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TMI Tax Updates - e-Newsletter
October 7, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Mode of service of notice u/s 143(2) - scrutiny assessment - Tribunal has rightly observed that the Assessing Officer has failed to adopt the proper mode of service of notice to the assessee which do not require interference of this Court - HC
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Levy of penalty under Section 271D - Whether the Tribunal is correct in concluding that the provisions of Section 269SS of the Act were attracted to the transactions under consideration with a view to levy penalty under Section 271D of the Act? - Held Yes, penalty confirmed - HC
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Rectification of mistake - set off of the carry forward business loss denied - the issue as to whether the said income earned by way of interest on Fixed Deposits, NSCs, would be available to the assessee to seek for set off as business loss or u/s 72 of the Act is a debatable issue and as such we are of the considered view that said issue could not have been gone into in a proceeding u/s 154 - HC
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Claim of exemption u/s 10(38) on long term capital gain from sale of shares - AO only on extraneous considerations and presumptions & surmises has concluded that assessee has purchased the shares only on 15 & 17/05/07 while treating the gain derived from sale of shares as short term capital gain - AT
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Depreciation on energy saving devices - as depreciation claimed by assessee is in terms with the statutory provisions, AO was not justified in interfering with the same. - AT
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Rebate & discount expenses - the bills were issued on Maximum Retail Price (MRP) and the discount was given through self made vouchers because there was no such software in the accounting system for giving discount. AO made the adhoc disallowance without any basis - Claim allowed - AT
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Penalty for failure to furnish annual information return - no appeal is provided under the Act against the penalty levied under section 271FA of the Act. Hence, the appeal filed by the assessee before this Tribunal against the order levying penalty under section 271FA is not maintainable - AT
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Method of accounting - income recognition - Addition made on estimation basis on construction of housing projects - CIT(A) cannot substitute his assessment to say that the assessee has postponed the tax liability - AT
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Income from house property - one is self occupied property and second is vacant property - AO has applied ALV at 7% of book value of the property and computed deemed house property income of ₹ 1,40,185/- assessee has paid interest of ₹ 3,50,641/- as interest towards vacant property - entire interest payment allowed as deduction - AT
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In assessment year 2002-03 the total contribution to the pension fund during the year was ₹ 1.22 crores out of which ₹ 22,89,137/- were actually disbursed to the pensioners and hence the said expenditure of ₹ 22,89,137/- is allowable as an expenditure in the hands of the assessee for assessment year 2002-03. - AT
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The Indian branch of the VIPL is not dependent agent of VGCs and therefore, it does not constitute PE for various Varian companies in India, as per Article 5(4) 5(5), respective DTAAs. - the addition being 10% of gross sales made by Varian Italy to its customer in India, cannot be taxed in the hands of the assessee. - AT
Customs
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In the present case the licences/scrips were transferred to the appellant importers who had no knowledge of the misrepresentation by the exporters in obtaining them. The Bills of Entry were filed by the appellant importers well before the cancellation of licenses, thus imports were made under valid licenses - authorities themselves are also responsible to the extent of not having checked the fraud at the time of exports. - AT
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Import made under DEPB scheme, of the goods which are fully exempt from payment of Customs duty and therefore, no Customs duty is levied and collected. The Education Cess at the prescribed rate also cannot be levied - AT
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Pre-shipment inspection – Recovery of live bomb shells – There is no evidence on record to hold that appellant was aware that waste and scrap imported by them contained live bomb shells – There is no justification for confiscation of waste and scraps (other than live Bomb Shells) imported by appellant and accordingly, no penalties upon appellant under Section 112 of Customs Act, 1962 can be imposed - AT
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Amendment of prayer for relief in the appeal – Prayer to re-export seized goods – Since period of five years were lapsed from date of first import under Bill of Entry, there is merit in appellant's plea as very purpose for which they have imported goods has not been served – Therefore application for amendment allowed - AT
Service Tax
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Refund / Rebate under Rule 5 of Export Service Rules, 2005 - Activity of providing Telecommunication service to their customers/clients of Foreign Telecom Operator (FTO) - Refund to be allowed - matter is remanded to the Adjudicating authority for verification as to whether the claims are time barred or not - AT
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Revenue having complied with the Tribunal's order and granted refund partially, has withheld the interest claim on a possible realisation that if this is also awarded and paid, the proceedings before the Supreme Court would be rendered infructuous. This cannot be the legal position nor can the understanding of the parties be based on the same - HC
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Job Work activity - Manpower Supply Recruitment Agency Services - lumpsum contract of carrying out the job in the factory premises - service recipient has deducted TDS - Not taxable as manpower supply services - AT
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Business Auxiliary Service - Arrangement of loans from various banks to customers - Receipt of commission - extended period is not invokable in the present case. - Demand set aside - AT
Central Excise
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Manufacture - customization of the already built up motor vehicle - he activity of customization carried out by the respondent does not fall under the four corners of chapter note 3 - Not a manufacturing activity - AT
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Manufacture of Plastic Pallets - Captive consumption of pallets - the pallets are clearly eligible for exemption under Notification No. 67/95-CE dated 16.3.1995 for captive consumption within the factory of the appellants - AT
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SSI Exemption - since the brand name owners of the brand names affixed on the containers had not been identified in the sense that the statutory certificate of the ownership of the brand name of the person who had been alleged to be the owner of the brand names have not been produced by the Revenue, SSI exemption cannot be denied - AT
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Claim of interest on refund - delayed refund has been sanctioned u/s 11B - there was no fault on the part of the appellants and the appellants were not responsible for delay that was caused for coming to correct decision in the matter. - claim of interest allowed - AT
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Valuation - price escalation - levy of interest on differential duty - No doubt, some additional amount is received thereafter, on account of price escalation. However, it is not coming on record as to under what circumstances such price escalation was given - SC
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Denial of concessional rate of duty - Tribunal has decided the case in favour of the assessee by observing that clearing of goods with payment of excise duty with current account was only an error and the assessee had not violated the more substantial condition viz no CENVAT Credit should be taken in regard to the goods. This is clearly a faulty approach on the part of the Tribunal - SC
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The process of cutting betel nuts into small pieces and addition of essential/non-essential oils, menthol, sweetening agent etc. did not result in a new and distinct product having a different character and use. - SC
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MRP based Valuation of goods - Revenue, for the purposes of excise duty, valued the said goods taking the maximum of the three MRPs mentioned on the packaging. This is clearly in consonance with Explanation 2(a) to Section 4A of the Act - SC
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Benefit of CENVAT credit of duty paid on various capital goods - anything used for managing the tobacco beetle infestation is required to be considered as an input having been used in relation to manufacture of final products. - AT
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Availment of CENVAT Credit - supplementary invoices - CENVAT Credit taken by the Appellant on the strength of supplementary invoice issued by their sister unit cannot be denied and demand of duty alongwith interest and penalty cannot be sustained - AT
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CENVAT Credit - Capital goods - it is clearly evident from the records that these items were used as components of Match Plates, Moulding Boxes, Sand Mixers, Conveyor and Furnaces used in the manufacture of final product casting. As the items are used as components, the Appellants are eligible to avail CENVAT Credit thereon - AT
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Duty demand - Clandestine removal of goods - Shortage of goods - appellant is liable for excise duty and it is restricted to actual shortage of 102.476 MTs found short during physical stock taking and the demand is upheld to that extent. Penalty is set aside. - AT
VAT
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Levy of interest - GVAT - tribunal confirmed the demand of interest without considering the heavy amount of refund, due for the previous period, available for adjustment against the dues for the succeeding year - order of tribunal confirmed - HC
Case Laws:
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Income Tax
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2015 (10) TMI 323
Mode of service of notice - scrutiny assessment - nothing has been brought on record that the notice under Section 143(2) was served - Held that:- As on the event of clause 9.1 of the manual, which has been made applicable on satisfaction of the Assessing Officer that the addressee is keeping out of the way for the purpose of avoiding service, the notice cannot be served in the ordinary way for any other reason. Once it has been found that the assessee had sold out the house and went away, definitely the Assessing Officer could have adopted the mode of service by way of publication in news paper circulating in the locality in which the addressee is last known to have resided or carried on business. Therefore, keeping in view the contrary stand of notice server as well as inspector with regard to the service of notice we are of the view that the Assessing Officer was under statutory obligation to adopt another mode of service by way of publication as is provided under the Act, but he has failed to do so. Thus, the learned Tribunal has rightly observed that the Assessing Officer has failed to adopt the proper mode of service of notice to the assessee which do not require interference of this Court. - Decided against revenue.
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2015 (10) TMI 322
Disallowance of interest on borrowed capital - ITAT sustained addition - Held that:- In the present case, we find that the assessee, with reference to illustrations as reproduced in the earlier part, had been able to demonstrate that the Tribunal had verbatim copied the order of CIT(A) at different places without even difference of punctuation by showing it to be an order passed by it. Thus, it cannot be said that there has been independent application of mind as the Tribunal being final fact finding authority was required to discuss the evidence before arriving at the conclusions. The order passed by the Tribunal is violative of principles of natural justice and does not satisfy the requirements of a reasoned order. Consequently, the substantial questions of law are answered accordingly. The impugned order passed by the Tribunal dated 20.3.2014, Annexure A.7 is set aside and the matter is remanded back to the Tribunal to decide it afresh after hearing learned counsel for the parties in accordance with law.
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2015 (10) TMI 321
Levy of penalty under Section 271D - Whether the Tribunal is correct in concluding that the provisions of Section 269SS of the Act were attracted to the transactions under consideration with a view to levy penalty under Section 271D of the Act? - whether the exercise of discretion to find out the existence or nonexistence of a reasonable cause was properly explained by the authorities or not? - Held that:- It is true that certain amount of discretion is vested in the assessing officer as well as the appellate authority and the Tribunal to choose not to impose penalty if the assessee proves that there was reasonable cause for the failure. But, what is reasonable cause is not clearly indicated either in section 269SS or in section 273B. Therefore, in an appeal under section 260A, we can only go by the question whether the exercise of discretion to find out the existence or nonexistence of a reasonable cause was properly explained by the authorities or not. We do not find any perversity in the approach of the Tribunal. As a matter of fact, instead of distinguishing the correctness of the discretion exercised by the assessing officer, the Tribunal has independently decided the question as to whether there was a reasonable cause or not. The Tribunal has independently applied its mind and come to the conclusion that there was no reasonable cause. In the circumstances, we do not think that question Nos.1 and 3 are to be answered in favour of the assessee. Accordingly, question Nos.1 and 3 are also answered against the assessee.
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2015 (10) TMI 320
Rectification of mistake - set off of the carry forward business loss denied - Held that:- In the instant case the Assessing Officer sought to rectify the original assessment order on the ground that carried forward business loss and same had been set off against the total income which was inclusive of the income earned by the assessee under the head "Income from Other Sources" and "Income from House Property" as declared by him in the return of income and carried forward loss could have been set off against "Business Income" only. As already observed by us herein above the issue as to whether the said income earned by way of interest on Fixed Deposits, NSCs, would be available to the assessee to seek for set off as business loss or not under section 72 of the Act is a debatable issue and as such we are of the considered view that said issue could not have been gone into in a proceeding under section 154 of the Act. The "brought forward loss" came to be set-off against the total income earned by the assessee as per the assessment order dated 30.11.2006. As to whether income earned by way of interest would form part of total income so as to allow the assessee to seek set-off is an issue which will have to be gone into in detail and mere declaration in the return of income by assessee would not alter its status and as such it cannot be held that an error had occurred in the assessment order so as to enable the Assessing Officer to invoke section 154 of the Act for rectification. In that view of the matter we are of the view that substantial question of law is required to be answered in the negative i.e., in favour of assessee and against the revenue.
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2015 (10) TMI 319
Revision u/s 263 - assessee’s claim of deduction u/s 80IA(4)(iii) in respect of Capella Industrial Park not considered by AO - Held that:- There is no dispute to the fact that assessee has developed industrial park, which is an eligible business activity u/s 80IA(4)(iii), hence, assessee is entitled to avail deduction in respect of the profit derived from such eligible business. There is also no dispute to the fact that industrial park developed by assessee is in terms with industrial parks scheme, 2002 of the central govt. As per the scheme formulated by central govt. in the Ministry of Commerce and Industry, approval for industrial park can be obtained from the Ministry of Commerce and Industry, Govt. of India through DIPP either under automatic route or non-automatic route. As far as the present assessee is concerned, there is no dispute to the fact that it has sought approval for Capella Industrial Park under non-automatic route. The only rational conclusion would be, Capella industrial park developed by assessee having been approved by Ministry of Commerce and Industry, govt. of India under non-automatic route, the condition imposed under para 4 of CBDT notification stipulating that no single unit should have more than 50% of the allocable industrial area is not applicable to present assessee. Moreover, as held in case of Creative Infocity Ltd. Vs. Under Secretary [2012 (4) TMI 117 - GUJARAT HIGH COURT] Commerce Ministry being the competent authority for granting approval, they only have the power to verify whether conditions of the scheme have been violated and if it is found so, only they can withdraw the benefit. Therefore, for aforesaid reasons, assessee’s claim of deduction u/s 80IA(4)(iii) cannot be rejected. It is very much evident that not only AO enquired into the issue of claim of deduction u/s 80IA(4)(iii) in respect of Capella industrial park with reference to the condition imposed in para 4 of CBDT notification, but, assessee also submitted a detailed reply explaining why such condition will not apply to assessee. Thus, AO after conducting necessary enquiry and applying his mind to the issue having taken a decision allowing assessee’s claim of deduction u/s 80IA(4)(iii) in respect of Capella industrial park, the decision so taken, cannot be considered to be erroneous and prejudicial to the interests of revenue. In fact, though, ld. CIT accepts the fact that AO did make enquiry with regard to assessee’s claim of deduction u/s 80IA(4)(iii) and assessee also explained its stand before AO, but, he nevertheless contradicts himself by observing that AO did not conduct proper enquiry and verify whether assessee has complied to the condition imposed in para 4 of CBDT’s notification. In our view, such conclusion drawn by ld. CIT is not only contrary to the material on record, but, also does not stand the test of legal scrutiny. Once AO has conducted enquiry on a particular issue and has taken a decision after proper application of mind and if such view taken by AO is one of the possible view, then, even if it is not discussed elaborately in the assessment order, it cannot be said assessment order passed is erroneous and prejudicial to the interests of revenue. Moreover, as could be seen, the coordinate bench in case of L&T Infocity (2015 (1) TMI 1065 - ITAT HYDERABAD) after going through the conditions imposed under automatic and non-automatic route held that the restriction imposed under the automatic approval route stipulating that no single unit shall exceed 50% of the allocable industrial area is not applicable to approval granted under non-automatic route. Therefore, the view taken by AO while accepting assessee’s claim being in consonance with the view expressed by the coordinate bench, as aforesaid, certainly can be considered to be a possible view. That being the case, ld. CIT has no authority to invoke his power u/s 263 of the Act only because he does not agree with the view expressed by AO and wants to substitute his view. - Decided in favour of assessee.
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2015 (10) TMI 318
Revision u/s 263 - Held that:- It is observed from the notice issued by the Ld. CIT under section 263 and the detailed reply filed by the assessee to the said notice that most of the issues raised by the Ld. CIT were not only enquired by the A.O. but the claim of the assessee was accepted by him by applying his mind to the relevant facts of the case as well as the material placed on record. In my opinion, the assessment order passed by the A.O. therefore cannot be held to be erroneous and prejudicial to the interests of the Revenue on these issues as alleged by the Ld. CIT in his impugned order passed under section 263. Assessment order passed by AO cannot be held to be erroneous and prejudicial to the interests of the Revenue only because the Ld. CIT is of the opinion that some more enquiry should have been made by the A.O. The power under section 263 cannot be extended to hold an order passed by the A.O. as erroneous and prejudicial to the interests of the Revenue due to inadequacy of enquiry. After having perused the impugned order of the Ld. CIT in the light of the facts and material on record and detailed submissions made by the assessee, find that the directions of the Ld. CIT on various issues are in the nature of starting roving and fishing enquiry which is not permissible under section 263 as held inter alia in the case of CIT vs. Gabriel India Ltd., [1993 (4) TMI 55 - BOMBAY High Court ]. CIT has no material before him to consider the assessment order to be erroneous and prejudicial to the interests of the Revenue on the issues pointed out by him. A perusal of the discussion made by him in this regard shows that his actions are more like an A.O. in session of assessment proceedings rather than revisional authority exercising power under section 263. It is settled law that the powers under section 263 are required to be exercised by the Ld. CIT sparingly and in genuine cases when due to error committed by the A.O. there is loss to the revenue. Thus no errors in the order of the A.O. passed under section 143(3) as alleged by the Ld. CIT calling for any revision under section 263. - Decided in favour of assessee.
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2015 (10) TMI 317
Claim of exemption u/s 10(38) on long term capital gain from sale of shares - date of transaction to be considered - shares were transferred to assessee’s D-mat account - CIT(A) held that the gain derived from transaction in shares cannot be treated as short term capital gain - also the conclusion drawn by AO that source of investment in shares on 15th nd 17/05/07 was not explained by assessee while making addition u/s 69A cannot be sustained - Held that:- It may be a fact that the shares of M/s Jai Corporation Ltd. were transferred to assessee’s D-mat account on 15 & 17/05/07, but, that alone cannot dilute the fact that assessee did purchase shares of M/s Jai Corporation through M/s Alliance Intermediateries & Network Pvt. Ltd. in April’06. This fact has been clearly demonstrated by assessee by producing adequate and cogent documentary evidences by way of contract note and other evidences including the return of income filed for AY 2007-08, which has not been controverted by the department. It is also a fact on record that sub-broker M/s Alliance Intermediateries & Network Pvt. Ltd. issued confirmation certificates acknowledging the fact that shares were held in its pool account on behalf of assessee till it is transferred to assessee’s D-mat account. When assessee has produced all documentary evidences and has also submitted its explanation before AO as well as ld. CIT(A), there is no reason to disbelieve the same unless strong and positive evidence is brought on record to disprove the same. As it appears, AO only on extraneous considerations and presumptions & surmises has concluded that assessee has purchased the shares only on 15 & 17/05/07 while treating the gain derived from sale of shares as short term capital gain. See Jafferali K. Rattonsey Versus Deputy Commissioner of Income-tax, Central Circle 5 [2012 (7) TMI 577 - ITAT MUMBAI ] In the present case, the contract note of purchase of shares clearly indicate the date of purchase as 04/04/2006. In the aforesaid view of the matter, finding no infirmity in the order of ld. CIT(A), we are inclined to uphold the same and dismiss the grounds raised by the department. - Decided against revenue
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2015 (10) TMI 316
Computation of deduction u/s 10A - exclusion of 50% of expenses incurred on leased lines communication which is treated as expenses incurred for delivery of computer software outside India) from the export turnover - Held that:- Freight, telecommunication charges or insurance attributable to the delivery of articles or things or computer software outside India or expenses incurred in foreign exchange in providing the technical services outside India has to be ironed out from the export turnover. In the case of the assessee, though these expenses are not separately stated and claimed in the invoice, it is embedded in the export invoice raised. If these expenses are not considered while raising the invoice, the assessee would incur loss to that extent because these expenses are directly related and attributable to the export invoice raised. It is only a method of raising the invoice followed by the assessee i.e., either to include such expenses in the invoice on adhoc basis or by specifically stating it separately. By these gimmicks of the assessee, the provisions of the income-tax Act cannot be treated differently in both the situations. Therefore, we agree with the view of the Ld. Assessing Officer that the expenses incurred by the assessee towards delivery of computer software outside India has to be excluded from the export turnover, though it is not separately stated in the invoice. However, we also hereby hold by relying on the decision of Special Bench of the Tribunal in ITO Vs. Sak Soft Ltd., reported in (2009 (3) TMI 243 - ITAT MADRAS-D) that what is excluded from the export turnover has to be also deducted from the total turnover while computing deduction U/s.10A of the Act. Accordingly, we agree with the alternative prayer made by the Ld. A.R. Disallowance of the contribution made to unapproved Gratuity Fund (A.Y 2006-07) - Held that:- Direction of AO to allow the deduction for the payment to LIC on account of Gratuity Fund u/s.37 of the Act is appropriate as the payment made to the Gratuity Fund maintained with LIC where the appellant has no control over the irrevocable trust created exclusively for the benefit of the employees deduction shall be allowed. Therefore, we hereby confirm the order of the Ld. CIT (A) on this issue. - Decided in favour of assessee. Disallowance of 1/3rd of expenditure incurred towards mediclaim for dependent family members of employees - Held that:- On examining the issue, we find that the entire payment of group mediclaim paid by the assessee was to keep the staff of the assessee in good spirits and secured, and to motivate them to perform their duties in the organization with full vigor which will only supplement to the prudent management of the human resources in the organization to increase productivity and profit. Hence, these expenses are directly attributable to the income earned by the assessee company. Therefore claim of the assessee is justified for granting deduction for these expenses incurred by the assessee. - Decided in favour of the assessee.
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2015 (10) TMI 315
Unexplained cash deposits found to be made in the bank account - CIT(A) deleted the addition - Held that:- In the submissions made before the Ld. CIT(A), a reference was made by the assessee only to his bank account with Development Credit Bank Ltd. The Ld. Counsel for the assessee therefore was directed by us to file copy of the bank account of the assessee maintained with Development Credit Bank Ltd., in order to establish the nexus between the amounts stated to be received by the assessee in cash from the students and the demand drafts drawn in favour of various foreign universities. He however has filed a letter stating that there is no bank account maintained by the assessee with Development Credit Bank Ltd. A perusal of the copy of certificate issued by Development Credit Bank Ltd., placed at page No.20 of the paper book however shows that the said certificate is issued at the request of the account holder i.e., assessee. Thus the matter has to go back to the A.O. for verifying the trail of Mr. Venugopal Reddy, Hyderabad. funds stated to be received from different students by the assessee in cash and drawing of demand drafts by the assessee on behalf of the said students. Even the explanation of the assessee as regards the cash deposits of ₹ 14,62,719 having been made from the contract receipts of his business requires verification by the A.O. We therefore, set aside the impugned order of the Ld. CIT(A) and restore the matter to the file of the A.O. for deciding the same afresh after verifying the explanation of the assessee. Needless to observe that the A.O. shall afford proper and sufficient opportunity of being heard to the assessee before deciding this issue finally in set aside proceedings. - Decided in favour of revenue for statistical purposes.
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2015 (10) TMI 314
Depreciation on energy saving devices - CIT(A)reversed the order of the AO on this issue and allowed the claim of assessee for depreciation @ 80% - Held that:- The issue involved in the appeal of revenue is squarely covered in favour of assessee by the decision of the coordinate bench of this Tribunal in assessee’s own case for AY 2004-05 and 2009-10 [2014 (11) TMI 407 - ITAT HYDERABAD ] wherein held The meaning of the term ‘before due date’ shall be understood as it is understood by a man of ordinary prudence - Before due date simply refers and means that not after the expiry of due date - If the requisite act is done before the last day expires then it will simply be said that before due date - When the time of filing the return is available to the assessee till the last moment of the due date then the whole of that day is available to the assessee and due date expires only when the last day is expired - the option exercised on the due date is nothing but before the due date as the same is not after the due date – revenue is not consistent with regard to assessee’s claim of depreciation - Be that as it may, as depreciation claimed by assessee is in terms with the statutory provisions, AO was not justified in interfering with the same. Assessee having exercised its option in terms of second proviso to Rule 5(1A), AO is duty bound to allow assessee’s claim of depreciation– thus, the order of the CIT(A) is upheld – Decided against revenue.
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2015 (10) TMI 313
Reopening of the assessment - Held that:- Section 147 clearly says that if the Assessing Officer has reason to believe that the income chargeable to tax has escaped assessment for any assessment year, he may issue notice under Section 148 of the Act to assess or reassess such income. Explanation 2(b) to Section 147 of the Act clearly says that understating of income or claiming excess loss, deduction, allowance or relief in the return is also deemed to be escapement of income. What is necessary is that the Assessing Officer has reason to believe that the income chargeable to tax has escaped assessment. Therefore, it is obligatory on the part of the Assessing Officer to record his reason which made him to believe that the income chargeable to tax has escaped assessment for any assessment year. In this case, the Assessing Officer reopened the assessment by issuing notice under Section 148 of the Act to verify whether the borrowal was for business purpose and whether the assessee claimed excess deduction. The Assessing Officer has not formed any opinion that the assessee claimed excess deduction thereby the income otherwise chargeable to tax escaped assessment. This Tribunal is of the considered opinion that to verify or to consider whether the assessee claimed excess deduction or borrowed loan for business purpose, the concluded assessment cannot be reopened. In view of the language employed by the Parliament in Section 147 of the Act, the Assessing Officer has to necessarily record the reason which made him to believe that the assessee claimed excess deduction or loss. In the absence of any such observation by the Assessing Officer in the reason for reopening the assessment, this Tribunal is of the considered opinion that reopening of the assessment is not justified. Accordingly, the order of the CIT(Appeals) confirming the reopening of assessment, is set aside and cross-objections for both the assessment years are allowed. - Decided in favour of assessee.
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2015 (10) TMI 312
Addition on account of arm’s length price under sec. 92CA(3) - whether marketing and selling expenses like trade discount etc. are not AMP expenses? - Held that:- We find that the Hon’ble jurisdictional High Court of Delhi in the case of Sony Ericsson Mobile Communication India (P) Ltd. [2015 (3) TMI 580 - DELHI HIGH COURT] after discussing the majority view of the Special Bench of the ITAT in the case of L.G. Electronics (2013 (6) TMI 217 - ITAT DELHI), has been pleased to hold that marketing and selling expenses like trade discount etc. are not AMP expenses. Thus we set aside the matter to the file of the Assessing Officer to decide afresh the issue as to whether local transaction of the assessee involving advertisement, cash discount, service expenses and business promotion expenses with unrelated parties are international transaction under sec. 92B of the Income-tax Act, 1961 and if so as to whether transfer pricing provisions are applicable on them and made the adjustment, if any, accordingly in view of the above ratios laid down by the Hon’ble Jurisdictional High Court in the case of Sony Ericson Mobile Communication India Pvt. Ltd. (supra) after affording opportunity of being heard to the assessee. Decided in favour of assessee for the statistical purposes.
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2015 (10) TMI 311
Revision u/s 263 - assessee has not made TDS on granite export expenses for ocean freight charges - Held that:- Regarding the shipping charges, there is a Circular issued by the CBDT No.723 dated 19.9.1995 states that where the provisions of sec.172 are to apply, the provisions of sections 194C and 195 relating to tax deduction at source are not applicable. Acting on the above Circular, ITAT, Ahmedabad Bench ‘C’, has held in the case of DCIT v. Hasmukh J. Patel [2011 (3) TMI 353 - ITAT, Ahmedabad] that where the provisions of sec.172 would apply, no deduction of tax is required under sec.194C. Also see ACIT vs. Leaap International (P.) Ltd. [2011 (5) TMI 700 - ITAT CHENNAI]. We find that the above circular and the Tribunal decisions support the case of the assessee on merit that the assessee was not under an obligation to deduct tax on freight charges paid to shipping agencies. - Decided in favour of assessee. Expenditure towards machinery spare parts was a capital expenditure - Held that:- In the show cause notice, the observation of the Commissioner of Income-tax is that the said expenditure would be of capital nature. But in the revision order passed by him, the Commissioner of Income-tax has disallowed the said expenditure under sec.40(a)(ia). Because of this contradiction, this objection made by the Commissioner of Income-tax cannot survive. Moreover, the view taken by the Assessing Officer on machinery spare parts as revenue expenditure is a possible view.- Decided in favour of assessee. Granite marking and inspection charges - non deduction of TDS - Held that:- Those charges were made by the assessee outside India for the purpose of export trade. All services are rendered outside India except for quality verification of granites in India. Where such payments are made for the purpose of business carried outside India and payments made to non-residents, there is no requirement of deducting any tax at source, as held by the Hon’ble High Court of Madras in the case of CIT v. Faizan Shoes (P.) Ltd. [2014 (8) TMI 170 - MADRAS HIGH COURT ]. Therefore, the said objection also does not survive against the assessee. - Decided in favour of assessee. Regarding the question of TDS, the provision of disallowance is applicable only to those amounts payable and not to the amounts already paid. ITAT, Chennai ‘B’ Bench in the case of ITO vs. M/s. Theekathir Press [2015 (4) TMI 616 - ITAT CHENNAI ] has held that the disallowance under sec.40(a)(ia) applies only to those amounts “payable” and not to those amounts “paid”. In the present case, therefore, the question of disallowance should apply only those amounts remained payable. But what is shown as payable in the balance sheet, has already been paid by the assessee before the due date of filing of return. Therefore, that portion of TDS amount does not remain as payable. On that ground also disallowance is not justified.- Decided in favour of assessee. Quarry development expenses would have been treated as a capital expenditure. That is also a case of divided opinion. Therefore, the Commissioner cannot take it as a ground to revise the assessment. - Decided in favour of the assessee.
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2015 (10) TMI 310
Disallowance of denting & painting and job charges expenditure - Held that:- In the present case, it is noticed that the assessee explained the reason for increasing the expenses which was mainly due to warranty scheme and no recovery was made in those case where warranty period was inexistence. The Assessing Officer did not point out any item of expenses which was not incurred for the business purposes. Therefore, the disallowance made by the Assessing Officer and sustained by the Ld. CIT(A) was not justified. Accordingly, the same is deleted. - Decided in favour of assessee. Addition @ 15% out of claim of rebate & discount expenses and various expenses debited in the P & L account - AO was of the view that the discount and rebate allowed to the customers was through self made vouchers instead of sales bills issued to the customers - Held that:- In the instant case, it is noticed that the Assessing Officer did not point out any defect in the books of accounts which were duly audited. He also did not point out any specific items of expenses which was not incurred for the business purposes. In our opinion, the Assessing Officer failed to appreciate the facts in right perspective even he did not consider this explanation of the assessee that sales bills for vehicles and spare parts were issued online through accounting software, the bills were issued on Maximum Retail Price (MRP) and the discount was given through self made vouchers because there was no such software in the accounting system for giving discount. The Assessing Officer made the adhoc disallowance without any basis and the Ld. CIT(A) also restricted the same in slip shod manner without giving any cogent reason and the basis. We therefore, considering the totality of the facts of the present case, are of the view that the disallowance sustained by the Ld. CIT(A) was not justified. Accordingly, same is deleted.- Decided in favour of assessee.
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2015 (10) TMI 309
Maintainability of appeal against the order levying penalty under section 274 read with section 271FA of the Act - Penalty for failure to furnish annual information return - delay of 24 days in filing the appeal - Held that:- Nowhere in section 253 mentions the order passed by the Director of Income-tax (Intelligence) or any other officer of the Income-tax Department levying penalty under section 271FA is appealable before this Tribunal. This Tribunal being a quasi judicial authority established under the provisions of the Income-tax Act cannot travel beyond the provisions of the Act. Therefore, unless and until an appeal is specifically provided in section 253 of the Act against the order levying penalty under section 271FA, this Tribunal is of the considered opinion that the present appeal is not maintainable before this Tribunal.See SRO, Meppayur-Kozhikode Versus Director of Income-tax (Intelligence), Cochi [2014 (1) TMI 102 - ITAT COCHIN ] After examining the provisions of the Act, this Tribunal found that no appeal is provided under the Act against the penalty levied under section 271FA of the Act. Hence, the appeal filed by the assessee before this Tribunal against the order levying penalty under section 271FA is not maintainable. - Decided against assessee.
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2015 (10) TMI 308
Disallowance of Employees' Contribution to Provident Fund and Employees' State Insurance Contribution paid belatedly - delays in payments ranging from two days to nine days from the due date of payments including grace period - Held that:- In view of the undisputed fact that the Employees share of contribution of Provident fund and ESIC was paid after the prescribed due date, and following the decision in the case of Gujarat State Road Transport Corporation (2014 (1) TMI 502 - GUJARAT HIGH COURT) wherein held that the payment of employees contribution is only allowable if the same is paid before the due date, we find no reason to interfere with the order of CIT(A) - Decided against assessee.
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2015 (10) TMI 307
Method of accounting - income recognition - Addition made on estimation basis by AO on construction of housing projects - assessee a company is engaged in the business of real estate development and construction - Held that:- Identical estimation of profit relating to Bit-III Housing Project in the preceding AY 2008-09 came up for consideration before the ITAT [2014 (1) TMI 1182 - ITAT HYDERABAD ] as held once the assessee recognised the income in accordance with the supplementary agreements, the CIT(A) cannot substitute his assessment to say that the assessee has postponed the tax liability. The CIT(A) observed that there is no basic deviation in the method followed by the assessee regarding recognising of income. However, he observed in the same breath that there is basic flaw in the method followed by the assessee to have threshold limit of 30% as the said threshold limit can be differed by various means. When there is no deviation in recognising the income by the assessee, the CIT(A) cannot recompute the profit of the assessee by observing that there is basic flaw in the method followed by the assessee to have threshold limit of 30% as the said threshold limit can be differed by various means, which is unwarranted. Accordingly, the findings of the CIT(A) are vacated and the grounds raised by the assessee are allowed.- Decided in favour of assessee. Disallowance u/s 40(a)(ia) - AO noticing that assessee has not remitted the TDS amount within the due date - Held that:- There is no dispute to the fact that assessee has remitted the TDS amount before the due date of return for the impugned assessment year as provided u/s 139(1) of the Act. The Hon'ble Calcutta High Court in case of M/s Virgin Creations (2011 (11) TMI 348 - CALCUTTA HIGH COURT ) interpreting the provisions of section 40(a)(ia) has held that if TDS amount is remitted to the Govt. account prior to the due date of return, u/s 139(1), there will be no disallowance u/s 40(a)(ia) as first proviso to section 40(a)(ia) brought to the statute by Finance Act, 2010 will apply retrospectively. Thus as first proviso to section 40(a)(ia) being retrospective in operation, if the TDS amount is remitted prior to the due date of return u/s 139(1), no disallowance is to be made u/s 40(a)(ia) of the Act. - Decided in favour of assessee.
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2015 (10) TMI 306
Disallowance u/s 14A read with Rule 8D(ii) and 8D(iii) - Held that:- None of the judgments cited by the Learned A.R. of the assessee is rendering any help to the assessee. Moreover, the only explanation of the assessee regarding source of fund used for making investment was that the same is out of interest free advances received from customers but we have seen that the advances received from customers as on 31/03/2008 were not sufficient to cover the entire investment in shares of ₹ 694.84 lacs because the advance from customers as on 31/03/2008 was ₹ 122.04 lacs only. We have also seen that even if these advances were received by the assessee from the customers, the assessee must have incurred bank charges for providing bank guarantee to the customers. Hence, under these facts, the disallowance made by the Assessing Officer as per Rule 8D is very much in order and therefore, we do not find any reason to interfere in the order of CIT(A) on this issue. - Decided against assessee.
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2015 (10) TMI 305
Revision u/s 263 - payment of hire charges on mixtures and rollers - Held that:- Adverting to the facts of the given case, we are convinced that this case was selected for scrutiny under CASS (Scheme) for a limited purpose. However, he has made his order u/s 143(3) after making necessary enquiries and investigation. The A.O. has taken one of the two possible view regarding TDS provisions. When the A.O. adopted one of the possible views, his order does not suffer from any error. Therefore, in view of the essence of precedents on the issue of revision u/s 263, the twin conditions – the order is erroneous and prejudicial to the interest of revenue, don’t co-exist in this case. Accordingly, we set aside the impugned revisional order and restore the assessment order. - Decided in favour of assessee.
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2015 (10) TMI 304
Interest income allegedly accrued at the rate of 15% on delayed payments made by the DISCOMs - CIT(A) deleted the addition - Held that:- Having regard to the facts of the case including especially the absence of any clause in the relevant agreement for the levy of interest or surcharge for the delayed payment and the order of the Andhra Pradesh Electricity Regulatory Commission, denying the claim of the assessee for such interest/surcharge, we are of the view that the assessee was not entitled to claim any interest on the delayed payments from the DISCOMs for the year under consideration, and such interest income cannot be said to have accrued to the assessee for the year, as rightly held by the learned CIT(A). In that view of the matter, we uphold the impugned order of the learned CIT(A) deleting the addition made by the Assessing Officer on account of interest allegedly receivable by the assessee from the DISCOMs on delayed payments, and dismiss this appeal of the Revenue. - Decided in favour of assessee.
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2015 (10) TMI 303
Income from house property - one is self occupied property and second is vacant property - AO has applied ALV at 7% of book value of the property and computed deemed house property income of ₹ 1,40,185/- Deduction on interest from such income - AO restricted the deduction by the AO to a sum of ₹ 1,40,193/- - Total interest of ₹ 3,50,641/- was paid - Held that:- According to section 24(b), where the property is acquired, constructed, repaired or renewed or constructed with the borrowed capital then any interest payable on such borrowed capital would be an allowable deduction. The restriction of ₹ 1,50,000/- described in second proviso is with reference to the property which is referred in sub-section (2) of section 23. Section 23(2) would be applicable to a house or part of the house which either is in the occupation of the owner for the purpose of his residence or the same is not actually occupied by the owner for the reason that owning to his employment, business or provision carried on at any other place and he is to reside at that other place in building not belonging to him and ALV of such property would be taken as nil. Undisputedly, the flat at Bandra falls under the category of property mentioned in section 23(2) of the Act as AO did not assess the ALV of the said property as income of the assessee. Therefore, provisions of second proviso to section 24 would not be applicable and the case of the assessee would fall within clause (b) of section 24 in which there is no limit for allowability of the interest and the condition is that the said property should inter-alia be acquired out of borrowed capital. In the present case as per submissions of the assessee before AO vide letter dated 13/09/2010 which are reproduced in para-4.4 of the assessment order the assessee has paid interest of ₹ 3,50,641/- as interest for Nestle Property. Therefore, interest deductible out of ALV of Nestle property could not be restricted to any amount less than the interest paid by the assessee. - Decided in favour of assessee.
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2015 (10) TMI 302
Unexplained cash credit u/s 68 - proceedings u/s. 144 - CIT(A) deleted part addition - Held that:- Out of the amount of ₹ 34,52,500 being the cash deposits into bank account, the assessee was able to establish the sources for ₹ 33,58,000 only. The assessee had explained that the cash receipts towards the contract amounts from the contractor for the year was only ₹ 33,58,000 and hence balance of ₹ 94,500 was left unexplained. The CIT(A) has rightly held that the amount of ₹ 33,58,000 which have been explained as cash receipts towards contract payment is to be deleted. We find no infirmity in the order of the CIT(A) on this count. Retention of addition of ₹ 94,500 made by the AO, the CIT(A) has rightly held that u/s. 68 addition can only be made when the assessee fails to explain the cash credit in the books of account maintained by the assessee and in this case the assessee has failed to explain the cash credit for an amount of ₹ 94,500. Hence, the same has been confirmed by the CIT(A) and we see no reason to hold a different view.
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2015 (10) TMI 301
Disallowance of expenses as not being for the purpose of the business of the appellant - as per revenue assessee has not filed any documentary evidence to substantiate its claim before the AO - Held that:- The correctness in the contention of the assessee that despite the fact that C-1 India incurred losses in the relevant previous year, the company had active business and the website of C-1 India also indicates the extensive business activities undertaken by them. We find that the company products and solutions in the Procurement space cover FRQ and Tender Management, vendor management, contract management, auction (reverse and forward), emarket place, sourcing services, consulting and supplier analytics etc. and the offer tailor made products and services based on the best practices specific to industry domain and the few screenshots from the company’s website showing the products and services offered, awards and achievements. We observe the correctness in the contention of the assessee’s counsel that these details are very much available on the internet which can be accessed by anybody. In view of the above, we find that assessee’s counsel has rightly submitted that facts indicate the extent of business activities of C-1 India which is beyond doubt. Decision of the AO as well Ld. CIT(A) is not correct in disallowing the payment of ₹ 21,00,000/- by holding that the expenditure made by the assessee was not for the business purpose. We also observe that Revenue Authorities have wrongly held that there were inconsistency in the stand of the assessee for the nature of payment to C-1 India Pvt. Ltd. as well as that assessee company is controlled by Sh. Suresh Nanda for the purpose of payment and the payment appeared to have been made of set off the losses in the public company. We find that expenditure incurred by the assessee qualify as deduction u/s. 37(1) of the I.T. Act and the assessee fully established that the expenditure in dispute has been made wholly and exclusively for the purpose of business. IN view of the above, we find that there is a force in the arguments advanced by the Ld. Counsel of the assessee, hence, we delete the disallowance of ₹ 21,00,000/-. - Decided in favour of assessee.
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2015 (10) TMI 300
Addition on account of actual payment of pension to the employees out of contribution by the assessee to the pension fund - Held that:- On perusal of the Balance Sheet for pension fund reflects that the pension contribution for the assessment year 2002-03 and the payments made to the pensioners as per Annexures-V,VI and VII totaled to ₹ 22,89,137/-. In assessment year 2003-04, the total contribution to the pension fund was ₹ 32,07,989/- and the payments made to the pensioners as per AnnexureV and VI totaled to ₹ 56,33,188/-. We find merit in the claim of the assessee that the expenditure incurred on payments being made to the pensioners is allowable in the hands of the assessee as revenue expenditure. In assessment year 2002-03 the total contribution to the pension fund during the year was ₹ 1.22 crores out of which ₹ 22,89,137/- were actually disbursed to the pensioners and hence the said expenditure of ₹ 22,89,137/- is allowable as an expenditure in the hands of the assessee for assessment year 2002-03. In assessment year 2003-04 the total contribution to the pension fund was ₹ 32,07,989/-. However, the payments made to the pensioners totaled to ₹ 56,33,188/-. We restrict the allowance of the expenditure in the hands of the assessee to the extent of pension contribution i.e. ₹ 32,07,989/- in assessment year 2003-04. In the totality of the above said facts and circumstances, we find merit in the claim of the assessee and the expenditure of ₹ 22,89,137/- is allowed in assessment year 2002-03 and expenditure of ₹ 32,07,989/- s allowed in assessment year 2003-04.
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2015 (10) TMI 299
Inclusion of reimbursement of expenses received for the purposes of computing the commission income - department’s case is that for the puprose of calculation of commission, the reimbursement of expenses, which has been received by the assessee has to be included in the gross sale value, as the commission is payable on the entire sales executed by the assessee including the part/equipment procurred locally - Held that:- Schedule ‘A’ categorically provides that commission is not to be computed on the sale orders which requires the procurement of local content by the assessee, then on such procurement of equipements by the assessee, commission cannot be imputed, because it is the reimbursment of the cost of local equipments procured. Further, it appears that this relevant piece of document which is also a part of “Distribution and Representation Agreement”, has not been examined by the Assessing Officer. Therefore, for the purpose of verification and examining of the content of this schedule, we restore the matter back to the file of AO, to adjudicate this issue afresh in light of the aforesaid document, because it changes the entire colour of the conclusion drawn by the AO. The AO will also examine the fact, whether the commission is on sale of Varian products only or not. The quantum of commission is a question of fact and cannot be imputed or presumed. In case of reimbursement of expenses from Varian Germany also, the matter is set-aside for examining, whether the commission is on gross sales or on the net of sales of the equipments directly procured by the associate enterprises. If the arrangement with this AE is also the same, then the same conclusion should be drawn in this case also. - Decided in favour of assessee for statistical purpose. Addition on account of attribution of profits by treating the assessee branch as permanent establishment of various VGCs - Held that:- This issue, whether the assessee is a PE of various Varian group of companies or not, has been discussed in detail by the Tribunal in assessee’s own case for the assessment years 2002-03 to 2006-07 [2013 (11) TMI 195 - ITAT MUMBAI]. After detail analysis, the Tribunal has finally held that, the Indian branch of the VIPL is not dependent agent of VGCs and therefore, it does not constitute PE for various Varian companies in India, as per Article 5(4) 5(5), respective DTAAs. Thus, in view of the findings given therein and as a matter of judicial precedence, we hold that the assessee branch, does not constitute PE of Varian-Italy and, therefore, the addition being 10% of gross sales made by Varian Italy to its customer in India, cannot be taxed in the hands of the assessee. - Decided in favour of assessee
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Customs
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2015 (10) TMI 330
Offence under NDPS ACT - secret information. - validity of evidence oral and documentary - From a cavity behind the tail light of the TATA Sumo Vehicle, Heroin/diacetylmorphine was recovered which after weighing was found to be 7.896 kg. Accused was apprehended and arrested. - Held that:- in this statement the appellant had stated that he used to park the vehicle in the night at the residence of his employer (PW-11) and used to pick it up the next morning which he had done on the fateful day as well. His further version is that Shera had hired this vehicle. It is not his defense that Shera had hired this vehicle from his employer Pragat Singh. If Shera had hired this vehicle from the appellant and the appellant having picked up the vehicle in the morning from the house of his owner, the further defense of the appellant that he was not aware that the contraband had been fixed in a part of the tail light of the vehicle is contrary to the rest of the defense adopted by him as the vehicle was admittedly never in possession of Shera and thus Shera would not have had a chance at any point of time to implant the contraband in the vehicle. The defense of the appellant appears to be dishonest and an afterthought. After the samples and contraband had been received by Lakhi Ram (PW-3) who was working as inspector in Valuable Godown (through PW-7) entries in the Register were made after tallying the seal impression which was affixed on case property with the facsimile of the seal appearing in the test memo. These endorsements were proved as Ex.PW-3/A and Ex.PW-3/B. The sample tested positive for diacetylmorphine. The report of the CRCL Ex.PW-6/B had also checked the purity percentage of diacetylmorphine was found to be between 79-88% of the total 7.896 kg which was above the commercial quantity (250 grams). - On no count does the impugned judgment calls for any interference. The sentence imposed upon the appellant is also the minimum. - Decided against the appellant.
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2015 (10) TMI 329
Over valuation of export goods - merchant exporters inflated the FOB value of their exports significantly and obtained the DEPB Scrips/DFIA Licenses against such exports. - duty benefits under Notifications 40/2006 and 89/2005 are sought to be denied - The demand of duty has been confirmed against the importers i.e. transferees of the scrips under Section 28 alongwith confirmation of penalties under Section 28AB. Penalties have also been imposed on the exporters and importers under Section 112/114A. Held that:-vIn the first Notification, we find no restriction on the transferee for import of goods on the basis of licenses transferred to him. The only condition applicable to the transferee is in para (2) that benefit will be allowed only if the Certificate bears endorsement of transferability by the Licensing Authority. Similarly in the second notification 89/2005-Cus relating to DEPB, the only condition relevant to the importer is condition No. (vii) which states that where benefit of exemption of duty is claimed by the person who is not Duty Entitlement Passbook Holder, such benefit shall be permissible only against specific amount of credit transferred by the DEPB holders. - in terms of the notifications there is no failure on the part of transferees availing duty benefits under these scheme. Procedure for transferability of the License/material imported against such scrips. - Held that:- authorities themselves are also responsible to the extent of not having checked the fraud at the time of exports. We should not be affected in our findings only by the fact that grant of benefit to transferees will encourage fraudsters. Transfer of DEPB scrips in the present cases will governed by the provisions of the statute, that is the Sale of Goods Act. In such a situation the Mumbai High Court decision in the case of Taparia Overseas will prevail. Resultantly, applying the ratio of Taparia, we are convinced that effect of misrepresentation in the present cases has not rendered the transaction between the original license holders and the transferees void ab-inito but rendered it voidable at the instance of the party (in this case importer) defrauded and transaction continues to be valid until the party defrauded has decided to avoid it. In the present case the licences/scrips were transferred to the appellant importers who had no knowledge of the misrepresentation by the exporters in obtaining them. The Bills of Entry were filed by the appellant importers well before the cancellation of licenses, thus imports were made under valid licenses. Therefore goods could not be subjected to levy of Customs duty for imports under Licences nor could availment of credit in DEPB scrips be denied. In view of analysis above based on judicial pronouncements, we set aside the confiscation, demands of duty and interest and penalties. In some cases, the exporter had deposited duty at the investigation stage on behalf of the importer also. In such cases too, the question of demanding duty to the extent of amount already deposited does not arise. In cases where the importer bought the goods on High Sea sales basis, misrepresentation of their part has not been proved. In any case we have stated in paras above that the transferees in cases of all appeals had no knowledge of mis-representation by the exporters. The confiscation of goods imported by the appellants who are transferees of the licenses/scrips does not arise - The demands of duty against them and penalties are set aside. - Decided in favor of assessee.
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2015 (10) TMI 328
Maintainability of appeal - Non compliance with pre deposit order - Held that:- It is seen from the Revenue's EH application that appellants have not made predeposit of ₹ 75 lakhs as ordered by the High Court. There is no proof of deposit available on record. Therefore, appellant failed to comply with Hon'ble High Court's order [2014 (2) TMI 403 - MADRAS HIGH COURT]. Accordingly, the appeal is dismissed for non-compliance of High Court order - Decided against assessee.
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2015 (10) TMI 327
Demand of Education Cess @ 2% citing CBEC Circular No.5/2005, dt.31.01.2005 - Goods imported against DEPB licence claiming exemption - Held that:- Importer/respondents had imported Crude Palm Oil in bulk at Bedi Port, Jamnagar, under DEPB scheme, without payment of duty. There was a demand of Education Cess @ 2% citing CBEC Circular No.5/2005, dt.31.01.2005. We find that the issue is no more res integra in view of the decision of Hon'ble Gujarat High Court in the case of Commissioner of Customs Vs Pasupati Acrylon Ltd - [2014 (1) TMI 169 - GUJARAT HIGH COURT], which has been upheld by Hon’ble Supreme Court as reported in [2015 (9) TMI 666 - SUPREME COURT]. The Hon'ble Gujarat High Court in the case of Pasupati Acrylon Ltd (supra) held that import made under DEPB scheme, of the goods which are fully exempt from payment of Customs duty and therefore, no Customs duty is levied and collected. The Education Cess at the prescribed rate also cannot be levied. - Decided against Revenue.
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2015 (10) TMI 326
Pre-shipment inspection – Recovery of live bomb shells – During examination of goods at time of clearance 10 Live Bombs Shells were found in consignment, therefore, entire consignment of Cast Iron Scrap alongwith 10 Live Bombs Shells was held to be liable for confiscation by Adjudicating Authority – Commissioner also upheld confiscation of goods and imposition of penalties, however, reduced redemption fine and penalty – Held that:-production of pre-shipment inspection certificates from authorized agency is not denied – Further consignments as per documents were originating from U.K., which is not war prone area – It is observed that pre-shipment inspection agency did not carry out their job properly for which appellant cannot be held responsible – There is no evidence on record to hold that appellant was aware that waste and scrap imported by them contained live bomb shells – There is no justification for confiscation of waste and scraps (other than live Bomb Shells) imported by appellant and accordingly, no penalties upon appellant under Section 112 of Customs Act, 1962 can be imposed – Accordingly redemption fine and penalty are set aside however, live bomb shells imported alongwith above melting waste and scraps are required to be absolutely confiscated – Decided in favour of Assesse.
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2015 (10) TMI 325
Amendment of prayer – Prayer to re-export seized goods – Customs seized goods imported on reasonable belief that appellants have imported full machinery in guise of parts in two different consignments to evade ADD – Appellate authority confirmed ADD with direction to authority to re-quantify ADD by taking into consideration of amended Notification No. 39/2010 and also set aside fines and penalty – Appellant filed application for amendment of prayer of their appeal and also filed stay application for setting aside operation of impugned order – Held that:- appellants seeks to amend their prayer to allow them for re-export – Considered that appellants have not made this plea either before adjudicating authority or before appellate authority – Since period of five years were lapsed from date of first import under Bill of Entry, there is merit in appellant's plea as very purpose for which they have imported goods has not been served – Therefore application for amendment allowed. Regarding stay application, goods are already under custody of customs and has also undertaken that they will not clear goods so, there is no question of stay of operation of impugned order – stay granted.
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Corporate Laws
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2015 (10) TMI 324
Challenge the decision of SEBI for setting up of SRO for distributers of mutual fund products – Petitioner contends that the Respondent was not eligible to apply as the same is not a Company registered under Section 25 of the Companies Act as on the cut-off date which is mandatory as per the SRO Regulations - Petitioner further holds that as per Regulation 10 of the SRO Regulations it should have got an opportunity of being heard before rejecting the application – Further contended by the Petitioner that SEBI was biased in favour of Respondent even before inviting applications for being recognized as SRO – Respondent contends that the said Company was holding license under Section 25(1) of the Companies Act on the date of submitting the application and registration was obtained by the appellant within the time stipulated under regulation 6 – Respondent further holds that opportunity of hearing under regulation 10 is relatable to the stage of rejecting the application of an applicant to whom in-principle approval is granted under regulation 4A. Held That:- Since the Respondent held license under Section 25(1) of the 1956 Act on the date of submitting the application under regulation 3 the same was eligible to apply and therefore SEBI was justified in entertaining the application submitted by Respondent – First contention held in favour of the Respondent. SEBI has failed to comply with the requirements of regulation 10, the same is quashed and set aside the impugned decision of SEBI - Directed SEBI to select an applicant afresh for grant of certificate of recognition in respect of distributors of mutual fund products – Court did not go onto the merits of the third contention held by the Petitioner – Petition disposed of as such – Second contention decided in favour of the Petitioner.
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Service Tax
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2015 (10) TMI 367
Refund / Rebate under Rule 5 of Export Service Rules, 2005 - Period of limitation - Activity of providing Telecommunication service to their customers/clients of Foreign Telecom Operator (FTO) - According to the Revenue, the Appellants rendered the Telecommunication services to the inland customers of FTO in India and therefore, such service cannot be treated as export of service. - Held that:- appellant should be eligible for refund of the service tax paid on input services used in or in relation to rendering of the output service which has been exported The main thrust of the argument of the learned Advocate is that there is no limitation mentioned in the notification, and therefore, the limitation would not be applied for filing the rebate claim. The Tribunal after following various decisions of High Court, held that where the statute provides the period of limitation under Section 11B of the Act, 1944 for a claim for rebate, the provisions has to be complied with as a mandatory requirement of law. In view of that, we find that the decision of the Tribunal in the case of Vodafone Cellular Ltd [2014 (3) TMI 117 - CESTAT MUMBAI] applicable in the present case. In view of the above discussion and following the decision of the Tribunal in the Appellant's own case, we allow all the appeal and the matter is remanded to the Adjudicating authority for verification as to whether the claims are time barred or not - We make it clear that the principle of unjust enrichment would not apply as held by the Tribunal in the Appellant's own case - Decided partly in favor of assessee.
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2015 (10) TMI 366
Demand for Service Tax – Service of Management, Maintenance or repairs of roads provided is totally exempted - Notification issued by the competent authority and vide amendment to the Finance Act, 2012 indicates the service is exempted from payment of tax – Department holds that the service so provided falls within the definition of service provided as given under Section 65(64) of the Finance Act – Held That:- Imposition of tax is wholly unsustainable and impermissible under law – Service mentioned was initially liable to tax as per the definition given in the Act but later the same got exemption via notification issued by Central Government – Petition is allowed and the objection raised by the Department are overruled and the impugned assessment order is quashed – Decided in favour of the assessee.
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2015 (10) TMI 365
Claim of interest on Refund - Duty paid under protest - club or association services - Denial on the ground that request for payment of interest is premature - Appeal against the order of CESTAT pending in Supreme Court - Held That:- Revenue having complied with the Tribunal's order and granted refund partially, has withheld the interest claim on a possible realisation that if this is also awarded and paid, the proceedings before the Supreme Court would be rendered infructuous. This cannot be the legal position nor can the understanding of the parties be based on the same. The Revenue had ample time to obtain such interim order from the Supreme Court as is permissible in law so that it is relieved from the obligation to pay interest on the Principal sum. However, it has not taken any such steps and there are no interim prohibitory or restraint orders in Revenue's favour. - Decided in favour of Assessee.
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2015 (10) TMI 364
Waiver of Pre-deposit - Appeal dismissed for non compliance - Held That:- Once it is found that the parameters for deciding the application for a pre-deposit condition have been properly applied, no question of law arises for consideration before this Court in an appeal under Section 35 of the Central Excise Act, 1944 - However, time to make pre deposit extended - partial stay granted.
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2015 (10) TMI 363
Waiver of Pre-deposit - Goods Transport Agency services falling under Section 65(105)(ZZP) of the Finance Act, 1994 – Dispute arises with regards to the quantum of pre-deposit - Appellant held pre-deposit as directed by the Tribunal was unfair and excessive, still deposited the same - Revenue held the amount as directed by the Tribunal was reasonable and justified – Held That:- Ends of justice would be met if the Tribunal is directed to hear the appeal on merits without insisting for any further deposit – Stay granted.
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2015 (10) TMI 362
Restoration of appeal - Appeal dismissed for non compliance with Section 35F - construction of service and man power supply service - Held that:- Appellant has not made out prima facie case for waiver of entire predeposit of entire demand. However, considering that the appellant paid ₹ 1.5 lakhs by T.R.6 challan dt. 4.12.2013, we direct the appellant to make a predeposit of ₹ 5,00,000 in two instalments. The deposit of ₹ 1,50,000/- already made by them shall be adjusted against above predeposit amount - Matter remanded back - Partial stay granted.
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2015 (10) TMI 361
Job Work activity - Manpower Supply Recruitment Agency Services - lumpsum contract of carrying out the job in the factory premises - service recipient has deducted TDS - Contract being entered by the respondent for rendering the services - Held that:- Issue in the current case is regarding the services rendered to Amitasha Enterprises, for various lump sum job undertaken at the service recipient's factory, which was the issue in those cases also. The service recipient in the case in hand and in those cases being the same and having held that similar kind of services rendered by various other service providers will not fall under the taxable services, we do not find any reason to deviate from such a view already taken. It is also to be mentioned that in those cases too revenue was in appeal against the first appellate authority's order holding same view on the same findings, as is in this case. - No infirmity in impugned order - Decision in the case of Yogesh fabricators [2015 (8) TMI 1013 - CESTAT MUMBAI] followed - Decided against Revenue.
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2015 (10) TMI 360
Business Auxiliary Service - Arrangement of loans from various banks to customers - Receipt of commission - Invocation of extended period of limitation - Held that:- extended period is not invokable in the present case. We find that the Show Cause Notice in this case was issued on 22.06.2006 and the period of demand is 01.07.2003 to 31.03.2005 and thus the entire period is beyond the normal period of one year. In these circumstances, when the extended period is not invocable, and the entire service tax was paid before the issuance of Show Cause Notice, the appellant is entitled to the benefit of Section 73(3) of the Finance Act in terms of which even the Show Cause Notice was not required to be issued in which case the question of imposing penalty would simply not arise. - impugned order unsustainable - Decision in the case of South City Motors Ltd.(2011 (11) TMI 408 - CESTAT, NEW DELHI) followed - Decided in favour of assessee.
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Central Excise
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2015 (10) TMI 375
Cenvat credit - Job worker availed the credit on the basis of endorsed Invoice - period April to August, 1994 - Invoices were in favor of principal manufacture - it is not in dispute that the applicant received the goods, which was duty paid. It is also not in dispute that the duty paid goods received by the appellant was processed for the ultimate manufacture of the end product and was given to the manufacturer. The only defect in the process of availing MODVAT credit was that the invoice was not marked by the original supplier in favour of the applicant as per the circular dated 12th September, 1995 but the same was endorsed by the manufacturer, namely, PCT. The particulars mentioned in the invoices are not in dispute nor its correctness on duty paid quantity, etc.is doubted. Held that:- In the facts and circumstances of the case, the applicant is entitled to MODVAT credit. Prior to 1st April, 1994 gate passes were considered as valid documents under which goods were cleared by the manufacturer and also could be transferred by a dealer to a third party. Two endorsements were made permissible on the gate passes - From the aforesaid, it is clear that credit would be given on an invoice bill, which indicates payment of duty on such inputs. In the instant case, the invoice bill was produced, which evidenced payment of excise duty on the inputs received by the applicant. The said bill was endorsed by the manufacturer. The fact that the invoice did not indicate the name of the appellant was only a procedural lapse, which was rectified by the endorsement made by the manufacturer in favour of the applicant. Such endorsement made cannot make the document invalid and, consequently, we are of the opinion that endorsement made by the manufacturer in favour of the applicant on the bills raised by the supplier does not make the invoice invalid and the applicant is entitled to avail MODVAT credit. - credit allowed - Decided in favor of assessee.
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2015 (10) TMI 374
Challenge to the order of Settlement Commission - in so far as it denied the benefit of proviso to Section 11-AC - reduction of penalty - further prayed for a writ of mandamus commanding the respondents to refund the excess amount of 75% deposited towards penalty. - Clandestine removal - Pan Masala, commonly known as Gutka - Held that:- the adjudicating order requires the quantification of the penalty to be made in terms of the first and second proviso of Section 11AC of the Act so that an incentive is given to the assessee to pay the duty and interest within the stipulated period in order to avail payment of duty at reduced rate of 25%, failing which, the total amount of penalty becomes payable. This option was not given in the instant case by the Settlement Commission and, therefore, to that extent the order of the Settlement Commission imposing penalty is in violation of the first proviso to Section 11AC of the Act. The Commission is required to pass orders in consonance with the provisions of the Act and cannot settle the case "dehors" the provisions of the Act. The Commission has the powers to waive the penalty, but, if it does not do so and imposes penalty, it can only do so in consonance with the provisions of the Act. The Commission cannot pass an order of penalty which over rides the provision of Section 11AC of the Act. The order of the Commission stands modified to the extent that, in the event, the petitioners pays the duty and interest determined within the stipulated period as provided under the first and second proviso to Section 11AC of the Act and the petitioners also pays 25% of the penalty so determined within the stipulated period as provided in the second proviso, in which case the petitioners would be entitled for the refund of the excess amount. - Decided in favor of assessee.
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2015 (10) TMI 373
Challenge to the order of Settlement Commission - power of the commission to remand the case back - scope of Section 32-F - Held that:- In the case of Vinay Wire and Poly Product P.Ltd. Vs. Dir. General of Central Excise [2014 (8) TMI 253 - ALLAHABAD HIGH COURT] Division Bench of this Court considered the provisions of Section 32-F and 32-L of the Act and held that a plain reading of provisions of sub-sections (5) and (8) of Section 32-F makes it clear that the Settlement Commission has to pass such order as it thinks fit and it has the power not only to provide the terms of the settlement but also to reject the application, in which eventuality, reasons have to be recorded. The power conferred on the Settlement Commission under Section 32-L to send the case back to the Central Excise Officer is in addition to the aforesaid powers of the Settlement Commission. Such a power given to the Settlement Commission under Section 32-L can be exercised, if it finds that any person who has made an application for settlement under Section 32-E, has not co-operated with the Settlement Commission in the proceedings before it. This power given to the Settlement Commission under Section 32-L does not and cannot take away the powers conferred on the Settlement Commission under sub-section (5) and (8) of Section 32-F. The specific instances of clandestine removal of goods, discrepancies of value recorded in the invoices and those recorded in the private record against the same invoice numbers and use of parallel invoices as alleged in the show cause notice, were not explained. The Settlement Commission also found that the stand taken by the applicant and the Department are at huge variance inasmuch as the petitioners merely accepted 10% of the demand and has contested the evidence collected by the Revenue without any convincing explanation. - Order of Settlement Commission sustained - decided against the assessee.
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2015 (10) TMI 372
Relevancy of statements under certain circumstances - principles of natural justice - Cenvat Credit - allegation of fake/manipulated documents - non receipt of the goods - difference of opinion is whether the lower authorities have violated the principles of natural justice by denying cross examination for the appellant and whether the matter needs reconsideration by the adjudicating authority for following the mandate of Section 9D of the Central Excise Act, 1944. Held that:- the provisions of section 9D mandates adjudicating authority to examine the witnesses on whose statements reliance has been placed and on exercise of such examination; and if cross-examination thereof is not undertaken, such statement needs to be discarded in the law. The provisions of Section 9D were interpreted by the Honourable High Court of Delhi in the case of J&K Cigarettes Ltd [2009 (8) TMI 64 - DELHI HIGH COURT]. The impugned order is found to be cryptic and in violation of principles of natural justice, non-speaking and further violates the provisions of Section 9D of the Central Excise Act. Thus, the impugned order is set aside and the matter is remanded back to the adjudicating authority with a direction to provide opportunity of hearing to the appellants in accordance with law, more particularly to provide opportunity of cross-examination of persons, the statements to whom have been relied upon by the Revenue and to consider the evidence on record or now produced in the de novo proceedings, more particularly documents like Goods Receipt Note, Material Requisition Note, Sales Tax Register including Way Bill Register, Form-C Register, sales invoice of watch case to the different buyers of the appellant etc. The appellant is also directed to appear before the adjudicating authority with a copy of this order and seek opportunity of hearing.
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2015 (10) TMI 371
Manufacture - SSI exemption - customization of the already built up motor vehicle - body building - exemption under Notification No. 3/2001 denied on the ground that the assessee availed the Cenvat credit of the input which is in violation of condition of said notification. - Held that:- They are doing cosmetic changes as per the requirement of the customer inside and outside of the vehicle. In our considered view these activity do not amount to manufacture for the reason that the original duty paid motor vehicles remained as motor vehicles only, except some changes and due to these changes original identity of the product in terms of Central Excise provisions does not change As per the fact of the present case it is undisputed that in the activity of customization of the car, the respondent has only made partial changes in the completely built up vehicle therefore they have neither fabricated any body/equipment nor mounted the same on chassis. Therefore the activity of customization carried out by the respondent does not fall under the four corners of chapter note 3. - Decided in favor of assessee. As regard the dropping of the demand on account of alleged removal of add on kits and parts and shortage found in the physical stock verification in Powai and Silvassa units, we find that there are serious conflicts between the allegation made in the show cause notices and Commissioner's findings in the impugned orders. The Ld. Counsel also made submissions that due to claim of SSI Exemption demand is not sustainable and also it is time bar. We therefore find that as regard demand of excise duty on alleged removal of add on kits and parts from Powai and Silvassa units needs re-consideration. - matter remanded back on this matter. Determination of turnover for the purpose of SSI exemption - extended period of limitation - Matter remanded back for reconsideration.
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2015 (10) TMI 370
Manufacture of Plastic Pallets - Captive consumption of pallets - exemption under Notification No. 67/95-CE - Held that:- the impugned Pallets are manufactured in the factory of the appellants and used within the factory of production in or in relation to the manufacture of final products. The said Pallets are also covered in the description of inputs, and final products manufactured by the appellants are also covered by the description of final products specified in the notification.Therefore, the impugned pallets are clearly eligible for exemption under Notification No. 67/95-CE dated 16.3.1995 for captive consumption within the factory of the appellants. - Decided in favor of assessee. Cenvat Credit in relation to defective goods and not fit for further consumption - debit notes were issued to supplier of inputs and recovered amount from suppliers. - Held that:- the fact of the recovery of the cost of the wasted inputs should not be a ground for asking them to reverse the Cenvat credit availed, because it is not the Departments case that the inputs have been removed as such, without being put to use. There is no legal authority with the Department for such recovery. Also it is seen from the debit notes that the appellant has recovered only the cost of the material and not excise duty portion. - Decided in favor of assessee.
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2015 (10) TMI 369
Deemed manufacturing - SSI Exemption - assessee put their brand name "The Heels" and also MRP - trading in shoes - purchasing of footwears in unit containers bearing brand name like Ben Sharman, Hitz, etc.. The shoes are received in unit containers with brand name declared on the containers but without any MRP. According to the department, in respect of these footwear, the respondent put their MRP sticker on the containers themselves - Held that:- The Commissioner (appeals) has held that the MRP stickers were being put on the footwear and not on the containers, and therefore, this activity would not amount to manufacture under section 2F (iii). However, even if it is accepted that the MRP stickers were being put on the containers and not on the footwear and the activity amounts to manufacture, in our view, since the brand name owners of the brand names affixed on the containers had not been identified in the sense that the statutory certificate of the ownership of the brand name of the person who had been alleged to be the owner of the brand names have not been produced by the Revenue, in view of the judgment of the Tribunal in the case of CCE-Cochin Vs. Geo Engineering Works [2003 (9) TMI 237 - CESTAT, BANGALORE] benefit of SSI exemption cannot be denied. There is no dispute that the sales turn over of the third category of footwear along with the sales turn over of the footwear bearing the respondent's own brand name was within the SSI exemption limit during each of the three financial year. In view of this without going into the question as to whether the activity of the respondent amounted to manufacture or not, we hold that the even if it is treated as manufacture, they would be eligible for SSI exemption, there would be no duty demand. - Decided against the revenue.
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2015 (10) TMI 368
Claim of interest on refund - delayed refund has been sanctioned u/s 11B - Held that:- It is clear from the facts of the case that department had not carried out the necessary verifications while disposing of the refund applications and when the matter reached to the Hon'ble CESTAT it categorically directed to conduct verification to clinch the issue. Therefore, there was no fault on the part of the appellants and the appellants were not responsible for delay that was caused for coming to correct decision in the matter. Department directed to pay interest, on the refund amount sanctioned, calculated at the notified rate/s, to the appellants as per provisions of Section 11BB of the Central Excise Act, 1944, for the period of delay as mentioned above. - Decided against the revenue.
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2015 (10) TMI 357
Valuation - price escalation clause - levy of interest on differential duty - Demand of interest u/s 11AB - Whether the interest was not leviable under Section 11AB of the Act particularly in view of the fact that the price indicated in the purchase orders were final during the period of supply of goods - Held that:- Time when the goods were cleared, the price which was charged from M/s. Maruti and the duty was paid on the said price. No doubt, some additional amount is received thereafter, on account of price escalation. However, it is not coming on record as to under what circumstances such price escalation was given. No such case was set up by the Revenue that the price was understated or depressed at the time of clearance of the goods and the additional amount was received subsequently, by a suspicious kind of arrangement. Even when the inquiries were made, we are conscious of the fact that the respondent-assessee had not appeared when summons were issued to clarify the position. However, in any case, the inquiries were made from M/s.Maruti and therefore, the concerned officer could find out from M/s. Maruti as to under what circumstances, price escalation was given and whether that was a factor contributing to the depression of price at the time of clearance of the goods. - it is difficult to hold that the aforesaid additional amount received at a subsequent stage was to be added for the purpose of arriving at the transaction value. - Decided against Revenue.
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2015 (10) TMI 356
Denial of concessional rate of duty - Imposition of interest and penalty - Non fulfilment of conditions of notification - whether the respondent/assessee is entitled to the benefit of Notification No. 10/02-CE dated 01.03.2002 - Held that:- It is an admitted case that duty was neither paid in cash nor through account current as the duty was paid through CENVAT Credit Account and therefore the assessee did not fulfill the second condition mentioned in the notification. - Tribunal has decided the case in favour of the assessee by observing that clearing of goods with payment of excise duty with current account was only an error and the assessee had not violated the more substantial condition viz no CENVAT Credit should be taken in regard to the goods. This is clearly a faulty approach on the part of the Tribunal. It is stated at the cost of repetition that the assessee was required to fulfill the condition in stricto senso viz to pay the duty either in cash or through account current if it wanted to avail the benefit of exemption notification and not through adjustment of CENVAT Credit which is not the mode prescribed in the aforesaid conditions. Once we find that the conditions have not been fulfilled the obvious consequence would be that the assessee was not entitled to the benefit of this notification. - However, Since the mistake is a bonafide mistake, Interest and penalty would not be charged - Decided partly in favour of Revenue.
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2015 (10) TMI 355
Validity of High Court's order - legality and constitutionality of Rule 5 of the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 - Held that:- Decision of this Court in “Commissioner of Central Excise, Chandigrah v. Doaba Steel Rolling Mills”, (2011 (7) TMI 10 - SUPREME COURT OF INDIA), has no application in the present situation. In Doaba Steel Rolling Mills’ case (supra) the legality and constitutional validity of Rule 5 of 1997 Rules was not put in issue - Impugned orders are set aside - matter restored before high court - Decided in favour of assessee.
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2015 (10) TMI 354
Duty demand - Manufacturing activity - Held that:- the process of cutting betel nuts into small pieces and addition of essential/non-essential oils, menthol, sweetening agent etc. did not result in a new and distinct product having a different character and use. Matter is squarely covered by the judgment of this Court in 'Crane Betel Nut Powder Works v. CCE, Tirupathi' [2007 (3) TMI 6 - SUPREME COURT OF INDIA] which has been followed in 'Satnam Overseas Ltd. v. CCE, New Delhi' [2015 (4) TMI 356 - SUPREME COURT] as well as 'Servo Med Industries Pvt. Ltd. v. CCE, Mumbai' [2015 (5) TMI 292 - SUPREME COURT] - appeal is squarely covered in favour of the assessee - Decided in favour of assessee.
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2015 (10) TMI 353
MRP based Valuation of goods - Section 4A - Held that:- Invoking the provisions of Section 4A of the Central Excise Act, 1944, the Revenue, for the purposes of excise duty, valued the said goods taking the maximum of the three MRPs mentioned on the packaging. This is clearly in consonance with Explanation 2(a) to Section 4A of the Act. - No error in order passed - Decided against assessee.
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2015 (10) TMI 352
Duty demand - Levy of duty on High Speed Diesel - Held that:- High Speed Diesel (H.S.D.) which is used for flushing out the Superior Kerosene Oil (S.K.O.) from the pipeline and thereafter, brought back into the refinery and distillation is undertaken to separate S.K.O. and H.S.D., would not attract any excise duty. - Decision in the case of CCE, Cochin v. M/s. Cochin Refineries Ltd. [1999 (12) TMI 189 - CEGAT, MADRAS] followed - Decided against Revenue.
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2015 (10) TMI 351
Duty demand - Base yarn - Captive consumption - Held that:- On waste no duty is payable and this aspect has been dealt with by the Tribunal in Modipon Ltd. vs. C.C.K.Meerut,[1999 (8) TMI 193 - CEGAT, NEW DELHI]. Insofar as the present case is concerned, the Tribunal has observed in the impugned order that the authorities are treating 'loss' and 'waste' as the same i.e. there was 'waste' of 6.5% of the base yarn during texturizing. In view thereof, we are of the opinion that the case of the respondent-assessee was squarely covered by the decision in the case of Modipon Ltd.(supra) as mentioned above and the Tribunal rightly allowed the appeal of the respondent-assessee setting aside the order passed by the authorities below. - Decided against Revenue.
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2015 (10) TMI 350
Remission of duty - Loss of goods in fire - Supreme Court dismissed the appeal filed by the assessee against the decision of High Court [2015 (4) TMI 166 - ALLAHABAD HIGH COURT] wherein high court held that assessee failed to lead any evidence whatsoever before the authority concerned to show as to what steps it has taken to avoid accident, if any, caused by fire and that accident in question was for unavoidable reasons.
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2015 (10) TMI 349
Denial of SSI exemption - opportunity of opting our for one unit availing benefit for other units - Supreme Court dismissed the appeal as only meagre amount is involved. The appeal was filed by the Revenue against the decision of Tribunal[2005 (4) TMI 155 - CESTAT, KOLKATA] wherein Tribunal held in favour of assessee following the decision of Dum Dum Metalloy Industries Pvt. Ltd. [2000 (7) TMI 173 - CEGAT, KOLKATA].
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2015 (10) TMI 348
Denial of MODVAT Credit - injunction moulding machine - Supreme Court dismissed the appeal filed by the Revenue against the decision of Tribunal [2005 (2) TMI 613 - CESTAT, CHENNAI] since no substantial amount is involved. In the impugned order Tribunal held that in respect of the goods for the manufacture of which the subject machine was used, demand of duty was raised and the appellants have since conceded such demand. Where the final products were duty-paid, the manufacturer was entitled to Modvat credit on eligible capital goods used for the manufacture of such products.
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2015 (10) TMI 347
Duty demand - manufacturing activity - activity of Punching, Notching, Bending in case of carline and edge bending in case of Body Side Pillars - Since during the pendency of appeal, the High Court has remanded the matter back to CESTAT, therefore, Supreme Court dismissed the appela filed by the assessee as withdrawn. The appeal was filed against the decision of Tribunal [2005 (5) TMI 428 - CESTAT, NEW DELHI], wherein tribunal held that both the authorities below have recorded the concurrent findings that activities amounted to manufacture as new products/articles came into existence which appellant No. I supplied to the appellant No. 2. No substantiate evidence on the record to disturb these findings of the authorities below.
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2015 (10) TMI 346
Determination of annual based capacity production - Supreme Court dismissed the appeal filed by the Revenue agsinst the decision of Tribunal [2005 (3) TMI 316 - CESTAT, NEW DELHI], as the issue involved had already been considered by the Tribunal while remanding the case in Final Order No. A/387-88/99-NB, dated 4-5-1999 [1999 (113) E.L.T. 177 (Tri. - Del.)] and, therefore, the appellant could not issue another show cause notice and levy the excise duty inasmuch the earlier proceedings which had attained finality operate as res judicata. Tribunal in the impugned order held that commissioner was duty bound to consider the application dated 18-5-1998 for determination of actual production of the appellants - If Section 3A(4) of the Central Excise Act gives a right to the appellants to get benefit under the said Section, the same cannot be taken away by declaration filed under the Rule.
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2015 (10) TMI 345
Denial of SSi exemption - Value of clearances - Clubbing of clearances - Supreme dismissed the appeal filed by Revenue by holding that it is nowhere pointed out in the show cause notice as to which unit is the principal unit and which is the dummy one, we are of the opinion that Customs, Excise and Service Tax Appellate Tribunal, New Delhi (CESTAT) has rightly held that there could not have been the clubbing of the two units. - Appeal was filed against the decision of Tribunal [2005 (2) TMI 294 - CESTAT, NEW DELHI] wherein Tribunal held that it has not been disclosed that which out of the two firms, was a principal firm and which was a dummy one. Only inter se relationship of the partners of both these firms and availment of certain facilities by them commonly, had been alleged in the show cause notice. The duty demand had been raised against both of them. The adjudicating authority also accordingly confirmed the duty demand against both the firms with penalties. The order of the adjudicating authority being contrary to the law laid down by the Apex Court [1997 (5) TMI 50 - SUPREME COURT OF INDIA], in our view, has been rightly set aside by the Commissioner (Appeals).
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2015 (10) TMI 344
Benefit of Exemption Notification No. 48/89-C.E., dated 1-3-1989 - Classification of goods - Bar of limitation - Supreme Court dismissed appeal filed by the Revenue as no ground is taken, challenging the finding on limitation. The appeal was filed by the Revenue against the decision of Tribunal [2005 (2) TMI 604 - CESTAT, NEW DELHI] wherein Tribunal held that appellants were regularly filing the classification list which was duly approved and also maintaining record as Mixing register, Digester register as per Trade notice. Therefore, no suppression can be alleged against the appellants.
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2015 (10) TMI 343
Duty Demand - Television set with infra-red ray window consequential circuits inside - Bar of limitation - Supreme Court dismissed the appeal filed by the Revenue since there are no legal heirs of the assessee that are pursuing the case further since the assessee is dead.
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2015 (10) TMI 342
Levy of duty on Waste of glass wool - Supreme Court dismissed the appeal filed by assessee against the decision of Tribunal [2005 (4) TMI 524 - CESTAT, NEW DELHI] by holding that all the authorities below have decided the matter against the appellants herein and since no question of law has arise - Tribunal in the impugned order followed the assessee's own previous case [2000 (8) TMI 119 - CEGAT, COURT NO. IV, NEW DELHI] held that the wool is excisable.
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2015 (10) TMI 341
Exemption under Notification No. 4/97-C.E., dated 1-3-1997 - manufacture of man-made staple fibre - Held that:- Tribunal by impugned judgment [2005 (1) TMI 144 - CESTAT, NEW DELHI] has come to a categorical finding that the respondents herein are not manufacturing man-made staple fibre by polymerization of organic polymers and, therefore, for this reason it is held that the respondents are entitled to exemption under Notification No. 4/97-C.E., dated 1-3-1997. This being the finding of fact arrived at by the Tribunal on the basis of the report of Northern India Textile Research Association (NITRA), we find no reason to interfere with the impugned order dated 10-1-2005 passed by the Tribunal - Decided against Revenue.
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2015 (10) TMI 340
Admissibility of credit on capital goods (power unit) which have been sold but not removed from premises - transactions of sale of power unit and simultaneous lease of premises are wisely resorted to by the assessee as a device to avoid the tax liability on it - said purchaser, after purchasing the power unit from the assessee, has been enjoying the same as its absolute owner and has been supplying to the assessee the power generated from the said power unit on payment basis - Supreme dismissed the appeal filed by assessee against the decision of High court [2007 (12) TMI 210 - KARNATAKA HIGH COURT] wherein High Court held that assessee-company lost its ownership and also control over the said power unit - Tribunal without proper appreciation of the said transactions has allowed the appeal of the assessee-company.
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2015 (10) TMI 339
Classification of goods - Classification under sub-heading 2710.90 or under sub-headings 2710.11, 2710.12 and 2710.13 - Supreme Court dismissed the appeal filed by the Revenue against the decision of Tribunal [2004 (9) TMI 242 - CESTAT, NEW DELHI]; wherein Tribunal has followed the decision of Delhi Bench of the Tribunal in Jagdamba Petroleum Pvt. Ltd. v. Commissioner of Central Excise, Noida reported in [2003 (10) TMI 123 - CESTAT, NEW DELHI]. The appeal of the Revenue in the said case was dismissed by this Court [2007 (4) TMI 672 - SUPREME COURT].
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2015 (10) TMI 338
Duty demand - Revenue contends that electricity is exempted and therefore they are liable to pay the amount 8% / 10% on value of the electricity under Rule 6 of the Cenvat Credit Rules - Held that:- Tribunal in the case of Hi-tech Carbon (2003 (3) TMI 238 - CEGAT, NEW DELHI) has discussed in detail this issue - Following the same - Impugned order is set aside - Decided in faovur of assessee.
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2015 (10) TMI 337
Waiver of pre deposit - Clandestine removal of goods - Held that:- Facts states by M/s. Maruthi Ploybags Pvt. Ltd., although prima facie convinces to certain extent to appreciate violation of natural justice, the material gathered during investigation equally demonstrates prejudice caused to Revenue by it. Accordingly, direction for pre-deposit against all the appellants is warranted in the fitness of the circumstances of the case. - Making overall assessment of the facts and circumstances of the case and striking out balance between the case of the Revenue and pleadings of the appellants, the appellants are directed pre-deposit of the following amount within six weeks - Stay granted.
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2015 (10) TMI 336
Benefit of CENVAT credit of duty paid on various capital goods - Subject items cannot be considered to be covered by the definition of capital goods inasmuch as they are classifiable under Chapters 29, 35 and 38 - Held that:- Traps in question are required to be used for avoiding the attack by the tobacco beetles. If the same are not used, raw materials as also the final products are likely to be damaged, in which case, they would not be in a position to be cleared. The items in question, may not be strictly covered by the definition of capital goods but admittedly they are required to be used for manufacture of final product and as such can be considered as inputs. The Hon'ble Karnataka High court in the case of Rane (Madras) Ltd Vs CCE Bangalore [2007 (12) TMI 208 - KARNATAKA HIGH COURT] has allowed the CENVAT credit on universal measuring machine used by the assessee for measurement of jigs, fixtures and gauges which are intended for manufacture of intermediary products as well as measuring some of the final products. It is well settled law that where a particular process is integrally connected with the ultimate production of the goods, but for that process, manufacture of goods would be commercially inexpedient, articles required in that process would be considered as having been used in the manufacture of goods. It is nobody's case that tobacco beetle is required to be managed and if not managed the production of cigarettes cannot take place commercially, though theoretically it may be possible to do so. As such anything used for managing the tobacco beetle infestation is required to be considered as an input having been used in relation to manufacture of final products. Demand is also barred by limitation - Decided in favour of assessee.
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2015 (10) TMI 335
Availment of CENVAT Credit - supplementary invoices - contravention of the provisions of Rule 9(b) of CENVAT Credit Rules, 2004 - Held that:- Appellant availed CENVAT Credit of ₹ 10,36,468.00 on the basis of supplementary invoices issued by their sister unit at Mumbai. Commissioner of Central Excise, Mumbai has passed an order dt.25.11.2005 to their sister unit at Mumbai demanding differential duty of ₹ 10,36,468.00 as the Mumbai unit failed to correctly determine the assessable value in respect of the goods declared to their sister unit (i.e. the Appellant herein). It was observed that since mis-declaration of the amount was admitted by the Mumbai unit, the extended period of limitation would be invoked. But, Mumbai unit paid duty and issued supplementary invoice to the sister unit - Department has not disputed the transaction between the Appellant and its sister unit. It is noted that the differential duty was paid for price of escalation, which was paid by sister unit. Hence, the decision of Honble Karnataka High Court in the case of Karnataka Soaps & Detergents Ltd (2010 (2) TMI 524 - KARNATAKA HIGH COURT) would be applicable in the present case. As the decision of Honble High Court is directly on the issue, the decision of Mumbai Tribunal as relied upon by the learned Authorised Representative is not applicable. - CENVAT Credit taken by the Appellant on the strength of supplementary invoice issued by their sister unit cannot be denied and demand of duty alongwith interest and penalty cannot be sustained - Decided in favour of assessee.
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2015 (10) TMI 334
Confiscation of goods - Imposition of redemption fine - Non availability of goods - Held that:- Appellants are not contesting the demand of duty. They have also paid the duty before issue of the Adjudication order. Hon’ble Gujarat High Court in the case of M/s Exotic Associates Vs Commissioner of Central Excise - [2009 (11) TMI 293 - GUJARAT HIGH COURT], held that the benefit of reduced penalty under Section 11AC of the Central Excise Act, 1944 would be given if the option was not given to the Appellant earlier. I agree with the submissions of the learned Advocate that the goods are not available and therefore, confiscation and imposition of redemption fine are not sustainable. The Larger Bench of the Tribunal in the case of M/s Shiv Kripa Ispat Pvt. Ltd (2009 (1) TMI 124 - CESTAT MUMBAI) held that the goods cannot be confiscated when not available, redemption fine is not imposable. - The confiscation and imposition of redemption fine are set aside. - Decided partly in favour of assessee.
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2015 (10) TMI 333
Denial of refund claim - non availability of sufficient documents - Bar of limitation - Held that:- Advocate drew the attention of the Bench to the relevant letter issued by Superintendent, Central Excise. The Range Officer requested the Appellant to provide several documents, and thereafter the assessee resubmitted the refund claim with all the documents as directed by the Range Officer. The Tribunal in the case of Indra Processors Vs Commissioner, Central Excise, Jallandhar - [2008 (7) TMI 777 - CESTAT, NEW DELHI] held that resubmission of refund claim was at the instance of Central Excise officers and therefore, the date of filing of refund claim would be taken into consideration for the purpose of limitation. I find that the assessee filed refund claim within the stipulated period. On perusal of the letter dt.29.04.2010 of the Range Officer, it is seen that the Range Officer returned the papers on the ground that it is not possible to process to refund claim in the absence of the documents as mentioned therein and the assessee was directed to do the needful. Hence, the Commissioner (Appeals) erroneously accepted the date of filing of the refund claim is on 29.09.2010. Assessee by letter dt.21.10.2010 had categorically requested to withdraw the amount of ₹ 6,47,473.00 as they had no documentary evidence. In the certificate dt.22.04.2011, I do not find any specific mention of this amount. Hence, both the authorities below has rightly rejected the refund claim of ₹ 6,47,473.00 - impugned order is modified to the extent that the rejection of refund of ₹ 19,26,095.00 as time barred is set aside. The Adjudicating authority is directed to decide this matter as per the direction of Commissioner (Appeals) and sanction the refund claim except the rejection of refund of ₹ 6,47,473.00, which is upheld. - Decided partly in favour of assessee.
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2015 (10) TMI 332
Denial of CENVAT Credit - Capital goods - Held that:- On perusal of the detailed verification report and the observations of Commissioner (Appeals), I find that these items were found to be used as components in the manufacture of Match Plates, Moulding Boxes, Sand Mixers, Conveyor and Furnaces. According to the Department, Match Plates, Moulding Boxes, Sand Mixers, Conveyor and Furnaces are supporting in the manufacture of castings. The appellant submitted a Chartered Engineer’s certificate dt.14.06.2011 stating that these items were used in the manufacture of accessories and components including moulding boxes for smooth running of the machinery. It is also stated that the actual manufacturing process is carried out by Match Plates, Moulding Boxes, Sand Mixers, Conveyor and Furnaces. It is apparent from the report and the certificate that these items were used as components of the machinery for manufacturing of casting. - it is clearly evident from the records that these items were used as components of Match Plates, Moulding Boxes, Sand Mixers, Conveyor and Furnaces used in the manufacture of final product casting. As the items are used as components, the Appellants are eligible to avail CENVAT Credit thereon. - impugned order is not sustainable - Decided in favour of assessee.
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2015 (10) TMI 331
Duty demand - Clandestine removal of goods - Shortage of goods - Penalty u/s 11AC - Held that:- Entire shortage of CTD bars was noticed during physical stock taking. The department has noticed shortage of 104.46 MTs. I find that there was no further investigation carried out except recording of statement from the M.D. of appellant company. The department has not established actual shortage so as to attribute clandestine removal. - any shortage of finished goods not accounted in the records is liable for excise duty. Every shortage of finished goods cannot be attributed as clandestine removal and unless it is proved to the contrary with evidence. Further, I find that adjudicating authority has demanded duty on 111.82 MTs whereas the actual shortage was 102.476 MTs as per the SCN. I find that appellants are liable for payment of excise duty on the quantity of 102.476 MTs found short in their accounts on the date of stock taking. - appellant is liable for excise duty and it is restricted to actual shortage of 102.476 MTs found short during physical stock taking and the demand is upheld to that extent. Penalty is set aside. - Decided partly in favour of assessee.
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CST, VAT & Sales Tax
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2015 (10) TMI 359
Levy of interest - tribunal confirmed the demand of interest without considering the heavy amount of refund, due for the previous period, available for adjustment against the dues for the succeeding year - Held that:- On the date when the appellant exercised the option under section 52 of the Act for adjustment of refund for the year 1999-2000 against the tax dues of the year 2000-2001, his entitlement to refund for the year 1999-2000 was not yet adjudicated, therefore, there was no question of exercising option under section 52 of the Act at that stage. The appellant ultimately succeeded in its appeal before the first appellate authority on 8.11.2004, whereupon the appellant became entitled to the refund. Therefore, amount due by way of refund under an order dated 8.11.2004 could not have been adjusted against the tax liability of the year 2000-2001. It may be that for the period the Department retained the moneys of the appellant, it may be entitled to interest thereon from the date on which such amount had been paid, however, the claim for adjustment of such amount towards the tax dues of the year 2000-2001 at the relevant time was wholly without any basis. Under the circumstances, it is not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise to a question of law, much less, a substantial question of law, so as to warrant interference. - Decided against assessee.
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2015 (10) TMI 358
Evasion of central excise and VAT on the paper purchased - Reopening of assessment - Reversal of ITC - Held that:- goods were dispatched to M/s Malhotra Book Depot of Cuttack. The Tribunal vide earlier order dated 5.7.2010 had ordered for reopening of the assessment to examine the transactions relating to the purchase made by it for which ITC was claimed and particularly regarding the purchase of goods which were intercepted while being sent to Cuttack. The said order had become final as its validity was never assailed by the appellant. The ETO-cum-Designated Officer, Jalandhar-I relying upon the report of the Assistant Excise and Taxation Commissioner, Mobile Wing, Chandigarh that both the said firms were fictitious and not genuine, disallowed the ITC against the purchases of paper worth 19,90,035/- and imposed penalties amounting to 79,602/- under Section 58 of the Act and 10,000/- under Section 60 of the Act. The appellant failed to challenge the verification report of the Assistant Excise and Taxation Commissioner, Mobile Wing, Chandigarh. - no question of law much less substantial question of law arises in this appeal - Decided against assessee.
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Indian Laws
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2015 (10) TMI 376
Promotion criteria - Diploma Holder Project Engineers (Junior) upon acquiring degree / qualification of ‘AMIE’ - whether would be entitled to count their experience of service prior to acquisition of such qualification for the purpose of eligibility of 3 years total experience of service for promotion to the post of Project Engineer (Sr.) in the quota fixed for Degree Holders? - Held that:- The relevant regulation does not contemplate any reduced total experience for promotion for a diploma holder who may acquire degree or AMIE qualification while in service. Even on acquiring such higher qualification the concerned diploma holder is neither given any advantage vis-à-vis other diploma holders nor is he ousted from the right of consideration against 30% quota provided for diploma holders. In such a situation in order to enter into the water-tight compartment of 20% quota for the degree holders with three years’ experience of service, a diploma holder with AMIE qualification must show that he fulfills the entire eligibility criterion, i.e., he is a degree holder with three years’ experience of service as a degree holder. Such water-tight compartment and separate quotas cannot be rendered meaningless so as to affect the prospect of promotion of the degree holders by inducting into that category a diploma holder who does not have three years’ experience of service as a degree holder. In the absence of any such provision in the Regulations, no equivalence can be permitted in such a situation because even a diploma holder with seven years’ experience of service is confined to a prospect or chance of promotion only against 30% quota for the diploma holders. So far as the word ‘total’ occurring before the words ‘experience of service’ is concerned, from the circumstances and past history relating to the service, it must be understood in the context of service rendered in regular capacity along with service rendered on ad-hoc or officiating or temporary basis. The word ‘total’ cannot be construed to mean service rendered either as diploma holder or degree holder. If this had been the intention, the word ‘total’ would have been included only in the context of three years’ total experience of service of degree holders and not in the context of seven years’ experience of service as diploma holders. A diploma holder in any case is required to have seven years’ experience of service for being eligible for promotion and hence the word ‘total’ would be otiose or redundant in the aforesaid context. No doubt, the High Court has now clarified and held that service rendered on adhoc or officiating basis prior to regularization cannot be counted for acquiring eligibility for promotion and that aspect is no longer under controversy. Hence the use of the word ‘with’ or ‘total’ in the relevant regulation does not make any difference and the judgment in the case of Shailendra Dania (2007 (4) TMI 689 - SUPREME COURT) applies to the present case, as contended by learned counsel for the appellants. We find merit in these appeals and they are accordingly allowed to the extent of reversing the views of the High Court in respect of Question no.2 as noted by the Division Bench in the common judgment under appeal. We hold that the Project Engineers (Junior) recruited on the basis of diploma, upon their acquiring the qualification of ‘AMIE’, are not entitled to count their experience of service prior to acquisition of such qualification for the purpose of eligibility for promotion to the post of Project Engineer (Senior) against the 20% quota fixed for promotion of degree holder Project Engineers (Junior). In order to claim promotion against such 20% quota the three years’ experience of service must be acquired after obtaining the qualification or degree of AMIE. We direct the Board and its authorities to treat the writ petitions filed in the High Court as disposed of in the light of our aforesaid views and to determine the controversies raised in the writ petitions in that light by granting relief to the eligible persons expeditiously and preferably within 4 months, without upsetting the transactions which had taken place earlier and were not under challenge in the writ petitions. In other words, the regular promotions made in the past prior to 1992, which were not subject matter of writ petitions filed in 1992 will not be re-opened on account of views expressed in this judgment.
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