whether the word “in relation to transport of export goods” covers also the transport of the empty containers to the factory of manufacturer before sending the stuffed containers to the port or inland container depot. It has been uniformly held that the words “in relation to transport of export goods” cover even bringing the empty containers to the factory for the purpose of stuffing the export goods. There is no reason to deviate from this consistent position taken in the various decisions - the appellant is entitled to refund of the service tax paid on goods transport agency services availed for transport of empty containers from the container yard to the factory for the purpose of export of goods. Since, there is no doubt about the eligibility of the exemption notification, there is no room to give the benefit of doubt to the revenue in this case. Appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 32
  Mandap Keeper Services - amounts have been collected as rental amount from persons who book the hall and in addition, an amount as donation has also been collected in the name of Wellingdon Charitable Trust - Extended period of limitation - Held that:- There has been considerable laxity on the part of the department. Nothing prevented them from issuing SCNs in 2004 itself when after collecting information, appellants had been advised by the department that service tax liability is required to be paid on the amount of donation - We are also unable to fathom why such a contentious issue was not again examined in two subsequent audits. We are not able to find any infirmity with the orders of the Commissioner (Appeals) that extended period cannot be invoked; that in the case of SCN No.234/2008 dt. 22.09.2008 in respect of Rani Meyyammai Hall, the demand for the period from 23.09.2007 to 30.11.2007 alone will survive; that similarly, in the case of SCN No.234/2009 dt. 22.9.2008 in respect of Raja Muthiah Hall the demand only for the period 23.09.2007 to 30.11.22007 alone will survive. Appeal dismissed - decided against Revenue.

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• 2018 (10) TMI 31
  Classification of services - business of marketing, sourcing, making available various kind of loans on behalf of various banks such as ICICI, HDFC, City Bank, Standard Chartered Banks and similar Financial & Banking Institutions - whether classified as Business Auxiliary Services or as Franchise Services? - 25/2004 dated 10th September, 2004 - invocation of extended period of limitation. Held that:- In the present case also, the demand is for the period w.e.f. July 2003 to December 2004. The Show Cause Notice was issued on 28.09.2007. Once there was an apparent acknowledged confusion about the impugned activity, non-discharge of the liability thereof cannot be alleged as an act of suppression of fact with an intent to evade tax. Resultantly, the Department was not entitled to invoke the extended period of limitation. Demand hit by limitation of time - appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 30
  Principles of Natural Justice - case of Revenue is that that the appellant has miserably been non cooperative since the issuance of the impugned Show Cause Notice - Held that:- The Adjudicating Authority had no option but to pass the impugned order in the absence of relevant documents. However, those documents are prayed to be brought on record. It is also observed that the calculation sheet for VCES is also based on the data as might be available in the documents as prayed for. In the given circumstances, it will be in the interest of justice, otherwise also will not be prejudicial to the interest of the department that these documents be reconsidered by the Adjudicating Authority below. Matter remanded to the Adjudicating Authority below to re-adjudicate confining to the documents as mentioned in the application for additional evidence as to whether these documents are sufficient to negate the entire part of demand of the impugned Show Cause Notice or not - appeal allowed by way of remand.

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• 2018 (10) TMI 29
  Manpower Recruitment or Supply Agency s Service - default in discharging service tax liability - default for the month of May 2008, June 2008 and July 2008 - the appellant also did not file the returns within the stipulated time - Held that:- It is admitted fact that the appellant has been defaulting in discharge of service tax and in filing of statutory returns right from the October 2002 and this pattern of default of payment of tax continued even in the month of May 2008 onwards. The appellant are not disputing the duty amounts and the interest amounts payable thereon. Hence, the demands of duty and interest in all the three appeals, being uncontested by the appellant are upheld. Penalty u/s 76 of FA, 1994 - invocation of section 80 - Held that:- Admittedly, the appellant has made it a pattern to delay the payment of service tax month after month since October 2002. Further, it is not disputed that the appellant has been recovering service tax from their clients but not depositing the same immediately. Appellants were fully aware of their liability and their obligation to pay service tax in time. However, on the ground of so-called of financial crunch, they have delayed the payment of service tax - In the present appeals, however, the appellant admittedly did not pay the service tax and interest before the issuance of show cause notice. The appellants have not been able to substantiate their claim for waiver of penalty imposed under Section 76 of the Act. Therefore, their plea for waiver of the penalty by exercising discretion under Section 80 of the Act is liable to be rejected. Benefit of the 2011 amendment in Section 76 ibid - the only reason given by the appellant is that since the 2011 amendment was by way of substitution, the same should be applied retrospectively - Held that:- In the Finance Act, 2011 which brought about the amendments in Section 76 of the Finance Act, 1994, there is nothing in the amendment which says that the amendment is to be applied retrospectively - In the present case, the amendments made are neither clarificatory in character nor for correcting any obvious mistake. The changes brought about by the 2011 amendment in Section 76 ibid in respect of the amount of penalty (from Rs. 200 to Rs. 100) or percentage based penalty (from 2% to 1%) to be imposed are not to rectify any mistake or to clarify any ambiguity - the said amendment is to apply prospectively only - penalties upheld. Appeal dismissed - decided against appellant.

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• 2018 (10) TMI 28
  Reversal of CENVAT Credit - providing services at concessional rate of service tax / abatement - common input services used for providing taxable as well as exempt service - non-maintenance of separate records - Rule 6(3) of the CENVAT Credit Rules - Held that:- The appellant is not providing any exempted service because his case does not fall in the definition of exempted service. However, the appellants are only availing the benefit of abatement in respect of the accommodation service as per Notification No.26/2012 dt. 20/06/2012 and as per the said Notification, 40% of the value of the accommodation service has been exempted from the levy of service tax on the condition that the CENVAT credit on inputs and capital goods has not been taken - In the present case, the appellant has not taken any CENVAT credit on inputs and capital goods. Further there is no restriction with respect to availment of CENVAT credit on input services. As far as restaurant services are concerned, it is found that the appellant is not availing the abatement notification and as per Rule 2C of Service Tax (Determination of Value) Rules, 2006, only 40% of the total value is taxable and the only condition attached with this is that CENVAT credit on inputs classified under Chapter 1 to 22 of the CETA, 1985 is not availed. When the statute itself prescribed certain percentage of total value as the value of service, the remaining portion of the value would neither be considered as an abatement nor as an exemption and consequently the restaurant services would not be covered under the definition of exempted services and hence the provisions of Rule 6 of CCR is not applicable in the present case. The appellants are not required to comply with the provisions of Rule 6 of CENVAT Credit Rules - appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 27
  100% EOU - Refund of unutilized CENVAT Credit - Rule 5 of CENVAT Credit Rules, 2004 read with Notification No.05/2006-CE(NT) dt. 14/03/2006 - various input services - scope of SCN - Held that:- The appellant is a 100% EOU and is engaged in the Business Process Outsourcing, Call Centre etc. which are liable to service tax under BAS/BSS. For rendering the export service, the appellant utilized various input services and has taken the credit of the same and thereafter filed refund claim under N/N. 5/2006 which was partially allowed by the sanctioning authority - the definition of input service as contained in Rule 2(l) of CENVAT Credit Rules is very wide. All the input services have been held to be input services by various case laws - Further the period involved in the present appeal is prior to 01/04/2011 where the definition of input service was very wide and exhaustive as held in various decisions. The assessee is entitled to the refund of Rs. 72,26,910/- along with applicable interest for the delay in grant of the refund - appeal dismissed - decided against Revenue.

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• Central Excise

• 2018 (10) TMI 26
  Rebate of duty - export/deemed export of goods - goods were removed, cleared and sold for the units located in ‘SEZ’ which are deemed to be exports under AREs 1 Rules - validity of SCN. Held that:- A bare perusal of the impugned order shows the utter confusion of the Respondent-Revisional authority when he seeks to quote Rule 19 in para-8 of the order, he actually quotes Rule 18 but in para-8.1, when he seeks to quote Rule 18, he actually quotes R.19. This cannot be taken as a simple typographical error by a senior officer of the Department dealing with the matter in the third round of litigation by the assessee. This on the other hand, reflects the lack of understanding on the part of the said authority in applying both the Rules on a harmonious reading of the said Rules. When the fact of export by way of supplying to ‘SEZ’ unit is not in dispute and the fact of payment of duty by debiting the CENVAT account is also not in dispute, there is no question of denying one of the reliefs viz. the Rebate of duty u/Rule 18 or Export without payment of duty u/Rule 19, which ought to have been allowed or the rebate of cash refund when once the duty has been paid by debit to CENVAT account u/R.18 ought to have been given. Both the reliefs could not have been simultaneously denied to the assessee on a combined and harmonious reading of Rules 18 and 19. The present case is a glaring example of such misuse of power by the authorities below. The impugned order therefore deserves to be set aside by imposing exemplary personal costs on all the three authorities below namely, the Asst. Commissioner of Central Excise (E-1) Division, Bangalore, the Commissioner of Central Excise (Appeals-1), Bangalore, and the Joint Secretary to the Government of India. The petition is allowed with exemplary costs quantified at Rs. 50,000/-.

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• 2018 (10) TMI 25
  Extended period of limitation - SSI Exemption - use of brand name - N/N. 1/93 - bone of contention raised by the assessee is on the ground that extended period of limitation could not have been invoked in their case - Suppression of facts. Held that:- Admittedly, in the instant case, the assessee was using the brand name of a different entity and presumed to have full knowledge that they are not entitled to the benefit of the exemption notification - the second proviso to the notification would stand attracted subject to fulfilment of the condition in the first proviso. Thus, having not disclosed the same nor filed the declaration as provided in the first proviso to the notification, it is, undoubtedly, a case of suppression and the department was justified in invoking the extended period of limitation. The learned counsel for the assessee contended that the legal issue attained finality only after the decision in the case of Grasim Industries Limited. [2005 (4) TMI 64 - SUPREME COURT OF INDIA] - However, we find that such contention was never raised by the assessee at any point of time. Therefore, we cannot permit the assessee to raise such contention for the first time in this appeal, especially in the earlier round of litigation, which was challenge to levy of duty had attained finality against the assessee. The assessee had suppressed information from the department. The case on hand is one pertaining to the claim for exemption. The burden is on the assessee to establish that the goods manufactured by them will come within the ambit of the exemption notification and the burden of proof is on the assessee to establish on facts that they are entitled for exemption. Furthermore, the exemption notification are required to be interpreted strictly and in favour of the department and in case of any ambiguity or doubt, it will be resolved in favour of the Revenue and not in favour of the assessee - the Tribunal rightly held that the extended period of limitation was invokable in the facts and circumstances of the case. Penalty - Held that:- Penalty is not warranted and is set aside. The substantial questions of law framed for consideration are answered against the assessee - penalty deleted - petition allowed in part.

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• 2018 (10) TMI 24
  Refund claim - unjust enrichment - Tribunal not considered the Appellants submissions with regard to the CA certificate in support of its claim - principles of Natural Justice. Held that:- The impugned order does not deal with the Appellant's contention that the burden stands discharged by virtue of the Chartered Accountant's certificate. The impugned order of the Tribunal merely relied upon decisions of its coordinate benches to conclude that the Appellant has not discharged its burden of establishing that duty has not been passed on by the Appellant's to its customers. In none of the cases relied upon by the impugned order of the Tribunal was the claim to establish absence of unjust enrichment supported by a Chartered Accountant's certificate as in this case. The substantial question of law as formulated is answered in the negative i.e. in favour of the Appellant and against the Respondent–Revenue - appeal allowed.

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• 2018 (10) TMI 23
  Restoration of appeal - Appeal was dismissed for non-appearance - both the Official Liquidator as well as the appellant herein were not represented by counsel - company under winding up proceedings - Whether the impugned order of the Tribunal is bad in law for departing from the following principles: (i) by virtue of Article 141 of The Constitution of India, the issue must be decided strictly in accordance with law laid down by the Supreme Court, it being the last word on the subject? and (ii) if, there is no decision of the Supreme Court on the issue, then the effort must be to decide the issue by any decision of the High Court of our country, if holding the field? Held that:- The Tribunal had not adverted to any of the contentions raised by the appellant in the application for restoration dated 09.10.2017. In the said application, the appellant pointed out certain reasons, which, according to him, were sufficient cause for not being able to appear before the Tribunal on 02.8.2017. Apart from that, he relied upon the decisions of the Hon'ble Supreme Court and of the Gujarat High Court to state that the appeal could not have been dismissed for default and should have been decided on merits in the light of the fact that Rule 20 of the 1982 Rules has been held to be ultra vires. The appellant also pointed out that the Tribunal has sufficient power to restore the appeal in terms of Rule 41 of the 1982 Rules. None of these grounds has been dealt with by the Tribunal. Rather, the Tribunal has not even referred to the same in the impugned order. In the decision in Viral Laminates (P) Ltd. [1998 (4) TMI 136 - HIGH COURT OF GUJARAT AT AHMEDABAD], the challenge was to Rule 20 of the Customs, Excise and Gold (Control) Appellate Tribunal Rules, 1982, which enables the Tribunal to dismiss the appeal for default of appearance, as being ultra vires the provisions of Section 35C(1) of the Act and Section 129B(1) of the Customs Act, 1962. The Division Bench of the Gujarat High Court held that having regard to the scheme of the Act as well as the Customs Act, 1962, there was no manner of doubt that the appeal filed before the Appellate Tribunal has got to be disposed of on merits and not for default of appearance of the appellant. It is not clear as to whether notice was served in the office of the Official Liquidator nor there was any proof of service produced. In any event, the impugned order, being an order without jurisdiction deserves to be set aside. The impugned order dated 12.2.2018 is set aside and the matter is remanded to the Tribunal for a fresh consideration with a direction to restore the appeal filed by the appellant - appeal restored.

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• 2018 (10) TMI 22
  Refund claim - unjust enrichment - Whether in the facts and circumstances of the case and in law was the Tribunal correct in holding that payment of duty by the assessee during the period 1988 to 1990 was provisional under Rule 9B of the erstwhile Central Excise Rules, 1944 and therefore, no question of unjust enrichment can arise? Held that:- No fault can be found with the impugned order of the Tribunal holding that the assessment during the period 1988 to 1990 were provisional under Rule 9B of the Rules. Further, no question of unjust enrichment would arise, as the refund claims were filed in 1991 that is much before the amendment to Rule 9B of the Rules in the year 1999 which requires the officers of the Revenue before granting refund, to be satisfied that there is no unjust enrichment on finalization of the provisional assessment. The finding of fact by the Tribunal that the assessment were provisional under Rule 9B of the Rules cannot be found fault with in the absence of the same being shown to be perverse - appeal dismissed.

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• 2018 (10) TMI 21
  Maintainability of appeal - Section 35G of CEA - Scope of SCN - Valuation - IC Engines and parts thereof which are captively consumed - Rule 6(b)(ii) of the erstwhile Central Excise (Valuation) Rules 1975 applied - Revenue objected on the ground Rule 6(b)(ii) of the Valuation Rules has not been properly applied, as various expenses which need to be included are not included to arrive at the cost of production of I.C. Engines and parts thereof - Revenue Neutrality. Held that:- The question of valuation though raised in the Appeal before it, was not examined by the Tribunal. This as the Appeal was allowed on account of Revenue neutrality making the question of appropriate valuation academic in the present facts - the impugned order does relate to the valuation of goods for the purposes of assessment. Hon ble Supreme Court decision in Steel Authority of India Ltd. [2017 (4) TMI 881 - SUPREME COURT] has held that where an issue relating to valuation for purpose of assessment arises and the order is passed in breach of natural justice, then the Apex Court will admit the Appeal. The submission that if this Appeal is admitted today then at the final hearing, if this Court holds that the issue of valuation has to be gone into it, the only order would be to remand the appeal to the Tribunal to decide the issue of valuation. This submission proceeds on the basis that the Appellate Authority while disposing of an Appeal which is in breach of principle of natural justice is only required to set aside the order and restore it to the Lower Authority for passing a fresh order. This submission is not based on provision which restricts the power of an Appellate Authority. Needless to state when there is any breach of natural justice is alleged, the Appellate Authority would have to examine the underlying dispute and find out whether on facts any prejudice is caused to the party or is the remand going to be an empty formality in the facts of this case. Maintainability of appeal - Held that:- When Section 35G of the Act very clearly excludes our jurisdiction in respect of the orders of the Tribunal relating to the rates of duty and the value of goods for the purposes of assessment, among other things, we cannot entertain an Appeal on the above issue on ground of perceived hardship. Appeal not maintainable in view of Section 35G of the Act - appeal dismissed as not maintainable.

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• 2018 (10) TMI 20
  Clandestine removal - substantial question of law - demand on the basis of assumptions and presumptions - Held that:- No substantial question of law arises under Sec. 35-G of the Central Excise Act - The findings of fact recorded by the learned Tribunal appear to be in order, based on relevant evidence and the Tribunal has rightly held that the additional excise duty could not be imposed merely on account of assumptions and presumptions of the assessing authority of the clandestine removal of the dutiable goods under the 20 invoices - appeal dismissed - decided against Revenue.

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• 2018 (10) TMI 19
  Concessional rate of duty - paper & paper board manufactured, starting from the stage of pulp, in a factory - denial of exemption on the ground that the assessee had used soft wood pulp, JK pulp, unbleached pulp, JK wet pulp in excess of 25 of the total pulp consumed - Benefit of N/N. 6/02 dt. 01/03/2002 - time limitation. Held that:- The show-cause notice proposing to deny the exemption under Notification No.6/2002 was issued for the period August 2003-September 2005. But the adjudicating authority, after proper verification of the reports submitted by the jurisdictional ACCE, has dropped the demand for the year 2004-05 and 2005-06 on the ground that the appellants had maintained proper records showing the details of the issue of raw material during the specific period for manufacture of specific type of paper. Further, the Commissioner(Appeals) has only confirmed the demand for the year 2003-04 on the ground that the said demand was not contested by the assessee whereas the assessee from the very beginning has contested the demand on merits as well as on limitation and for the year 2004-05 and 2005-06, the original authority has dropped the demands after proper verification. Time Limitation - Held that:- The entire demand is barred by limitation as there is no allegation of suppression against the appellant as he has maintained the proper records and has also been submitting the monthly RT12 / ER1 returns showing the quantity of paper cleared under concessional rate of duty under Notification No.6/2002-CE - In the absence of specific finding of deliberate suppression of facts with intent to evade payment of duty, the demand confirmed for the year 2003- 04 is barred by limitation. Appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 18
  Clandestine removal - lower authorities have concluded the demand on the basis that of the confessional statements - Principles of Natural Justice - Held that:- Without availability of relied upon documents, the demand can be confirmed on the basis of these statements - the basic document from which the data was collected for confirming the demand are must. The statements alone in absence of said documents will not suffice for confirmation of demand. This is a settled law that when the departments relied upon document on the basis of which demand is raised, without such documents made available to the assessee, no proceeding can be concluded. Principles of Natural Justice - Held that:- Confirmation of demand without providing the relied upon documents is in gross violation of principles of natural justice. Observance of the principles of natural justice is foremost requirement in any of the judicial proceeding, irrespective of any grave nature of the case, therefore, the demand, without making available the relied upon documents to the appellant, cannot sustain. Appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 17
  SSI exemption - clubbing of clearances - dummy units or not? - N/N. 8/2003-CE dated 01.03.2003 - Held that:- All the three units were independent of each other and they did not have common funding and financial flow-back - Reliance placed in the case of RENU TANDON VERSUS UNION OF INDIA [1992 (1) TMI 126 - HIGH COURT OF JUDICATURE FOR RAJASTHAN], where it was held that Mere blood relationship or sharing of staff, some temporary common employment, similarity of product is also not sufficient to draw an inference that the two units should be clubbed together. In the present case clubbing of clearances was not justified - appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 16
  Clandestine removal - crown corks - shortages and excesses of goods - PP caps - dummy units - clubbing of clearances - appellants were vehemently contending on the fact that there was no facility to manufacture crown corks in the factory of M/s. MCPL. Therefore, it cannot be alleged that they have manufactured and cleared crown corks. Held that:- The Commissioner in the de novo adjudication order had cursorily mentioned that “the productivity status register and production register of the assessee’s unit (M/s. MCPL) confirm the view that the crown corks were manufactured by M/s. MCPL, therefore, it can be inferred that though part of the activity like punching has been undertaken at M/s. ECPL and invoices were raised by M/s. WC, the crown corks cleared were manufactured at M/s. MCPL. Since the manufacture was done in the assessee’s premises, the duty of demand raised in the show-cause notice with regard to manufacture and clearance of crown corks” confirmed. It is pertinent to see that neither the mahazar or any subsequent statement or investigation conducted have given reasons for this inference. The show-cause notice alleges that the manufacturing activity was done by M/s. MCPL, without giving any concrete proof to the effect that M/s. MCPL had any facility to manufacture the same - Department did not issue any show-cause notice to M/s. WC. Even assuming that the Department has considered M/s. WC, a non-existing unit, the issue required to be investigated deeply whether such goods were manufactured at M/s. ECPL, this investigation was not conducted. Moreover, no SCN was given to M/s. ECPL alleging manufacture of crown corks that was ultimately alleged to have been cleared by M/s. MCPL in the name of M/s. WC. The SCN acknowledges the fact that M/s WC was started in 1983 and was functioning from the premises of M/s MCPL and was closed down in 1987. Shei Ananth Rao has stated that he has started the unit M/s WC again in 1991-92 from premises at Murgeshpalya. The Revenue has not taken any steps to come to a definitive conclusion as to whether the impugned crown corks were manufactured at M/s. MCPL or at M/s. ECPL. This being not done, arriving at a conclusion that the goods have been manufactured at M/s. ECPL and cleared later by M/s. MCPL in the name of M/s. WC does not stand the scrutiny of law. As far as the allegation of manufacture and clearance of crown corks by M/s. MCPL, in the name oif M/s WC is concerned, it is found that the appellants have a point. The SCN and the order in de novo are silent on the claim that the appellants had no manufacturing activity. Whereas, the show-cause notice alleges that the crown corks have been manufactured in the premises of M/s. MCPL, the Order-in-Original talks of crown corks have been manufactured in the premises of M/s. ECPL. - The Department has not issued show-cause notices either to M/s. WC or to M/s. ECPL. - thus, the assessee’s contentions on this ground too are strong. Existence of unit by name M/s. WC - Held that:- Both the Karnataka Electricity Authority and Central Excise having jurisdiction over Murugeshpalya, did not come to the categorical conclusion that the unit by name M/s. WC did not exist there. Whereas, Karnataka Electricity Authority has only given that the premises had an electricity connection in the name of Shri E. Hanumantha Rao and have given certain details of electricity consumption from which it could only be inferred that the electricity consumption was less and infrequent - Also, the appellants have produced various correspondences between M/s. WC and the bankers and have also brought on record the fact that the payments by customers of M/s. WC were made into the Bank accounts of M/s. WC. On this count also, the appellants have a case. Financial dealings - Held that:- The show-cause notice does not provide any proof regarding the accrual of such sums to M/s. MCPL. In the absence of any financial flow in both directions, we are afraid that this much would not suffice to establish mutuality of interest between M/s. MCPL and M/s. WC. Removal of PP caps clandestinely by M/s. MCPL - clearance of scrap clandestinely by M/s. MCPL - irregular availment of MODVAT credit by M/s. MCPL - irregular availment of MODVAT credit by M/s. ECPL - Held that:- The show-cause notice was able to bring out from various records and statement of the officers of M/s. MCPL that clandestine removal of PP caps and scrap has taken place. No entries have been made in the statutory records like RG-1 Register - demand on all counts upheld. Penalties on the M/s. ECPL and M/s. MCPL and various personal penalties - Held that:- Looking into the amount of duty confirmed on M/s. MCPL, we reduce the penalty imposed on M/s. MCPL from Rs. 5,00,000/- to Rs. 2,00,000/- and the penalty imposed on Shri Prasanth Hegde, from Rs. 2,00,000/- to Rs. 1,00,000/- - We do not interfere with the penalties imposed on M/s. ECPL. However, looking into the role of various persons involved, we find that penalties imposed on Shri Mahesh Hegde (E/1174/2005) and Shri K. S. Dilip (E/1175/2005) are harsh - It was brought on record that Shri Mahesh Hegde used to sign differently in different documents and the same was confirmed by Government Examiner of Questioned Documents. However, it is not clear as to any criminal proceedings have been initiated against him - As far as the instant proceedings are concerned, nothing was brought on record to show that as to how they were benefitted by the alleged evasion by M/s. MCPL or M/s. ECPL, to substantiate the penalties levied on them, hence, we set aside the penalties. Appeal allowed in part.

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• 2018 (10) TMI 15
  Area based exemption - Calculation of value addition norms - N/N. 32/99-CE dated 08.07.1999 - applications for fixing of special value addition submitted by the applicant was rejected on the ground that the assessee have not deducted Indirect Taxes other than excise duty and also on the ground that the entire value of excise duty has not been deducted, but only the net excise duty. Held that:- The Notification vide ‘Explanation’ to para 4 specifies that to determine the actual value addition, the sales value of the goods excluding excise duty/vat/other indirect taxes, if any, paid on the goods, should be taken into account. This clearly tells us that the entire excise duty is required to be deducted which does not appear to have been done by the assessee at the time of projecting the value addition. Similar mistakes in calculation also appear to be happened in respect of Cleaning Preparation also - The other misgiving recorded by the Commissioner is that the finished goods stock, lying with the various C&F Agents across India has also not been taken into account. The matter value addition is required to be re-worked out by the Adjudicating Authority, after taking into account the certificate submitted by the appellant, subsequent to passing of the impugned orders - Appeal allowed by way of remand.

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• 2018 (10) TMI 14
  SSI exemption - clubbing of clearances - dummy units - it was alleged that their clearances in the name of one M/s Ashwini Enterprises are actually dummy clearances and the unit itself is a dummy one - Held that:- The learned Commissioner has considered all the directions given by this Bench vide Final Order dated 09.07.2009 and has recorded his findings in detail. He also gave a detailed annexure justifying the demands confirmed by him with respect to the three show cause notices. There are no reason to interfere with this order of the Commissioner except to the extent that their denial of benefit of SSI exemption for the period 1994-95 is incorrect as even according to the order passed by the Commissioner, the total turnover of the appellant during the period 1993-94 was only Rs. 1,36,71,419/-. The appellant is entitled to the benefit of SSI exemption during the period 1994- 95 and the demand needs to be re-computed accordingly and if the demand in the show cause notice was in excess of this amount, the same needs to be reduced - appeal allowed by way of remand.

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• 2018 (10) TMI 13
  Clandestine removal - shortage of finished goods - open remand order - there is a request for remanding the matter once again to the Adjudicating Authority - Held that:- The appellants were given an opportunity to put forth their case. Admittedly the same would include allowing of cross examination inasmuch as the appellants were free to contest the case in the manner in which they deem it fit. The Adjudicating Authority’s reasoning that there was no special direction of the Tribunal to allow the cross examination cannot be appreciated inasmuch as admittedly the Tribunal did not deal with the merits of the case and the same was remanded only on the short ground of non supply of documents. The impugned order passed by Commissioner is self-contradictory inasmuch as at one place he has recorded that the appellants filed written submission whereas in another Para, he observed that no reply was filed and as such the written submission filed by the appellants were not considered by him. Appeal disposed off.

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• 2018 (10) TMI 12
  EOU - Levy of AED (GSI) and AED (T TA) - N/N. 23/2003-CE dated 31.03.2003 - whether AED (GSI) and AED (T TA) are leviable on the goods cleared by the appellant during the relevant periods as per the show cause notice? - Held that:- Notification No.23/2003-CE exempts the appellant from payment of Central Excise duty leviable under Sec.3 of the Central Exise Act. Sl.No.5 of this notification also exempts the goods from the AED (GSI). There is a separate exemption Notification No.24/2003 which exempts the goods cleared from EOUs from AED (GSI) as well as AED (T TA) but it does not apply to DTA clearances. When the goods are manufatured by EOU, they are treated as if they are manufactured outside India and when they are cleared to domestic tariff area, an excise duty is levied equivalent to the Customs Duty leviable on similar goods. This includes both the Basic Customs Duty as well as CVD which is equal to all the excise duties leviable on similar products. As far as the CVD component is concerned, the question as to whether it should be calculated after taking into account the excise exemption notifications, if any, available for the goods or otherwise is the question. During the relevant period Notification No.31/2004 and Notification No.32/2004 have exempted all goods from AED (T TA) and AED (GSI) - when similar goods are imported into India or they are cleared by an EOU to DTA there will be no CVD on the components of AED (T TA) and AED (GSI) in view of the aforesaid exemptions. Appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 11
  Transitional Credit - benefit of N/N. 30/2004 dated 09.07.2004 - Revenue was of the view that consequent upon opting for the exemption notification, the respondent will be liable to follow the transitional provision outlined in Rule 11(3)(ii) of the Cenvat Credit Rules, 2004 - whether the respondent will be covered by the provisions of Rule 11(3)(i) or 11(3)(ii)? Held that:- The identical issue has been considered in detail in the case laws relied by the respondent. In the case of Jansons Textile Processors [2018 (7) TMI 850 - CESTAT CHENNAI], the Chennai Bench of the Tribunal has taken the view that in case of conditional exemption such as exemption under Notification No. 30/2004, the assessee will be covered only by Rule 11(3)(i). Appeal dismissed - decided against Revenue.

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• 2018 (10) TMI 10
  CENVAT credit - Clean Energy Cess paid on imported / indigenous coal, Lignite - Demand of Interest and penalty - Held that:- Clean Energy Cess contains the reference to the provision of Central Excise Act, 1944 and even if the CCRs, 2004 do not specifically mention in Section 3 but still the appellants are entitled to CENVAT credit because the Cess has been paid as duty of excise and the same has been levied under Section 83 of the Finance Act, 2010. Sugar Cess levied under Sugar Cess Act, 1982 is similar to Clean Energy Cess levied under Section 83 of the Finance Act, 2010 and therefore the ratio laid down by the Hon'ble High Court of Karnataka in the case of Sri Renuka Sugars Ltd. [2014 (1) TMI 1469 - KARNATAKA HIGH COURT] is squarely applicable in the facts and circumstances of the case, because the Clean Energy Cess has been levied and collected as duty of excise by virtue of Section 3(1) of Customs Tariff Act. CENVAT credit of Clean Energy Cess is allowed - appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 9
  Pre-deposit - Section 35F of the Central Excise Act, 1944 - case of appellant is that they have already paid more than 7.5% which is admitted by the Department in the show-cause notice itself. They are not required to pay additional 7.5% - Held that:- The appellant has already paid duty @ 1% on the said item which is sufficient to take care of 7.5% of the duty to be deposited in terms of Section 35F. Further on identical facts for the earlier period, the Registry has not raised the objection and has considered the payment of duty made @ 1% and did not demand 7.5% under Section 35F - the defect raised by the Registry is not legally tenable and the appellant is not required to pay again 7.5% of the duty under Section 35F. Condonation of delay in filing the appeals beyond the stipulated period of 3 months - Held that:- The orders were communicated to the assessee on 14/10/2017 and the appeals were filed on 16/01/2018, which is beyond 90 days. Therefore the appellants are directed to file COD applications. Application disposed off.

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• 2018 (10) TMI 8
  100% EOU - import of capital goods under Notification No.13/81-Cus. and Notification No.123/81-CE - unit was declared defunct and was closed in March, 1998 - non- fulfillment of export obligation - whether a EOU which has not fulfilled the positive NFE is liable to pay the customs duty foregone on the capital goods procured duty free under Notification No.13/81-Cust and No.123/81-CE? Held that:- It is undisputed that the capital goods which were procured by claiming benefit under exemption notification were installed and used for production of goods for export. Therefore, as per Notification, the demand of duty on the capital goods cannot be sustained. On going through the notifications, it is very clear that the condition in respect of capital goods was only with respect to the installation as has been held by this Bench in the case of Hindustan Agrigenetics ltd. [2010 (5) TMI 929 - CESTAT, BANGALORE]. For calculating the duty payable by the appellants on the raw materials imported or procured duty free lying as such or contained in the finished goods, the matter required to go back to the original authority. Appeal allowed by way of remand.

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• 2018 (10) TMI 7
  CEVAT Credit - duty paying invoices - credit availed on the basis of Photocopy of invoices is denied - Held that:- The identical issue has been considered by the Tribunal in the case of M/s Fusion Electronics (P) Ltd. [2010 (11) TMI 285 - CESTAT, NEW DELHI] where the Tribunal while allowing such credit held that Production of photocopies of bill of entry by the respondents cannot be held against them - credit allowed - appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 6
  Benefit of reduced penalty - irregular availment of CENVAT Credit - Duty demand has already been paid by the appellant, even before the issue of show cause notice - Held that:- Section 11AC provides for mandatory penalty equal to the duty determined as payable, in terms of the proviso to Section 11A. But it also provides that if the said duty amount is paid within 30 days from the date of communication of the order of the Central Excise officer determining such duty, the amount of penalty liable to be paid shall be only 25% of the duty so determined. The appellant is entitled to the payment of reduced amount of penalty - appeal allowed.

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• 2018 (10) TMI 5
  Clandestine manufacture and removal - M. S. Ingots - demand for duty raised on the basis of the input output norm declared by the appellant in their ER-5 returns - whether the demand raised thereby on the basis of arithmetical calculation can be sustained? Held that:- The allegation of clandestine clearance has been made by the Revenue authorities, but the same has not been supported by any documentary evidence. The entire demand has been worked out on the basis of presumption, taking into account the formula declared by the appellant - Clandestine clearance needs to be established on the basis of tangible documentary as well as oral evidence. In the present case, no such evidence has been brought on record by the Revenue. The Tribunal in the case of M/S EASTER (INDIA) CHEMICALS LTD. & RAJ TANDON VERSUS COMMISSIONER OF CENTRAL EXCISE, GHAZIABAD [2017 (2) TMI 304 - CESTAT ALLAHABAD] has set aside the demand made only on the basis of input output ratio declared in ER-5 returns. The demand of Central Excise duty is not justified, in the absence of any documentary evidence supporting the charge of clandestine clearance - appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 4
  Clandestine removal - third party evidences - demand raised is based on the entries found in a diary recovered from one Sh. S. K. Pansari, Prop. of M/s Monu Steel a consignment agent - Held that:- The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established - It stand held in various judgements that the findings of clandestine removal cannot be upheld based upon only the third party documents, unless there is clinching evidence of clandestine manufacture and removal of the goods. Demand do not sustain - appeal allowed - decided in favor of appellant.

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• 2018 (10) TMI 3
  CENVAT Credit - removal of input, iron ore concentrate, without reversing the CENVAT Credit availed - input service tax credit availed on coal received by the appellant - principles of natural justice - Held that:- It is the main claim of the appellant that the copies of the show cause notice and RUDs have not been provided to the appellant. Even though the copy of the acknowledgement has been reproduced, by the Commissioner (Appeals) in the body of this order, in the copy of the show cause notice no RUDs have been attached as part of the appeal papers. I am unable to appreciate the documentary evidence for raising the demand. It is further seen that the original authority has passed the order ex-parte, and the appellant never got a chance to defend his case before him. The matter is remanded to the original adjudicating authority to readjudicate the matter after furnishing copies of the show cause notice as well as relied upon documents to the appellant - appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2018 (10) TMI 2
  Revision of assessment - rejection of revision on the ground that petitioner have not filed any fresh records and grounds warranting to revise the assessment - section 84 of the TNVAT Act - Validity of Order of Attachment. Held that:- A perusal of the impugned orders would indicate otherwise that the Assessing Officer, in fact, has observed in Paragraph No.2 that the documents along with Section 84 applications were already filed by the Assessee and were already examined by the Assessing Officer - the impugned orders passed by the 3rd respondent cannot sustain the scrutiny of this Court, since the same was not by considering the materials already placed on record which were examined by the Assessing Officer. The matter is remitted to the 3rd respondent for considering the rectification petition filed by the petitioner and pass orders on the same on merits and in accordance with law - appeal allowed by way of remand.

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• 2018 (10) TMI 1
  Compounding rate of tax - Section 3(4) of the TNVAT Act - Switch over to Form-I, instead of Form-K - Exceeding turnover of Rs. 50 lakhs - By the Tamil Nadu Ordinance No.1 of 2008, dated 17.06.2008, with effect from 18.06.2008, Section 3(4) of the Act was amended - effect of subsequent amendment in the Act - Held that:- As per the amendment, on exceeding the sales turnover of Rs. 50 lakhs, it has to be intimated to the respondent in writing within seven days from the date on which such has so reached and such dealer has to pay tax under Sub-Section (2) on all his sales of rupees fifty lakhs and above. But, this amendment came into effect only from 18.06.2008. Even before the amendment the dealer has filed returns. Therefore, the impugned order cannot be sustained. However, as it is disputed by the respondent that the petitioner has not filed Form-I returns and he paid tax only at 0.5% by filing Form-K returns for the total taxable turnover, this Court is inclined to remit the matter back to the file of the respondent for fresh consideration -

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• Indian Laws

• 2018 (10) TMI 75
  Rights of prisoners - Held that:- Keeping this in mind and the dire necessity of reforms in prison administration and prison management despite earlier efforts, it was put to the learned Attorney General to consider the feasibility of appointing a Committee to look into the entire range of issues raised, not only in this petition, but also other issues that have cropped up during the hearing on several dates and from time to time. As mentioned above, the learned Attorney General accepted the suggestion of a Committee being appointed - The Committee will make its recommendations as soon as feasible. It may consider, if necessary, sending reports on any of the matters as and when the recommendations are finalized. It shall also make its recommendations to the State Governments. The Committee will devise its own procedure and formulate modalities necessary for accomplishing the task. It may appoint such advisers, institutional consultants and experts as it may consider necessary for any particular purpose. It may call for such information and take such evidence as it may consider necessary. All State Governments, UT Administrations and the Ministries/Departments of the Central Government will furnish such information, documents and other assistance as required by the Committee. The Committee is requested to complete the collection of data and information and make appropriate recommendations and submit the same to this Court preferably within a period of 12 months. The Government of India will make the services of an Additional Solicitor General of India, as and when required by the Committee for any assistance. The writ petition may be revived and listed as and when required.

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• 2018 (10) TMI 74
  Whether legislators can be debarred from practising as advocates during the period when they continue to be the Members of Parliament or the State Assembly/Council? Held that:- The fact that the legislators draw salary and allowances from the consolidated fund in terms of Article 106 of the Constitution and the law made by the Parliament in that regard, it does not follow that a relationship of a full-time salaried employee(s) of the Government or otherwise is created. The legislators receive payment in the form of salary, and allowances or pension from the consolidated fund is not enough to debar them from practising as advocates, sans being a full-time salaried employee of the specified entities. They continue to remain only as member(s) of the House representing the territorial constituencies from where they have been elected until the House is dissolved or if he/she resigns including vacates the seat for having incurred disqualification as may be prescribed by law. Merely because the advocate concerned is an elected people‘s representative, it does not follow that he/she has indulged in professional misconduct. Similarly, the conferment of power on the legislators (MPs) to move an impeachment motion against the judge(s) of the Constitutional Courts does not per se result in conflict of interest or a case of impacting constitutional morality or for that matter institutional integrity. The provisions of the Act of 1961 and the Rules framed thereunder, do not place any restrictions on the legislators to practise as advocates during the relevant period. The closest rule framed by the Bar Council of India is Rule 49 which, however, has no application to the elected people‘s representatives as they do not fall in the category of full-time salaried employee of any person, firm, government, corporation or concern. As there is no express provision to prohibit or restrict the legislators from practising as advocates during the relevant period, the question of granting relief, as prayed, to debar them from practising as advocates cannot be countenanced. Even the alternative relief to declare Rule 49 as unconstitutional, does not commend to us. As of now, the Bar Council of India has made its stand explicitly clear that no such prohibition can be placed on the legislators - the reliefs claimed in this writ petition are devoid of merit. Petition dismissed.

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