TMI Tax Updates - e-Newsletter
October 30, 2014

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise Indian Laws

Articles

1. Swachhata Abhiyan – we must remember and follow nursery rhyme Bits of Paper, bits of paper …. And other such poems concerning human and social being.

   By: DEVKUMAR KOTHARI

2. Make in India programme- Amendment in Customs Needed

   By: Monalisa Khuntia

News

1. India and Oman Discuss Ways to Increase Bilateral Trade and Investment Linkages

2. RBI Reference Rate for US $

Notifications

Income Tax

1. 54/2014 - dated 22-10-2014 - IT

U/s 120 of the Income Tax Act 1961 - Direction made by CBDT to income-tax authority to exercise the powers and perform functions and also jurisdiction as specified.

2. 52/2014 - dated 22-10-2014 - IT

Section 120(1) and (2) of the Income-tax Act, 1961 - Jurisdiction of income-tax authorities

3. 51/2014 - dated 22-10-2014 - IT

Jurisdiction of income-tax authorities - Designation of the Income-tax Authorities,Headquarters demarcated.

Circulars / Instructions / Orders

Income Tax

1. Instruction No. 08/2014 - dated 27-10-2014

Framing of scrutiny assessments in cases of fish farmers involved in running inland fresh water fish tanks-regarding.

Highlights / Catch Notes

Income Tax

• Assessing Officer Overlooks Income Discrepancy Due to Service Tax; No Additional Income Added per Tax Return Evidence.

  Case-Laws - AT : Suppressed income - AO clearly failed to appreciate the reason of the difference noted by him - the difference was on account of service tax is also supported by the service tax return and tax payment challan - no addition - AT
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• Property Sale: DVO's Valuation Date Determines Final Consideration for Long Term Capital Gains under Income Tax Act Sec 50C(2.

  Case-Laws - AT : Reference made u/s 55A - Transaction of immovable property against the actual deed of conveyance – the value of the property estimated by DVO as on the date of sale is to be taken as the final consideration for the purpose of computation of Long Term Capital Gains u/s. 50C(2) of the Act - AT
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• High Courts Follow Earliest Supreme Court Decision When Faced with Conflicting Rulings to Ensure Consistency and Precedent.

  Case-Laws - HC : It is often encountered in High Courts that two or more mutually irreconcilable decisions of the Supreme Court are cited - the inviolable recourse is to apply the earliest view as the succeeding ones would fall in the category of per incuriam - HC
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• Unpaid Deposit Balance Isn't Income, Assessee Not Tax Liable for It Under Tax Law.

  Case-Laws - HC : Sum received as written off amount – Cessation of liability or not - the balance amount of deposit which was not repaid under the arrangement, did not constitute an income and therefore, the assessee is not liable to pay any tax under the context - HC
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• Deferred Revenue Expenditure: Accounting Records Don't Dictate Tax Obligations or Deductions, Tax Laws Prevail.

  Case-Laws - AT : Deferred revenue expenditure - the entries in the books of account cannot be the basis whether a receipt is taxable or not or whether expenses are allowable as a deduction or not - AT
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• RBI and Ministry of Industry approve transfer pricing adjustments; royalty payments deemed at arm's length, assessee's grounds allowed.

  Case-Laws - AT : Transfer pricing adjustment - approval given by the RBI and Ministry of Industry is at par with similar agreements being approved in other contracts/agreements - royalty and technical knowhow payments made by the assessee to its AE are considered at arm’s length and the grounds raised by the assessee on this issue are allowed - AT
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• CIT Jurisdiction Invoked u/s 263 Due to AO's Inaction on Share Capital and Premium Inquiry.

  Case-Laws - AT : Jurisdiction of CIT u/s 263 – It is evident that after collecting some information the AO did not act any further. There is no whisper in the order sheet as to whether AO made any discussion or enquiry with regard to the share capital and share premium - revision upheld - AT
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• Income Tax Act Sections 2(22)(e) and 56(2)(vi) applied to equity share transfer without company asset involvement. No corporate veil piercing.

  Case-Laws - AT : Piercing the corporate veil - Application of section 2(22)(e) and 56(2)(vi) - only the equity shares of M/s. SKM Egg Products Export (India) Ltd., were transferred and not any assets held by the company were transferred, therefore the issue of piercing the corporate veil of this company will not arise - AT
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• Court Rules Assessing Officers Must Consider Practicality in Evidence Production for Unexplained Credits u/s 68.

  Case-Laws - AT : Unexplained credits u/s 68 – Onus to prove - AO cannot brush aside the entire evidence on the pretext that party is not physically produced more so when it is apparent that it was physically impossible for assessee to ensure production of Kolkata party in one day’s short time. - AT
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• Loans to Shareholders as Deemed Dividends Under Income Tax Act Section 2(22)(e) if Money Lending is Substantial Business.

  Case-Laws - AT : Deemed dividend u/s 2(22)(e) – Loans and advances received - if 20% of the capital of the company is deployed in money lending business of the company, the company shall be held to have a substantial part of business in money lending. - AT
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Service Tax

• Tax Demand Confirmed: Notification Holds Service Receiver Liable Despite Provider's Payment for GTA Service Tax.

  Case-Laws - AT : GTA service - service provider has paid the tax - The demand has been confirmed only on the ground that according to the notification the service receiver is liable to pay - for the same services, there cannot be calculation of tax otherwise. - AT
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• Cenvat Credit Recovery Must Target Manufacturer or Output Service Provider, Not Input Service Distributor, per Rule 14.

  Case-Laws - AT : CENVAT Credit - demand for recovery of Cenvat credit cannot be raised against the Input Service Distributor under Rule 14 of the Cenvat Credit Rules, 2004; and where Cenvat credit is wrongly availed and utilized, the same should be recovered from the manufacturer or provider of output services - AT
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• CENVAT Credit Allowed After Rectifying Service Provider's Registration Number Error.

  Case-Laws - AT : Denial of CENVAT Credit - absence of registration number of service provider - said defect is a rectifiable defect - credit allowed - AT
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• Assessee Wins Appeal, Re-credits Suo Moto Reversed Amount with Interest; Demand Against Them Set Aside.

  Case-Laws - AT : Suo moto credit - earlier when objected by the department, assessee reversed the credit with interest - after winning the appeal he took the re-credit of amount reversed earlier with interest - demand set aside - AT
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Central Excise

• Rebate Claim Denied for Failing to Export Goods Within Six-Month Deadline; No Extension Documentation Provided.

  Case-Laws - HC : Denial of rebate claim - non export of goods within 6 months - The Petitioners admitted their lapse and inability to produce the permission or grant of extension for further period of three months. - rebate was rightly denied - HC
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• Goods Used in Platform Construction Not Eligible for Cenvat Credit; Not Classified as Machinery or Plant Under Chapter 84.

  Case-Laws - HC : Cenvat Credit - Goods used by the appellant was for manufacture of a platform, which was used for raising a civil structure and by no stretch of imagination, could it be considered as a sugar mill machinery or a plant or component, spares or accessories classifiable under Chapter Heading 84. - HC
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• Bale Weighment Charts Used to Combat Duty Evasion in Central Excise; Ensures Accurate Duty Assessment.

  Case-Laws - HC : Duty evasion - Clandestine removal of goods - Department has adopted the best possible method i.e. bale weighment charts which means that the average weighment was done on the actual basis and not with hypothetical basis on purchase order etc. - HC
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• CENVAT Credit on Molasses: Monthly Reversal and Notification by Debit Notes Make Demand Unsustainable.

  Case-Laws - AT : CENVAT Credit - the appellant was reversing the credit on molasses every month and intimating the department by means of the debit notes - demand is not sustainable - AT
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VAT

• Clarifying Local vs. Central Sales in Works Contracts: Interstate Movement Key for VAT and Sales Tax Applicability.

  Case-Laws - HC : Local sale or Central Sale - works contract in the course of interstate sale - It is not necessary that the sale must precede the inter-State movement in order that the sale may be deemed to have occasioned such movement - It would be sufficient if the movement was in pursuance of and incidental to the contract of sale - HC
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Case Laws:

• Income Tax

• 2014 (10) TMI 711
  Suppressed income - undisclosed income towards collection of amount of service tax on taxable services – Held that:- The AO has made addition as regards the difference between the sum credited in the P 1,08,36,000/- and service tax component was 13,39,330/- and the total of the bill thus comes to 1,21,75,330 - This bill was also before the AO - AO clearly failed to appreciate the reason of the difference noted by him - the difference was on account of service tax is also supported by the service tax return and tax payment challan accepted by the CIT(A) – there was no infirmity in the order of the CIT(A) – Decided against revenue. Commission received from Platinum Hospitality Pvt. Ltd & Astek Infracom Ltd. – Undisclosed income deleted – Held that:- Regarding the commission payment to M/s. AIL, the addition was solely on the basis of initial confirmation issued by M/s. Quantium Agencies Ltd. - CIT(A) observed that before the addition, it was necessary for the AO to ascertain the true and correct facts - The CIT(A) has noted that there was no material available in assessment record regarding the existence of M/s. Astek Infracom Ltd (M/s. AIL) - The initial confirmation of M/s. Quantium Agencies Ltd was later on explained by them as a clerical mistake as services were rendered in connection with M/s. PHSPL – the order of the CIT(A) is upheld that there is no evidence on record that the assessee has rendered services in connection with arranging of bank loan to M/s. AIL – Decided against revenue.

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• 2014 (10) TMI 710
  Reference made u/s 55A - Transaction of immovable property against the actual deed of conveyance – Adoption of FMV as on 01.04.1981 - Computation of LTCG – Held that:- The long term capital gains arising out of transaction of this property will be assessed in AY 2006-07 and not in AY 2005-06 - following the decision in Commissioner of Income-tax Versus Umedbhai International P. Ltd. [2010 (2) TMI 631 - Calcutta High Court] - once the assessee has filed approved valuer's report, which is in the case of the assessee is dated 18.10.2006 valuing the property as on 01.04.1981 at 24,03,838/-, is final - No further reference u/s. 55A can be made for estimating the fair market value of the property for determining the value as on 01.04.1981 unless and until the AO forms an opinion that value shown by the assessee was less than fair market value – Decided against revenue. Reference made to DVO u/s 50C(2) - Whether the value adopted by the AO based on deemed value determined on the basis of circle rates by stamp valuation authority at 1,16,58,995/- is to be taken for the purpose of computation of long term capital gain or the property is to be referred to DVO for determining the fair market value in term of section 50C of the Act – Held that:- Following the decision in Sunil Kumar Agarwal Versus Commissioner of Income Tax, Siliguri [2014 (6) TMI 13 - CALCUTTA HIGH COURT] - the value of the property estimated by DVO as on the date of sale is to be taken as the final consideration for the purpose of computation of Long Term Capital Gains u/s. 50C of the Act - The assessee sold the property for a total consideration of 25 lacs during the relevant financial year relevant to this assessment year - The AO as well as CIT(A) has taken the value as adopted by Sub-registrar based on circle rate for assessing the long term capital gain arising out of sale of the above property - the value of the property estimated by DVO as on the date of sale is to be taken as the final consideration for the purpose of computation of Long Term Capital Gains u/s. 50C(2) of the Act – the AO is directed to refer the matter to DVO u/s 50C(2) of the Act and also allow opportunity of being heard to the assessee – Decided in favour of assessee.

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• 2014 (10) TMI 709
  Rejection of books of accounts - Addition u/s 40A(3) – Computation of income as per GP rate – Held that:- When the income of the assessee was computed by applying gross profit rate, there is no need to look into the provisions of Section 40A(3) of the Act, inasmuch as that, when the gross profit rate is applied, then it takes care of the expenditure otherwise by way of crossed cheques - once books of accounts are rejected, no further disallowance can be made – relying upon Commissioner of Income-Tax. Versus Smt. Santosh Jain [2006 (8) TMI 167 - PUNJAB AND HARYANA High Court] - the provisions of Section 40(3) of the Act could not be invoked in the estimation of gross profit – thus, the discretion exercised by the Tribunal is based on relevant consideration and does not suffer from any legal infirmity – as such no substantial question of law would arise for determination – Decided against revenue.

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• 2014 (10) TMI 708
  Entitlement for claim of deduction u/s 80HH and 80I – Claim can be made independent of set off and carry forward provision or not – Whether the deductions under the respective provisions must be made from the respective incomes of the concerned sources or the aggregate of both - Held that:- The intention of Section 80AB is to maintain the distinction between the respective sources of income, referable to the sections contained in heading C of Chapter VI-A - The intention appears to be to discourage or to prevent an assessee from avoiding tax by posting the profits earned in one industry, against the losses incurred in the other - the hard work put by an entrepreneur resulting in profits in an industry cannot be wiped away if he suffered losses in another industry of the same category – following the decision in M/s Synco Industries Ltd Versus Assessing Officer [2008 (3) TMI 13 - Supreme court] - It is often encountered in High Courts that two or more mutually irreconcilable decisions of the Supreme Court are cited - the inviolable recourse is to apply the earliest view as the succeeding ones would fall in the category of per incuriam – the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (10) TMI 707
  Principles of natural justice not followed - Opportunity of being heard - Validity of direction made by AO for audit of accounts u/s 142(2A) - Whether Section 142(2A) of the Act renders it imperative that before passing an order an AO is required to afford a reasonable opportunity of being heard to an assessee Held that:- An opportunity of being heard was not granted to the assessee thereby prohibiting the AO from exercising power u/s 142(2A) of the Act, to order audit of the assessee s accounts by an auditor nominated by the AO the contention of the revenue cannot be accepted that during the process of examination of accounts, spread over the period of six months during which various queries were raised with respect to the accounts, may be considered as an opportunity of hearing, disregards the fact that a hearing is to be afforded after the AO forms a prima-facie opinion, based upon credible material that the accounts produced by the assessee require to be audited by an auditor nominated by the department - The AO formed such an opinion and served a show cause notice upon the assessee but thereafter did not afford an opportunity of being heard - The absence of an opportunity of being heard cannot be cured by reference to queries that preceded the show cause notice thus, the order is to be set aside though department would be at liberty to proceed afresh/further and if permissible in law Decided in favour of assessee.

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• 2014 (10) TMI 706
  Sum received as written off amount – Cessation of liability or not - Whether the Tribunal was correct in holding that the sum received by the assessee as fixed deposit during the earlier AY was written off by forfeiture during the current AY under a settlement resulted in cessation of a liability in the ordinary course of the business of the assessee resulting in income liable to tax – Held that:- As decided in ISKRAEMECO REGENT LTD. Vs COMMISSIONER OF INCOME TAX [2010 (11) TMI 43 - Madras High Court] - The assessee received the deposits which were repayable with interest - The assessee sustained loss in the business - They framed a scheme of compromise/arrangement - During the course of such a claim before the High Court, the assessee entered into an arrangement with the depositors who were willing to receive a portion of the amount deposited by them towards settlement of their claim - Therefore, those depositors were paid a portion of the money which they had deposited - With such payment, the entire liability to pay the amount received stood extinguished. By extinguishment of the liability, the assessee did not receive any amount either by forfeiture or by discount and it is a case of sheer inability to pay the amount received by way of deposits - though such rebate or remission has benefitted the assessee insofar as discharging his liability to the depositor, in reality it did not result in any income at the hands of the assessee unless there is accrual or receipt of income by the assessee, it would not constitute income for the purpose of levy of tax - The income to be taxed under the Act should be real income and not fictional one - the tribunal was justified in holding that the balance amount of deposit which was not repaid under the arrangement, did not constitute an income and therefore, the assessee is not liable to pay any tax under the context – Decided against revenue.

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• 2014 (10) TMI 705
  Grant of registration u/s 12AA - Objects of the trust deed was never amended - Whether the Tribunal was justified in upholding the order of CIT granting registration u/s 12AA from the date of amendment of trust deed – Held that:- The registration was initially declined on the ground that CCIT was not satisfied in regard to genuineness of the objects of the trust and since the assessee was not able to establish that the trust was indeed carrying on an activity for the benefit of the general public - Subsequently, a supplementary trust deed was executed on 20 April 2013 - It was in view of the execution of the deed on 20 April 2013 that the Tribunal, while acceding to the submission of the assessee, remanded the proceedings back - The CIT, on remand, has correctly granted registration w.e.f. 01 April 2013, upon being duly satisfied that the registration should be granted u/s 12AA of the Act after the necessary amendments were carried out – thus, no substantial question of law arises for consideration – Decided against assessee.

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• 2014 (10) TMI 704
  Waiver of interest – Adjustment of advance tax - Held that:- Revenue seized 21 lacs from M/s Ram Lal Kesar Dass, of which the petitioner and one Sh.Kesar Dass were partners - no credible reason has been assigned for rejecting the assessee's prayer for adjustment or for treating him differently - assessee's application has been rejected by referring to irrelevant provisions and facts that were not germane to the controversy and without considering whether benefit granted to the firm and Sh. Kesar Dass should also be granted to the assessee by adjusting the amount towards advance tax – thus, the matter is to be remitted back to the AO for fresh consideration – Decided in favour of assessee.

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• 2014 (10) TMI 703
  Validity of Power to transfer cases u/s 127 – Ten cases transferred – Direction made to file reply - Held that:- The assessee’s are directed to file reply/objection petition/ representation before the AO, to whom the case has been transferred vide order dated 18.05.2011, within a period of 30 days from today, challenging the jurisdiction to initiate the action under the provisions of Income Tax Act, 1961.

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• 2014 (10) TMI 702
  Correctness of ALP adjustment - The nature of assessee's trading activity – Applicability of berry ratio - Held that:- Even with respect to the trading transactions, which were claimed by the assessee to be in the nature of a service rather than a trading activity, the assessee will only be compared with such entities "which are similarly placed as the assessee including in respect of their functional and risk profile as well as working capital exposure would be chosen as comparables" - the unique intangible of sogo shosha business model, even if that can be treated as a unique intangible asset, belongs to the MCJ group and not the MCI individually - neither the assessee has performed any functions on or with respect to the goods traded by it, beyond holding flash title for the goods in some of the cases, nor has the assessee borne any significant risks associated with the goods so traded - All the functions, assets and risk of the assessee are quite reasonably reflected by the operating costs incurred and the value of goods traded does not have much of an impact on its analysis of FAR - The cost of goods sold would be relevant if and only if the assessee would have assumed any significant risks associated with such goods sold and when monetary impact of such risks is not reflected in operating expenses of the assessee - GAP International Sourcing India Pvt Ltd Vs ACIT [2012 (9) TMI 766 - ITAT DELHI] - a business entity does not assume any significant inventory risk or perform any functions on the goods traded or add any value to the same, by use of unique intangibles or otherwise, the right profit level indicator should be operating profit to operating expenses i.e. berry ratio. There is neither anything inappropriate in the use as such of berry ratio per se, nor there are any real issues with respect to accounting policies of the assessee vis-à-vis accounting policies of the comparables finally selected – there is nothing wrong in principle in use of berry ratio in the case of an assessee, though, in the absence of any specific comparables before us, it is not possible to visualize and deal with the difficulties with regard to variations in, and impact of, accounting policies in such cases - the use of berry ratio as PLI is appropriate to the facts and circumstances of this case, the objections taken by the authorities below to the use of berry ratio are unsustainable in law, and the adjustments for use of intangibles and locational savings are unwarranted - the computation of ALP so far as buy sell segment of assessee's activities are concerned stands restored to the assessment stage – thus, the matter is to be remitted back for fresh examination. Service fee/commission segment of assessee's activities – Held that:- It is impermissible to make notional additions in the cost base and thus take into account the costs which are not borne by the assessee – following the decision in LI And Fung India Pvt. Ltd. Versus Commissioner of Income Tax [2014 (1) TMI 501 - DELHI HIGH COURT] - It is no longer open to the revenue authorities to reconstruct the financial statements of the assessee by including the cost of products incurred by the AEs, in respect of which services are rendered, in its reconstructed financial statements, and then putting the hypothetical trading profits, so arrived at in these reconstructed financial statements, to the tests for determining arms' length price - the adjustments carried out in the cost base of ALP computation, in respect of service fee/commission segment, are indeed devoid of legally sustainable merits – the AO is directed to delete these adjustments. Correctness of disallowance u/s 40(a)(i) – Payments made to the foreign entities – No permanent establishment in India - Held that:- once it is an undisputed position that the recipient entities did not have any permanent establishment in India and the transactions are of purchases simplictor, the payments made to entities cannot give rise to any income taxable in India - It is so for the reason that it is only when the recipient has a PE in India under article 5 of India Japan tax treaty, it's income from trading can be brought to tax in India only when such an income is "directly or indirectly" attributable to such a PE – relying upon GE Technology Center Pvt Ltd. v. CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA] - unless the non-resident has a tax liability in respect of income embedded in the payment, tax deduction obligation under section 195 cannot come into play – as the assessee did not have any obligation to deduct tax at source from these payments, the very foundation of disallowances ceases to hold good in law - The disallowances of payments to MC Metal Services Asia (Thailand), Metal One Corporation (Japan) and to Metal One (Asia) Pte Ltd Singapore is to be deleted. Payment made to foreign entities – TDS not deducted – Held that:- There is no failure on the part of the assessee in deducting tax at source u/s 195 and there is no cause of action for disallowance u/s 40(a)(ia) - the AO is directed to delete the disallowance u/s 40(a)(ia) in respect of payment to Mitsubishi Corporation Singapore, MC Tubular Inc USA, Thai MC Co Ltd, Thailand, and Peto Diamond Corporation, Japan. Payment made without deducting TDS – PE in India – Held that:- As decided in Daimlerchrysler India (P) Limited. Versus Deputy Commissioner Of Income-Tax [2009 (1) TMI 339 - ITAT PUNE-B] – so far as payments made to Japanese non-residents is concerned, there cannot be any discrimination so far as deductibility of the payments in the hands of the person making the payment is concerned - If appropriate tax withholding by the person making the payment is a sine qua non for business deduction so far as payments to non-residents are concerned, unless there is a similar pre-condition for deductibility of related expenses to the payments to residents as well, that disabling provision cannot be enforced in respect to payments made to non-residents either - no disallowance can be made in respect of payments made to a resident assessee, even without applicable deduction of tax at source, as long as related payments are taken into account by the recipients in computation of their income, and taxes in respect of such income are duly paid and related income tax returns are duly filed by the resident recipients u/s 139(1). Section 40(a)(i) does not have an exclusion clause similar to second proviso to Section 40(a)(ia), so far as payments made to nonresidents, without deduction of applicable tax deduction at source, are concerned, such payments will be disallowable even in a situation, as is the admitted factual position in this case, even when the non-resident recipient has taken into account such payments in computation of his income, has paid taxes on the same and duly filed, under section 139(1), related income tax return - so far examining discrimination to the non resident Japanese taxpayers is concerned, the right comparator will be a resident Indian taxpayer - it will be contrary to the scheme of the tax treaties in question that if rigour of disallowance of a payment, on account non-deduction of tax at source from the related payment, is to be relaxed in the situations in which the resident recipient has taken the said amount into account in computation of income, paid taxes on the income so computed and filed, under section 139(1), related income tax return, and yet the rigour of disallowance in respect of payments made, without appropriate deduction of tax at source, to the non-residents are concerned, is not relaxed in the cases in which the non-resident recipient has taken such receipts into account in computation of income, paid taxes on the income so computed and filed, under section 139(1), related income tax return - the AO was in error in making a disallowance – Decided in favour of assessee.

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• 2014 (10) TMI 701
  Addition of contracts payments – Held that:- The supplementary cash book has been verified – it could not be understood that after making such verification how whole receipts were added to the income - It is not possible in case of various construction receipts to have 90-100% rate of profit which is shown in profit and loss account by special auditor which itself shows that contention of the assessee has merits - However, at the same time there is no evidence to show that receipts in the hands of G.M. Construction Company proprietary concern and in the hand of Matchless Associates were security receipts - these receipts do not relate to construction payment therefore whole of the amounts is required to be added to the income - these are construction receipts and therefore direct receipts and therefore the AO is directed to apply Net profit rate of 8% on these receipts - Therefore this ground is partly allowed. Unexplained cash credits u/s 68 – Held that:- The matter was remanded to the AO and the AO has made enquiries - In response to the query u/s 133(6) Matchless Associates had clearly mentioned the fact regarding purchase of property jointly with Pritam Singh i.e the assessee and the fact that M.S. 5 lakh withdrawn by Hardeep Singh on various dates which becomes clear from the copy of the bank account placed - Hardeep Singh has clearly stated in his letter that he was employed by the assessee and was deputed to Gurdaspur site and the amounts were withdrawn from the bank and were handed over to Pritam Singh - clearly the assessee has discharged the onus which was put on the assessee and the AO has not made any further inquiry – the AO is not right to reject this evidence without further enquiry – the order of the CIT(A) is set aside – Decided in favour of assessee. Addition of opening/closing work in progress – Total contract receipts received from PBIL Apex Consortium Ltd. treated as income – Held that:- The income and expenditure account clearly show that opening stock of 214700/- closing stock is also shown at 214700/-. Therefore there is no justification in addition of opening stock which has been shown as closing stock – the order of the CIT(A) is set aside – Decided and accordingly we set aside the order of the Ld. CIT(A) and delete the addition of 214700 - The contention of the assessee is accepted that for example in G.M. Construction case against the payment of 1579700/-, Net profit is shown at 1364715/- which is almost 90% which is not possible in construction business - the expenses were booked in the supplementary cash book which was verified by the AO during remand report in AY 2003-04 – the order of the CIT(A) is to be set aside and the AO is directed to apply rate of profit at 8% in respect of receipts of 2265000/- and delete the addition made on account of construction receipts – Decided in favour of assessee. Addition of cash deposited for purchase of demand draft – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the supplementary cash book was originally admitted by the CIT(A) and sent for remand report - entry in respect of 450000/- was verified by the AO - If the Assessing officer had any further doubt he should have made further enquiry but he could not simply reject this evidence – thus, the order of the CIT(A) is to be set aside – Decided in favour of assessee. Unexplained cash credits u/s 68 – Held that:- As far as a sum of 2 Lakh is said to have received from Sharma Associates the assessee has filed a copy of confirmation copy of account is sent by the assessee to Sharma Associates in which Mahinder Sharma has simply signed - PAN No. has also been given - The AO has not made any enquiry - Once the depositor has given the confirmation and PAN, if the AO had any doubt he should have conducted further enquiry and could not have rejected this evidence without any further enquiry - the assessee has discharged the burden of proving the genuineness of this transaction of 2 lakhs. In respect of a sum of 4.50 lakhs and 4 lakhs received from R.K. Associates, they were having 25% share in property No. BMM 373 Ph 11, Mohali which was purchased through auction - Other details of payment through DD were also furnished. Even copy of the agreement was filed - PAN of R.K. Associates was not mentioned in the confirmation - Thus the assessee had clearly failed to discharge the onus. Sum of 3 lakhs received from G.M. Construction, only document filed is a letter from M.S. Alagh stating that he has purchased a truck and a jeep - Even PAN No is not mentioned in such letter - during hearing whether evidence in the form of transfer of vehicles by way of endorsement in the registration certification is there, the assessee showed inability to file such evidence - in respect of the transaction the assessee has not discharged his burden and the addition has been rightly made by the CIT(A) - Decided partly in favour of assessee. Validity of transaction - Cash withdrawal or cheque withdrawal – Held that:- The contention of the assessee is to be accepted that once additional evidence was accepted and during verification in the remand proceedings certain further documents were filed - all the evidences were filed including a certificate from bank - Certificate from the bank show that through cheque No. 252583 cash was withdrawn - This evidence cannot be brushed aside by simply saying that cash was withdrawn through Sarabjit Singh who is only a domestic help - If the Revenue had any doubt the AO should have made further enquiry during assessment proceedings – thus the order of the CIT(A) is to be set aside – Decided in favour of assessee. Addition of undisclosed investment in jewellery – Held that:- Net jewellery is required to be added because no explanation is available and that is 598.48 gms - This jewellery is required to be added in the hands of Pritam Singh and Gurjit Singh - Since this issue has been considered jointly no details have been furnished for individual jewellery and out of the jewellery weighing 298.48 gms should be added in the hands of the assessee and balance 300 gms should be added in the hands of Gurjit Singh – the order of the CIT(A) is to be set aside and the AO is directed to make addition on account of jewellery weighing 298.48 gms in case of the assessee – Decided partly in favour of assessee. Validity of gift received – Failure to prove the genuineness – Held that:- The Revenue has already accepted the fact of giving gifts by Shri Surinderpal Singh - after issuing notice u/s 148 on the basis of above noted reasons the assessment was ultimately completed u/s 143(3) r.w.s. 148 in case of Shri Surinderpal Singh vide order dated 28.2.2013 for AY 2005-06 in which it is clearly mentioned that the gifts given by Surinderpal Singh to Pritam Singh and Gurjit Singh were verified - Surinderpal Singh is an NRI and running many business organizations and assessable income in India was nil - Therefore it becomes clear that source of gifts stand explained - reasoning given by the CIT(A) for deleting the addition, is totally correct and the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (10) TMI 700
  Non-admissibility of this commission u/s 37 -Applicability of section 9(1)(vii)(b) r.w. section 40(a)(i)(A) – Held that:- It is noted by the CIT(A) that countries of South America and Europe etc. are new business places which required the help of local agents who could be in close proximity with the customers and who could understand the local language whereas LEG who had big picture and also the authority to be flexible with the rate, was overall coordinator of all the LSAs - This finding of CIT(A) could not be controverted by the Revenue - copy of certain correspondences over internet/e-mail of customers /local sales agents and company in connection with procurement of sale orders/ marketing are submitted by the assessee and it is noted that Mr. Brian Young of LEG was very much involved over and above the local sales agents in procurement of orders - the assessee is in India and the customers and LSAs are in South America and Europe etc. - Therefore, if the assessee is taking the services of LEG for better coordination between the assessee company and LSAs, then it is a business decision of the assessee company which cannot be questioned by the AO. Explanation 2 to section 9(1)(vii) has already been taken into consideration by CIT(A) and by following the Board’s Circular No. 786 dated 07/02/2000, it was held that services rendered by LEG are not managerial services falling within “Fees for Technical Services” (FTS) - commission has been paid by the assessee to LEG for acting in foreign country as selling agent and therefore, the services rendered by LEG are not managerial services to fall in the scope of Fees for technical services (FTS). Retrospective effect of amendment u/s 195(1) w.e.f. 01/04/1962 – Held that:- As per this explanation, the amendment is this that if the payee is liable to tax in India in respect of the impugned payment than the payer cannot claim that he is not supposed to deduct TDS because the payer is neither a resident of India nor the payer has any place of business in India or business connection in India - since as per Board Instruction, the payment is not taxable in the hands of the payee, TDS is not required to be deducted by the assessee – Decided against revenue. Addition of payment of "Top UPS" made by the company – Payment constitute Key Man Insurance Premium – Held that:- Both the policies were issued on 28/02/2005 and therefore, the issurance of these policies was before the date of this circular dated 27/04/2005 - At the time of issue of these policies in the financial year 2004-05 relevant to assessment 2005-06, the payment made by the assessee company of 4 crore was claimed and allowed as keyman insurance policy premium - at the time of issuance of these policies, these policies were not keyman insurance policy - the payment is not renewal but top up premium - if any top up premium is paid after 30/06/2006, it will be hit by this circular of IRDA but in the present case, the top up premium has been paid by the assessee and received by insurance company on 31/12/2005 which is before the date of these last two circulars dated 3/01/2006 and 30/06/2006 in which such increase in sum assured in respect of earlier policy was barred – the order of the CIT(A) is upheld – Decided against revenue. Addition u/s 43B – Amount paid in not actual payment of Excise Duty but represents adjustment in Cenvat Receivable A/c – Held that:- The payment has been done through the CENVAT deposit account before due date of filing of return of income - this is actual payment and therefore, allowable u/s 43B because it was paid before due date of filing of return of income - payment through CENVAT or through PLA both are actual payments and therefore, both are allowable if the same has been paid before the due date of filing of return of income - If payment by way of CENVAT is not actual payment as per the AO - then he should have added all such payments also which were paid during the year but he has added only those such payments which were made after 31st march but before the due date of filing of return of income - This is not the objection of the Revenue that this payment was not made before due date of filing of return of income – the order of the CIT(A) is upheld – Decided against revenue. Commission paid on domestic sales – Held that:- CIT(A) rightly was of the view that although the agent i.e. M/s Super Smelters Ltd. had booked its commission income in the F.Y. 2004-2005 for coordinating the sales to M/s Shiva Polymers Pvt. Ltd., the same norm cannot be thrust on the assessee company because the assessee company has booked the commission expenditure because the sales have been effected during the current year i.e. AY 2005-06 only – the order of the CIT(A) is upheld – Decided against revenue. Commission paid to Managing Director – Held that:- CIT(A) rightly was of the view that the AO has not brought anything on record to show that the salary paid to the Managing Director is excessive in comparison to other similarly placed Managing Director (CEOs) - the Managing Director gets a fixed salary and a variable pay in the form of commission which is computed @1% of the profit of the assessee company - the payment of commission to the Managing Director is much below this ceiling as per Companies Act because no commission has been paid to any other Director - Since the payment of commission is in line with the resolution passed in Annual General Meeting of the assessee company and also in the line with the provisions of Companies Act and no adverse material has been brought on record to show that the same is excessive, there is no reason to interfere in the order of CIT(A) – Decided against revenue. Withdrawal of depreciation on New Aluminum Structure and Water Proofing – Held that:- CIT(A) rightly noted that the expenditures were incurred in respect of water proofing - these new aluminum structure/doors were got erected for making partitions & dividing walls and the water proofing was done on the existing roof of factory shed and therefore, it is not creating any new asset nor it increased the existing efficiency or capacity - putting dividing walls and doors as partition in the existing shed and water proofing of existing factory shed, does not amount to bringing a new asset in existence and hence, the same is allowable as revenue expenditure – Decided against revenue. Interest and expenses disallowed u/s 14A r.w. Rule 8D – Held that:- Following the decision in Godrej & Boyce Mfg. Co. Ltd. vs. Dy. CIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Rule 8D is applicable from the AY 2008-09 and therefore, it is not applicable in the present year - But at the same time reasonable disallowance is to be made - Since disallowance was made by the Assessing Officer and confirmed by CIT(A) as per Rule 8D, the matter is liable to be remitted back to the AO for fresh adjudication – Decided in favour of assessee. Various expenses disallowed - staff welfare expenses, telephone expenses and vehicle running & maintenance expenses – Held that:- Ad hoc disallowance out of staff welfare, telephone expenses and vehicle running & maintenance expenses was made by the AO - Following the decision in Sayaji Iron and Engg. Co. vs. CIT [2001 (7) TMI 70 - GUJARAT High Court] - no disallowance is to be made out of telephone and vehicle running expenses in the hands of a company on the allegation of personal user of the directors/employees - the part disallowance deleted by CIT(A) under the two heads i.e. telephone expenses and vehicle expenses do not call for any interference - Regarding the part disallowance deleted by CIT(A) in respect of staff welfare, the disallowance was made by the AO for the expenses by alleging that they are not fully verifiable but he has not cited a single instance which is of not verifiable – Decided against revenue.

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• 2014 (10) TMI 699
  Deferred revenue expenditure - assessee submitted that since the amount was of deferred revenue nature, being partly relatable to current year and partly to subsequent year, therefore, for preparation of balance sheet, it was claimed as deferred revenue expenditure in the balance sheet but for Income tax purposes the entire amount was claimed as deduction in the computation of income u/s 37 – Held that:- There is no concept of deferred revenue expenditure under the Income Tax Act except under certain specific provisions like section 35D - unless statutory provision is there to defer the revenue expenditure over a period, the entire amount is to be allowed in the year in which it is incurred for running the business as per section 37 of the Income Tax Act – following the decision in COMMISSIONER OF INCOME TAX Versus SALORA INTERNATIONAL LIMITED [2008 (8) TMI 138 - DELHI HIGH COURT] - the entries in the books of account cannot be the basis whether a receipt is taxable or not or whether expenses are allowable as a deduction or not - Courts are compelled to go by the true nature of receipts and not to go by the entries made in the books of account – Decided partly in favour of assessee. Credit investigation expenses – expenses on application capture – Held that:- The reasoning given by AO in regard to amount is akin to treating the amount as deferred revenue expenditure inasmuch as the AO himself has observed that there was necessity of this expenditure and while so holding, the AO himself has allowed 25% of this expenditure impliedly 1/4th of the amount has been considered as expenditure relating to current AY and the balance being allowable in subsequent three years - this treatment is not permissible in law and the entire amount had to be allowed u/s 37 of the Income Tax Act being incurred wholly and necessarily for the purpose of business - the nature of application capture expenditure, reasons for making disallowance by AO and the reasons for allowing this expenditure by ld. CIT(A) are identical to the issue relating to credit investigation expenses – thus, the order of the CIT(A) is upheld. Partial disallowance of creation of brand and advertisement expenses – Held that:- AO had allowed 25% of the expenses treating the same being relating to current year under consideration and balance has been disallowed - he has primarily treated this amount as deferred revenue expenditure - the entire amount was rightly allowed by CIT(A) particularly because 79% of the expenditure was in the nature of commission paid to marketing agent for procuring new cardholders - It cannot be denied that this expenditure though classified under the head “advertising expenditure” was essential for running of assessee’s business – Decided against revenue.

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• 2014 (10) TMI 698
  Interpretation of word previous owner - Family settlement agreement/memorandum – transfer of shares - Held that:- Section 49 makes it clear that if the mode of acquisition of a capital asset was by way of gift or will then it would not mean only the last previous owner but would include the previous owner from whom the capital asset devolved on the last previous owner because indexation is to be allowed in respect of period of holding of the asset and not in relation to the individuality of the assessee – following the decision in CIT vs. M/s Janhavi S. Desai [2012 (7) TMI 496 - BOMBAY HIGH COURT] - while computing the capital gains arising on sale of shares acquired by the assessee by way of gift, the indexed cost of acquisition is to be computed with reference to the year in which the previous owners first held the assets and not the year in which the assessee became the owner of the asset – thus, there was no infirmity in the order of CIT(A) directing the AO to compute the capital gains in the case of the assessee by applying the indexed cost of acquisition in which the previous owners first held the shares – Decided against revenue.

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• 2014 (10) TMI 697
  Addition of excess consumption of diesel - Whether the CIT(Appeals) has erred in not considering the deletion of addition of 3,58,15,876/- on account of excess consumption of Diesel without appreciating the facts brought on record by the A.O. and only upholding the addition of 1,20,000/-on account of personal use of diesel in the diesel car owned by the assessee – Held that:- As per AO, the consumption of diesel was excessively high in comparison to the earlier years - CIT(A) allowed the claim of the assessee by deleting whole addition except 1,20,000 on the ground of personal use of diesel in the car owned by the assessee - the AO has made disallowance presuming that the consumption of raw material was 1,07,049.45 quintals which was of wheat only - The AO ignored a very important fact that the assessee was not doing only processing of wheat for manufacturing of atta, suji and maida upto AY 2006-07 but during the year under consideration i.e. AY 2007-08, the assessee also started the processing of choker for producing superfine choker/bran which had been sold for 6,03,38,004/- during the year - the assessee has processed 1,86,207.04 quintals of choker for production of superfine choker/bran which process also uses diesel - The AO has not considered the consumption of diesel for the purpose of manufacturing of superfine choker/bran by processing of 1.86 lakh quintals of choker - as per expert advice for production of better quality of choker etc., the assessee needed load of 625 KVA against existing load of 385 KVA but despite application and efforts by the assessee, load was not increased during the year - the assessee got connection of 625 KVA on 26.05.2009 beyond the period of financial year under consideration. The assessee maintains proper records to show the purchase and consumption of diesel for its business purpose which justifies the increase of consumption of diesel during the year – the AO has formed opinion for disallowance on incorrect and incomplete facts and also by ignoring and not considering other important evidence submitted by the assessee to support its claim - CIT(A) has granted relief for the assessee but the findings are not based on cogent and justified reasons - the AO should have considered some substantial and cogent evidence submitted by the assessee to verify its claim pertaining to the diesel consumption - The AO ignored verification of diesel consumption log book, purchase of generators, boilers and six body chakki installed during the year for production of better quality products - The AO also ignored a very important fact that besides production of atta, suji and maida, the assessee also started production of high quality choker/bran during the year for which the assessee required increased load of electricity and power which the assessee could not get during the year and maximum use of power was based on generators - The AO also ignored another important fact that there was load shedding during the year and on the other hand, the assessee was compelled to install generators, boilers and other equipments to meet the decreased supply of electricity and increased use of power during the year – thus, the matter is to be remitted back to the AO for verification of correctness of claim – Decided in favour of revenue.

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• 2014 (10) TMI 696
  Transfer pricing adjustment - Payment of royalty and technical service fee – Held that:- Kirby Building Systems India P. Ltd., is a wholly owned subsidiary of Alghanim Industries, a Kuwait based Multi-Billion Conglomerate - It is one of the world’s largest producers of Pre- Engineered Steel Buildings (in short “PEB”) and has been operational for more than 38 years since 1976 - There is no dispute with reference to the fact that assessee was promoted by the Kirby Building Systems, Kuwait and its original technical service agreement for payment of lump sum amount of $ 2 million dollars as technical knowhow fee and royalty of 2.5% in the first year and 5% from second year onwards up to March 31, 2007 was approved by the RBI and Ministry of Industries - assessee did not remit any of those amounts in those years and the agreement was amended periodically - in the year assessee has paid $ 1 lakh dollars as technical knowhow fee and royalty at 7.5% on domestic sales as per the agreements entered into and approved by the authorities - apart from legal position, even on merits the disallowance of entire technical knowhow payment and part disallowance of royalty payment to AE was not warranted. The agreements were periodically approved by RBI and by Ministry of Industry and assessee was paying the amounts as per the agreements - Even though approval by the other Governmental authorities does not prevent TPO in examining the ALP as per the provisions of the Act, TPO did not examine the issue under the T.P. provisions at all but took upon the role of an A.O. in analyzing the commercial expediency of payment of royalty and technical knowhow under the provisions of section 37(1) - Since the agreements were approved by the authorities and the royalty fee and technical knowhow are at arm’s length and that assessee’s claim should be allowed as such - There is no information brought on record by the TPO that the payment at 7.5% on the net sales is not at arm’s length as there was no other comparable case brought on record - Generally, the Government of India is approving the royalty payments at 7.5% of the sales and this approval given by the RBI and Ministry of Industry is at par with similar agreements being approved in other contracts/agreements - royalty and technical knowhow payments made by the assessee to its AE are considered at arm’s length and the grounds raised by the assessee on this issue are allowed – Decided in favour of assessee. Deferred sales tax u/s 43B - Provisions of A.P. VAT Act, 2005 – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the AO disallowed the claim of the assessee stating that it failed to produce a copy of the agreement with the Sales Tax department on conversion of deferment into interest free loan - As per this document, which the photocopy is enclosed herewith, the benefit availed under sales tax deferment scheme - They have also produced the letter of Asst. Commissioner, Large tax payers Unit, Charminar Division in their favour – thus, the AO is directed to allow the amount as well – Decided in favour of assessee.

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• 2014 (10) TMI 695
  Partial disallowance on license fee payment u/s 40 A - excessive or unreasonable payment of royalty – Held that:- The assessee paid royalty to the extent of 100,18,62,000/- on account of general license fee payable to SPN - The AO disallowed to the extent of 40% holding that the assessee has incurred huge expenditure on advertisement which had resulted in brand building for the parent company – following the decision in COMMISSIONER OF INCOME TAX Versus M/s NESTLE INDIA LTD. [2011 (5) TMI 566 - DELHI HIGH COURT] - Past history on the issue has been the reasoning for making the disallowance by the AO and thus apart from difference in the amounts the reasoning for making the disallowance has remained the same - the CIT(A) taking into consideration the past history as discussed in the earlier appeal has deleted the addition made by a disallowance – Decided against revenue. Disallowance u/s 14A – Held that:- The AO considering the facts that the assessee had earned dividend income which did not form part of the total income required the assessee to address why disallowance u/s 14A read with Rule 8D of I.T Rules 1962 should not be made - sub-sections (2) & (3) of section 14A and Rule 8D would operate prospectively does not mean that the AO is not to satisfy himself with the correctness of the claim of the assessee with regard to such expenditure - If he is satisfied that the assessee has correctly reflected the amount of such expenditure, he has to do nothing further – relying upon CIT., Mumbai Versus M/s. Walfort Share & Stock Brokers P. Ltd. [2010 (7) TMI 15 - SUPREME COURT] - in this light of the departmental stand the assessee’s stand that detailed argument on facts are required to be addressed stands addressed by the issue accordingly after having the parties is restore, by the AO who shall adjudicated upon the issue denovo after giving the assessee a reasonable opportunity of being heard – thus, the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of assessee.

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• 2014 (10) TMI 694
  Jurisdiction of CIT u/s 263 – Requisite enquiries carried out or not – AO not acted after obtaining the information - Held that:- the return of income was filed on 31.08.2009 - The assessee company had shown no trading activity - after collecting some information the AO did not act any further - There is no whisper in the order sheet as to whether AO made any discussion or enquiry with regard to the share capital and share premium - there was no enquiry by the AO and hence the CIT was justified in taking action u/s 263 of the Act - CIT has referred to the common practice being followed particularly in Kolkata where through the entries of share capital and share premium in dummy companies a very large amount is sought to be introduced and laundered by way of these companies - the issue of share capital and share premium needed an enquiry in the proper sense of the word and not a facade of enquiry. It is evident that after collecting some information the AO did not act any further. There is no whisper in the order sheet as to whether AO made any discussion or enquiry with regard to the share capital and share premium. In order dated 18.03.2011 it was barely two days after the receipt of last reply the AO writes in the assessment order that “notice u/s 133(6) of the Act were issued to the share subscribers on test check basis the replies from their end are verified”. In this regard we agree with the ld. DR, the AO has shown undue haste in completing the assessment. There was no enquiry whatsoever by the AO rather the entire exercise was to make a perfunctory attempt to give a facade of enquiry – there was no cogent substance in the submission that prior to the introduction of proviso to section 68 and introduction of section 56(2)(viib) there was no requirement on the AO to enquire the genuineness of amount received as share capital and share premium - The receipt of any amount by whatever name called if the same is not genuine does fall under the ken of section 68 - there is no infirmity in the order passed by the CIT u/s 263 – Decision in Zigma Commodities Private Limited vs ITO [2014 (5) TMI 672 - CALCUTTA HIGH COURT] followed - Decided against assessee.

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• 2014 (10) TMI 693
  Piercing the corporate veil - Application of section 2(22)(e) and 56(2)(vi) - Realignment of the assets between family - Whether the realignment of the assets between the family members/HUF will give arise to taxable income U/s. 2(22)(e) and 56(2)(vi) or any other provisions of the Act – Held that:- For understanding the true nature of the transactions, the corporate veil of the intermingled companies in the transactions needs to be pierced - In the case of the Public Limited company M/s. SKM Egg Products Export (India) Ltd., only the equity shares of M/s. SKM Egg Products Export (India) Ltd., held by M/s.SKM Animal Feeds and Foods (India) Limited were transferred to Shri SKM Shree Shivkumar and not any assets held by the company were transferred, therefore the issue of piercing the corporate veil of this company will not arise and also being a public limited company, that may not be permitted - In the case of both the other companies, the entire shares are held by the family members only - on piercing the corporate veil of both these companies; it becomes clear that all the transactions intermingled were due to the family settlement arrived at either pursuant to Arbitration Award or oral agreements - various higher judiciaries have also validated the oral agreements in the case of Family/HUF partial or total partition. When there is any distribution of assets pursuant to family arrangement or HUF partial/total partition, such transactions will not amount to transfer of asset attracting tax liability in the hands of the recipient under the provisions of the Act - on piercing the corporate veil with respect to the two private limited companies viz. M/s.SKM Animals Feeds and Foods (India) Ltd., and M/s. SKM Siddha and Ayurvedic Medicines India Pvt Ltd., the entire intermingled transactions can be seen only as the family settlement arrived at through Arbitration Award amongst Hindu family members - Further there are no transfers of assets with respect to the public limited company M/s.SKM Egg Products Exports (India) Ltd. - Therefore, considering the facts and circumstances of the case the provisions of section 2(22)(e), 2(24)(iv) or Sec.56(2)(vi) cannot be invoked - the addition made by the AO which is further sustained by the Ld. CIT (A) on account of deemed dividend U/s. 2(22)(e) of the Act and income from other sources U/s. 56(2)(vi) is to be deleted – Decided in favour of assessee.

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• 2014 (10) TMI 692
  Unexplained credits u/s 68 – Onus to prove - Held that:- Whatever compliance was asked by AO, assessee has duly filed the same - onus cast u/s 68 is primary in nature – there is no infirmity in the order of CIT(A) that as a per the first requirement of sec 68 assessee discharged its primary onus – relying upon COMMISSIONER OF INCOME TAX DELHI - II Versus KINETIC CAPITAL FINANCE LTD. [2011 (9) TMI 289 - DELHI HIGH COURT] - each instance of cash credit is to be identified and a bunch of transaction without specifying the details cannot be added u/s 68 - assessee has explained each credit entry in both the bank a/cs along with the source thereof i.e. cash available in books - Bank a/cs are disclosed and part of the regular recording of assesses real estate business - They have not been rejected, therefore, the books of accounts and generation of cash is thus impliedly accepted by AO - There is total lack of appreciation of facts and material available on record and the assessing officer’s observations suffer from self-contradictions - CIT(A) after verification has given clear findings of facts that AO failed to properly considered the material produced by the assessee in discharge to it’s primary onus - due to non-appreciation of assesses explanation and evidence in a proper manner, AO has made contradictory observations – the order of the CIT(A) is upheld as the assessee duly discharged its primary onus in terms of sec 68 to explain the entries in SBI and ABN Amro bank A/cs – Decided against revenue. Unconfirmed creditors – Held that:- Assessee has filed sufficient evidence which are detailed above and claims to have discharged its primary onus in terms of sec 68 - CIT(A) has rightly held that in income tax proceedings attested photocopies duly signed are admissible as evidence in income tax proceedings - the assessee has been able to demonstrate that due to name change of Taral Vincom to Link point Infrastructure Pvt. Ltd w.e.f. 6.5.2009, the notice u/s 133(6) remained unserved - AO has to ascertain the facts and discharge of primary onus on the basis of material available on record after giving adequate opportunity of hearing - He cannot brush aside the entire evidence on the pretext that party is not physically produced more so when it is apparent that it was physically impossible for assessee to ensure production of Kolkata party in one day’s short time. Regarding other sundry creditors, assessee discharges its primary onus in terms of sec. 68 which is attempted to be rebutted by AO on assumptions and sweeping observations - They are all parts of books of accounts which are accepted by AO without raising iota of doubt - The due confirmation, explanation of entries and source thereof emanating from books of accounts is duly explained by the assessee – relying upon COMMISSIONER OF INCOME TAX-IV Versus M/s. DWARKADHISH INVESTMENT (P) LTD. and M/s. DWARKADHISH CAPITAL (P) LTD. [2010 (8) TMI 23 - DELHI HIGH COURT] - assessee has discharged it’s onus in terms of sec 68 – thus, the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (10) TMI 691
  Deemed dividend u/s 2(22)(e) – Loans and advances received - substantial part of business in money lending - ordinary course of business of the company - Held that:- If the assessee receives loans or advances from a company, in which it has substantial interest, the same loan and advances would be treated as deemed dividend in the light of provisions of section 2(2)(e) of the Act - But there are exceptions in this provision and as per exclusory clause (ii), if the assessee establish that advance or loan made to shareholders/assessee by a company in the ordinary course of its business and the lending of money is substantial part of business of the company - Loan and advances by the company would not be deemed dividend - the advance or loan was given to the assessee in the ordinary course of its business - the assessee has failed to establish that substantial part of business of the company is money lending - where the money lending business of the company constitutes less than 20% of its total business, lending of money was not substantial part of business of the company – relying upon CIT vs. Parle Plastics Ltd. and Another [2010 (9) TMI 726 - BOMBAY HIGH COURT] - expression substantial part does not connote an idea of being the “major part” or the part that constitutes majority of the whole - the capital employed by a company for carrying on a particular division of its business as compared to the total capital employed by it, would also be relevant while considering whether the part of the business of the company constitutes “substantial part of the business” of the company. There should not be any controversy that “substantial part of business” is not equivalent to the word “major part of business”, as the Legislature has not used the words “major part of business” in place of “substantial part of business” - But the Legislature has consciously used the words “substantial part of business” which means that any business of a company which the company does not regard as small, trivial, or inconsequential as compared to the whole of the business is substantial business - if particular per cent of capital of the company is employed in the money lending business, the company can be called to have substantial part of business in money lending - In the light of Explanation 3(b) below section 2(22)(e) of the Act, where a person shall be deemed to have a substantial interest in a concern, other than a company, if he is, at any time during the previous year, beneficially entitled to not less than twenty per cent of the income of that concern - if 20% of the capital of the company is deployed in money lending business of the company, the company shall be held to have a substantial part of business in money lending. Two companies i.e. Kukki Color Photos Pvt. Ltd. and Kukki Color Prints Pvt. Ltd., in which the assessee has more than 10% shareholding and has substantial interest therein, have given loan and advance to assessee only - Except the assessee, they have not given any loan or advance to any other person - the company has substantial part of business in money lending - If the company is engaged in advancing loans to different persons apart from assessee and fulfils the conditions of percentage of capital employed in money lending business, the company has substantial part of business in money lending - loans and advances were given only to the assessee and not to others, therefore, the company cannot be called to have a substantial part of business in money lending - Thus, the second ingredient of exclusion clause (ii) contained in section 2(22)(e) of the Act is not satisfied and the assessee cannot get the benefit of exceptional clause - the A.O. has rightly treated the advance or loan given to the assessee by the company i.e. Kukki Color Photos Pvt. Ltd. and Kukki Color Prints Pvt. Ltd. as deemed dividend - CIT(A) who has not examined all the aspects while granting relief to the assessee – the order of the CIT(A) is set aside and the matter is to be remitted back to the AO – Decided in favour of revenue.

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• Customs

• 2014 (10) TMI 716
  Suspension of the CHA licence - Regulation 20(3) of the Custom House Agents Licencing Regulations, 2004 - Held that:- as the Hon’ble High Court of Madras had already set aside the enquiry proceedings, the impugned orders of suspension of CHA Licence under the provisions of Regulation 20(3) of the CHALR, 2004, is set aside. The appeal filed by the appellant is allowed - Decided in favour of appellants.

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• 2014 (10) TMI 715
  Denial of the extension of the warehousing period - Whether the appellant was given reasonable opportunity of personal hearing before passing the impugned order and whether the principles of natural justice is complied - Held that:- impugned order has been passed by the adjudicating authority without giving any proper opportunity of hearing to explain their case in person. It is also seen that the appellant vide letter dated 27.03.2013, had submitted before the Commissioner that they have obtained necessary authorization (Zero Duty EPCG Licence). On perusal of the said authorization No. 2230002152, it was issued on 20.03.2013 by the JDDGFT for import under ‘Zero Duty EPCG Scheme’ - adjudicating authority had passed the impugned order without giving any proper opportunity of hearing, it is appropriate in the interest of justice to remand the matter to the original authority to decide afresh after considering all the grounds including the notices issued under 72(2) of Customs Act, after giving proper opportunity of hearing to the appellants and pass the order as expeditiously as possible within eight weeks from the date of receipt of this order - Decided in favour of assessee.

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• 2014 (10) TMI 714
  Waiver of pre-deposit of duty, interest and penalty - Notification No.104/94 dated 16.03.1994 - Held that:- Since the containers along with the goods are still in the custody of the Revenue, prima facie interest of the Revenue is safeguarded. Accordingly, we grant waiver of pre-deposit of the entire amount of duty, interest and penalty and stay recovery thereof during the pendency of the appeal - Stay granted.

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• 2014 (10) TMI 713
  Penalty u/s 112 - Seizure of goods - Held that:- Adjudicating Authority first to satisfy himself that the statement recorded during the course of investigation and thereafter if necessary allow the cross-examination of the persons whose statement has been relied upon. As in this case, this has not happened. Moreover, the statement of Shri Sujit B. Satam has not directly implicated the appellant as accused for the impugned consignment. With regard to the earlier consignments, where the corroborative statement has been recorded by the investigating team, in this case, it has held that for the earlier consignment, there is no evidence on record, same cannot be confiscated. When this finding has been made by the Adjudicating Authority and same has been accepted by the department. In these circumstances, no penalty is warranted against the appellant as the appellant is not importer (as no bill of entry is filed), no inculpatory statement is recorded for the impugned consignment and the provisions of Section 138B of the Act were not followed - Decided in favour of assessee.

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• 2014 (10) TMI 712
  Seizure of goods - import of restricted goods - Commissioner refused the provisional release of the goods seized by DRI to Shri Manjit Singh on the ground that M/s. KAM, M/s. Khyati and M/s. KM International are non-existent and the respondent, Shri Manjit Singh is not a bona fide owner of the goods - Held that:- Just by furnishing affidavits claiming to be the owner, the respondent does not become bona fide owner of the seized goods. We also take note of the fact that the Commissioner in his earlier order dated 29-10-2013 addressed to the Advocate, Shri Yogesh M. Rohira of the respondent had mentioned that the goods cannot be provisionally released to Shri Manjit Singh, as he is not the bona fide owner of the imported goods. Though in subsequent order dated 5-11-2017 the Commissioner reversing his earlier stand, has ordered provisional release to the respondent, he has not stated as to how he is satisfied that the respondent is the bona fide owner of the goods. Provisional release of the goods imported in the name of M/s. KAM Enterprises, M/s. Khyati Enterprises, M/s. K.M. International, M/s. Satyam Enterprises and M/s. Vaishali Enterprises has been ordered to the respondent, Shri Manjit Singh on the basis of the affidavits regarding ownership already submitted by him and the provisional release of the goods imported in the name of M/s. Aashavi Enterprises and M/s. Dhruv Enterprises has been ordered to the respondent, Shri Manjit Singh in the event of production of the necessary affidavits/authorization. When the importers are fictitious persons and the value of the goods has been grossly undeclared and the adjudication of the matter may result in huge duty demands, against the importers, releasing the goods on provisional basis to a person, who is not the owner of the goods would certainly jeopardize the interests of the Revenue, as, if provisional release is made and the respondent, Shri Manjit Singh vanishes with the goods and subsequently duty demands are confirmed, the department will neither have the goods nor the persons from whom the duty can be recovered. impugned order is contrary to the provisions of the law and in fact is a perverse order - Decided in favour of Revenue.

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• Service Tax

• 2014 (10) TMI 732
  Abatement under Notification No. 32/2004 - GTA service - CENVAT Credit - Held that:- where the service provider has not taken registration, there is no need for the service receiver to show evidence that the service provider has not taken any credit and benefit of abatement under Notification No. 32/2004 would be available. As regards the second ground which is resulted in demand for service tax, the learned CA submits that once the service tax has been paid by the supplier of GTA services, the question of demand by the appellant does not arise. The demand has been confirmed only on the ground that according to the notification the service receiver is liable to pay. In our opinion, for the same services, there cannot be calculation of tax otherwise. In the absence of any evidence that the service provider had not paid the tax, the demand for service tax on the sole ground that receiver is liable to pay cannot be sustained. - stay granted.

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• 2014 (10) TMI 731
  Successor's liability - Imposition of penalty - Difference in the services provided by the appellant in the balance sheet as compared to their service tax returns - Held that:- during the impugned period the service tax could not have been taken from the successor of a person who is dead. In these circumstances, I set aside the impugned order qua confirming the demand of service tax along with interest - Decided in favour of assessee.

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• 2014 (10) TMI 730
  Classification of service - Cleaning service or Business Auxiliary Service - Held that:- If it is cleaning service, normally the area to be cleaned and the nature of cleaning, the periodicity etc. would be specified. Moreover the amount payable for the services rendered would not be based on number of vehicles and from the work order and the certificate provided by a receiver of service, we find that the appellants were paid only on the basis of number of vehicles provided for shifting of slurry from settling tank to disposal yard and there is no evidence of any payment made by taking into account other services provided. No doubt in the invoices the appellant, who is an individual, has mentioned the service provided as cleaning service but the actual facts are otherwise. Service provided by the appellant appears to be supply of tangible goods since the payment is made on number of vehicles provided and appellants have discharged their liability for the period subsequent to 16/05/2008 and have been paying service tax which would mean that the conditions for treating the service as supply of tangible goods has been accepted by the appellant himself for the period subsequently. The service has not been reclassified after 16/05/2008 also even though the matter was adjudicated and it was contended that service provided was not cleaning service. Under these circumstances, even if the appellant does not have a strong case on merits which in our opinion may not be a fact yet the appellant would be entitled to the benefit of limitation - there is no pre-deposit required to hear the appeal and accordingly, the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal - Stay granted.

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• 2014 (10) TMI 729
  CENVAT Credit - demand against the Input Service Distributor under Rule 14 - contravention of Rules 2(l), 2(m) and 7 of the Cenvat Credit Rules, 2004 - Held that:- Identical proceedings were earlier initiated by way of two show cause notices, dated 21-9-2010 covering the period 2005-2006 to 2009-2010. These proceedings were however dropped by the Commissioner by the order dated 27-8-2012 on the ground that the demand for recovery of Cenvat credit cannot be raised against the Input Service Distributor under Rule 14 of the Cenvat Credit Rules, 2004; and where Cenvat credit is wrongly availed and utilized, the same should be recovered from the manufacturer or provider of output services. The wholly contrary conclusion and reasoning is adopted in the impugned order vis-a-vis the earlier order referred to. In a prima facie construction of the provisions of Rule 14 of the Cenvat Credit Rules, 2004, we are of the view that the impugned order is unsustainable - Decided in favour of assessee.

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• 2014 (10) TMI 728
  Denial of CENVAT Credit - absence of registration number of service provider - Held that:- There is no dispute about raising of the invoices by the service provider and giving all the particulars including the fact of payment of service tax. When the same is taken into consideration along with S.T. 3 return filed by the service provider, it leads to the inevitable conclusion that service provider has paid the service tax. In any case, I find that there is no dispute about the above fact and only reason for denial of credit is absence of registration number of service provider. I find that said defect is a rectifiable defect and the appellant having produced S.T. 3 return of the service provider which bears his registration, is sufficient to meet the objection of the Revenue. Accordingly, I find no reason to deny the credit to the appellant. Impugned order is set aside - Decided in favour of assessee.

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• 2014 (10) TMI 717
  Suo moto credit - earlier when objected by the department, assessee reversed the credit with interest - after winning the appeal he took the re-credit of amount reversed earlier with interest - Held that:- When service tax was not liable to be paid, assessee should not have been made to pay. Having made them to pay, credit should have been allowed gracefully. Having denied the credit, when they won the appeal, they should have been advised to reverse the suo moto credit taken and file a refund claim which they would have done since when department wrote a letter asking them whether they have taken suo moto credit, time was still available for filing refund claim. When advice was given to the assessee it was a wrong advice which resulted in proceedings initiated by the department itself. When advice was required to be given, no advice was given instead proceedings were initiated. To add insult to injury, Penalty that too mandatory penalty was imposed. We find approach of the department is not at all correct. Strictly speaking, legally, the credit of interest on CENVAT credit availed is also wrong because only credit could have been taken which was reversed at the insistence of the department and not the interest paid. Nevertheless in this case since the entire proceedings was unnecessary and whole litigation process was unnecessary and the amount recovered itself was not at all recoverable, we consider that at some stage the matter should be closed - there is absolutely no revenue loss caused to the Revenue so far - Decided in favour of assessee.

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• Central Excise

• 2014 (10) TMI 726
  Denial of rebate claim - non export of goods within 6 months - extension of time for export - Notification No.19/2004-CE (NT) dated 6th September, 2004 - Held that:- The application was filed with the Jurisdictional Deputy Commissioner of Central Excise/Assistant Commissioner of Central Excise much after six months, namely, 17th June, 2005 and extension was prayed for three months upto 31st October, 2005. The goods have been exported not relying upon any such extension but during the pendency of the application for extension. The precise date of export is 9th September, 2005. The Petitioners admitted their lapse and inability to produce the permission or grant of extension for further period of three months. - rebate claim has been rightly rejected by the Maritime Commissioner (Rebate) Central Excise, Mumbai-III by his order which has been impugned in the writ petition - Decided against assessee.

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• 2014 (10) TMI 725
  SSI Exemption - Brand Name - assigning the brand name - Manufacturing of Nipple or complete feeding bottles - affixing/assembling of Nipple to other components/accessories bought out from outside or manufactured by others - Valuation - Brand Name - Held that:- In view of the judgment of the Supreme Court in Naveen Chemicals (1993 (9) TMI 107 - SUPREME COURT OF INDIA), we are of the view that the issue raised in the appeal has a direct and proximate relationship to the rate of duty within the meaning of Section 35-G and the issue as to whether the assessee was or was not entitled to the benefit of the exemption, cannot be decided in these proceedings. Hence, the appeal would not be maintainable on that ground. - Decided against Revenue.

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• 2014 (10) TMI 724
  Power of tribunal to grant stay beyond the total period of 365 days - extension of stay granted earlier - extension order should be speaking or not - Held that:- even in a case where the period of 365 days has passed from the date of initial grant of stay but the appeal could not be disposed of for reasons not attributable to the appellant/ assessee (in whose favour the stay was granted); and where the Tribunal is satisfied that the appellant/ assessee was ready and willing for disposal of the appeal and/ or had not indulged in any protractive strategies, extension of stay could be granted (beyond the period of 365 days) by passing a speaking order disclosing the satisfaction of the Tribunal as to absence of any delay/ protractive stratagems by the appellant/ assessee resulting in non disposal of the appeal or that the appeal could not be disposed of on account of pendency of several appeals or other reasons attributable to the structure and context of the Tribunal or other appropriate reasons. Appellant in whose favour an order of stay earlier granted stood vacated on expiry of 180 days or 365 days as the case may be, may present an application seeking extension of stay by pleading the necessary facts as would authorise the exercise of discretion by this Tribunal for grant of such extension. The Registry is directed to maintain a separate register to record data with respect to the appeals in which stay has been granted and other appeals where no stay is granted, so as to enable prioritised listing of appeals where stay has been granted, subject to infrastructure and organisational limitations of CESTAT - Following decision of Commissioner Versus Small Industries Development Bank of India [2014 (7) TMI 738 - GUJARAT HIGH COURT] and Commissioner of Central Excise Versus Disha Engineers [2014 (8) TMI 737 - GUJARAT HIGH COURT] - Matter remanded back - Decided in favour of assessee.

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• 2014 (10) TMI 723
  Cenvat credit - allegation of non receipt of material - Held that:- no investigation had been taken by the Department at the end of the suppliers to ascertain the facts regarding delivery of goods. Moreover, the statutory records of the assessee concerned, shows receipt and consumption of goods. There was no statement of the supplier that the goods were not supplied to the assessee and were supplied to a third party. In light of the aforesaid facts, it cannot be said that the findings recorded by the Tribunal are in any manner erroneous. demands were based upon the statements of transporters or drivers of the trucks which were not corroborated by any evidence. Under the circumstances, the Tribunal was justified in holding that only on the basis of third party statements, such demand cannot be made. Moreover, as rightly pointed out by the Tribunal, no investigation has been conducted at consignors' place or at the place where the said goods are alleged to have been supplied. Under the circumstances, it cannot be said the Tribunal has committed any error in deleting the aforesaid demands. All the goods supplied by M/s. Motabhai Iron & Steel were accompanied by documents evidencing payment of duty. The representative of M/s. Motabhai Iron & Steel had nowhere admitted that the assessee was issued only invoices and that there was no delivery of goods to the assessee. Besides, all the payments that were made to M/s. Motabhai Iron & Steel were made through bank drafts. The Tribunal has also noted that, in all, demand was made in respect of 44 consignments. However, it was only in respect of two transporters, who had transported merely three consignments that the alleged discrepancy had been pointed out, whereas, in case of other transporters, no discrepancy has been found. In the light of the aforesaid findings recorded by the Tribunal, it cannot be said that there is any error in the conclusion arrived at by the Tribunal while deleting the demand - Decided against Revenue.

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• 2014 (10) TMI 722
  MODVAT Credit - Capital goods - Wrongful availment of credit - Goods used by the appellant was for manufacture of a platform - Held that:- The invoices reveal that the appellant had purchased checkered plates, packing plates, sheets, sections, staging materials, which were classified by the supplier as items falling under Chapter 84 as sugar mill machinery parts - These items are appropriately classifiable either under Chapter 72 as checkered plates, sections, etc. or under Chapter 73 as stagging material, if subjected to various processes, which go to the erection of shed and erected structures. The appellant admits that these plates, sheets, sections, etc. were used in the factory for the purpose of constructing platform for use of the running of machinery. By no stretch of imagination these items could be considered as sugar mill machinery or its components, spares or accessories classifiable under Chapter Heading 84. These items are not capital goods given against Sl.Nos.1 to 4 nor are components, spares and accessories, which are used as capital goods of Sl. Nos.1 to 4 of the table annexed to Rule 57-Q of the Rules. It is quite evident that the goods received by the appellant was used for construction of a platform which are used by mechanics for checking the running of the machines or used for supporting the equipments. Goods used by the appellant was for manufacture of a platform, which was used for raising a civil structure and by no stretch of imagination, could it be considered as a sugar mill machinery or a plant or component, spares or accessories classifiable under Chapter Heading 84. We are of the opinion, that these items cannot be specified as capital goods under Rule 57-Q of the Rules and, consequently, we hold that the appellant had wrongly availed the credit - Decided against assessee.

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• 2014 (10) TMI 721
  Maintainability of revision application before the revisional authority - matter related to rebate of duty of excise on goods exported or on excisable material used in the manufacture of goods which are exported - scope of section section 35EE - Held that:- A bare perusal of sub-section (1) of section 35EE shows that the Central Government may, on the application of any person aggrieved by any order passed under section 35A where the order is of the nature referred to in first proviso to sub-section (1) of section 35B, annul or modify such order. The argument before the revisional authority was that the Petitioner before us may be person aggrieved but since the order passed is in the nature stipulated by the proviso to sub-section (1) of section 35B, the revision application does not lie. However, the revisional authority while upholding the objection lost sight of sub-section (1a) of section 35EE and that empowers the Commissioner of Central Excise to prefer an application to the Central Government for revision of the order passed under section 35A. Sub-section (1A) of section 35EE has been brought in the statute book with effect from 11th May, 1999. That does not proceed to indicate that a specific order under section 35A could only be revised and not otherwise. Section 35EE(1a) permits invocation of the revisional power of the Central Government, in case the order is passed by the Commissioner (Appeals) and on the satisfaction or opinion of the Commissioner of Central Excise that the said order is not legal or appropriate. It is in these terms that the present application was filed. In these circumstances, the objection could not have been raised as to the maintainability of the revision application. The revision application is maintainable and could not have been dismissed for want of jurisdiction in the Central Government. The impugned order is therefore quashed and set aside and the revision application filed by the Petitioner is restored to the file and the same be decided afresh on merits and in accordance with law. - Matter Restored - Decided in favour of Revenue.

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• 2014 (10) TMI 720
  Duty evasion - Clandestine removal of goods - Reversal of MODVAT Credit - Held that:- during the period of 21.04.1999 to 26.08.1999, the appellants did job work of 1,29,430 kgs. of inputs used for the manufacture of fabric, bags and wastage for a particular period. The total weight of input used must be equal to the weight of finished product manufactured including wastage and that there is no process loss. The most vital evidence in the instant case is the job work done by the party for different customers from time to time. Department has adopted the best possible method i.e. bale weighment charts which means that the average weighment was done on the actual basis and not with hypothetical basis on purchase order etc. From the record, it also appears that the appellants claimed to have consumed 11,134 kgs. of fabrics for packing purposes but their claim had been rightly not accepted by the adjudicating authority. They never informed about this fact to the department, even no entry in this regard was made by them in the statutory records. They also did not pay the duty/reverse the Modvat Credit for this purpose. In fact, they wanted to take advantage on their own fault by not maintaining the record for captive consumption properly. Their record showed that they had no balance of fabrics after 13.8.1998. Whatever fabrics was manufactured till 13.8.1998, they consumed the same in the manufacture of cement/fertilizers bags, during the period 1.8.1998 to 13.8.1998. Similarly, on 17.08.1998, 5000 fertilizer bags were found in excess of the recorded balance and again on 19.3.1999, excess stock of 3899.8 kgs. fabric, 37,739 cement bags and 1,550 kgs. of wastage were found. This circumstance is enough to adversely reflect on the working of the appellants. Appellant has manufactured and removed the goods without payment of duty as per the details given in the order of authorities below. The circumstances goes long way coupled with other materials are sufficient to prove that there had been unaccounted production and removal of the goods in clandestine manner by the appellant during the period in question without payment of duty. When it is so, then we find no reason to interfere with the impugned order passed by the Tribunal. Hence, the same is hereby sustained - Decided against assessee.

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• 2014 (10) TMI 718
  CENVAT Credit - Debit notes - Credit on ethyl alcohol - Captive consumption - Held that:- Debit notes raised every month by the appellant to the Superintendent of Division III of Nasik that the molasses used in manufacture of ethyl alcohol was systematically reversed every month either from RG-23 account or from PLA account and intimated to the department. We have seen the copies of the debit notes. One debit note No. 90/03-04 dated 07.06.2003 bears the stamp of Inspector of the Range. In any case the authenticity of the debit notes has not contested by the Revenue. It is seen from the documents submitted in the appeal that Superintendent Range I had directed the appellant to reverse proportionate credit as per the provisions of then Rule 57CC of the Central Excise Rules which provided for the procedure of payment of duty on inputs used in the manufacture of exempted as well as dutiable final products. On this basis, the appellant was reversing the credit on molasses every month and intimating the department by means of the debit notes. The total amount of duty of 83,95,165/- on quantity of 16790.330 MT's of molasses has admittedly been paid. Therefore, the demand of duty on molasses used in the manufacture of exempted ethyl alcohol is not sustainable - Decided in favour of assessee.

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• Indian Laws

• 2014 (10) TMI 719
  Cancellation of liquor license - Validity of order passed - Mandatory requirements not fulfilled - Held that:- section 48 clearly places an obligation upon the authorities prescribed therein to enter inspect any place in which any licensed manufacturer carries on the manufacture of or stores any intoxicant but such entry and inspection can only be made within the hours during which sale is permitted, and at any other time during which the same may be open, the authority has to record his reasons. In the present case the raid was admittedly conducted during the period when the shop was required to be closed and even if the shop was found open in the middle of the night recording of reasons by the authority was necessary. None of the impugned orders indicate that any reasons were recorded by the competent authority and therefore, in my opinion the recording of reasons under Section 48 being absolutely mandatory and the same have not been complied with the entire action in cancelling the liquor license of the petitioner as well as the appellate order and the revisional order are illegal and without jurisdiction - Decided in favour of assessee.

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