Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 5, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Disallowance of commission paid to two Managing Directors u/s 36(1) (ii) - The provision u/s 263 of the Act does not give powers to the Commissioner to make enquiry again for the issue which has been decided after verifying all the documents on record by the AO - AT
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Unexplained investment - payments were made after registration of the sale deed - as the payments were made after the end of the relevant FY i.e. FY 2007-08, such payments, if at all, are to be treated as unexplained investment of assessee, they cannot be considered for addition in the impugned AY - AT
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TDS u/s 194LA - As there is no compulsory acquisition and the acquisition is by a mutual agreement as contended by the assessee corporation, therefore, to the extent of properties acquired u/s 146 of HMCA, 1955, TDS not required to be made u/s 194LA - AT
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Deduction u/s 80-P - what is provided under the statute cannot be denied by means of a circular and, thereby, deny the benefit to the assessees - as long as the assessees are cottage industries, they would be entitled to the benefit of Section 80-P - AT
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Penalty u/s 272A(2)(c) - Non-issuance of TDS certificate in time - assessee was under bonafide belief that once the tax has not been deposited to the Government account then no certificate under section 203 could have been issued and such a bonafide belief falls within the ambit of section 273B, which envisages that no penalty is leviable if the assessee has bonafide reasons. - AT
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Disallowance u/s 40A(3) - cash payment exceeding ₹ 20,000 - assessee had no bank account at Cuttack and seller was insisting for cash payments - genuineness of the purchases had not been doubted by the AO - disallowance of these expenses by applying to section 40A(3) would not be justified. - AT
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Rectification of mistake u/s 154 - period of limitation - the said order has not been passed to rectify any apparent mistake but was passed to give complete effect to the appellate order passed by the Commissioner of Income Tax (Appeals) - rectification u/s 154 is in order - AT
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TDS - reversal of provision made - later TDS deducted on actual basis - C AO was also not correct in levying interest up to the date of order while accepting that the amounts provided were reversed in later year and TDS was made on actual claims made in that year. - AT
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Disallowance made u/s. 14A - Once, the assessee has kept the shares as stock in trade, the rule 8D of the Rules will not apply - AT
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Nature of non refundable deposit received - the deposited amount still belonged to the members - The amounts deducted from the cane price towards the non-refundable deposits were not trading receipts of the assessee - AT
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Revision u/s 263 - erroneous and prejudicial to revenue order - assessee himself admitted of having earned pension income. That being so, how and under what circumstances, assessee filed his return of income showing ‘nil’ income and the AO also overlooked to consider pension income is not understood - revision uphold - AT
Customs
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100% EOU - Development Commissioner has penalized appellant for non-fulfilment of export obligation committed by him and also for reason that they have not achieved positive NFEP - appellant was not eligible to avail benefits of Notification No. 2/95-C.E - AT
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Special Additional Duty – Refund - invoices do not bear declaration regarding non-admissibility of Cenvat credit by buyers - appellant was neither registered dealer under Central Excise for passing on Cenvat credit nor goods was Cenvatable items - refund allowed - AT
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Retrospective Imposition of ADD – date of presentation of bill of entry is relevant date for purpose of determining applicable rate of duty - As applicant has already been assessed to zero anti-dumping duty, further demand of anti-dumping duty in terms of subsequent notification is not called for - AT
Corporate Law
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Recovery of debts - period of limitation – Petitioner failed to prosecute its civil and company law rights with due care and diligence - Petition accordingly would stand dismissed - HC
Service Tax
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Rate of tax - whether service tax was required to be paid @ 8% when services were rendered or @ 10.2% rate of service tax prevailing on the date of rendering of service will be the appropriate rate for payment of service tax except in the case of reverse charge mechanism - AT
Central Excise
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Demand of interest on reversal of cenvat credit - Reversal of CENVAT credit if goods are not returned from the Job worker within 180 days - before utilisation of credit if the entry has been reversed, it amounts to not taking credit. - AT
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Refund claim of unutilized credit towards export of goods - Sanction of partial claim and denial of input credit involved relates to physical stock of raw material - Rule 5 of CENVAT Credit Rules, 2002 - credit on the inputs lying in stock has not gone to the manufacture of the exported goods was rightly dened - AT
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Captive consumption - Revenue, contended that use of tin containers for packing of soya oils cannot be held consumption of goods in the manufacture of the specified goods - Contention of revenue rejected - exemption allowed - AT
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Rate of duty @1% subject to non-availment of cenvat credit - Notification no/ 1/2011 - appellants had not taken credit of duty paid on inputs or tax paid on services at all - but utilizing the credit as accumulated earlier - prima facie case is against the assessee - AT
VAT
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DVAT - Since the impugned notice of default assessment of tax and interest and the impugned notice of assessment of penalty dated 01.04.2015 have been issued beyond the statutory period, the same cannot be sustained and are accordingly quashed - HC
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Levy of penalty on the Appellant Assessee under Section 86(10) of the DVAT Act without issuing notice to the Assessee - order is unsustainable in law and is hereby set aside - HC
Case Laws:
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Income Tax
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2015 (10) TMI 88
Bogus purchases - ITAT deleted the addition - Held that:- ITAT has noted that there was one vital fact overlooked by the AO as well as the CIT (A) which was that “the above said entry has really no effect on the profits of the company as the assessee had not made any sales during the year and all the purchases including that of purchase of flat made during the year has been taken into closing stock which is apparent from the paper book page 7 and 43. When there is no effect on the profitability of the assessee, the confirmation of the addition by Ld. CIT(A) is not justified as there is no loss to the revenue as the effect of including the same amount in the purchases as well as in the closing stock nullifies each other's effect." Having heard the submissions of Mr. Sahni, learned Senior Standing counsel appearing for the Revenue, the Court is not satisfied that the ITAT has committed any legal error in coming to the aforementioned conclusion. - Decided against revenue.
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2015 (10) TMI 87
Addition being interest paid, brokerage paid and loans taken from certain others - ITAT deleted the addition - Held that:- We find that both the CIT(A) as well as the Tribunal have reached the concurrent finding of fact that all amounts which have gone to reduce the cost of land to the extent of interest attributable to the payment made before the due date, the brokerage charges paid on behalf of vendor and non-return of loan of ₹ 10 lakhs by the vendor-M/ s Shakti to the respondent-assessee. All these were indications of the fact that the above amounts are those for which credit has been given by vendor-M/ s Shakti to the respondent-assessee. Moreover, two authorities under the Act have reached concurrent finding of fact and these findings not been shown to be perverse or arbitrary. The view taken by the Tribunal is a plausible view on the basis of documents and evidence led before it. Accordingly, Question No.1 does not give rise to any substantial question of law. Thus not entertained. Addition on amount paid to a certain 'VT' - ITAT deleted the addition - Held that:- Appeal admitted on substantial question of law at Question No.2.
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2015 (10) TMI 86
Fringe Benefits - whether benefit cannot arise when the expenditure is incurred on non-employees ? - Whether ITAT was justified in law in holding that expenses which are specifically mentioned in section 115 WB (2) can be reduced from the valuation of fringe benefit if they have not been incurred for employees without appreciating that the CBDT Circular No.8 of 2005 categorically states that sub section(2) is an extension of sub-section (1) of section 115 JB of the Income Tax Act? - Held that:- We find that the impugned order of the Tribunal has followed its decision in respect of the same respondent-assessee for A.Y.2006-07 and 2007-08 in respect of Fringe benefit Tax Returns. We have today by a separate order dismissed the revenue's appeal to the order of the Tribunal We have today by a separate order dismissed the revenue's appeal to the order of the Tribunal. Thus, for the reasons recorded in our order passed today we see no reason to entertain the proposed questions of law.
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2015 (10) TMI 85
Exemption in respect of both the residential unit under section 54F - ITAT allowed the claim relying on the decision of the Special Bench of the ITAT in the case of Ms.Sushila M.Jhaveri (2007 (4) TMI 289 - ITAT BOMBAY-I) - Held that:- The fact that only one kitchen was functional in the house was itself an indication of the fact that both the flats are being used as one residential unit. The Special Bench of the Tribunal in the case of Ms.Sushila M.Jhaveri (supra) has held that where an assessee had purchased two independent flats and converted into one that by itself would not deprive the respondent-assessee the benefit of Section 54F of the Act. We find that the view taken by the impugned order on facts is a possible view and nothing has been shown to us to hold that view of the Tribunal is perverse or arbitrary. Thus, no substantial question of law arises for our consideration. - Decided against revenue.
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2015 (10) TMI 84
Delay condonation application - delay in filing of an appeal before CIT(A) - Held that:- On a consideration of the principles as laid down in Esha Bhattacharjee v. Managing Committee of Raghunathpur Nafar Academy and others [2015 (1) TMI 1053 - SUPREME COURT] in the instant case, the 1st respondent has not considered the application for condonation of delay filed by the appellant in accordance with the decisions laid down by the Supreme Court. Accordingly, quash Ext.P4 order and direct the 1st respondent, to restore the appeals, stay application and the delay condonation applications to file, and consider the applications filed for condonation of delay afresh within a period of two months from the date of receipt of a copy of this judgment, after hearing the petitioner. There will be a stay of recovery proceedings against the petitioner, for recovery of the amounts confirmed against him by the lower authority, till such time as orders are passed by the 1st respondent, as directed in this judgment and communicated to the petitioner.
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2015 (10) TMI 83
Addition made under Section 41(1) - failure to produce any explanation/documentary evidence during the course of assessment proceedings and as well as before Ist appellate authority - ITAT deleted the addition - Held that:- It has been categorically recorded by the Tribunal that the assessee had submitted the copies of accounts and complete postal addresses of all the parties on record which had not been held to be false or fraudulent by the Assessing Officer and therefore, the assessment had to be made on that basis. The assessment has to be made on the basis of such copies of account when they are not proved false or fraudulent. Notwithstanding the fact, the rejection of books of account, the matter disclosed by the assessee, other material has to be collected by the AO which should have formed the basis of computation of income. In the present case, the assessee having submitted the copies of accounts and complete postal addresses of all the parties is a matter of record and the AO has not collected any adverse material. The assessee having proved the identity, capacity and creditworthiness of said persons and therefore cannot be subject matter of addition. Thus addition deleted - Decided in favour of assessee.
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2015 (10) TMI 82
Applicability of section 115WB - Fringe Benefit Tax - Held that:- Upon careful reading of the order passed by the Tribunal, we are of the opinion that the Tribunal allowed the assessee's appeal [2011 (11) TMI 497 - ITAT MUMBAI ] simply because the assessing officer had not examined the issue in its entirety. The assessing officer has not considered whether section 115WB and sub-sections (1) & (2) thereof applies or not to the case at hand. In the facts and circumstances and when the Tribunal admitted additional evidence, then, all the more an order of remand to the assessing officer cannot be faulted. The observation and conclusion of the Tribunal as recorded in para 10 are termed as command to the assessing officer by Mr. Suresh Kumar. He submits that it is a reasonable apprehension for the Revenue to approach this Court as the Tribunal's commands are binding and the A.O. must abide by the exposition of law and act as directed in para 10. Upon reading of the entire order, we do not think so and we disagree with Mr.Suresh Kumar as the issue is restored back to the file of the assessing officer for adjudication afresh and the assessing officer is directed to apply the law as laid down by the Tribunal. The assessing officer is required to examine the issue afresh and pass an order in accordance with law.
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2015 (10) TMI 81
Disallowance of commission paid to two Managing Directors u/s 36(1) (ii) - revision u/s 263 - Held that:- The Hon'ble High Court has given a direction in respect of examining the scope of Section 36 (i) (ii) of the Act after taking into account various documents. Secondly, the enclosures supplied by the assessee to the Assessing Officer were actually given to the Assessing Officer and there was no proof given by the DR that at no point of time, that the documents were not available with the Department. The third aspect that AO has not applied his mind does not come in the purview of Section 263 of the Act. The scope of Section 263 of the Act has to be taken into account that if the Assessing Officer while passing the Assessment order has erroneously done the same and which is prejudicial to the interest of the revenue then only the revision of orders u/s 263 of the Act be passed by the Commissioner of Income Tax. The provision under Section 263 of the Act does not give powers to the Commissioner to make enquiry again for the issue which has been decided after verifying all the documents on record by the Assessing Officer. In fact the scope of Section 263 of the Act is in respect of the order passed by the assessing officer which is erroneous in so far as it is prejudicial to the interest of the revenue. In the present case, the Assessing Officer has verified all the documents in fact he has taken into consideration and after verifying the same has rightly held that no disallowance is to be made under Section 36(1) (ii) of the Act. We, therefore, set aside the impugned order of the Ld. CIT and restore the assessment order passed by the A.O. - Decided in favour of assessee.
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2015 (10) TMI 80
Claim of deduction u/s 80IB(10) - AO rejected assessee’s claim as the housing project has not been completed on or before 31/03/08 and some of the residential units have exceeded the prescribed built up area of 1500 sq.ft. - CIT(A) deleted the addition - Held that:- As held in case of CIT Vs. Vandana Properties [2012 (4) TMI 54 - BOMBAY HIGH COURT ] since the term ‘housing project’ has not been defined under section 80IB(10), meaning as per common parlance has to be taken. The Hon’ble High Court observed that the expression ‘housing project’ in common parlance would mean constructing a building or group of buildings consisting of several units. Referring to explanation u/s 80IB(10), the hon’ble court observed, the language used in the explanation to the effect that approval granted to a building plan would suggest that housing project would mean a building consisting of several units. Thus, the Hon’ble Court ultimately held that construction of a building with several residential units having prescribed built up area would constitute a ‘housing project’ u/s 80IB(10). In view of the aforesaid, as approval by local authority for the four blocks, namely, Prime Rose, Lilly, Jasmine and Morning Glory was granted by local authority on 06/02/06, assessee, in our opinion, would be eligible to avail deduction u/s 80IB(10) since these four blocks were completed within the stipulated period of five years. As far as the second allegation of AO that few of the residential unit in the housing project exceeded the prescribed limit of 1550 sq.ft., it is to be noted that assessee before AO itself has stated that the total number of units which exceeded prescribed built up area limit of 1500 sq.ft. constitute 9% of the total housing project. It was further brought to the notice of AO, assessee itself has not claimed deduction u/s 80IB(10) in respect of those units. In our view, ld. CIT(A) was justified in allowing assessee’s claim of deduction u/s 80IB(10) in respect of the residential units comprising housing project, which adhered to conditions of section 80IB(10). Since the provision contained u/s 80IB(10) is a beneficial provision, a liberal approach has to be taken as a literal interpretation would lead to a situation where the very intention of bringing such provision would be defeated. The Hon’ble Madras High Court in case of CIT Vs. Arun Excello Foundation (P) Ltd. (2012 (12) TMI 415 - MADRAS HIGH COURT ) expressing similar view held, in a case where some of the units exceed the prescribed built up area of 1500 sft., assessee would not be entitled to have benefit 100% deduction u/s 80IB(10) of the Act for entire project, but would be entitled to prorate deduction on the units satisfying the conditions under clause (c). Thus CIT(A) was justified in allowing assessee’s claim of deduction u/s 80IB(10) - Decided against revenue.
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2015 (10) TMI 79
Unexplained investment - CIT(A) granted partial relief - the only reason for which ld. CIT(A) has sustained the addition of an amount, such payments were made after registration of the sale deed - Held that:- n this regard, assessee’s explanation that the registered sale deed was not for the entire extent of land as mentioned in the agreement of sale, hence, the amount was withheld and subsequently paid after the transfer of land, in our view, is believable. Moreover, it has been contended before us by ld. AR, when the payments were admittedly made after the end of relevant FY, they cannot be considered as unexplained investment of assessee for the impugned AY. We f ind merit in the aforesaid submissions of ld. AR. As can be seen from the details, as extracted in para 5.3 of ld. CIT(A)’s order, the amount o was paid to Shri Syed Asif between 31/05/08 to 12/01/09. Therefore, as the payments were made after the end of the relevant FY i.e. FY 2007-08, such payments, if at all, are to be treated as unexplained investment of assessee, they cannot be considered for addition in the impugned AY. Accordingly, we delete the addition sustained by ld. CIT(A). - Decided in favour of assessee.
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2015 (10) TMI 78
Disallowance of deduction on account of cost of acquisition and cost of improvement while computing long term capital gain (LTCG) - exemption u/s 54EC - assessee is a non-resident individual - Held that:- As can be seen from the terms of the deed of settlement, the property given by father of assessee to her was out of natural love and affection and without any monetary consideration. That being the case, it cannot be said that it is not a gift so as to come within the purview of section 49 of the Act. Though, the property might have been given to assessee under a document termed as deed of settlement, but, the recitals in the deed to the effect that property was given out of natural love and affection and without monetary consideration suggest that it is in the nature of gift by father to a daughter. That being the case, the cost of acquisition to the previous owner i.e. father shall be deemed to be the cost of acquisition to assessee in terms of section 49 of the Act. Even otherwise also, if we accept the contention of ld. DR that the property came to assessee by way of settlement since another of property belonging to assessee was sold by her father, then, also it cannot be said that devolution of property in favour of assessee is without any monetary consideration. As could be seen from the facts on record and as well as the recitals in the deed of settlement, part of the subject property was given to the daughter as the property inherited by daughter from her grand father by virtue of a will was sold by her father without her knowledge. Thus, it is to be assumed that settlement of property in favour of assessee by her father was in exchange of property belonging to assessee at Delhi sold by her father without her knowledge. That being the case, it cannot be said that the transfer of property by assessee’s father to his daughter was without any monetary consideration. As can be seen from the mode of computation of capital gain provided u/s 48 of the Act, income chargeable under the head ‘capital gain’ shall be computed after deducting therefrom expenditure incurred wholly and exclusively in connection with such transfer of the asset and secondly, the cost of acquisition of the asset and cost of any improvement thereto. Therefore, unless there is cost of acquisition, computation provision as per section 48 will fail. In this context reliance can be placed on CIT Vs. B.C. Srinivasa Setty (1981 (2) TMI 1 - SUPREME Court ). Though, section 45(5) provides for considering cost of acquisition and cost of improvement at ‘nil’, under certain specified circumstances, those, conditions are absent in the present case. Therefore, considered in the aforesaid perspective, disallowance of cost of acquisition by AO, in our view, is not permissible in law. Accordingly, we allow assessee’s claim of cost of acquisition As far as cost of improvement is concerned, it is evident from the deed of settlement that scheduled property received by assessee from her father is built up area of 2000 sft. comprising of ground floor and 1st floor over a land of 300 sq.yds., whereas, as per the schedule of property, which forms part of the sale deed executed by assessee, property sold is 3000 sft. of built up area consisting of ground floor and 1st floor over 300 sq.yds. land. Thus, the aforesaid facts, to certain extent indicates that assessee’s claim that she has constructed some extra space both in the ground floor and 1st floor appears to be believable. However, since both these aspects have not been examined by AO or ld. CIT(A), and it is not forthcoming whether documentary evidences produced before us were specifically brought to the notice of the departmental authorities, we are inclined to remit the issue relating to claim of cost of construction to AO for deciding afresh after verifying documentary evidence submitted by assessee and only after due opportunity of being heard to assessee. - Decided in favour of assessee for statistical purposes.
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2015 (10) TMI 77
Un-recorded sales - difference in sales as declared by the assessee to the sales tax authority and as shown in the P & L Account - Held that:- As regards the explanation of the assessee that the difference is also on account of APGST and CST amounting to ₹ 5,03,441 and ₹ 1,70,070 respectively, it is noted from the final assessment order passed by the concerned sales tax authority that these taxes are separately levied on the gross turnover of ₹ 1,66,66,050 determined by them after excluding the exempted turnover of ₹ 59,99,210. The said turnover determined by the sales tax authorities thus is not of sales tax and it cannot be said that there is a difference between such sales and the sales as credited by the assessee to the P & L account which again is net of sales tax, on account of the amount of sales tax. The explanation offered by the assessee while reconciling the difference in sales to this extent thus is not acceptable. As such considering all the facts of the case and the material placed on record before us, we hold that the difference in sales to the extent of ₹ 5,91,140 being purchase of fire wood and ₹ 68,915 being sale of packaging material stands explained and the addition made by the A.O. and confirmed by the Ld. CIT(A) on this issue is required to be deleted to that extent. We therefore, modify the impugned order of the Ld. CIT(A) and allow the appeal of the assessee partly. - Decided partly in favour of assessee
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2015 (10) TMI 76
Entitlement for depreciation on the Railway siding and channel dredging - @ 15% being items of plant and machinery or at the rate of 10% being items of building - Held that:- As regards t claim of the assessee for depreciation at 15% on the Railway siding treating the same as plant, it is observed that this issue is squarely covered in favour of the assessee by the decision of the coordinate bench of this Tribunal in assessee’s own case for assessment year 2006-07 wherein a similar claim of the assessee was allowed by the Tribunal relying inter alia on the decision of the Hon'ble Kolkata High Court in the case of CIT V/s. Birla Jute and Industries Ltd. (2003 (1) TMI 81 - CALCUTTA High Court) and in the case of Kandla Port Trust (2006 (4) TMI 243 - ITAT RAJKOT). Respectfully following the said decision of coordinate bench of the Tribunal for assessment year 2006-07, we uphold the impugned order of the learned CIT(A) allowing the claim of the assessee for depreciation at 15% on Railway siding, treating the same as plant. As regards the issue relating to the claim of the assessee for depreciation at 15% on channel dredging being plant, it is observed that a similar claim was made by the assessee in the case of Kandla Port Trust (supra) on wharfs, dry docks, drains, jetties, railways, rolling stock, etc., treating the same as plant and machinery and the same was allowed by the Tribunal - Decided in favour of assessee
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2015 (10) TMI 75
Non deduction of tax at source u/s 194LA - assessee paying compensation to the property owners on account of road widening - assessee corporation strongly contended that the acquisition proceedings made as per section 146 of Hyderabad Municipal Corporation Act, 1955 - CIT(A) delted the disallowance - Held that:- After considering the provisions of section 146, 147 of GHMC Act and also section 194LA of I.T. Act, 1961, it is clear that sec.146 of HMCA, 1955 is an independent provision for acquiring immovable property by the assessee corporation through an agreement without taking recourse to the provisions of the Land Acquisition Act, 1894 and only in the event of failure to invoke the provision of sec.146 of the HMCA in any particular case, the question of compulsory acquisition of land under the Land Acquisition Act, 1894 arises. Admittedly, there is no dispute that the assessee corporation has acquired the land under section 146 of GHMC Act, 1955. So far as section 194LA of I.T. Act, 1961 is concerned, the language used in section and provision is “Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property.” Therefore, one of the ingredients is compensation on account of compulsory acquisition if fulfilled will impose the liability of deduction of TDS under this provision. As there is no compulsory acquisition and the acquisition is by a mutual agreement as contended by the assessee corporation, therefore, to the extent of properties acquired under section 146, we are of the opinion that provisions of section 194LA of the I.T. Act, 1961 do not apply for the present case on hand. After considering the facts and circumstances of the present case, we are of the firm view that there is no infirmity in the order of the Ld. CIT(A) and accordingly we confirm the same. - Decided in favour of assessee.
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2015 (10) TMI 74
Denial of benefit available to them under Section 80-P - Held that:- Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be, given effect to and not the view expressed in a decision of this Court or the High Court. This Court is of the considered view hat what is provided under the statute cannot be denied by means of a circular and, thereby, deny the benefit to the assessees. The further objection of the department that the size of the cottage industries of the assessees with number of workers would go to show that the assessees are not co-operative societies cannot at all be sustained. The mere reason that the size of the industry is big and there are large number of workers employed, is no reason to deny the assessees the benefit available to them under Section 80-P of the Act, when there is no specific embargo imposed under the Act. Accordingly, this Court holds that as long as the assessees are cottage industries, they would be entitled to the benefit of Section 80-P of the Act. No further fetters, as is done by the Department, can be imposed on such a claim, by means of circulars, to the detriment of the assessees. - Decided in favour of assessee.
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2015 (10) TMI 73
Disallowance of depreciation - whether the business of the assessee was set up as on 31st March, 2005? - Held that:- In the case on hand the Revenue is not disputing the fact that the assessee has sold goods worth ₹ 698.70 on 28.3.2005. The assessee has filed both excise records as well as sales tax records, as evidence of sale. This evidence is not controverted by the Ld.D.R. except for some that these are self-serving documents. In our view the assessee has effectively replied to the issues raised by Ld.AO. Records were produced to demonstrate payments made to the contractors for construction of the building. It was also demonstrated that the assessee had two large generators of 500 KVA and that these generators were run for substantive number of hours and that there was substantial consumption of fuel. There is no denying of the fact that the trial run production was carried out by the assessee. There was a pilot lot of goods produced by the assessee and there was also a sale of goods produced by the assessee. Except for finding fault with the evidences produced by the assessee, there is no material with Revenue to controvert the stand of the assessee. Thus in our considered view, once we have come to a conclusion that the assessee's business was set up prior to 31st March, 2005 and that the plant and machinery were ready to use and that the trial run has been carried out, we have to accept the contention of the assessee that the disallowance of depreciation and business loss by the AO, as confirmed by the First Appellate Authority is erroneous. - Decided in favour of assessee.
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2015 (10) TMI 72
Penalty u/s 271(1)(c) - advance tax written off debited to the P&L - assessee did not dispute the addition of the said amount as it was not disallowed by the assessee itself in the computation of income due to oversight and bonafide mistake - CIT(A) has upheld the levy of penalty on the ground that the assessee has made a false claim in the return of income and it was not a bonafide mistake but the assessee has concealed its income - Held that:- Hon'ble Supreme Court in the case of Price Waterhosue Coopers Pvt. Ltd. (2012 (9) TMI 775 - SUPREME COURT) while dealing with an identical situation and in the case of CIT Vs. Beneettee Coleman [2013 (3) TMI 373 - BOMBAY HIGH COURT] to held that the bona fide inadvertent mistake is accepted as reasonable and bona fide explanation for the purpose of section 271(1)(c) and in terms of explanation 1(B) to section 271(1). In view of the above discussion as well as fact and circumstances of the case, we are of the view that the case of the assessee falls under the bonafide and inadvertent mistake and, therefore, the explanation of the assessee is a bona fide explanation in terms of Explanation 1(B) of section 271(1). Accordingly, the penalty levied u/s 271(1)(c) is not sustainable, hence deleted. - Decided in favour of assessee.
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2015 (10) TMI 71
Penalty u/s 272A(2)(c) - failure to furnish return of income under section 206 within due date - CIT(A) deleted the penalty - Held that:- Penalty under section 272A(2)(c), has been levied on account of failure to furnish return of income under section 206 within due date. As culled out from the impugned orders, the assessee has not deposited the TDS amount in the Government account on the ground that it had no funds due to heavy losses. Due to non–deposit of TDS in the Government account, the assessee has already been subjected to heavy interest under section 201(1A) and further penalty under section 271C. The order under section 201(1) and 201(1A) has already been confirmed by the Tribunal. Once, already a penalty under section 271C has been levied for non–payment of TDS amount to the Government account, then the assessee had a bonafide reason that the return of income under section 206, giving particulars of TDS deposited and cheque number was not required to be filed, because the requisite details and particulars were not there with the assessee. Under these circumstances, Thus we agree with the findings and the conclusion of the Commissioner (Appeals) that there was a reasonable cause within the meaning of 273B for not imposing penalty. Penalty deleted by the learned Commissioner (Appeals) is upheld. - Decided against revenue. Penalty under section 272A(2)(g) - assessee’s main contention was that the TDS certificate could not have been issued to the tax deductee, since the tax deducted at source could not be paid to the Government account and, therefore, the assessee could not have filed the particulars which is required to be mentioned in the certificate - Held that:- aAssessee company was not supposed to issue incomplete certificate because no credit could have been received by the deductee. A false certificate could not have been issued. The other explanations were exactly the same as given in relation to the penalty proceedings under section 272A(2)(c). The learned Commissioner (Appeals) has correctly deleted the said penalty on the similar reason holding that the assessee was under bonafide belief that once the tax has not been deposited to the Government account then no certificate under section 203 could have been issued and such a bonafide belief falls within the ambit of section 273B, which envisages that no penalty is leviable if the assessee has bonafide reasons. - Decided against revenue.
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2015 (10) TMI 70
Disallowance under section 40A(3) - payments made against purchase of traded goods exceeding ₹ 20,000 - Held that:- Assessee's claim is not covered by any of the exceptions provided under rule 6DD. However, the first proviso below section 40A(3) clearly takes into consideration the nature of expenses, banking facilities, consideration of business expediency and other relevant factors. Rule 6DD in intent and purpose takes into consideration all these aspects for prescribing various exceptional circumstances. Therefore, rule 6DD cannot be mechanically applied and we have to consider the overall explanation of the assessee having regard to the business consideration (the assessee's explanation is that the assessee had no bank account at Cuttack and seller was insisting for cash payments. The payments had been made to the seller because of that reason. The genuineness of the purchases had not been doubted by the Assessing Officer. Under such circumstances, we are of the opinion that the disallowance of these expenses by applying to section 40A(3) would not be justified. - Decided in favour of assessee. Charge of interest on interest-free loan to another business concern - Held that:- If the assessee is able to substantiate its claim, that the advance was given out of its own funds, then no addition is called for. It is well-settled law that if the assessee has advanced interest-free loan out of its own funds, then no disallowance can be made under section 36(1)(iii) of the Act. We find this aspect has not been examined by the lower revenue authorities and, therefore, we restore the matter to the file of the Assessing Officer to decide the issue de novo in the light of our observations. - Decided in favour of assessee for statistical purposes.
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2015 (10) TMI 69
Disallowance u/s 40(a)(ia) - payment of interest and brokerage without deduction of TDS - CIT(A) deleted the addition - Held that:- The decision of Hon'ble ITAT Special Bench, Vishakhapatnam, in the case of Merilyn Shipping and Transport (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ) will hold good in this issue also, since, the amounts of brokerage have already been paid by the appellant during the year under consideration. Therefore, these amounts would not be hit by the regors of the provisions of Section 40(a)(ia) - as find that there are contrary judgements of Allahabad High Court as compared to Calcutta and Gujarat High Courts. However, appeal filed by the Department with Hon'ble Supreme Court against the order of Hon'ble Allahabad High Court has been dismissed by Hon'ble Supreme Court in limine. Moreover, as per the Hon'ble Supreme Court order in the cases of Vegetable Products [1973 (1) TMI 1 - SUPREME Court] as relied upon by Ld. A. R. in the case of conflicting judgements that judgment is to be applied to an assessee which is beneficial to it. Therefore, we do not see any infirmity in the order of Ld. CIT(A) in this context - Decided in favour of assessee. Addition of rebate and discount - CIT(A) deleted the addition - Held that:- The total amount of goods sold to M/s. B.L. Goyal & Co. during the year under consideration was to the tune of ₹ 3,08,39,874/-, on which the amount of rate difference was only ₹ 1,04,757/-, i.e. only 0.34%. This claim also was duly supported with the details submitted during the course of proceedings along with the copy of account of M/s. B.L. Goyal & Co., showing the deductions, and hence, the appellant claimed that this disallowance was totally uncalled for. Rate difference of 0.34% in a transaction of more than ₹ 3 crores is nothing unusual and therefore, the addition is hereby deleted. - Decided in favour of assessee.
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2015 (10) TMI 68
Disallowance u/s 40 (a)(ia) - short deduction of TDS - CIT(A) deleted the disallowance - Held that:- Section 40(a)(ia) does not envisage a situation where there was short deduction / lesser deduction as in case of section 201(1A) of the Act. There is an obvious omission to include short deduction / lesser deduction in section 40(a)(ia) of the Act. Therefore, this Tribunal is of the considered opinion that in case of short / lesser deduction of tax, the entire expenditure whose genuineness was not doubted by the assessing officer, cannot be disallowed. Accordingly, the entire disallowance is deleted. See case of S.K. Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT] - Decided in favour of assessee.
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2015 (10) TMI 67
Rectification of mistake - period of limitation - computation of MAT credit - whether the order u/s 154 passed by Assessing Officer is beyond the period allowed as per the provisions of Section 154(7) and therefore is beyond the time limit allowed by law and hence void - Held that:- In the instant case, the assessee company claimed credit for MAT in the Assessment Year 1998-99 in its return of income which was filed on 24.11.1998 and the income was assessed u/s. 143(1) on 31.03.2000. The MAT credit which was claimed at ₹ 21.31 lakhs related to the Assessment Year 1997-98. In the Assessment Year 1997-98, the Assessing Officer had given effect to the order passed by the Commissioner of Income Tax(Appeals) vide order dated 08.10.2003 and therein computed the assessee’s book profit u/s. 115JA at a loss. Thus, the assessee was not required to pay any MAT for Assessment Year 1997-08. Consequentially, the Assessing Officer vide order dated 07.05.2008 passed for the Assessment Year 1998-99 withdrew the MAT credit which was allowed earlier to the assessee. The order dated 07.05.2008 was passed by the Assessing Officer in consequence or to give full effect to the order of the Commissioner of Income Tax(Appeals) which was passed for the Assessment Year 1997-98 in the case of assessee itself. As per the order of the Commissioner of Income Tax(Appeals) passed for the Assessment Year 1997-98, the assessee was not liable to pay any amount of MAT. Therefore, the MAT paid earlier by the assessee for the Assessment Year 1997-98 was refunded to the assessee. Consequential to this, the MAT credit which was allowed to the assessee in the assessment for Assessment Year 1998-99 required to be withdrawn which the Assessing Officer withdrew vide order dated 07.05.2008. Though the Assessing Officer has mentioned the impugned order dated 07.05.2008 as passed u/s. 154 to rectify an apparent mistake but in fact it has been observed that the said order has not been passed to rectify any apparent mistake but was passed to give complete effect to the appellate order passed by the Commissioner of Income Tax (Appeals) for the Assessment Year 1997-98. - Decided against assessee.
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2015 (10) TMI 66
TDS deduction for interest, professional fees and provision on Transport contractors - reversal of provision made - later TDS deducted on actual basis - CIT(A) held that the TDS was not deductable in the same year in which Assessee actually incurred the expenditure and relevant entries made in the books - Held that:- There is no dispute with reference to the fact that assessee has only made the provisions without identifying the parties as a liability in the year and actual amounts were credited in a later year on which TDS was made. It is also a fact that in the computation of income, assessee has added back the entire provision and has not claimed any deduction. We fully agree with the findings of the Ld. CIT(A) on the issue that there is no scope for deducting tax, as the amounts are not covered by the provisions of section 194C to 194J. Not only that A.O. has only raised the interest under section 201(1A) and has not raised the basic demand under section 201(1). This aspect was also considered by the Ld. CIT(A) that assessee was not held as ‘assessee in default’ and therefore, on this reason also interest cannot be levied as the amount to be deducted has not even quantified under section 201. AO was also not correct in levying interest up to the date of order while accepting that the amounts provided were reversed in later year and TDS was made on actual claims made in that year. See PFIZER LTD. Versus INCOME TAX OFFICER (TDS), (OSD) RANGE-2, MUMBAI [2012 (11) TMI 164 - ITAT MUMBAI ] - Decided in favour of assessee.
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2015 (10) TMI 65
Disallowance made u/s. 14A - CIT(A) deleted the disallowance - Held that:- This issue is now covered by the decision of Hon'ble jurisdictional High Court in the case of CIT Vs. R.E.I. Agro Ltd. [2013 (12) TMI 1517 - CALCUTTA HIGH COURT] wherein the order of Tribunal in DCIT Vs. R.E.I. Agro Ltd.[2013 (5) TMI 582 - ITAT KOLKATA] was confirmed to held that AO has not examined the accounts of the assessee and there is no satisfaction recorded by the AO about the correctness of the claim of the assessee and without the same he invoked Rule 8D of the Rules. AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at 1/2% of the total value. Respectfully following the decision in the case of J. K. Investors (Bombay) Ltd. [2013 (5) TMI 580 - ITAT MUMBAI] ground of appeal of revenue is dismissed. Even otherwise, on merits also the assessee had made disallowance itself and filed computation of disallowance as per rule 8D of the Rules. The AO could not find any fault in the computation of disallowance made by assessee and secondly, the assessee does not have any investment and all the shares are held as stock in trade, as is evident from the orders of the lower authorities. Once, the assessee has kept the shares as stock in trade, the rule 8D of the Rules will not apply. Hence, the assessee's case is covered by jurisdictional High Court by the case law of R.E.I. Agro Ltd., supra and also on merits. - Decided in favour of assessee.
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2015 (10) TMI 64
Disallowance on account of non refundable deposit received - whether the amount of deduction is liable to be taxed as income of the assessee as per provision of section 41? - Held that:- As decided in CIT vs. Ramala Sahkari Chini Mills Ltd. [2005 (3) TMI 82 - ALLAHABAD High Court] the word “may” in the bye-laws had to be construed as “shall” and the board was bound to allot shares to the members in relation to the deposits, after full repayment to the Government and the financial institutions. The existence of the other features such as transferability of the deposit to another member and the provision for refund of the deposited amount to the member in case of cessation of membership or to his legal heirs in case of death indicated that the deposited amount could not be treated as money belonging to the assessee-society. The payment of interest at a specified rate from year to year was consistent only with the fact that the deposited amount still belonged to the members. And the fact that the deposited amounts were credited to the individual accounts of the members corroborated the circumstance that the deposits belonged to the members. The amounts deducted from the cane price towards the non-refundable deposits were not trading receipts of the assessee. Thus in the present case non-refundable deposit received by the assessee is not revenue receipts, therefore, not exigible to tax. Accordingly, the addition confirmed by the ld. CIT(A) is deleted - Decided in favour of the assessee.
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2015 (10) TMI 63
Penalty u/s 271(1)(c) - addition on provisions for bad and doubtful debts - Held that:- This is not denied that the particulars of provisions of doubtful debts have duly been shown by the assessee and debited in the audited profit and loss account. It is also not denied that the assessee has submitted the explanation in reply to show cause notice issued by the Assessing Officer. Even though the Assessing Officer, in our opinion, failed to discharge his onus as he was not sure at the initiation of penalty u/s 271(1)(c) for which specific charge penalty has been initiated by the Assessing Officer. Even while levying the penalty also, the Assessing Officer simply relied on the explanation to Section 271(1)(c) even though he levied the penalty for furnishing the inaccurate particulars of income. This is apparent from the provisions of Section 271(1)(c) that explanation of Section 271(1)(c) is not applicable in case inaccurate particulars are furnished. Therefore, in our opinion, the basis of levy of penalty itself is not correct. As decided in CIT vs. New Sorathia Engineering Co. vs. CIT, [2006 (1) TMI 71 - GUJARAT HIGH COURT] it is incumbent upon the Assessing Officer to state whether penalty was being levied for concealment of particulars of income by the assessee or whether any inaccurate particulars of income had been furnished by the assessee. - Penalty levied quashed - Decided in favour of assessee.
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2015 (10) TMI 62
Revision u/s 263 - AO failed to examine and consider the quantum of agricultural income and pension income earned by assessee - CIT(A) revising the assessment completed u/s 143(3) read with section 147 - Held that:- As it is clear that assessee himself has admitted that he has earned income from agriculture as well as pension. However, neither in the course of assessment proceeding or while completing the assessment AO has paid any attention to nondisclosure of income from agriculture and pension. He simply completed the assessment by only bringing to tax accrued interest on bank deposit thereby completely overlooking the issue of pension earned and agricultural income. This reveals not only non-application of mind on the part of AO, but, also total lack of enquiry. The contention of the learned AR that when assessee is declaring ‘nil’ income there is no necessity to show agricultural income is devoid of merit. It may be true that when the Assessee earned income only from agriculture it may not be taxable. However, in the present case, AO has determined taxable income at ₹ 19,94,589. Therefore, if there is any agricultural income, the same is required to be considered for rate purpose. AO having failed to examine and consider the quantum of agricultural income earned by assessee, assessment order is certainly erroneous and prejudicial to the interests of revenue. Further, as can be seen from the reply dated 04/08/10, assessee himself admitted of having earned pension income. That being so, how and under what circumstances, assessee filed his return of income showing ‘nil’ income and the AO also overlooked to consider pension income is not understood. Therefore, failure on the part of AO to examine the issue relating to earning of agricultural income and pension income has rendered the assessment order erroneous and prejudicial to the interests of revenue. In these circumstances, CIT, in our view, was justified in setting aside the assessment order by exercising his revisional powers u/s 263 of the Act. - Decided against assessee.
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Customs
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2015 (10) TMI 98
Rectification of mistake - Held that:- Main contention of the Revenue in the ROM Application is that the Tribunal proceeded on the basis that the Ullage Report, which was filed in the application of the additional evidence by the Revenue, was always available on record and was not made part of the relied upon documents in the Show Cause Notice. On perusal of the Final order, we find that the Tribunal categorically recorded the submission of the Revenue that these documents now been sought to be relied were not brought to the notice of the customs and that the importer had cleverly manipulated the documents and avoided verification of the same by the Customs at the time of investigation. The finding of the Tribunal in this context is that the documents required are always collected by the premier investigating agency and if they did not get these documents, then there is an improper investigation and the Tribunal rejected the contentions of the Revenue. - we do not find any mistake apparent on the face of the records in Final Order - Appeal disposed of.
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2015 (10) TMI 97
Denial of renewal of Customs Broker License - Held that:- When the appellant made application on 22.5.2014 before Customs for requesting for renewal the same was kept pending. We find that when the appellant filed writ petition and the Hon'ble High Court in their order directed the respondent i.e. Commissioner of Customs to consider their application on merits within four weeks. It is pertinent to see that it is only after the Hon'ble High Court direction in the above order the authority has considered the application and denied the renewal. It is needless to say that when a Lower Authority was directed by the High Court to decide the application, the Commissioner of Customs being respondent in the said High Court order should have signed and issued the said order in this case whereas we find there is not even any mention of the High Court order in the said letter signed by the Deputy Commissioner of Customs and issued in a routine manner communicating the Commissioner's decision of denial of renewal of licence. Valid reason or any new grounds made out for denial for renewal of licence. Instead the same findings and allegations are made in para 3 to 5 of the OIO dt. 30.4.04 of revocation of licence were reproduced in the said order and based on this came to conclusion that CHA appellant's antecedents are not satisfactory. Once the order is stayed absolutely by Hon'ble High Court and court is yet to decide the writ petition, it cannot be termed as "adverse antecedents" unless and until the writ petition is disposed by the Hon'ble High Court. In view of the above facts and also considering the LAA had renewed the licence 14 times since 2006, we are of the considered view that CHA licence merits renewal - Decided in favour of appellant.
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2015 (10) TMI 96
Non-bona-fide unaccompanied baggage – Benefit of Notification No.171/93-Cus – Lower authorities, after investigation and issuance of show-cause notice, had alleged that appellant had imported non-bona fide unaccompanied baggage intended for commercial purposes and cleared said goods in guise of bona fide gifts availing benefit of Notification No.171/93-Cus. – Held that:- Tribunal in identical investigation held that, according to Regulation 13(a) of CIECR, appellants are required to keep authorizations for period of one year so that Customs authorities can inspect authorizations and satisfy themselves about bona fide of receivers – However, demands have been confirmed for period of more than one year and there is no indication as to whether appellants had fulfilled requirements of Regulation or not – If authorizations are available, at least some sample verifications have to be done to ensure that such consignees were non-existent, bogus or not genuine – Matter is required to be re-examined under these circumstances and adjudicated afresh – Accordingly, impugned orders are set aside and matters are remanded for de novo adjudication – Appeal disposed of.
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2015 (10) TMI 95
100% EOU - Benefit of Notification no. 2/95-C.E - Fulfillment of Export Obligation - Whether benefit of Notification No. 2/95-C.E. was available to appellant or not on advance DTA sales – Held that:-there was no dispute that appellant has registered himself as 100% EOU – Permission granted to appellant by various authorities indicates that appellant has committed to authorities that he would adhere to fulfilment of export obligation, in lieu of various concessions granted to him – During year 1996-97 to 1998-99, appellant being 100% EOU did not effect any exports – Development Commissioner held that appellant has not exported single kilo of finished products, which was contrary to permissions granted to him as 100% EOU – It was also noticed that Development Commissioner has penalized appellant for non-fulfilment of export obligation committed by him and also for reason that they have not achieved positive NFEP –On face of such factual matrix, exception has been further extended by DGFT authorities by permitting appellant to clear to DTA in advance for adjustment against exports to be undertaken in future – Therefore, appellant was not eligible to avail benefits of Notification No. 2/95-C.E. – In view of majority decision – Appeal rejected – Decided against Assesse.
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2015 (10) TMI 94
Special Additional Duty – Refund - Appellant filed refund claim under Notification 102/2007-Cus., for 4% SAD of Customs Duty – Refund was rejected by original authority on ground that original sale invoices were not submitted and invoices so issued do not bear declaration regarding non-admissibility of Cenvat credit by buyers – Held that from clarification of Board it was clear that appellant has complied with Condition No. 2(e) (ii) of Notification 102/2007-Cus, therefore, appellant cannot be insisted upon to submit original invoices – Refund claim should not have been rejected on this ground –As importer was selling goods to individual customer and from various cities and showrooms, it was obvious that entire invoices were practically not possible to be produced – Fact, that appellant was neither registered dealer under Central Excise for passing on Cenvat credit nor goods was Cenvatable items – Thus established by facts that Cenvat credit was neither passed on nor availed by buyer – Condition of endorsement stand fulfilled – Therefore, there was no violation of any condition of Notification 102/2007 – Impugned order set aside – Decided in favour of Assesse.
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2015 (10) TMI 93
Retrospective Imposition of ADD – 3 bills of entries were filed on which provisional Anti-Dumping duty in terms of Notification No. 106/2006-Cus., was levied – As landed value of goods was higher, anti-dumping duty was assessed as zero in each case – Later Notification No. 88/2003 was issued in respect of Anti-Dumping Duty revising reference price from earlier reference price specified in provisional Notification No. 106/2006 – As value of imported goods by appellant was less than reference price, Revenue recalled bills of entries, assessed same imposing anti-dumping duties – Held that:- while dealing with amendments in Customs Tariff Act, 1975 it stands observed that provisions of Section 9A of Customs Tariff Act, 1975 was amended to extend retrospectively machinery provisions of Customs Act, 1962 to anti-dumping duties levied under this section – In view of foregoing, date of presentation of bill of entry is relevant date for purpose of determining applicable rate of duty – Admittedly bills of entry were presented prior to 24-7-2007, when final anti-dumping notification was issued – As applicant has already been assessed to zero anti-dumping duty, court of view that further demand of anti-dumping duty in terms of subsequent notification is not called for – Accordingly, impugned order set aside – Decide in favour of Assesse.
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Corporate Laws
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2015 (10) TMI 92
Challenging of order under Section 14 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Petitioner contends that they were not given any opportunity of being heard before passing of the said order – Petitioner further holds that the amount due towards the Respondent was not verified and permission for possession of assets of the Petitioner was not justified – Held That:- There was no dispute regarding the amount due as the same has not been paid and neither the notice issued earlier under Section 13(2) was challenged - Section 14 does not contemplate any notice to be given by the District Magistrate nor does it contemplate any opportunity of being heard - Possession of the assets of the Petitioners was compliance of Section 14 – Petition being devoid of merits was dismissed - Decided in favour of the Respondent.
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2015 (10) TMI 91
Sanction of Scheme of Arrangement - In the nature of arrangement or Slump Sale - Requires sanction under Section 391 to 394 or falling within the purview of Section 293 and Section 180 and requires no sanction – Appointed date be shifted to 1St April, 2014 from April 1, 2013 or the date of sanction of scheme – Held That:- even in a case of a slump sale, the provisions of sections 391 to 394 stand attracted requiring the approval of the company court. - the same would stand attracted by sections 391 to 394 of the Act requiring the approval of the court. The Circular narrates that the objections raised by the Regional Director for filing of the accounts for the subsequent year being mandatory in terms of section 211 does not imply that the appointed date requires to be shifted to the date on which the scheme is approved. Under these circumstances, in view of the clarification by the Department of Company Affairs, the said objection cannot be sustained. The transferor company has already filed a petition before the High Court of Madras wherein by the order dated July 31, 2014, in Company Petition No. 2 of 2014, the scheme was sanctioned. It cannot be said that the affairs of the petitioner's-company were conducted in a manner that is prejudicial to the interest of the public. The Competition Commission of India has approved the scheme. The scheme proposes the hive off the transferred undertaking of the petitioner-company into Enrica, the transferee company, by way of a slump sale on a going concern basis. The same would be in the interest of the creditors of the petitioner-company and its shareholders. The scheme requires to be sanctioned. Hence, the petition is allowed. - Decided in favour of the Petitioner.
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2015 (10) TMI 90
Recovery of debts - period of limitation – Petitioner contends that it registered its claim against the Respondent with the BIFR alongwith the other creditors, secured and unsecured – Petitioner further sends a legal notice calling upon the Respondent to pay the Debt – Respondent objects that the claim is grossly time barred and the Petitioner has not been diligently pursuing its remedy to recover the amount - No communication or demand for return of the amount after the application was filed with the BIFR has been made by the Petitioner – Held That:- Petition is found barred by thirteen years of somnolence - Petition is barred by limitation by more than five years - Petitioner failed to prosecute its civil and company law rights with due care and diligence - Petition accordingly would stand dismissed – Decided in favour of the Respondent.
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Service Tax
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2015 (10) TMI 118
GTA service - condition regarding declaration to be made by the transport agency regarding non availment of cenvat credit - Abatement under Notification no.32/2004-ST dated 3.12.2004 - Held that:- Credit on inputs and capital goods is not taken by transport agency nor the benefit of Notification No.12/2003-ST availed by it. The notification nowhere prescribes that declaration to that effect has to be made on the consignment notes for the purpose of claiming the benefit of Notification No.32/2004-ST. Even so the appellant was able to provide such declarations from the major transporters at the time of filing reply to the show cause notice. It is settled law that CBEC circular cannot add conditionalities to an exemption notification. By producing certificates from the major transporters, the appellant substantially established that the conditions of Notification No.32/2004-ST were met. On the other hand, there is not even an iota of evidence in the SCN that the condition of Notification No.32/2004-ST were not satisfied. In a fairly similar case of Venkateshwara Distributors Pvt.Ltd. vs. CCE, Delhi-I- [2013 (12) TMI 730 - CESTAT NEW DELHI], CESTAT allowed the benefit of the said notification. In view of foregoing circumstances, we find that the demand is not sustainable - Decided in favour of assessee.
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2015 (10) TMI 117
Denial of CENVAT Credit - outdoor Catering service - amount collected on the head canteen charges from employee - Held that:- The show cause notice does not allege that the respondents have been collecting amounts from the employees. The original adjudicating authority has relied on a single salary slip in which ₹ 276/- has been charged as canteen charges, and denied credit of ₹ 9,35,580/- towards catering services. The Commissioner (Appeals) has observed that the balance sheet of the respondents for the period 2007-08 to 2010-2011 shows that the respondents have incurred expenses of ₹ 32,29,583/-, ₹ 47,23,412, ₹ 41,30,997 and ₹ 78,88,902/- towards staff and workers welfare. Therefore it shows that expenses are incurred by the respondents. A single salary ship showing a meager amount of ₹ 276/- is too feeble to be relied when the appellants have properly accounted the expenses in these heads in their books of accounts. - No infirmity in impugned order - Decided against Revenue.
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2015 (10) TMI 116
Rate of tax - whether service tax was required to be paid @ 8% when services were rendered or @ 10.2% when the bill for the service rendered was raised by the appellant - Penalty u/s 78 - Held that:- Rate of service tax prevailing on the date of rendering of service will be the appropriate rate for payment of service tax except in the case of reverse charge mechanism where service tax is required to be paid on the date of receiving of bill for the services rendered. This view is fortified by the case law of Reliance Industries Ltd. vs. CCE, Rajkot reported in (2008 (1) TMI 86 - CESTAT, AHMEDABAD) - Decided in favour of assessee.
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2015 (10) TMI 115
Penalty u/s 75A, 76 and 77 - Revisional jurisdiction u/s 84 - Held that:- There was no adjudication order available for exercise of revisional powers under Section 84 of the Act. Though the revision was proposed as against non-imposition of penalty in the primary adjudication order, which is an aspect distinct from the issues on which the assessee had preferred an appeal before the appellate Commissioner, in view of setting aside of the primary adjudication order by the appellate order dated 26.5.2008, there was no order available for exercising revisional jurisdiction, on or after 26.5.2008. - Imougned order is unsustainable - Decided in favour of assessee.
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2015 (10) TMI 114
Penalty u/s 78 - Business Auxiliary Service - Receipt of comission - Bonafide belief - Held that:- In this case, most (about 92%) of the impugned demand of service tax alongwith interest was deposited voluntarily by 5.4.2006 and the remaining (about 8% of the impugned demand) was deposited alongwith interest just before receipt of show cause notice. Such voluntary deposit itself gives credence to the contention of the appellant that it was under bonafide belief that the commission received from M/s.Maruti Finance Ltd. was not liable to service tax. - Even the CBEC acknowledged that there has been certain doubts regarding service tax liability on commission from banks/non banking financial institutions and issued a clarificatory circular No.87/05/2006-ST dated 6.11.2006. In these circumstances, we are of the view that the appellant has made out a good case to get benefit under section 80 - penalty set aside - Decided in favour of assessee.
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2015 (10) TMI 113
Denial of CENVAT Credit - Whether Cenvat credit is available on house-keeping service and business auxiliary service - Held that:- Cleanliness has to be maintained by all factories/manufacturing units as also provided under the ‘Prevention and Control of Pollution Act’ for industries. Cleaning services are taken by the noticee as a pollution control measure and to ensure a healthy surrounding to all its employees. Further in the case of M/s. Ultra Tech Cement, in [2009 (4) TMI 785 - COMMISSIONER OF CENTRAL EXCISE (APPEALS), PUNE-II], decision of the Apex Court in the case of Indian Farmers Fertilizer Co-operative Ltd. v. CCE [1996 (7) TMI 141 - SUPREME COURT OF INDIA] has been referred. - in the place of equipment/devices, in the instant case, services such as cleaning/maintenance of garden/trees, plantation, etc. are used to control the pollution created by the industry and the same could be considered as input services used in relation to manufacture of final product. In view of above, there is no force in the contention of the Revenue that Cenvat credit should be disallowed. In view of Supreme Court’s judgment and other several judgments relating to law at relevant time i.e. before amendment in 2011, Cenvat credit was allowable. Revenue’s contention that Network cable laying/dismantling, installation of network cable, network laying fall in the Business Auxiliary Service was not correct. It was further pleaded that provision of these services has no nexus with the manufacturing/clearance process of final products. Rule 9(5) of the Cenvat Credit Rules, 2004 places the burden of proof regarding admissibility of Cenvat credit on the manufacturer taking such credit. In the present case, the assessee has failed to show how the provision of these services has any nexus with the manufacturing/clearance process of their final products. I find force in Revenue’s contention. It is rightly pointed out that laying of cables or network cables were not in the nature of Business Auxiliary Service. Cenvat credit on these cables could be allowed only if these are covered under eligible inputs or capitals as provided under the rules. - Decided partly in favour of Revenue.
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2015 (10) TMI 112
Erection, Commissioning arid Installation Service - Short payment of duty - Held that:- Commissioner (Appeals) has failed to exercise the jurisdiction vested in him. The power entrusted on the adjudicating authority can also be exercised by the Commissioner (Appeals), being the first Appellate Authority having the power of enhancement of the demand, including enhancement of imposition of penalty, which the adjudicating authority have. Hon’ble Supreme Court has held in C.I.T. v. Kanpur Coal Syndicate - [1964 (4) TMI 18 - SUPREME Court] that the powers of the first Appellate Authority in tax matters are co-extensive. Thus, in the interest of justice, we set aside the impugned order and direct the learned Commissioner (Appeals) to decide the appeal on merits after hearing the appellant. We also direct the appellant to appear before the Commissioner (Appeals) and seek the opportunity of hearing. - Matter remanded back - Decided in favour of assessee.
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2015 (10) TMI 111
Waiver of pre deposit - Mandatory pre deposit - Held that:- Last proviso of Section 35F is very clear and it clearly provides that in respect of stay applications and appeals pending before any appellate authority, the provisions of this Section shall not apply. This shows that the intention of the legislature clearly is that irrespective of the date of commencement of lis, the provision of the Section as amended shall apply. By clearly stating that in which cases the Section shall not apply, the legislature has made the intention very clear. It cannot be presumed and to be presumed that the legislature was not aware that while enacting this proviso, it may affect the vested rights of those cases wherein the show-cause notice had been issued earlier or the orders were passed earlier. But for this provision, a view could have been taken or at least canvassed and considered but in view of this specific provision and when the necessary intendment in our opinion has been expressly provided, the decision of the Hon’ble Supreme Court relied upon by the learned CA is not applicable. - Tribunal being a creature of statute, cannot go into the question as to whether a vested right has been affected and whether the provision is ultra virus. This is under the exclusive jurisdiction of the High Courts and the Supreme Court and this Tribunal is not the forum. On this ground also, the submissions made by the appellants have no merit and have to be rejected. - Decided against assessee.
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Central Excise
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2015 (10) TMI 108
Demand of interest on reversal of cenvat credit - Reversal of CENVAT credit if goods are not returned from the Job worker within 180 days - Demand of interest and penalty - Held that:- Karnataka High Court [2011 (4) TMI 969 - KARNATAKA HIGH COURT] as well as Hon’ble Madras High Court [2014 (11) TMI 89 - MADRAS HIGH COURT] in the cases have considered the decision of Hon’ble Supreme Court made in the case of UOI Vs. Ind-Swift Laboratories Ltd. [2011 (2) TMI 6 - Supreme Court] and have come to the conclusion that wherever CENVAT credit has wrongly been taken but not utilised, the interest is not payable. The Hon’ble Karnataka High court in the said decision says that before utilisation of credit if the entry has been reversed, it amounts to not taking credit. - cases where CENVAT credit though wrongly taken not utilised, interest and penalty cannot be recovered from assessee. - Decided in favour of assessee.
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2015 (10) TMI 107
Denial of CENVAT Credit - Non maintenance of separate accounts - whether the appellant has maintained separate accounts as required under Rule 6(2) of CENVAT Credits Rules 2004 - Held that:- matter deserves to be remanded to the original adjudicating authority who is to verify the submissions of the appellant that they were maintaining separate accounts in terms of Rule 6(2) of CENVAT Credit Rules and liability of payment of duty under Rule 6(3) of CENVAT Credit Rules does not arise against them. It is made clear here that till the verification is made and fresh decision is arrived at by the original adjudicating authority, there will not be any change in respect of the status of the predeposit made by the appellant in terms of the CESTAT, Bangalore. - Appeal disposed of.
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2015 (10) TMI 106
Refund claim of unutilized credit towards export of goods - Sanction of partial claim and denial of input credit involved relates to physical stock of raw material - Rule 5 of CENVAT Credit Rules, 2002 read with Notification No. 11/2002-CX dated 1.3.2002 - Held that:- closing balance of CENVAT credit as on the relevant date includes the input credit on the physical stock of raw material and finished goods lying in stock on the relevant date. After excluding the credit on inputs lying in stock and the input contained in finished goods in stock the adjudicating authority has correctly arrived the balance amount as ₹ 14,09,814/-. Rule 5 of CENVAT Credit Rules stipulates that where exporter can claim refund only when they are not able to use the accumulated credit for payment of domestic clearance. As seen from the above, the input credit is attributable to the goods already exported during the relevant quarter has been correctly worked out to ₹ 14,09,814/-. The amount excluded is the input credit involved in the physical stock of raw materials lying in stock as on 31.3.2002. Therefore, the original authority has correctly sanctioned the refund - Decided against assessee.
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2015 (10) TMI 105
Variation in value of goods - goods which they had sold from the depot at a value higher than the value on which they have paid the duty - SSI Exemption - Invocation of extended period of limitation - Notification No. 9/99-CE dated 28.2.1999, 9/2000-CE dated 1.3.2000 and 9/2001-CE dated 1.3.2001 - Held that:- Assessees contention that extended period cannot be invoked has merit as the appellant-assessee was submitting the returns. They were also submitting the price declaration at the relevant time. Further, every month they were computing the differential duty on the value of the goods which they had sold from the depot at a value higher than the value on which they have paid the duty. They were also informing the details to the range Superintendent every month. We also note that the appellant-assessee was not even claiming the refund of duty in cases where they had sold the goods at a lower price. Invoking the extended period or imposition of penalty under Section 11AC is not correct. However, we note that the learned counsel for the appellant-assessee has submitted that they are not disputing the duty determined by the Commissioner (Appeals) which they have already paid. - as per definition of place of removal under Section 4 of the Central Excise Act, it was factory gate in the facts of present case. - Decided in favour of assessee.
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2015 (10) TMI 104
Denial of CENVAT Credit - Availment on imported Nickel for use in the manufacture of final product - Held that:- Adjudicating authority disallowed the credits of ₹ 1.30 crores on the ground that the appellant availed the credits on the basis of invoice without receipt of the goods. The Tribunal in the respondent s own case dropped the demand which was upheld by Hon ble High Court - submission of the Learned Authorised Representative in respect of the balance amount of the demand, which was dropped by the Adjudicating Authority has no merit. The Learned Authorised Representative for Revenue relied upon the decisions in different context. On the other hand the decision of the Tribunal against this impugned order should be accepted as upheld by the Hon’ble High Court. We find that the Tribunal already considered all the issues in the Final Order dtd 6.2.2008 and therefore, there is no reason to interfere the Adjudication Order. The appeals filed by the Revenue cannot be sustained. - Decided against Revenue.
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2015 (10) TMI 103
Captive consumption - Revenue, contended that use of tin containers for packing of soya oils cannot be held consumption of goods in the manufacture of the specified goods - Exemption under Notification No. 10/96-C.E., dated 23-7-1996 - Held that:- tin containers manufactured in the appellant’s factory and used for packing of Vanaspati have to be regarded as having been consumed within the factory of manufacture and the benefit of the notification would be available. - Admittedly the issue in the case of Mihijam Vanaspati Ltd. [2001 (1) TMI 152 - CEGAT, KOLKATA], was identical to the issue before the Adjudicating Authority. The Tribunal having declared the law in respect of the same very notification, the original authority was bound to follow the same, unless the said declaration of law stand set aside by any other higher forum. It was not open to the original adjudicating authority to take a different view by introducing his own interpretation and by taking support of other decision which are not directly on the point. It is not the case of the Revenue that the said decision of the Tribunal was not accepted and was appealed against by them. In the absence of any such developments, it goes without saying that the Tribunal’s orders are binding on the lower authority, who should have followed the same. - inasmuch as issue is finally decided, the impugned orders are not sustainable. Accordingly, the same are set aside - Decided in favour of assessee.
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2015 (10) TMI 102
Remission of duty - Goods destroyed in fire - Availment of CENVAT Credit - Held that:- Commissioner may remit the duty payable on such goods on which duty is payable in respect of outputs of a manufacturer. Thus, I find that there is no mention of inputs under Rule 21, which are lying unused as not subjected to manufacture, thus no duty is payable. The appellant manufacturer has to pay duty only on its output when they are removed, and in case of loss in fire, which amounts to removal. The provisions of remission has been made for granting adequate relief for loss suffered, so as to give the relief to the assessee from further burden of duty. Therefore, I uphold the demand of duty in respect of raw materials and packing materials (lying in store). - So far as penalty under Section 11AC is concerned, I find that there is no deliberate intention in filing the remission late or any act or intention of evasion of duty is made out. The issue is interpretation of statute, and accordingly, penalty imposed under Section 11AC is set aside. - Decided partly in favour of assessee.
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2015 (10) TMI 101
Denial of CENVAT Credit - exempted goods or not - exemption under the 'Served from India Scheme' i.e. "SFIS" - Benefit of exemption Notification No. 34/2006-CE dated-14/06/2006 - assessee contended that clearance of such goods cannot be treated as 'Exempt' in as much as instead of duty payment through account current i.e. PLA or CENVAT Credit A/cs. of the manufacturer, the amount of duty is to be debited from such 'SFIS Certificate' - Held that:- at the time of passing the order, the case laws cited by the Assessee were not available to the Ld. Commr. and therefore, he had no occasion to examine the facts of the present case, in light of the case laws (2014 (1) TMI 169 - GUJARAT HIGH COURT) and [2012 (7) TMI 679 - GUJARAT HIGH COURT]. We also find that Ld. Commr. has not recorded his findings on the issue raised by the Revenue whether the credit could be allowed on the duty paid materials used in the manufacture of impugned exempt goods. Revenue has further contended that while allowing the said credit, the Ld. Commr. has traversed beyond the scope of the show cause notice. Both sides agreed that these issues to be addressed afresh by the adjudicating authority. In view of the facts and circumstances of the case stated above, we are of the opinion that order passed by the Ld. Commissioner requires to be set aside - Matter remanded back - Decided in favour of assessee.
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2015 (10) TMI 100
Waiver of pre deposit - Rate of duty @1% subject to non-availment of cenvat credit - Notification no/ 1/2011 - appellants submitted that they had not taken credit of duty paid on inputs or tax paid on services at all. What they had done was, they had accumulated Cenvat credit in their books which had arisen as a result of export of Caprolactum, a dutiable product. - Held that:- According to Notification No. 1/2011, the proviso to the introductory paragraph provided that “nothing contained in this Notification shall apply to the goods in respect of which credit of duty on inputs or tax on input services has been taken under the provisions of Cenvat Credit Rules, 2004.” Therefore we find considerable force in the arguments advanced by the learned counsel that proviso in the Notification does not bar payment of duty by utilizing Cenvat credit available in the books. Only if the credit of duty/tax paid on inputs or input services is taken, the benefit of the Notification would not be available. It was a categorical submission on behalf of the appellant that they have not taken such credit. There is no finding in the impugned order also that appellants have taken such credit. Nevertheless, the Notification cannot be read in isolation. Availment and utilization of Cenvat credit on inputs and input services is regulated by Cenvat Credit Rules and whether it is taking the credit or utilizing the same it has to be in accordance with the provisions of Cenvat Credit Rules. In the hierarchy of statutory provisions, the Notification is one rung below the Rules and therefore the Notification has to be read with the Rules and cannot be read in isolation. In view of the discussion, the appellant clearly does not have a case prima facie on merits. - Partial stay granted.
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2015 (10) TMI 99
Waiver of pre-deposit of duty - Tobacco Packing Machines - claim of the applicant at this stage, that the machine was not in working condition, accordingly, no duty is required to be paid - Penalty u/s 11AC - Held that:- On a visit to the factory of the applicant on 24-1-2012, the Visiting Officers noticed a FFS Packing Machine along with Printed Plastic Pouch Rolls of “Maruti Special Khaini” and “Maruti Sabasit Kada Khaini” of ₹ 2/- per pouch. Further, on verification, it was found that the said pouch packing machine contained some tobacco dust even though the machine was not in operation at the time of visit. The Officers also noticed in the premises adjacent to the said room, 46 bags of tobacco. - At no point of time, the applicant had informed the Department about the existence of such machine in their premises, hence, the claim of the applicant at this stage, that the machine was not in working condition, accordingly, no duty is required to be paid, cannot be out rightly accepted without analyzing the evidences on record and also the implication of the relevant Rules of the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010. In these circumstances, we are of the view that the applicant could not able to make out a prima facie case for total waiver of pre-deposit. - Partial stay granted.
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CST, VAT & Sales Tax
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2015 (10) TMI 110
Challange to assessment of tax and levy of penalty - Bar of limitation - Whether the limitation for reassessment under section 34 of the act is to be counted in relation to the period in which the return/revised return is filed or whether the same is counted in relation to the period to which the return/revised return relates to - Held that:- Rule 36 mandates that where the Commissioner makes a default assessment of tax under Section 32 or an assessment of penalty under Section 33 of the Act, he shall record the order in Form DVAT-24 and DVAT-24A respectively and such notice of assessment or notice of assessment of penalty shall be served in the manner prescribed in Rule 62. The daily order-sheet recorded on 31.03.2015 is not in Form DVAT-24 or DVAT-24A, though the impugned notices dated 01.04.2015 are in Form DVAT-24 and DVAT-24A - Since the daily order sheet is not in the Form as mandated by Rule 36, it cannot be countenanced that merely because the orders based on which the online orders were issued on 01.04.2015 were factually recorded in the order sheet dated 31.03.2015, there was sufficient compliance with Rule 36 and Section 34. Rule 36 also mandates that the order is to be served on the dealer in the manner prescribed under Rule 62. The daily order sheet recorded on 31.03.2015 is not a notice of default assessment, which could have been served on the dealer in the manner prescribed under Rule 62. - Since the impugned notice of default assessment of tax and interest and the impugned notice of assessment of penalty dated 01.04.2015 have been issued beyond the statutory period, the same cannot be sustained and are accordingly quashed. - Decided in favour of assessee.
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2015 (10) TMI 109
Levy of penalty on the Appellant Assessee under Section 86(10) of the DVAT Act without issuing notice to the Assessee - Held that:- No notice was issued to the Assessee by the VATO on the aspect of penalty. The mere fact that the Assessee had paid the penalty under protest would not preclude it from questioning the levy of penalty on the ground that the basic procedural requirement was not fulfilled by the VATO. - Assessment of penalty is an exercise separate from the main assessment for determining the tax and interest payable. This is evident from a perusal of Sections 31 and 32 (which talk of the self assessment and default assessment) and Section 33 of the DVAT Act which deals with the penalty assessment - on the basis of the survey, a notice was issued to the Assessee under Section 59 of the DVAT Act as regards the assessment to tax. The Assessee did not participate in the assessment proceedings and an ex parte ‘Notice of Default Assessment of Tax and Interest’ was issued on 24th February 2013 by the VATO under Section 32 of the DVAT Act read with Rule 36 (1) of the DVAT Rules in Form 24. On the same day the VATO passed the penalty order, without any service of prior notice on the Assessee. The VATO sent to the assessee the penalty order as a “Notice of Assessment of Penalty” under Rule 36 (2) of the DVAT Rules in Form 24A. The Assessee was simply called upon to deposit the penalty amount already determined by the VATO. As the penalty order dated 24th February 2013 under Section 86 (10) of the DVAT Act was passed by the VATO without service of prior notice of penalty on the Assessee and without affording the Assessee an opportunity of being heard on the question of penalty, the said order is held unsustainable in law and is hereby set aside. The consequential order dated 21st January 2014 of the OHA and the impugned order dated 28th April, 2015 of the AT are also set aside. - matter remanded back - Decided in favour of assessee.
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