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TMI Tax Updates - e-Newsletter November 10, 2015 Case Laws in this Newsletter: Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Articles Diwali Bonus “Swachh Bharat Cess” SWACHH BHARAT CESS Swachh Bharat Cess @ 0.5% on value of all taxable services levied from November 15, 2015 DEDUCTION IN RESPECT OF INTEREST ON LOAN TAKEN FOR HIGHER EDUCATION News Change in Tariff Value of Crude Palm Oil, Rbd Palm Oil, others – Palm Oil, Crude Palmolein, RBD Palmolein, others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver notified Government Signs Loan Agreement with Asian Development Bank (ADB) for $273 Million Loan under Rural Connectivity Investment Program for Improving Rural Roads in States of Assam, Chhattisgarh, Madhya Pradesh, Odisha and West Bengal Government Approves Four (4) Proposals of Foreign Direct Investment (FDI) Amounting to ₹ 384.45 Crore Approximately RBI Reference Rate for US $ Notifications Customs 107/2015 - dated 9-11-2015 - Cus (NT) Fixation of T V of Edible oil, Brass, Poppy seed, Areca nut, gold and Sliver Circulars / Instructions / Orders Customs 3/Ad.IV/2015 - dated 13-8-2015 Renaming of DG Inspections (Customs & Central Excise) as Directorate General of Performance Management under CBEC Highlights / Catch Notes Income Tax Registration under Section 10 (23C)(vi) denied - expenditure on advertisement made does not necessarily means that the activity of the petitioner is commercial in nature or is being done with the intention to earn more profit. Such finding given by the authority is patently erroneous - HC Visit to Get Source Non deduction of TDS u/s 194A - Loan amount raised from the State Government and the interest payable to the Government - assessee was unable to show that the payment of interest was made to the Government except to repeat that the corpus fund was created by the Government from which the loan was advanced to the appellant - benefit of section 196 cannot be extended - HC Visit to Get Source Eligibility for deduction under section 80IA - whether the Bangalore International Airport Ltd. [BIAL] is a statutory body u/s 80IA(4)(i) of the Act? - Held Yes - AT Visit to Get Source Trusts for the benefit of two minor children - provisions of section 64(1)(iii) invoked to include the income of trust into the income of assessee (Individual) - the deferment of the benefit is beyond the period of minority of the assessee's three sons, since the assets are to be received by them when they attain majority, the provisions of section 64(1)(v) have no application. - SC Visit to Get Source Entitlement to exemption u/s 11(2) - The memorandum of association does not permit the profits to be distributed between the members. The profits are provided to be utilised for services of the public utility, would thus clearly fall and will qualify for exemption within the meaning of "charitable purpose", as defined in section 2(15) - HC Visit to Get Source Determination of unaccounted turnover - There is no provision to simply incorporate the demand made in the show-cause notice issued under the central excise laws for the purpose of computation of tax under the Income-tax laws. - HC Visit to Get Source Interest earned on grants made by the State Government kept in fixed deposits pending utilization - interest on all these fixed deposits are considered to be capitalised and not revenue receipts to treat it as an income. - HC Visit to Get Source Income from 'seconds' - block assessment in the light of the provisions of section 158BA - No law permits maintenance of two sets of accounts, i.e., one unaccounted and the other accounted - HC Visit to Get Source Taxability of the amount waived by the mutual funds/financial institutions - the amount of principal waived by the financial institutions cannot be taxed under section 41(1) as the same had not been debited to the profit and loss account in the earlier years nor had been claimed as a deduction from taxable income - HC Visit to Get Source Disallowance of interest paid to the bank - the appellant/assesse had advanced an interest free loan to its sister concern - there would be a direct benefit on account of the advance made by the appellant to its sister company if the same improves the financial health of the sister company and makes it a viable enterprise. - deduction on interest allowed - HC Visit to Get Source Customs Benefit of duty drawback - Conversion of free shipping bills into drawback shipping bills - Circular No. 04/2004 dated 16.01.2004 - there was no reason for denying the benefit only on the ground that at the time when the appellant had sought the duty drawback, the goods could not be physically examined. - SC Visit to Get Source Undervaluation of goods - no documentary evidence was produced by the assessee to support the plea that the goods at Chennai port were inferior in quality than the goods imported and cleared at Mumbai port - Tribunal has not only misinterpreted the statements of two partners of the assessee, it has also sidetracked and ignored other relevant material. - SC Visit to Get Source Classification of goods - Bridges/Aerobridges - required to be used for the modernization of airport facilities - benefit of Notification No. 36/96-CUS dated 23.07.1996 and Notification No.11/97-CUS dated 01.03.1997 allowed - SC Visit to Get Source Corporate Law Reduction of paid up share capital seeked - the procedure stipulated in Section 101(2) and (3) of the Companies Act, 1956, for the settlement of list of creditors will not apply. The prayers sought for in this petition are granted and the petition is allowed. - HC Visit to Get Source Service Tax Fraudulent availment of CENVAT Credit - Inference of fraudulent transactions in the matter of payment of commissions to sub-brokers - The facts remained unnoticed if the same would have not been detected by the department. - Demand with penalty upheld - AT Visit to Get Source Denial of refund claim - Bar of limitation - The relevant date for refund in the case of rebate should be from the date of payment of service tax on the taxable services exported. - AT Visit to Get Source Claim of interest - Delayed refund - Unjust enrichment - appellant is entitled for claim of interest on delayed refund - AT Visit to Get Source Rent-a-Cab Service provided to SEZ unit - benefit of Notification 4/2004-ST dated 31/03/2004 - There is no dispute that the appellant herein rendered service of tour operator for transportation of employees of a unit situated in SEZ - exemption allowed. - AT Visit to Get Source Demand of service tax - cum-tax benefit expended to the assessee - value received for the taxable purpose needs to be considered as cum-tax amount if the service tax is not charged. - AT Visit to Get Source Effective rate of service tax will be 14.5% inclusive of Swachh Bharat Cess w.e.f. 15-11-2015 Visit to Get Source Central Excise Refund - unjust enrichment - excess payment of duty due to valuation dispute - in terms of legally enforceable Agreement of the appellant with HLL, the loan amount, was to be returned to HLL as soon as the Appellant gets refund of the excise duty; the refund would not be hit by the bar of unjust enrichment - AT Visit to Get Source MRP based Valuation u/s 4A - affixing of sticker showing revised MRP over the printed MRP on the packages is in accordance with Rule 6 of the Standards of Weight and Measures (Package) Rule, 1977 and it fulfils the requirement of the declaration in terms of Section 4A of Central Excise Act, 1944 - AT Visit to Get Source Classification of goods - Classification under CSH 1701.31 or 1701.39 - Clearance of sugar as levy sugar - It is nobody s case that the said Act is not Central act. The tariff heading 1701.31 is applicable in the cases in hand. - AT Visit to Get Source Automobile cess - whether the appellant being job worker i.e. manufacturer of body building is required to pay automobile cess or not as per Automobile Cess Rules, 1984 read with Industries (Development and Regulation) Act, 1951 or not - Held No - AT Visit to Get Source CENVAT Credit - suo moto re-credit of Cenvat credit which was reversed at the instance of Audit Team on GTA service - appellant is entitle for Cenvat credit - demand set aside - AT Visit to Get Source Reversal of cenvat credit on goods lost / written off - returned goods - on written off value, Cenvat credit is not admissible - AT Visit to Get Source VAT Challenge to coercive recovery of alleged Value Added Tax - no provision is pointed out to us under which the department can recover disputed tax even before passing any order by competent authority - respondents are directed to return three cheques - HC Visit to Get Source Claim of sales tax exemption on rice bran - It is not for the selling dealer to go after the purchasing dealer to find out as to in what manner he utilized the goods, which it has purchased on the strength of the Declaration Forms in order to be entitled to the deduction. Such a requirement would fasten an impossible burden on the selling dealer. - HC Visit to Get Source Case Laws: Income Tax 2015 (11) TMI 414 Trading addition - rejection of books of accounts - CIT(A) deleted the addition confirmed by ITAT - Held that:- the manner in which the manufacturing activity should be carried out must be left to the assessee who is the best judge in such matters; in fact the assessee pointed out that how impractical it would be to stop the production process merely to verify the moisture content of the logs at the point of time when they are fed into the plant to satisfy the curiosity of the Assessing Officer or to comply with his unreasonable direction. It seems to us that the assessee has a valid point here. As regards the use of cotton stalks, the assessee had a technical problem when they got entangled in the machinery and for a temporary period, the assessee switched over to the use of eucalyptus wood but it could not be continued for long because it is costlier than the cotton stalks. Had the assessee continued to use eucalyptus wood in the place of cotton stalks, perhaps the gross profit rate would have been lower. It is also true that the Assessing Officer had not pointed out any suppression of sales or inflation of expenses. For these reasons, we are of the view that the Assessing Officer was not justified in not accepting the results of the MDF Division. - Decided against revenue. Addition on account of interest on interest free loans - Held that:- The facts and circumstances relating to the disallownace of the interest of the year under appeal are identical with the earlier years. Therefore, in line with our decision for those years, the disallowance of the interest referable to the advance made to Novika Investment is deleted, while the disallowance of the interest referable to the advances made to other four sister concerns is sustained. The deletion of the disallownace of the interest referable to the advances made to Southern Synthetics Limited is sustained as in the earlier years. - Decided partly in favour of assessee. Disallowance of inauguration expenses - ITAT allowed the claim - Held that:- The findings recorded by the CIT(A) as well as the Tribunal are pure findings of fact where they have recorded that the said expenditure was incurred exclusively for the purpose of assessee's business. The said findings have not been shown to be illegal or perverse in any manner by the learned counsel for the appellant, warranting interference by this Court. - Decided against revenue. 2015 (11) TMI 413 Registration under Section 10 (23C)(vi) denied - as per revenue the petitioner has several objects and was not running the institute solely for educational purposes - Held that:- A categorical assertion has been made that the petitioner is only running an educational institution and is not carrying on any other activity. This fact has not been denied by the respondents in their counter affidavit. The finding given by the Commissioner that the petitioner-society does not exist solely for educational purposes is based on no reasoning. No finding has been given on this aspect. In our opinion, this finding is perverse. Mere fact that the petitioner is making profit does not indicate that it is carrying on the activity solely for the purpose of making a profit and that it ceases to be for an educational purpose. In our opinion, the predominant test as given by the Supreme Court in American Hotel (2008 (5) TMI 17 - SUPREME COURT OF INDIA) and Queen's Educational Society (2015 (3) TMI 619 - SUPREME COURT ) has to be considered. Further, we find that the Commissioner has considered the profit before applying the depreciation, which is incorrect. The authority is required to consider the profit after allowing depreciation and is also further required to consider the investment made by the petitioner in the creation of fixed assets. These investments of capital nature are required to be considered while calculating the money spent by them in the educational activity. Further, the fact that the petitioner is generating profit or is carrying on commercial activity and is making a huge expenditure in advertisement is a fact, which is not required to be considered at the stage of considering the application for grant of registration. These factors would come into play under the 3rd and 13th proviso at the stage of considering the return and making the assessment. Further, expenditure on advertisement made does not necessarily means that the activity of the petitioner is commercial in nature or is being done with the intention to earn more profit. Such finding given by the authority is patently erroneous. - Decided in favour of assessee. 2015 (11) TMI 412 Validity of notice under Section 158-BD - Whether recording of satisfaction by the Assessing Officer of the person searched is a necessary ingredient to validate block assessment proceedings under Section 158-BD? - Held that:- In the present case, as already noticed, the Revenue has been unable to produce the satisfaction note of the AO of the searched person, to the effect that there was "cogent and demonstrative" material to conclude that the seized documents showed undisclosed income belonging to the Assessee. The absence of such satisfaction note on the file also explains why the AO resorted to Section 147 of the Act to reopen the assessment in the first place instead of issuing notice under Section 158 BD of the Act. Consequently, on this short ground of there being no satisfaction note, which is a mandatory requirement under Section 158 BD of the Act, as explained by the Supreme Court in Commissioner of Income-Tax v. Calcutta Knitwears (2014 (4) TMI 33 - SUPREME COURT), the entire block assessment proceedings are held to be bad in law. In the circumstances of the present case, the notice under Section 158-BD issued to the Assessee is held to be bad in law. - Decided in favour of assessee. 2015 (11) TMI 411 Disallowance of 'Export Promotion Expenses'- as per ITAT foreign travelling expenses incurred by the President, Director and the Executive Director were not incurred wholly and exclusively for the purpose of the business - Held that:- Before the authorities including the Tribunal the deduction was sought on the aforesaid travel expenses only on the ground that these expenses have been incurred for the purpose of meeting its foreign buyers. Undisputedly, it has only one buyer who is situated at Singapore. No one cannot dispute the proposition that it is for the assessee concerned to decide as to what expenses is necessary for its business and it is not for the Assessing officer to disallow the expenses which the assessee feels is necessary for its business. In the present facts, the case of the assessee before the Tribunal is that those expenses are necessary to meet the foreign buyers. In this view of the matter, the view taken by the Authorities under the Act to restrict the expenses of travel only to Singapore visit where the foreign buyer of the appellant is situated, cannot be said to be perverse. It is a possible view. The fact that the assessee's expenses on travel have been allowed for subsequent years or have been set aside by the Tribunal in the earlier Assessment Years or subsequent Assessment Years, would not by itself govern the issue. It all depend upon the claim made for deduction and the contention of the assessee with regard to what was that expenditure incurred in that particular year. Transfer pricing adjustment - denial of comparable - Held that:- We find that the three comparables which were relied upon by the appellant-assessee before the CIT(A) had not been examined by CIT(A) on merits of its applicability for the subject Assessment Year nor did the TPO, as same was not put before it for the subject Assessment Year. No fault can be found with the order of the Tribunal to the extent it holds that merely because a comparable has been used in the subsequent assessment year for determining the ALP, it would not ispo facto apply to determine the ALP in the subsequent Assessment Year. The issue be restored to TPO to determine whether or not the three comparables companies which have admittedly have been accepted as comparables for subsequent Assessment year can be considered as comparables for the subject assessment year. If the answer is in the affirmative by the TPO, then necessary adjustment would be needed to be done so as to make an appropriate comparison between the sale made by the appellant-assessee to its A.E. and the independent sales made of three comparables, alongwith the four comparables already on record. - Decided in favour of the appellant-assessee 2015 (11) TMI 410 Assessment u/s 153A - Addition under Section 69C - Held that:- The only document seized during the search in question was a cheque book pertaining to the Assessee which reflected issue of cheques during the period August 2008 to October 2008, relevant to the AY 2009-10. The facts and the questions of law that arise in these appeals are similar to the facts and the controversy involved in RRJ Securities Ltd. (2015 (11) TMI 19 - DELHI HIGH COURT ) as documents seized had no relevance or bearing on the income of the Assessee for the relevant assessment years and could not possibly reflect any undisclosed income. This being the undisputed position, no investigation was necessary. Thus, the provisions of section 153C, which are to enable an investigation in respect of the seized asset, could not be resorted to; the AO had no jurisdiction to make the reassessment under Section 153C of the Act - Decided in favour of the Assessee and against the Revenue. 2015 (11) TMI 409 Non deduction of TDS u/s 194A - Loan amount raised from the State Government and the interest payable to the Government - whether the issue is covered under Section 196(i) of the Act? - Held that:- The assessee was unable to show from the perusal of Annexures A-4 and A-5 appended along with the appeal that the payment of interest was made to the Government except to repeat that the corpus fund was created by the Government from which the loan was advanced to the appellant. A perusal of Annexure A-4 shows that it is a certificate issued by the PAIC that the corpus fund belong to the State Government of Punjab and an income arising out of it belonged to the Government of Punjab. Annexure A-4 is a self-serving certificate issued without any corroboration from any supporting material. Annexure A-5 also does not advance the case of the appellant as it is the minutes of meeting of Corpus Fund Committee only. Thus, it cannot be said that the interest paid by the appellant was to the Government and would fall under Section 196(i) of the Act. - Decided against assessee. 2015 (11) TMI 408 Validity of notice issued under section 201(1)/201(1A) - whether the said notice was time barred in view of the provisions of section 201(3) as it then existed? - Held that:- In the present case, no new information has come and the impugned notice that was issued on January 20, 2015, was on the basis of the same information in respect of which the notice dated February 17, 2014, had been issued. Thus, those proceedings which had ended and attained finality with the passing of the order dated December 5, 2014, of this court in cannot now be sought to be revived through this methodology adopted by the Assessing Officer. Even otherwise, in so far as the financial year 2007-08 is concerned, the period for completing the assessment under section 201(1)/201(1A) has expired on March 31, 2015. Therefore, looked at from any point of view, in so far as the facts of the present case are concerned, the impugned notice dated January 20, 2015, and subsequent order dated March 17, 2015, cannot be sustained. The same are set aside. The writ petition is allowed. 2015 (11) TMI 407 Disallowance of guest house expenses - ITAT allowed the claim - Held that:- The appeal by the Revenue to the Tribunal was dismissed in view of the fact that sub-section (4) of section 37 of the Act was deleted from the Act with effect from April 1, 1988. Thus, disallowance of the guest house expenses for the assessment year 1999-2000 in the absence of section 37(4) of the Act was not proper. Thus in view of the clear and self-evident position of law during the subject assessment year, viz., absence of section 37(4) of the Act, no fault can be found with the impugned order. Thus, no substantial question of law arises. - Decided against revenue. Non deduction of TDS - payment to master card international and visa card international - disallowance under section 40(a)(i) - Indo-US DTAA - Held that:- In allowing its appeal, the Tribunal rightly followed its decision in the case of Central Bank of India v. Deputy CIT [2010 (9) TMI 661 - ITAT MUMBAI] wherein on similar facts, it was held that even if no TDS is deducted, the payments made to visa card international and master card international on account of fees could not be disallowed in view of article 26(3) of the Indo-US Double Taxation Avoidance Agreement (DTAA).- Decided against revenue. Notional loss arising from unmatured foreign exchange contracts - whether allowable when the loss is neither a definite liability nor a legal liability as held by ITAT ? - Held that:- o ground made out in the appeal memo or in any affidavit as to why the Revenue is preferring an appeal against the impugned order on the above issue when an identical question decided by the Special Bench of the Tribunal in Bank of Baharain and Kuwait (2010 (8) TMI 578 - ITAT, MUMBAI ) has been accepted by the Revenue. - Decided against revenue. 2015 (11) TMI 406 Undisclosed income - to be assessed in the hands of the Hindu undivided family in so far as the lottery business is concerned as per ITAT - Held that:- The sales tax registration was done on August 2, 1999, and within two months, the father died. Therefore, the question of the father maintaining the books of account would not arise. After the death of the father, the son is carrying on with the said business. If he had maintained the accounts and if he had disclosed all the amounts in the accounts, it seems that it would not have been treated as undisclosed income. It is because books were not maintained and returns were not filed, the authorities laid their hands on the undisclosed income. Therefore, the Tribunal was justified in the facts of the case in holding that the said amount is to be assessed in the hands of the Hindu undivided family in the aforesaid circumstances and not in the hands of the assessee in his individual capacity. In fact during such proceedings, the assessee had requested the authorities to adjust this undisclosed income and seized cash as advance tax for Hindu undivided family and, therefore, we do not find any infirmity in the order passed by the Tribunal, which calls for interference. Hence, we answer the first substantial question of law in favour of the assessee and against the Revenue. As the finance business is concerned, it is to be assessed as an association of persons under the name Easy Finance and not under the name of the assessee in his individual capacity as per ITAT - Held that:- In so far as the second substantial question of law is concerned, it is not in dispute that the seized materials disclose the names of the three persons, namely, Manish, Jagadish and Rajesh. They were carrying on the finance business under the name and style of Easy Finance as an association of persons.In fact the notice under section 158BC of the Act was issued in the capacity as an association of persons only on November 8, 2002. Even before issue of that notice, returns had been filed in the status of an association of persons and the tax had been paid. The returns filed by the assessee on August 24, 2001, for all the three years from 1999-2000, 2000-01 and 2001-02 shows undisclosed income as nil. In the light of the aforesaid evidence on record the undisclosed income relatable to the finance business is to be assessed in the hands of the association of persons and not as an individual. Thus, second substantial question of law is answered in favour of the assessee and against the Revenue. 2015 (11) TMI 405 Determination of net profit rate - Held that:- A perusal of the order passed by the Income-tax Appellate Tribunal reveals that though a reference is made to these principles but while recording its opinion that a net profit rate of 5 per cent. should be applied, the Tribunal has not referred to the relevant factors that formed the foundation of its opinion, applying a net profit rate of 5 per cent. It would be appropriate to point out that on the basis of the same material, the Assessing Officer determined a net profit rate of 10 per cent. the Commissioner of Income-tax (Appeals) at 8 per cent. and the learned Tribunal at 5 per cent. The learned Tribunal was, therefore, required to record reasons by reference to relevant facts before determining the net profit rate of 5 per cent. Consequently, without expressing any opinion on the merits of the controversy and while affirming the rejection of account books, the matter is restored to the Income-tax Appellate Tribunal, Amritsar Bench. Amritsar, for determining net profit rate in terms of the ratio in Telelinks v. CIT (2014 (12) TMI 570 - PUNJAB & HARYANA HIGH COURT ). - Decided in favour of revenue for statistical purposes. 2015 (11) TMI 404 Disallowance of the expenses debited as cost of Employees Stock Option (‘ESOP’ ) - Held that:- The Court has been shown a copy of the decision dated 19th June 2012 passed by the Division Bench of Madras High Court in CIT-III Chennai v. PVP Ventures Ltd. (2012 (7) TMI 696 - MADRAS HIGH COURT ) where a similar question was answered in favour of the Assessee by holding that the cost of ESOP could be debited to the profit and loss account of the Assessee. This Court has also in its decision CIT v. Oswal Agro Mills Ltd.(2015 (11) TMI 301 - DELHI HIGH COURT) held that the expenditure incurred in connection with issue of debentures or obtaining loan should be considered as revenue expenditure. - Decided in favour of assessee. 2015 (11) TMI 403 Unexplained credit u/s.68 - Out of 6000 persons only 14 of them have given confirmation saying that they have given deposit - Assessing Officer considered 15% deposit as genuine and the balance he considered as unexplained income - Held that:- In the present case, the Assessing Officer had given ample of opportunity at various level to prove the genuineness of the deposits. Inspite of this, the assessee failed to prove the genuineness of the deposits. In our opinion, no useful purpose will be served by remitting the issue back to the file of the Assessing Officer for fresh consideration. Hence, the order of the Assessing Officer is confirmed. This ground of the appeal of the assessee is rejected. Disallowance treating purchase of newsprint from capital market as undisclosed income of the assessee - Held that:- Since the stock appeared to have been used by the assessee himself or it was lying in stock with him, the assessee derived benefit from this business. Such benefit needs to be made eligible to tax within the meaning of section 28(i). Alternatively, it was proposed that the assessee can be assessed under section 41(1) of the Act for the cessation of liability. The assessee did not respond to the proposal. As such, the Assessing Officer included the sum as the undisclosed income of the assessee for the assessment year 1996-97 in the light of the definition of undisclosed income contained in section 158B(b) of the Act. No particular argument was advanced in his regard at the time of hearing. Order was contested on the ground of opportunity. Having heard both the parties and after perusing the records, we uphold the order of the Assessing Officer on this count. - Decided against assessee. Advance paid to Mr. Vivek treated as undisclosed income - Held that:- We find there is no entry with regard to advance to Mr. Vivek in the cash flow statement. Being so, we consider this amount as undisclosed income of the assessee. Accordingly, this ground of the appeal of the assessee is rejected.- Decided against assessee Fixed deposits in Canara bank treated as undisclosed income - Held that:- There are entries for E65,000/- for the assessment year 1987-88 and E1,00,000/-for the assessment year 1992-93. Being so, we direct the Assessing Officer to give due credit to the tune of E1,65,000/- only. This ground of the appeal of the assessee is partly allowed. Difference in cost of construction which was treated as undisclosed income - Held that:- The addition is made only based on the DVO report and the variation between the amount shown by the assessee for construction and the DVO report which is less than 10.4% and there is no seized material reflecting this addition. Being so, we are inclined to delete the addition. This ground of the appeal of the assessee is allowed.- Decided against revenue E1,94,000/-being the personal expenses which was treated as undisclosed income - Held that:- The addition is only based on estimation and there is no seized material available on record to suggest the personal expenses. Being so, we delete the addition made by the Assessing Officer on this count.- Decided against revenue Purchase of E2,15,000/- as household articles which was treated as undisclosed income - Held that:- There is no seized material found during the course of search suggesting this addition. The addition is made only on estimation basis hoping that they were purchased during the course of block period. The assessee is being a senior person having means to purchase these articles from known sources as there is no evidence to suggest that it has acquired from unaccounted income of the assessee. Accordingly, this addition is deleted. This ground of the appeal of the assessee is allowed.- Decided against revenue Deposits in Canara bank - Held that:- In the cash flow statement these deposits was not reflected in the respective assessments years. Being so, it is treated as undisclosed income of the assessee. This ground of the appeal of the assessee is dismissed. - Decided against assessee Unaccounted investment of E1,00,000/- for the assessment year 1991-92 - Held that:- This amount of E1,00,000/- was reflected in the cash flow statement for the year ending 31.03.1991. Accordingly, this ground of the appeal of the assessee is allowed. - Decided against revenue Unexplained Gift payment - Held that:- These gifts are reflected in the cash flow statement for the financial year ending 31.03.1992 for E20,000/-, 31.03.1993 for E20,000/-. 31.3.1994 for E25,000/-, 31.03.1995 for E25,000/- and 31.03.1996 for E30,000/-, totaling to E1,20,000/-. Being so, we find that the assessee has explained this expenditure and accordingly, this addition is deleted. This ground of the appeal of the assessee is allowed.- Decided against revenue Investment in Tamilarasi which was treated as undisclosed income - Held that:- This amount of E52,500/- was reflected in the cash flow statement for the year ended 31.03.1992. Being so, the addition cannot be made. Hence, we delete the addition made by the Assessing Officer. Accordingly, this ground of the appeal of the assessee is allowed. - Decided against revenue Purchase of land at Thanjavur treated as undisclosed income - Held that:- These amounts reflected in the cash flow statement at E1,24,000/-as on 31.3.1992 and E89,000/- as on 31.03.1993. Being so, the additions are deleted as the assessee has explained the investments. This ground of the appeal of the assessee are allowed.- Decided against revenue Interest suspense account - Held that:- The assessee has not furnished the details of these expenditure. In our opinion, whenever assessee claimed an expenditure it should be incurred wholly and exclusively for the purpose of business. In the absence of any evidence to substantiate this expenditure, we decline to appreciate the argument of the assessee counsel. This ground of the appeal of the assessee is rejected.- Decided against assessee Unexplained credits which was treated as undisclosed income - Held that:- The Assessing Officer has given ample of opportunities to prove the identity, genuineness and creditworthiness of the transactions. Whenever any amount found credited in the books of account of the assessee in the previous year relevant to the assessment year, it is the duty of the assessee to prove the above ingredient of the transaction. Since the assessee was not able to produce necessary evidence to prove the transaction with the supporting evidence, we are inclined to confirm the addition in respect of these substantive credits. Hence, this ground of the appeal of the assessee is dismissed.- Decided against assessee Credit card payments which was treated as undisclosed income - Held that:- These credit card payments are not reflected in the cash flow statement. In our opinion, the credit card payments cannot be considered as explained. Being so, this addition is sustained. This ground of the appeal of the assessee is rejected.- Decided against assessee Undisclosed investment in jewellery - Held that:- In the cash flow statement for the year ending 31.03.1996, this amount of E2,00,000/- was not reflected in the cash flow statement filed before us. Being so, the addition of E2,00,000/- is sustained. This ground of the appeal of the assessee is dismissed.- Decided against assessee Undisclosed foreign travel expenses - Held that:- The contention of the ld. Authorised Representative for assessee is that addition is made only on estimation basis in the block assessment. One cannot estimate the expenditure in block assessment without any seized material suggesting the expenditure. Being so, we are remitting this issue back to the file of the Assessing Officer to verify the nexus between the seized material and the expenditure incurred and decide the issue afresh and if there is no seized material in respect of this addition, the Assessing Officer cannot make addition on this count. This issue is remitted back to the Assessing Officer for fresh consideration. This ground of the appeal of the assessee is partly allowed for statistical purposes. 2015 (11) TMI 402 Addition on account of third party evidence - additions on account of unaccounted sales - search and seizure action under section 132 - assessment u/s.153A - Gross profit ratio @ 35% of unaccounted sales - Held that:- The facts of the present case are identical to the facts before Pune Bench of Tribunal in Shri Vinit Ranawat Vs. ACIT (2015 (6) TMI 608 - ITAT PUNE) and where the assessee has denied to have received any payment from M/s. DIL through Shri Sohan Raj Mehta and in the absence of any incriminating documents having been found from the residence of the assessee during the course of search on 20.01.2010 and where the assessee is not dealing with M/s. DIL in his individual capacity, the ratio laid down by the earlier decision of Tribunal as referred to in Shri Vinit Ranawat Vs. ACIT (supra) , is squarely applicable to the facts of the present case. The company Pragatiram Pvt. Ltd., in which the assessee is a director was supplying raw material to M/s. DIL and the assessee is not supplier of any items of raw material to M/s. DIL. In the above said facts and circumstances, where it is not established that name PC Jain of Mumbai written in the said document was in fact the assessee before us and in the absence of any evidence having been found to establish that the assessee before us has received the said amounts from Shri Sohan Raj Mehta on account of M/s. DIL group, we find no merit in the aforesaid addition made in the hands of the assessee. In view thereof, we set-aside the order of CIT(A) and direct the Assessing Officer to delete the addition of ₹ 1.76 crores in assessment year 2004- 05. In view of our deleting the said addition in the hands of the assessee, there is no merit in estimating any gross profit on such undisclosed receipts. Accordingly, the main objections raised by the assessee are allowed and the ground of appeal raised on alternate base is dismissed. The grounds of appeal raised by the Revenue are also dismissed. - Decided in favour of assessee. 2015 (11) TMI 401 Eligibility for deduction under section 80IA - whether the Bangalore International Airport Ltd. [BIAL] is a statutory body u/s 80IA(4)(i) of the Act? - Held that:- As considering the constitution of BIAL, the shares of different parties in the said company and it is a statutory body as it is discharging statutory functions of the Government. - Decided in favour of assessee. 2015 (11) TMI 400 Transfer of Development Rights (TDR) - Chargeability to capital gain - whether acquisition of TDR (additional FSI) would amount to capital gains in the case at hand? – Held that:- Only that which was capable of acquisition at a cost would be included within the provisions pertaining to the head “Capital gains” as opposed to assets in the acquisition of which there was no cost at all. As in the present case, the situation was that the FSI/TDR was generated by the plot itself. There was no cost of acquisition in any of the appeals before us. Accordingly, following the view taken in Sambhaji Nagar Co-operative Housing Society Ltd. [2014 (12) TMI 1069 - BOMBAY HIGH COURT] we find that none of the questions proposed by the Appellant raise any substantial question of law. - Decided in favour of assessee. 2015 (11) TMI 399 Disallowance made under section 14A - interest bearing borrowed funds were utilised by the assessee entirely for the purpose of its business and investment in tax-free bonds having been made by the assessee out of its own funds as submittted by revenue - ITAT allowed assessee claim - Held that:- The Commissioner of Income-tax (Appeals) and the Tribunal both held that there was no warrant for such an estimation. The Commissioner of Income-tax (Appeals) held that no interest expenditure can be allocated to the earning of the tax-free income received by the assessee on tax-free bonds. The Tribunal held that the Commissioner of Income-tax (Appeals) rightly interfered with the order of the Assessing Officer. The decision of the Commissioner of Income-tax (Appeals) was upheld by the Tribunal and the view taken by the Commissioner of Income-tax (Appeals) as also the Tribunal is inconsonance with the law laid down by this court in the case of CIT v. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY ]. The view taken also has been in consonance with the law laid down by this court in the case of Godrej and Boyce Mfg. Co. Ltd. v. Deputy CIT reported in [2010 (8) TMI 77 - BOMBAY HIGH COURT ] 328 ITR 81 (Bom). In these circumstances, we find that merely because that there is a common pool of funds, a presumption that the investment yielding tax-free returns is made by the assessee out of its own funds cannot be raised. Such a view of the Tribunal, therefore, does not raise any substantial question of law. - Decided against revenue. 2015 (11) TMI 398 Trusts for the benefit of two minor children - provisions of section 64(1)(iii) invoked - the Assessing Officer included the said income in the income of the assessee and taxed as such - Held that:- No doubt two minor children of the appellant were the beneficiaries under the two trusts. It is also not in dispute that the said trustees were the partners in the firm and had their shares in the income as partners in the said firm. However, the entire controversy revolves around the question as to whether it could be treated as income of a "minor child". This controversy has arisen because of the reason that the income that had been earned by the trustees was not available to the two minor children till attaining the age of majority. As pointed out above, this was one of the conditions contained in the trust deeds that the income so generated by the trust, shall not be given to or spent for the benefit of the minor children till they attain majority and the money was to be handed over to them only on attaining the majority which would mean that the income was available to these persons when they cease to be the minors. This very question came up before this court in almost identical circumstances in the case of CIT v. M. R. Doshi [1994 (9) TMI 3 - SUPREME Court] wherein held as in this case the deferment of the benefit is beyond the period of minority of the assessee's three sons, since the assets are to be received by them when they attain majority, the provisions of section 64(1)(v) have no application. In the present case, as pointed out above, specific stipulation which is contained in both the trust deeds is that in case of demise of any of the minor the income would accrue to the other child. Therefore, the receipt of the said income is also contingent upon the aforesaid eventuality and the two minors had not received the benefit immediately for the assessment year in question, viz., as "minor" children. Thus High Court [2003 (10) TMI 33 - UTTARANCHAL High Court ] does not lay down the correct proposition of law. 2015 (11) TMI 397 Additional depreciation - denial of claim as the assessee has failed to furnish form 3AA along with the return of income - Held that:- Even if form 3AA was not filed along with return of income but the same was filed during the assessment proceedings and before the final order of the assessment was made that would amount to sufficient compliance. It is not in dispute that the assessee is entitled to the additional depreciation - Decided in favour of assessee. 2015 (11) TMI 396 Entitlement to exemption under section 11(2) and section 11(1)(a) - whether the assessee-respondent is a charitable institution as contemplated under section 2(15)? - assessee-company is a stock exchange registered as public limited company under the Companies Act, 1956, and is alleged to be a charitable institution under section 12A - Held that:- We have gone through the objects of the Jaipur Stock Exchange Ltd. in the memorandum of association. The Jaipur Stock Exchange Ltd. is a company, registered by the Income-tax Department as charitable trust under section 12A of the Income-tax Act. The object of the stock exchange is not only to further the interests both of the brokers and dealers but also the public interested in securities, to assist, regulate and control the trade or business in securities, to maintain high standards of commercial honour and integrity, to promote and inculcate honourable practices, and just and equitable principles of trade and business, to discourage and to suppress malpractices, to settle disputes, and to decide all questions of usage, custom or courtesy in the conduct of trade and business. The memorandum of association does not permit the profits to be distributed between the members. The profits are provided to be utilised for services of the public utility, would thus clearly fall and will qualify for exemption within the meaning of "charitable purpose", as defined in section 2(15) of the Act. In our view, the question is covered by the judgment of the hon'ble Supreme Court in Delhi Stock Exchange Association Ltd. v. CIT (1997 (3) TMI 11 - SUPREME Court), and CIT v. Andhra Chamber of Commerce (1964 (10) TMI 19 - SUPREME Court ), CIT v. Bar Council of Maharashtra (1981 (4) TMI 8 - SUPREME Court ) - Decided in favour of assessee. 2015 (11) TMI 395 Determination of unaccounted turnover - Whether the Tribunal was right in holding that the turnover determined by the Commissioner of Central Excise in his de novo adjudication proceedings consequent to the remand order of the CESTAT can be adopted for the purpose of determining the unaccounted turnover? - Held that:- The finding of the Commissioner of Income-tax (Appeals) as well as the Tribunal that merely on the basis of the show-cause notice issued by the Central Excise Department, determination of tax under the Income-tax Act cannot be made, as it is not incumbent on the Income-tax authorities to take into consideration only the materials made available by the Central Excise Department but the authorities are bound to make an independent enquiry, before passing any order, which enquiry has not happened in the present case. There is no provision to simply incorporate the demand made in the show-cause notice issued under the central excise laws for the purpose of computation of tax under the Income-tax laws. The provisions under the two laws, viz., the Central Excise Act and the Income-tax Act, operate in two different fields. Without there being an independent enquiry by the concerned taxing authorities the demand made under the provisions of the Central Excise Act cannot be incorporated as such, more so when the notice of demand has been modified by the adjudicating authority. See K. T. M. S. Mohammed v. Union of India [1992 (4) TMI 6 - SUPREME Court -]. Thus no hesitation to hold that the method adopted by the Commissioner of Income-tax (Appeals) with regard to taxation under the Income-tax Act, as affirmed by the Tribunal, is the correct method of determining the income based on the unaccounted turnover. - Decided against revenue Disallowance under section 40A(3) - CIT(Appeals) held that the additions made under section 40A(3) of the Act are to be deleted since the basis of the additions had been faulted and are no more valid and since the income is estimated, no disallowance on this account can be made affirmed by the Tribunal - Held that:- As already held in the former portion of the order that the assessment order came to be passed only on the basis of the show-cause notice issued by the Central Excise Department and no independent enquiry has been conducted by the Assessing Officer. The order of the Tribunal in concurring with the Commissioner of Income-tax (Appeals) on this issue is justified and this court finds no reason to differ with the same. - Decided against revenue 2015 (11) TMI 394 Peak of unexplained debit - Held that:- 'Peak credit' theory-One of the commonest defects of an assessee, where a single credit or number of credits appear in the books in the account of any particular person side by side with a number of debits is that they should all be arranged in serial order, that a credit following a debit entry should be treated as referable to the latter to the extent possible and that, not the aggregate but only the 'peak' of the credit should treated as own explained. To give a simple example, suppose there are credits in the assessee's book in the account. A or ₹ 5,000 each on October 1, 1990, and again on November 5, 1990, but there is a debit by way of repayment shown on October 27, 1990, the expla nation will be that the credit appearing on November 5, 1981, has or could have come out of the withdrawal/repayment on October 27, 1981. This plea is generally accepted as it is logical and acceptable (whether the creditor is a genuine party or not), provided there is nothing in the material on record to show that a particular with drawal/repayment could not have been available on the date of the subsequent credit. A refinement or extension of the plea occurs where the credits appear not in the same account but in the accounts of different per sons. Even then, if the genuineness of all the person is disbelieved and all the credits appearing in the different account are held to be the assessee's own moneys, the assessee will be entitled to set off and a determination of the peak credit after arranging all the credits in the chronological order. - Decided against Revenue. 2015 (11) TMI 393 Rejection of books of accounts - whether the books have not been rejected under section 145 of the Act in the present case and in the absence of such rejection, the book result can not be substituted ? - Held that:- following an accepted method of accounting and the consistency in maintaining such accounts, does not ensure the correctness or completeness of the accounts. Even if, the method of accounting is correct, the accounts may be maintained in a manner, in which without creating any doubt over the method of maintaining of the accounts, the Assessing Officer, for good and sufficient reasons recorded by him, find that the computation is in such a manner, which does not accurately records the profits and gains. In the present case, the substantial increase in turnover from ₹ 4.58 to 33.63 crores, and the gross profits from ₹ 90 lakhs to 3.76 crores, did not justify the gradual fall in the gross profit rates. The reasons, given by the assessee-company explaining the reduction of gross profit rates, were not accepted by the Assessing Officer, and, thus, he made lump sum addition of ₹ 5 lakhs, which has been upheld by the Tribunal. We do not find any error of law in the computation of the income in a manner in the absence of a valid justification of reduction of gross profit rate, a marginal addition of ₹ 5 lakhs was made. - Decided in favour of revenue. Profits and gains u/s 80HH and 80IA of the Act - Whether the term 'profit and gains' used in section 80HH and section 80-I of the Income-tax Act, 1961, with reference to an eligible industrial undertaking have the same meaning as the term 'income' whereas the statute uses both the terms independently in different provisions of the Act ? - Held that:- Question No. 2 is covered by the judgment of Vijay Solvex Ltd. v. CIT (2014 (7) TMI 136 - RAJASTHAN HIGH COURT) following the judgment of the apex court in Motilal Pesticides (I.) P. Ltd. v. CIT [2000 (2) TMI 9 - SUPREME Court] wherein held that both sections 80HH and 80M fall in Chapter VI-A relating to deductions to be made in computing total income. It will be seen that the language of sections 80HH and 80M is the same 2015 (11) TMI 392 Disallowance of the interest expenses under section 14A read with rule 8D - assessee suo motu disallowed the amount - ITAT delted the disallowance - Held that:- So far as the contention on behalf of the appellant with respect to the applicability of rule 8D of the Rules with effect from March 31, 2006, is concerned, there cannot be any dispute about the same. How ever, it is required to be noted that the Assessing Officer made the dis allowance under section 14A of the Act solely on the ground that the assessee failed to justify that the investment was made out of the interest- free funds. However, both the learned Commissioner of Income-tax (Appeals) as well as the learned Tribunal have found otherwise. Under the circumstances, the decision of the Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT ) which has been relied upon by the learned counsel appearing on behalf of the Revenue would not be of any assistance to the facts of the case on hand. Therefore, we confirm the impugned judgment and order passed by the learned Tribunal in so far as deleting the disallowance of interest expenses under section 14A of the Act in its entirety.- Decided against revenue. Disallowance under section 40(a)(ia) - non-deduction of the TDS on over seas freight - ITAT deleted the disallowance - Held that:- As per section 172 of the Act, payment made to the non-resident shipping company would not be covered in section 194C or section 194 of the Act. At this stage, it is required to be noted that it is not in dispute that the amount in question was in fact paid to the non-resident shipping company. Under the circumstances, the learned Tribunal has rightly deleted the disallowance made by the Assessing Officer under section 40(a)(ia) of the Act. - Decided against revenue. 2015 (11) TMI 391 Interest earned on grants made by the State Government kept in fixed deposits pending utilization - whether should be treated as additional grant of the scheme or a revenue receipt exigible to tax under the head 'Income from other sources'? - Held that:- The very purpose of granting ₹ 10 crores to the assessee was to act as a nodal agency for implementation of the scheme. There is no profit motive as the entire fund entrusted and the interest accrued therefrom from deposits has to be utilised only for the purpose of the scheme originally granted. The whole of the fund belongs to the State exchequer and the assessee has to channelise them to achieve the objects of centrally sponsored scheme of infrastructural development as specified in the Government order. Hence, interest on all these fixed deposits are considered to be capitalised and not revenue receipts to treat it as an income. The Tribunal considering these aspects and more particularly, following the judgment of this court in KUIDC case [2006 (2) TMI 114 - KARNATAKA High Court ] has held that the interest earned on these grants is not an income, which we do not find fault with. - Decided in favour of assessee. 2015 (11) TMI 390 Disallowance of benefit of accumulation by the assessee of an amount u/s 11(2) - ITAT allowed calim - Held that:- The required information was furnished through Form No. 10 along with the return and subsequently on March 10, 1997, the assessee submitted another letter to the Assessing Officer intimating the specific purpose for which the said amount was sought to be utilised by indicating that they want to utilise the amount for the objects mentioned in clause 3(a) of the trust deed. In the instant case, the assessee specifically mentioned the purpose for which the accumulated income was sought to be utilised. Learned counsel for the Revenue also fairly submitted that the said intimation is sufficient compliance within the meaning of section 11(2) of the Act. But his opposition is only with regard to the furnishing of the required information on March 10, 1997, as he submits that it ought to have been furnished by September 30, 1996, the last date for filing of the return. It is an admitted fact that the said information was furnished before the completion of the assessment. In view of the ratio laid down by the Supreme Court in Nagpur Hotel Owners' Association (2000 (12) TMI 99 - SUPREME Court) and the acceptance of the date of information by the assessee as March 10, 1997, viz., before the date of completion of assessment by the Tribunal, we do not think that the objection raised by the learned Counsel for the Revenue has any substance. The explanation in the letter dated March 10, 1997, is in sufficient compliance with section 11(2) of the Act. - Decided in favour of assessee. 2015 (11) TMI 389 Addition made in the hands of the firm with regard to the amounts related to capital account of the partners in the books of the firm - Held that:- In the present matter, the partners were also assessees and had been summarily assessed under Section 143 (1) of the Act for several years prior to the assessment year 1991-92. They have brought in the said amount to be included as a capital to the firm. Evidently, it is for the partner to explain the source of the said funds and it was not open to the Assessing Officer to have treated the said amounts as income of the firm as there was no business of the firm to carry forward such income, and it was not in dispute that the amounts had been brought in by the partners into the firm. In the said circumstances, the Tribunal has rightly held that if at all the assessments had to be made, they may be of the partners of the firm and not the firm itself and such amounts could not have been treated as income of the firm by relying upon Section 68 of the Act. - Decided against revenue. 2015 (11) TMI 388 Non-compete consideration received - whether is not liable to tax as capital gains even after the amendment to section 55(2)(a) of the Act with effect from April 1, 1998, which introduced the words 'or a right to manufacture, produce or process any article or thing' ? - Held that:- Section 55(2)(a) of the Act would have no application in the present circumstances, as it deals with the cost of acquisition in relation to a capital asset which includes a right to manufacture or carrying on busi ness. In the present case, the agreement prohibits the assessee inasmuch as it amounts to giving up its right to carry on business, i.e., a restrictive cov enant. It held that such restrictive covenant stands covered only with effect from April 1, 2003, on introduction of section 28(va) of the Act. In view of the above, the impugned order having merely followed the decision of the apex court in Guffic Chem. Pvt. Ltd. [2011 (3) TMI 6 - Supreme Court ] no substantial question of law arises for our consideration. Accordingly question No. 1 as proposed is not entertained.- Decided against revenue. Whether the Tribunal was correct in holding that the non-compete consider ation taken as reserves to the balance-sheet cannot be added to the book profit under section 115JA of the Act even in terms of clause (b) of the Explanation thereto ? - Held that:- Explanation to section 115JA of the Act to be invoked it is necessary that the amount which has been carried to the reserves should have necessarily been first debited to the profit and loss account resulting in a reduction in the profit declared by the respondent- assessee-company. This issue stands settled in view of National Hydroelectric Power Corpn. Ltd. v. CIT [2010 (1) TMI 281 - SUPREME COURT] wherein it has been held that to invoke clause (b) of the Explanation below section 115JB (identical to section 115JA) of the Act, two conditions must be satisfied cumulatively, viz., there must be a debit of the amount to the profit and loss account and the amount so debited must be carried to reserves. Admitted position in this case is that there is no debit to the profit and loss account of the amount of reserves. The impugned order has in view of the self-evident position taken a view that in the absence of the amount being debited to profit and loss account and taken directly to the reserve account in the balance-sheet, the book profits as declared under the profit and loss account cannot be tampered with. Thus the Explanation to section 115JA of the Act would not be triggered. Thus, question No. 2 raises no substantial question of law for consideration. - Decided against revenue. 2015 (11) TMI 387 Income from 'seconds' - Whether the transaction of 'seconds' having been recorded in the normal course in the ledger maintained, the income therefrom for period April 1, 2002, to September 12, 2002, was excludible from the block assessment in the light of the provisions of section 158BA ? - Held that:- The learned counsel admits that the appellant is maintaining two sets of accounts which is not permissible in law merely because subsequent to the search held on September 12, 2002, the assessee has filed the returns for the assessment year 2003-04 disclosing the amount of ₹ 1,64,158 held to be undisclosed income, would not carry any conviction. The reliance placed on by the learned counsel on section 158BA and annexure C said to be a document maintained by the assessee-firm disclosing the details of the said undisclosed income is not acceptable since the said document is very vague, without having the details of dates and the proof of the transaction said to have been effected with the parties except the parties names and the amount. Much emphasis is placed by the learned counsel appearing for the appellant, on annexure C, to bring this document under section 158BA(3) of the Act which provides that undisclosed income, if recorded on or before the date of search or requisition in the books of account or other documents maintained in the normal course relating to such previous years shall not be included in the block period. We are unable to appreciate this argument advanced by the learned counsel. No law permits maintenance of two sets of accounts, i.e., one unaccounted and the other accounted. Such scheme of maintaining two different sets of accounts is totally forbidden in law and no credential value can be given to such illegal accounts maintained by the assessee. At no stretch of imagination, this document at annexure C would be considered as "other documents" maintained in the normal course to exclude from the block period. - Decided against the assessee Transactions with Kaveri Bar -unexplained investment of the appellant in block assess ment under section 158B(b) - Held that:- It is admitted fact that Sri Elias Gerald D'Silva has given the statement before the Departmental authorities on September 16, 2004, wherein it is stated that he had received ₹ 2,50,000 in cash on February 18, 2002. Now, the case of the assessee-firm is that two partners of M/s. Kaveri Bar had made the payment to Sri Elias Gerald D' Silva and the assessee-firm is no way concerned with the said transaction and the Departmental authorities have wrongly held it to be the unexplained investment of the assessee which has been affirmed by the Tribunal without appreciating the material on record in a proper perspective. The Tribunal has considered this issue at length and has come to the conclusion that the partnership deed of Kaveri Bar dated August 27, 2002, was drawn on a stamp paper dated March 31, 1999, purchased by the assessee-firm and the circumstances create a doubt regarding the genuineness of the said partnership deed relied on by the assessee. After a detailed examination of the documents, the Tribunal has arrived at a conclusion that the assessee-firm has failed to explain the source of the amount of ₹ 2,50,000 paid to Sri Elias Gerald D' Silva. These are pure questions of facts and the findings given on these factual aspects cannot be interfered by us in this appeal. - Decided against the assessee 2015 (11) TMI 386 Computation of income arising from the conversion/treatment of land into stock-in- trade of construction business and profits thereon - invoking of section 45(2) accepted by ITAT - Held that:- The fact that the land and its buildings were treated by the respondent-assessee as capital asset as, according to them, the project was not completed loses all significance, once the Revenue does not accept the same and proceeds to hold that the property had been sold in the subject assessment year and the same has to be subjected to tax. On the aforesaid finding, the issue of conversion of a capital asset into stock-in-trade would arise and require consideration. The impugned order on facts has found the land was originally a capital asset which has later been converted into stock-in-trade. Thus, section 45(2) of the Act is applicable. However, the capital gains on conversion of capital assets into stock-in- trade is payable only in the year in which the assessee ultimately sells such stock-in-trade yet for purpose of computing capital gains the date of conversion would have to be determined. This exercise has to be carried out by the Assessing Officer after considering the evidence to be led before it. Thus, no fault can be found with the above direction of the Tribunal as it is a consequence of the finding of fact arrived at by the Tribunal that the land in question was originally held as capital asset and was later converted into stock-in-trade. - Decided against revenue. Concealed income on account of certain cash transactions - evidence found during the course of survey under section 133A - Tribunal reached a finding of fact on examination of documents that there is no corroboration to the stand of the Assessing Officer that there was cash element of ₹ 27.31 lakhs involved in sale of the flat at ₹ 2.11 crores - Held that:- The above findings of the Tribunal are a finding of fact and the lower authorities without any basis drew an inference that an amount of ₹ 27.31 lakhs was the amount received in cash by the respondent- assessee. We find that the aforesaid conclusions reached by the Tribunal is a possible and reasonable view. Thus, no substantial question of law arises for our consideration. - Decided against revenue. 2015 (11) TMI 385 Taxability of the amount waived by the mutual funds/financial institutions/debenture holders as a concession for the financial restructuring of the assessee - ITAT allowed assessee claim - Held that:- Indisputably, the amount of principal waived by the financial institutions cannot be taxed under section 41(1) of the Act as the same had not been debited to the profit and loss account in the earlier years nor had been claimed as a deduction from taxable income. The Tribunal had, accordingly, allowed the claim of the assessee. The Tribunal had further noted that the Commissioner of Income-tax (Appeals) had considered the appellant's claim on the merits and that action had not been challenged by the Revenue. The Tribunal held that under the circumstances, the Revenue's contention could not be upheld. The learned counsel for the Revenue stated that since the order of the Commissioner of Income-tax (Appeals) was in its favour, there was no question of the Revenue filing an appeal and the observation made by the Tribunal in this regard was ex facie erroneous. The observation made by the Tribunal was with respect to the Revenue's contention that the assessee's claim could not be considered on the merits. It is, in this context, that the Tribunal observed that the Commissioner of Income-tax (Appeals)'s action of examining the assessee's claim on the merits had not been challenged. The said observations do not relate to the decision of the Commissioner of Income-tax (Appeals) on the merits of the assessee's claim. In the aforesaid circumstances, we are not inclined to entertain the present appeal. - Decided against revenue 2015 (11) TMI 342 Disallowance of interest paid to the bank - the appellant/assesse had advanced an interest free loan to its sister concern although the appellant had no business dealings with the sister concern - Whether while arising at the ‘chargeable income’ u/s 29 considering the provisions of Section 36(1)(iii), the disallowance of interest paid to banks is mandatory on the true and correct interpretation of the words ‘for the purpose of business? - Held that:- The Assessing Officer’s view that the advance was not for business purposes as the appellant had no business dealings with the sister company is erroneous. Commercial expediency in advancing loans does not arise only on account of there being transactions directly between the holding company and the subsidiary company or between the group companies inter se. The two companies may even be in a different line of business. It would make no difference. It would still be commercially expedient for one group company to advance amounts to another group company, if, for instance, as a result thereof the former benefits. In the present case, as we have already demonstrated, there would be a direct benefit on account of the advance made by the appellant to its sister company if the same improves the financial health of the sister company and makes it a viable enterprise. We hasten to add that it is not necessary that the advance results in a positive tangible benefit. So long as the amount is advanced with that view in mind or with any other commercially expedient view in mind that is sufficient. Thus the question of law is answered in favour of the appellant and against the department. The order of the Tribunal is set aside. The appellant shall be entitled to the deduction under Section 36(1)(iii). - Decided in favour of assessee. 2015 (11) TMI 341 Deduction u/s 80IB - whether Tribunal did not err in holding that the clarification of the builtup area introduced by way of section 80IB(14)(a) with effect from 01-04-2005 can only be applied to projects which have been sanctioned after 01-4-2005? - Held that:- The present controversy stands concluded in favour of the RespondentAssessee by the decision of this Court in CIT v/s. Raviraj Kothari Punjabi Associates [2015 (5) TMI 361 - BOMBAY HIGH COURT] wherein held held that the clause (d) of section 80IB(10) is prospective in nature and would not apply to the housing projects commenced prior to 1.4.2005. Also see CIT v/s. M/s. Sarkar Builders [2015 (5) TMI 555 - SUPREME COURT] - Decided in favour of assessee. Customs 2015 (11) TMI 381 Confiscation of goods - transportation of smuggled goods - Improper documents - Whether appellants had prior knowledge of the Smuggled nature of the seized garlic of Chinese origin - Imposition of redemption fine - Held that:- Appellants have denied to have prior knowledge of the smuggled nature of seized garlic of Chinese origin. For confiscation of vehicle knowledge of the owner of the vehicle or the person in charge of the vehicles is required as per Sec -115 of the Custom Act 1962 - It is observed from the case records that use of vehicles for transporting garlic of Chinese origin is established for which no claimant has come forward and even the drivers also had no document of licit import of the seized garlic. Drivers of the vehicles definitely had knowledge of the contraband and smuggled nature of garlic. That is why the drivers ran away and never came forward during investigation. There is thus nothing irregular regarding confiscation of said vehicles & their release on payment of redemption fine. No interference is therefore called for regarding confiscation / redemption of vehicles order passed by the Adjudicating authority. Correct residential details of the drivers were not maintained by the owners when they were giving vehicles valued more than ₹ 10 lakh to the drivers. No registration papers or driving license copies were found in the vehicles. For more than six months from the date of seizure & interception none of the owners made any attempt to locate their trucks when the same were in the possession of the department. - Only after the owners were traced out with the help of reports from DTO s did the appellants came forward to claim provisional release of vehicles. - Accordingly, order passed by the Adjudicating authority is well reasoned/justified and no interference is called for in the adjudication order - Decided against assessee. 2015 (11) TMI 380 Revocation of CHA License - forfeiture of the security - Imposition of penalty - Regulation 22 read with Regulation 20 of the Customs Brokers Licensing Regulations, 2013 - whether the principal commissioner or commissioner of customs, as the case may be, is bound to accept the inquiry report, if it is in favour of the Custom Broker or can he disagree with the same - Held that:- Inquiry report is in favour of the petitioner and exonerates him. Mere communication of the inquiry report, which is in favour of the petitioner and without communication of adverse material and/or reasons for difference, would not enable the petitioner to rebut, qualify or explain the adverse material and show cause against the proposed adverse action. Principles of natural justice required that before an adverse decision was taken against the petitioner, the petitioner should have been communicated the adverse material/reasons for disagreement. The fact that the reasons for disagreement were not communicated to the petitioner prior to the adverse decision being taken by the Commissioner of Customs, there was clearly a violation of principles of natural justice. The Commissioner of Customs should have recorded the reasons for disagreement and forwarded the same to the petitioner for his comments before passing the impugned order. Because of failure to do so, the impugned order is clearly in violation of the principles of natural justice. - impugned order cannot be sustained - commissioner to decide the matter afresh - Decided in favour of assessee. 2015 (11) TMI 379 Condonation of delay - Held that:- Tribunal refused to exercise its discretion in favour of the Applicant/Appellant before us because it found that the cause shown was not reasonable. The cause shown was completely insufficient, inasmuch as the enormous delay of three years could not have been condoned by the Tribunal simply by relying on some officials not being appointed or the company not having the benefit of complete set of officers. In these circumstances, we are of the view that the discretion has been exercised in accordance with law. The present Appeal does not raise any substantial question of law - Decided against assessee. 2015 (11) TMI 378 Benefit of duty drawback - Conversion of free shipping bills into drawback shipping bills - Circular No. 04/2004 dated 16.01.2004 - Held that:- conversion is permissible only when the exporter is able to satisfy the Commissioner that "for reasons beyond his control" drawback was not claimed. In the instant case, a finding of fact is arrived at by the Commissioner (Customs), which has been accepted by the High Court also, that no case was made out by the appellant to suggest that claim for duty drawback was beyond the control of the appellant. It is rightly pointed out that merely because the appellant was not aware of the correct legal position would not afford any such ground that it was beyond his control. Benefit of Circular No. 04/2004 dated 16.01.2004 - Held that:- After taking note of the provisions contained in Rule 12(1)(a) of the Rules which undoubtedly state that "no provision exists for permitting conversion of free shipping bills into drawback shipping bills", the Board was still of the opinion that it was permissible for the Commissioner to examine and consider individual requests on merits and facts in terms of the aforesaid provisions and the relaxation shall only apply in respect of drawback claims pertaining to All Industry Rates of drawback and it would not apply to brand rate of duty drawback, where rate is claimed in terms of Rule 6 or Rule 7 of the Customs & Central Excise Duties Drawback Rules. Appellant wanted only "All Industry Rates of duty drawback". Reasons given by the Commissioner that the goods were not physically examined would be of no relevance. This view of ours further stands substantiated on the reading of Sections 50, 51 and 113 of the Customs Act. - proper officer is to satisfy itself only to the extent that the goods which are entered for export are not prohibited goods and the exporter has paid the duty at the time of clearance of the goods meant for export and therefore, the inspection is confined to the aforesaid aspect viz. the goods are not prohibited. Since in the present case, goods are not dutiable, no duty has to be paid. Therefore, there was no reason for denying the benefit only on the ground that at the time when the appellant had sought the duty drawback, the goods could not be physically examined. This position is further supported when we compare the fundamental provisions of Section 113 with the amendment to the said Section carried out by the Finance Act, 2003 (w.e.f. 14th May, 2003). In the instant case amended provisions are applicable - provisions of Circular No. 04/2004 dated 16.01.2004 would be applicable in the instant case. The Commissioner may examine and consider the individual request on merits and facts in terms of the aforesaid provisions. We remit the case back to the Commissioner - Decided in favour of assessee. 2015 (11) TMI 377 Violation of EXIM policy - Undervaluation of goods - assessee had imported the same material declaring higher price which was cleared at Mumbai port - Held that:- Tribunal has not only misinterpreted the statements of two partners of the assessee, it has also sidetracked and ignored other relevant material. We have gone through the statements of the two partners of the assessee and find that there is a categorical admission on their part that the prices/values declared by them for imports through Chennai port for similar items was much less compared to the values declared at Mumbai port. - The factory of the assessee is at Daman and, thus, Mumbai port was much closer. On this basis, specific query was put to the assessee as to why certain imports were made through Chennai port instead of Mumbai port. However, no satisfactory reply was given to this question except making a bald averment that landing charges etc. were much less compared to rates at Mumbai which does not inspire any confidence, that too in the absence of any material given by the assessee in support of this plea. - no documentary evidence was produced by the assessee to support the plea that the goods at Chennai port were inferior in quality than the goods imported and cleared at Mumbai port and there was no warranty clause of the goods imported at Chennai The goods imported by the assessee which were cleared at Mumbai port were found to be similar in nature. These imports were by the assessee itself. Therefore, price declared therein could be made the basis of valuation. Minimum price was taken as the transaction value. It was clearly permissible under Rule 8 read with Rules 5 and 6 of the Valuation Rules. - impugned order is set aside - Decided in favour of Revenue. 2015 (11) TMI 376 Validity of order of High Court - Demand of interest - Delayed payment of duty - Date of applicable interest - Held that:- Section 28AA, inter alia, provided that where a person chargeable with duty determined under sub-Section (2) of Section 28 fails to pay such duty within three months from the date of determination, he shall pay, in addition to the duty, interest as well as per the rate specified therein. - effect of the aforesaid provision was to charge interest after the expiry of three months from the date when this provision came into force. The President has given assent to the aforesaid amendment on 26.05.1995. Insofar as the appellant is concerned, in his case, duty had already been determined prior to coming into force of this amendment inasmuch as Order-in-Original confirming the duty was passed on 28.01.1994 - when the appellant as well as its counsel knew that the issue as to whether the interest is payable or not on other grounds had already been foreclosed in the earlier writ petition, the counsel for the appellant did not make any submission with regard to the plea raising the issue in Show Cause Notice and limited his prayer from the date from which the interest was to be paid. - when this issue was raised and abandoned in the first writ petition which was dismissed as withdrawn, the principles of constructive res-judicata which is laid down under Order 23 Rule 1 of the Code of Civil Procedure, 1908, and which principles are extendable to writ proceedings as well as held by this Court in `Sarguja Transport Service v. State Transport Appellate Tribunal, M.P., Gwalior and Others' [1986 (11) TMI 377 - SUPREME COURT] would squarely be applicable. - Decided against assessee. 2015 (11) TMI 375 Classification of goods - Bridges/Aerobridges - required to be used for the modernization of airport facilities - benefit of Notification No. 36/96-CUS dated 23.07.1996 and Notification No.11/97-CUS dated 01.03.1997 - Classification under Chapter Heading 8428,8430.80 and 4011.99 or under Chapter Heading 7308.10 - Held that:- If the goods fall within the description as mentioned therein the classification may not be of any relevance, inasmuch as, Chapter Heading states "84 or any other chapter". Coming to the description of goods, landing equipments are specifically covered. Of course, in order to get the benefit of this Notification, the assessee is also required to satisfy condition no. 21 as mentioned therein For availing the benefit of the said Notification the assessee had produced certificate which was issued by the Regional Airworthiness Office of DGCA and the said Regional Airworthiness Office is the delegated authority of DGCA to issue such certificate. The assessee had thus fulfilled the condition laid down in Notification No. 36/96. To the same effect is the Notification No. 11/97-Part I. - conclusion of the Tribunal does not call for any interference. - Decided against Revenue. 2015 (11) TMI 374 Smuggling racket - Search and seizure - Illegally imported – Penalty on Revenue officers - abatement of smuggling - refusal of cross-examination request to the appellants - Supreme Court allowed withdrawal of appeal by the appellant. The appeal was filed by appellant against the decision of High Court [2015 (3) TMI 820 - DELHI HIGH COURT]. Corporate Laws 2015 (11) TMI 384 Reduction of paid up share capital seeked - Held that:- As stated in the petition and as seen from the financial statements filed, the decision taken to have a true reflection of the financial position of the company is purely a commercial decision. Considering the fact that such move has been approved by the overwhelming majority of the shareholders, apart from the facts that such reduction does not involve the diminution of any liability in respect of unpaid share capital or the payment to any shareholder of any paid-up capital, and there is no outflow of funds or assets from the petitioner or any reduction in the amount payable to any of the creditors and the reduction will not affect the normal operations of the petitioner or its ability to honour its commitment and to pay its debts in the ordinary course of business, this Court does not find any impediment in granting the reliefs prayed for herein. In the light of the above said facts, the procedure stipulated in Section 101(2) and (3) of the Companies Act, 1956, for the settlement of list of creditors will not apply. The prayers sought for in this petition are granted and the petition is allowed. A certified copy of the order including the minutes as approved be delivered to the Registrar of Companies within twenty one days and the notice of the registration order by the Registrar of Companies and of the said minutes as approved by this Court be published in one issue of English daily ''The New Indian Express'' and also in one issue of Tamil Daily ''Dinamani'' within four weeks from the date of receipt of copy of the order. Direction to petitioner company to pay a sum of ₹ 5,000/- (Rupees five thousand only) towards fee to the Central Government Counsel for Regional Director. 2015 (11) TMI 382 Entitled to “fee continuity” or exemption from payment of fees - Held that:- It is evident to us that as per Clause 4 of Schedule III, the Respondent was not an ‘entity’ as envisaged in the Regulations as would be entitled to “fee continuity” or exemption from payment of fees. The Regulation 4 clearly refers to a newly formed entity through conversion from either a sole proprietorship or a partnership to a limited Company, which alone has been bestowed the benefit of continuity. Given that the Respondent is barred by the provisions, the Appellant’s internal file notings are of no consequence and the Appellant is not estopped from coming to a contrary conclusion. The Respondent’s argument that the Appellant experienced a change of heart after the issuance of the Circular dated 28.3.2002 is untenable, because if that was indeed what the Respondent believed, it would not have written a letter requesting fee continuity on 4.2.2002, a date prior to the issuance of the circular dated 28.3.2002. Thus, the Respondent has failed to prove that it believed it was granted fee continuity, in light of its letter to the Appellant requesting the same. Further, it appears to us that the Respondent was an entity quite distinct from Oracle, with the consequence that it would be bound to pay the fee in accordance with Schedule III, Clause (a) or (b) as the case may be, and would not be entitled to claim the advantage of Clause (c). In fact, this is the very understanding of the Respondent since fees were deposited by them under Clause (a) in sharp contradistinction of Clause (c). Service Tax 2015 (11) TMI 352 Denial of refund claim - input services - Held that:- Appellant herein is providing various services and is registered as a STPI unit with Software Technology Park, is registered with the department on 28.11.2008 and the services which are rendered by the appellant are for exports without payment of service tax. Because of continuous export of taxable services appellant was not in a position to utilize the CENVAT credit of service tax on the “input services”. - the issue is squarely settled in favour of the appellant and this view has been followed by various Benches of the Tribunal [2011 (9) TMI 450 - KARNATAKA HIGH COURT ]. Accordingly, in view of the foregoing, we set aside the impugned order - Decided in favour of assessee. 2015 (11) TMI 351 Fraudulent availment of CENVAT Credit - Inference of fraudulent transactions in the matter of payment of commissions to sub-brokers - Held that:- In the instance case as there is no nexus between the input service received by the appellant with the output service provided, therefore , the service received by the appellant from sub-broker cannot be treated as input service and hence service tax credit taken on such input service is also not admissible. Further, appellant suppressed the fact of paying more commission to their sub-broker than the commission earned and the fact that the services rendered by the sub-broker is not an input service for providing output service by them. The facts remained unnoticed if the same would have not been detected by the department. Therefore, the appellant suppressed the vital facts and contravened the provision of Rule 2(l) and 2(p) of the Cenvat Credit Rules, 2004 with intent to evade payment of duty and hence they are also liable for penal action for their such act. In view of above, I agree with the order impugned of the adjudicating authority disallowing the cenvat credit amounting to ₹ 15,75,754/- taken during 2007-08 and ₹ 65,694/- during 2008-09 (upto 8/2010) invoking extended period under Section 73(1) of the Finance Act, 1994 and imposing penalty of ₹ 16,41,448/- upon the appellant under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 78 of the Finance Act, 1994. - no perverseity in the process of reasoning or in the conclusion recorded, warranting appellate interference with the impugned order. - Decided against Assessee. 2015 (11) TMI 350 Denial of CENVAT Credit - various services - Imposition of interest and penalty - Held that:- Issue of Service Tax on "Membership Fees" is covered by the decision of the Hon'ble Tribunal in the case of Shree Kamrej Vibhag Sahakari Khand Undying Mandli Ltd (2015 (10) TMI 1233 - CESTAT AHMEDABAD). Therefore, as far as the Service Tax amount of ₹ 2,43,178/- on Membership fees is concerned, it is held that the appellants are not eligible for taking Cenvat Credit of the same. Demand of interest and penalty - Held that:- matter pertains to the period April 2007 - Feb, 2009 and the show cause notice is issued only on 21.6.2011. The appellants Shree Kamrej Vibhag Sahakari Khand Undying Mandli Ltd is an assessee who regularly files monthly returns and the cenvat credit taken has been duly intimated to the Dept. It is also seen that the assessee had reversed the credit taken immediately on being pointed out by the Audit. The appellants have also reportedly submitted, from the adjudication stage onwards, that the credit taken has not been utilised. There is no indication to the contrary on the records. - demand of interest and penalty in this matter cannot be sustained. Therefore the demand of the same is set aside. - Decided partly in favour of assessee. 2015 (11) TMI 349 Denial of refund claim - Bar of limitation - whether the appellant is eligible for the refund of an amount paid by them as service tax on the services exported under the category of ‘Business Auxiliary Services’ and ‘Business Support Services’ to an entity in Germany and Yugoslavia - Held that:- Relevant provisions of Notification, the conditions and limitations for granting the refund of the service tax paid on services exported are that the taxable service should have been exported and the payment for such services should have been received in convertible foreign exchange; that the service tax and cess have been paid on taxable service exported. In the case in hand there is no dispute as to the services have been exported and the payment has been received in a convertible foreign exchange. It is also undisputed that the amount of service tax liability on the services exported are to be paid on or before 5th January 2010 for the services exported in the month of December 2009 and such tax liability is paid by the appellant. The relevant date for refund in the case of rebate should be, in our view from the date of payment of service tax on the taxable services exported. - Impugned order which upholds the rejection of refund claim of ₹ 23,29,471/- is incorrect and the appellant s appeal needs to be allowed - Impugned order is set aside - Decided in favour of assessee. 2015 (11) TMI 348 Claim of interest - Delayed refund - Unjust enrichment - Held that:- As per the table, the appellant has returned the amount of ₹ 6,11,41,066/- before filing the refund claim and a sum of ₹ 4,37,66,670/- were returned on 28.09.2010 and a sum of ₹ 4,24,78,264/- were returned on 26.05.2011. These facts are admitted by both the sides. It is admitted fact that refund claim was sanctioned to the appellant only on 28.10.2013. Therefore, relying on the decision of Ranbaxy Laboratories Ltd. (2011 (10) TMI 16 - Supreme Court of India) the appellant is entitled for claim of interest on delayed refund of ₹ 6,11,41,066/- after three months from 31.07.2009 till 28.10.2013. For the amount of ₹ 4,37,66,670/- the appellant is entitled for interest for the period 28.09.2010 to 28.10.2013. On the amount ₹ 4,24,78,264/- the appellant is entitled to claim of interest for the period 26.05.2011 to 28.10.2013. - appellant is entitled to claim interest - Decided in favour of assessee. 2015 (11) TMI 347 Cenvat Credit - eligible input services - whether the input service credit sought to be denied to the respondent is used by the respondent exclusively for providing movie theatre operation service or advertisement agency service - input service credit on the services namely, manpower supply, security services, professional service, courier services, rent-a-cab services and cleaning services - Held that:- Services have been used by the respondent for advertisement agency service. In these circumstances, it cannot be held that respondent has used the subject mentioned services exclusively for providing movie theatre operation services. In these circumstances, the learned Commissioner (Appeals) has rightly allowed cenvat credit to the respondent. Therefore, I do not find any infirmity in the impugned order. - Decided against Revenue. 2015 (11) TMI 346 Demand of service tax - Rent-a-Cab Service provided to SEZ unit - benefit of Notification 4/2004-ST dated 31/03/2004 - Held that:- lower authorities have confirmed the demands only on the ground that the benefit of Notification 4/2004 is available only in those cases where services are consumed within the special economic zone and units situated therein while it is the case of the appellant that the services are rendered for transportation of the employees to and from their residences located outside SEZ. - There is no dispute that the appellant herein rendered service of tour operator for transportation of employees of a unit situated in SEZ. If that be so the ratio of the judgment of the Tribunal, [2013 (7) TMI 703 - CESTAT AHMEDABAD], will apply - Impugned order is set aside - Decided in favour of assessee. 2015 (11) TMI 345 Demand of service tax - cum-tax benefit expended to the assessee - commission received by them for sale of RBI bonds - Held that:- Adjudicating authority has held that the respondent has received an amount of ₹ 7,01,26,712/- as commission from Reserve Bank of India for the sale of bonds. Undoubtedly, no service tax was paid on the said amount and accordingly the conclusion reached by the adjudicating authority that the entire amount needs to be considered as cum-tax amount and tax liability worked out on such value is the correct conclusion and the judgment of the Tribunal in the case of Advantage Media Consultant (2008 (3) TMI 59 - CESTAT KOLKATA) holds so. - judgment has been upheld by the Hon’ble apex Court by dismissing Civil Appeal filed by the Revenue after condoning the delay which would mean that the value received for the taxable purpose needs to be considered as cum-tax amount if the service tax is not charged. - impugned order is correct - Decided against Revenue. 2015 (11) TMI 344 Denial of refund claim - accumulated CENVAT credit - input services claimed to have been utilised for export - Held that:- Input services have been excluded post 01/04/2011 from the definition of input service given in Rule 2(l) of CENVAT Credit Rules 2004. However the period involved here is prior to 01/04/2011, that is why this exclusion will not be applicable to the appellants case. - rule in sub-clause (ii) clearly says that the input service which are used directly or indirectly, in or in relation to the final products and clearance of final products upto the place of removal of the manufacturer / service provider would be covered within the definition of ‘Input Service’. This Rule 2(l) has given inclusions where services used in relation to the modernization, renovation or repairs of a factory, premises of provider of ouput service or an office relating to such factory or premises, advertisement or sales promotion, market research and so on. - definition of input service is wide and the input services in question (the appellant here has not pleaded relief in respect of Banking and Other Financial Service & Design Service) would be covered for relief i.e. refund of accumulated input service credit in terms of Rule 5 of CENVAT Credit Rules, 2004 to the appellant. - Decided partly in favour of assessee. 2015 (11) TMI 343 Denial of refund claim - Construction Services - Unjust enrichment - Held that:- there is no basis to remand the case back either to the original adjudicating authority or to the Commissioner (Appeals) when the Hon’ble High Court of Madras [2015 (3) TMI 735 - MADRAS HIGH COURT] has clearly held that the deposits made during investigation or adjudication proceedings of the department are in the nature of deposits made under protest and the principle of unjust enrichment is not applicable to the same. - appellant is entitled to the sanction of the refund - Decided in favour of assessee. Central Excise 2015 (11) TMI 373 Availment of fraudulent CENVAT Credit - Bogus invoices - Non receipt of physical goods - the case of the Revenue is that the main appellant has purchased/procured duty paid invoices of Jindals and credit of duty paid indicated in such invoices was taken without receiving the HR trimmings covered by the said invoices and the HR trimmings covered by the said invoices were diverted to Viramgam and nearby areas and there HR trimmings were used by hundreds of small scale units manufacturing nails etc - Imposition of penalty. Held that:- Invoices are pertaining to HR trimmings. During the investigation, the main appellant and their officials including appellant No.2 were specifically asked whether they have any evidence whatsoever to prove that the goods viz. HR trimmings covered by the said invoices were transported to their factory and received in their factory. The appellants could not produce copy of the Gate register, goods receipt note or LR or even any document evidencing payment of freight charges to the driver/transporter in respect of each invoice (whether paid in cash or by any other means). It is a common knowledge that the persons who are familiar with the excise laws and are aware about the violations of excise law, they are indulging in them they do not disclose proper and true facts at the first instance and they tend to give at times misleading explanations. In the present case also, generally the co-noticees have said in the statements after assessing the information already available with the investigating officers. In the later statements when they were shown more details, they came out with correct facts. - Since the invoices of such HR trimmings were of no use to them, they were trading the invoices through brokers based in Mumbai who in turn were locating the furnace units who could fraudulently avail the credit based on such invoices. The cash amount of HR trimmings being sent through angadia or other services from Viramgam and nearby area and were being converted into Bank Draft etc. through banking channels either by such brokers or by manufacturers of ingots or was used in cash to purchase bazaari scrap/scavenger scrap. In view of the above position, we have no hesitation in holding that the demand and penalty imposed on the main appellant is correct and the appeal of the main appellant is, therefore, dismissed. HR trimmings in the coil form is very distinct commodity compared to the bazaari/scavenger scrap and if they were receiving invoices for the HR trimmings, there was no reason for them to accept the bazaari scrap. In any case, HR trimmings is more expensive than bazaari/scavenger scrap. We, therefore, hold that the penalty imposed on him under Rule 13 of the Cenvat Credit Rules, 2002 is in order and the quantum of penalty imposed is also not on the higher side. Penalty imposed on Appellant 6 & 7 is sustained - Decided partly in favour of assessee. 2015 (11) TMI 372 CENVAT Credit - credit in respect of input service used in the dutiable and exempted goods but by virtue of retrospective amendment in Rule 6 - appellant had not maintained separate account of input service for exempted and dutiable category of goods - Held that:- Since in the present case the amount alongwith 24% interest stand paid within stipulated time period as provided under the retrospective amendment to Rule 6, the only issue left is verification of the quantum of equal amount of Cenvat Credit i.e. ₹ 14,656/- alongwith interest as presented by the appellant. In view of the settled legal position and also on the statutory provisions made under Finance Act, 2010. I am of the considered view that demand confirmed by the original authority and upheld by the Ld. Commissioner (Appeals) alongwith penalties is not sustainable; therefore the same is set aside. However, amount of Cenvat Credit i.e. ₹ 14,656/- alongwith interest @ 24% thereon shall be adjusted from the amount of Cenvat Credit and interest already paid by the appellant. Since the lower authority has not considered quantification of actual amount of Cenvat Credit attributed to the input services used in the manufacture of exempted goods at the time of issuance of show cause notice, Adjudication order and order in appeal, the matter needs to be remitted back to the original authority - Matter remanded back - Decided in favour of assessee. 2015 (11) TMI 371 Refund - unjust enrichment - excess payment of duty due to valuation dispute - appellant then paid duty on the value determined under section 4A for the period 19.11.2002 to 15.12.2003 under protest - later it was held that duty was payable on value u/s 4 - Whether the appellant is eligible for refund of differential duty - Held that:- Amount provided by HLL to the Appellant Company were given as unsecured loan , vide clear understanding, obligation and undertaking on the part of the Appellant Company that upon final decision on merits relating to the correct amount of duty payable, the refund of differential duty so made, would be returned by the Appellant Company to HLL. - We do not find any whisper about an agreement/undertaking between the appellant and the department whereby the department has agreed to refund the differential duty to the appellant unconditionally. - From the perusal of sub-section (2) of section 11B, we find that sub-section (2) lays down the conditions to be fulfilled to be eligible for refund of duty. Sub-section (3) makes clear that notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court, the refund shall be made only if the condition stated in sub-section (2) are fulfilled. Clause (d) of sub-section (2) provides that the manufacturer has to establish that the incidence of such duty has not passed on to any other person. If the incidence of duty is passed on to any other person, the claim of refund would be hit by the bar of unjust enrichment. The provision of law as stated above makes it clear that it is burden of the appellant/applicant to establish that the incidence of duty has not been passed on any other persons. In view of sub-section (3) of section 11B, the first leg of argument of the appellant fails. The goods manufactured by the appellant was sold to HLL in terms of the agreement entered into between them. HLL in turn sells the products to redistributors/stockist, who are large wholesalers of the various confectionary products and other products. The redistributors/stockist have the option of selling directly to the wholesalers in an area which are not directly covered by the redistributors/stockiest. In such situation, it is for the appellant to establish with documents that the incidence of duty has not been passed on to any other person. - if in the invoices raised by the Appellant to HLL, the higher duty paid on the value determined under section 4A had been mentioned and the Appellant had received only the lower amount of duty paid on the value determined under section 4, and the difference between the duty payable under section 4 and the higher duty payable under section 4A had been received by the Appellant from HLL in the form of a loan which had been utilized by the appellant to pay the higher duty to the Department, and which in terms of legally enforceable Agreement of the appellant with HLL was to be returned to HLL as soon as the Appellant gets refund of the excise duty; the refund would not be hit by the bar of unjust enrichment. - Matter remanded back - Decided in favour of assessee. 2015 (11) TMI 370 Waiver of pre deposit - Mandatory pre deposit - Held that:- This is an appeal filed after 6.8.2014 after the amendment of Section 35F. After the amendment of Section 35F, any appeal filed the Tribunal shall not entertain any appeal unless appellant deposits 7.5% of the duty. - Tribunal in their own case ordered predeposit in an identical issue. Therefore, appellants have not made out a prima facie case for waiver of predeposit as the Tribunal vide order dt. 8.1.2013 in the above case ordered for predeposit of ₹ 15 lakhs on the identical issue of denial of cenvat credit of distributed by the ISD on various input services including corporate office. The Tribunal in their order dt.26.8.2013 also ordered predeposit in their own case. - Following the same, Partial stay granted. 2015 (11) TMI 369 Waiver of pre deposit - availment of cenvat credit - Non receipt of inputs - Held that:- Appellants have availed credit on CVD paid on the aluminium scrap based on the invoices. Taking into account the amount already appropriated, prima facie, appellants have not made out a case for waiver of predeposit - Upon makin pre deposit M/s. Vignesh Alloys Pvt. Ltd., predeposit of balance duty and penalty on them and predeposit of penalty imposed on its Director Shri R. Vijaykumar shall stand waived and recovery thereof stayed during pendency of their appeals. For the rest of the appellants, upon compliance of predeposit amount, balance penalty shall stand waived and recovery thereof stayed during pendency of appeals. - Partial stay granted. 2015 (11) TMI 368 Duty demand under sub-rule (3) of Rule 96ZO of Central Excise Rules, 1944 - Compounded levy scheme - Held that:- According to the appellant, the letter was sent Under Postal Certificate (UPC) and the receipt thereof is not traceable. Under the provisions of Rule 195 of the Indian Post Office Rules , 1933 'Certificate of Posting' is granted to the public to afford an assurance that letters and other articles for which no receipts are granted by the Post Office and entrusted to servants and messengers for posting have actually been posted. Therefore, the seal of UPC at best can only presume that the letter was sent. It cannot draw any presumption that the letter was served/delivered to the addressee. In the present case, the respondent have not only disputed the receipt of the letter but also its veracity. The burden rests heavily upon the appellant to establish that the said letter was served on the respondent - A letter sent under UPC does not give any presumption that the same is served upon the addressee. In this case, the respondent has not only disputed receipt of the letter but also its veracity i.e. photocopy of the letter produced by the appellant. On analyzing, the facts, evidence and the law placed before us, we are not able to hold that the letter dated 26.5.1998 had reached the office of the Commissionerate. Therefore, the contention of the appellant that they had informed the Department by letter dated 26.5.98 stating that the appellant opted out of the compounded levy scheme, does not find favour with us. Department by its letter dated 22.10.1997 had passed the order determining the annual capacity of production of the appellant. In the said letter, the appellant was granted 10 days time to file objection. The appellant did not file any objection and has paid duty as determined during first month. It is obvious that the appellant had consented to the compounded levy scheme. - appellant cannot opt out of the scheme for the disputed period, after exercising his option to pay duty under sub-rule (3) of Rule 96ZO. Therefore, the duty demand of ₹ 7,26,352/- is sustainable. - However, penalty is set aside - Decided partly in favour of assessee. 2015 (11) TMI 367 Denial of refund claim - Reversal of CENVAT Credit - Non maintenance of separate accounts - exemption from payment of duty at job workers(Appellant) but in terms of Notification 214/86CE - Held that:- Goods which are cleared without payment of duty and on the payment of 8% under Rule 57-CC is manufactured as job work goods under Rule 57F (3) and under exemption notification No. 214/86 therefore Cenvat credit is not deniable on the input used in the manufacture of job work goods at the job worker s end. Though it is covered by Notification No. 214/86 but it is not exempted from payment of excise duty whereas it only temporary defers the excise duty liability for the reason that as per the condition of notification No. 214/86 principal is required to pay excise duty on the final product or if job work is removed as such therefore it cannot be said that job work goods cleared without payment of duty is exempted goods. - in case of input used in the job work goods manufactured and cleared under Notification 214/86-CE dated 25/3/1986, neither Cenvat Credit can be denied nor demand under Rule 57 CC can be made. - impugned order is set aside - Decided in favour of assessee. 2015 (11) TMI 366 Demand of Cenvat credit - Welding electrodes - Held that:- Appellant has availed the modvat credit in respect of spot welding electrodes which has been used in the production of motor vehicle by the appellant. Though the coordinate bench of this Tribunal while remanding the matter directed to adjudicating authority to decide the matter a fresh in the light of larger bench judgments of M/s. Triveni Engineering and Industries Limited and M/s. Jaypee Rewa Plant [2003 (3) TMI 145 - CEGAT, NEW DELHI] but on perusal of the facts, it is observed that both the judgments are in respect of welding electrodes used for repair and maintenance of plant and machinery whereas in the present case spot welding electrodes are used in manufacturing of final product therefore in my considered view the lower authority should not have brushed aside the fact that there is difference in use of welding electrodes in the M/s. Jaypee Rewa Plant case and in the present case. - since spot welding electrodes used in the manufacture of final product i.e. motor vehicle, it is qualified as input and therefore credit is otherwise admissible as input. Though the appellant has availed Cenvat Credit under capital goods that alone cannot disentitled appellant from availing the credit under input. As regard admissibility of modvat credit in respect of spot welding electrodes used in the manufacture of final product - appellant is entitled for modvat credit in respect of spot welding electrodes used for manufacture of final product i.e. motor vehicle therefore impugned order is set aside - Decided in favour of assessee. 2015 (11) TMI 365 MRP based valuation u/s 4A - affixing of sticker showing revised MRP over the printed MRP - Held that:- The bulk of the duty demand ₹ 11,91,164/- is on the basis of the allegation that while on the cartons of the LPG stoves cleared by the appellant from MRP was printed, the appellant had put MRP stickers on the MRP originally printed on the containers, which is much lower than the MRP originally printed on the containers and discharged duty liability on the value determined on the basis of the MRP printed on the stickers. - Tribunal in case of Hindustan Appliances [2002 (1) TMI 729 - CEGAT, NEW DELHI] held that MRP indicated on the sticker being put on the MRP printed on the cartons when the same were manufactured is not a declaration of two MRP one originally printed on the cartons and the other shown on the sticker and hence the duty demand in terms of Explanation II to Section 4 on the basis of higher of the two MRP would not be sustainable. The Tribunal in this order also held that affixing of sticker showing revised MRP over the printed MRP on the packages is in accordance with Rule 6 of the Standards of Weight and Measures (Package) Rule, 1977 and it fulfils the requirement of the declaration in terms of Section 4A of Central Excise Act, 1944. Same view has been taken by the Tribunal in the case of Sukumar Soft Drinks vs. CCE, Bangalore (2006 (6) TMI 383 - CESTAT, BANGALORE). - Impugned order confirming duty demand is not sustainable and the same has to be set aside - Decided in favor of assessee. As regards the duty demand of ₹ 1,59,304/- on the basis of allegation that the appellant have cleared LPG stoves in the guise of bio-gas stoves without payment of duty - Matter remanded back - Decided partly in favour of assssee. 2015 (11) TMI 364 Classification of goods - Classification under CSH 1701.31 or 1701.39 - Clearance of sugar as levy sugar - Held that:- Clearance of free sale sugar by the respondent sugar factories are as per the direction and order of the State or the Central Government, which is covered under the tariff heading number 1701.31 and the Central Excise duty is payable as per the tariff entry. This conclusion of ours is after considering the order issued by the competent authority, in exercise of the powers delegated under Section 3 of Essential Commodities Act. It is nobody s case that the said Act is not Central act. The tariff heading 1701.31 is applicable in the cases in hand. We find that the first appellate authority has correctly set out the reasonings for setting aside the orders in original. - issue is covered by the judgement and order of the Tribunal in the case of Perambulur Sugar Mills (2009 (11) TMI 767 - CESTAT CHENNAI) - impugned orders are correct and legal and there is no infirmity in them. - Decided in favour of assessee. 2015 (11) TMI 363 Denial of abatement claim under the Pan Masala Packaging Machines (Capacity Determination and Collection of Duty) Rules, 2008 - Held that:- Rule 10 does not use the word single continuous period. It says any continuous period of fifteen days or more. Abatement can be claimed for the period when there is no production only when duty has been paid. If duty is not paid there is no question of granting any abatement. The appellant had paid the duty for the whole month of April before 5th of April. For the period of closure of production during the month of April, he filed application claiming abatement from 16.4.2013 to 30.4.2013. This was filed on 08.05.2013. At that time the closure was continuing and further the duty of May was not yet paid. It is impossible for the appellant to include the closure period in May in that application. - appellant has paid the duty with delay only on 16.05.2013. But the it was paid with interest and respondent has accepted the same. To claim abatement, Rule 10 lays down only two conditions. First, that there is no production during any continuous period of fifteen days or more. Second, that the manufacturer files an intimation to this effect to the Deputy Commissioner or Assistant Commissioner with copy to Superintendent at least three working days prior to the commencement of the said closure period. There is no condition imposed with regard to date of payment of duty. If the manufacturer fails to pay duty within due date he shall be liable to pay the duty alongwith interest. Therefore, the rejection of claim of abatement on this ground is unsustainable. - As per Rule 10 as it stood during the relevant period the appellant was bound to intimate only three days prior to the commencement of closure. The appellant has complied with the same. The Department cannot alter the notice period provided in the law. Therefore, the rejection of claim of abatement on this ground is also found unsustainable. - rejection of claim of abatement is totally unjustified. The impugned order is set aside - Decided in favour of assessee. 2015 (11) TMI 362 Denial of refund claim - Automobile cess - whether the appellant being job worker i.e. manufacturer of body building is required to pay automobile cess or not as per Automobile Cess Rules, 1984 read with Industries (Development and Regulation) Act, 1951 or not - Held that:- Matter of levy of automobile cess was referred to Administrative Ministry i.e. Ministry of Industries and as intimated the intention behind the notification levying the cess is to realized from the vehicle manufacturers and not from the body builders. Further, as per IDR Act, 1951, the notification levying of cess has been issued, which provides that the rate of cess shall not, in any case, exceeds to two percent of the value of the goods i.e. 1/8th per cent of the value of the vehicle. It was also clarified that the cess may continue to be levied and collected in the condition they are cleared from the premises of the manufacturers and no cess should be levied again in case the body on the chassis is built by an independent body builder on the cess paid chassis. Therefore, there was no intention of the Administrative Ministry to levy cess on the activity of the body building. In that case, although the appellant may be the manufacturer in the light of the Chapter Note 5 of the Chapter 87 of the Central Excise Act, 1985, the automobile cess cannot be levied or collected from the appellant. - automobile cess cannot be demanded from the appellant. Therefore, the demand on account of automobile cess along with intened set aside. - Decided in favour of assessee. 2015 (11) TMI 361 Waiver of pre deposit - unregistered dealer - the applicant is a broker and introduced the parties with each other. He is neither registered dealer nor authorized dealer of Prakash Industries Ltd. - parallel invoices - Held that:- As per facts & circumstances of the case, Pre deposit is waived in some case and in some case it is directed to deposit the same. 2015 (11) TMI 360 Denial of refund claim - payment of excess duty - held that:- The period extended for supply of its remaining quantity was also lapsed. Therefore as against 61,000 quintals the respondent could clear 17,329 quintals, hence excise duty paid by the respondent is in excess to what was payable and refund for an amount of ₹ 37,12,051/- arises. Refund was rejected by the Adjudicating authority only on the ground E.R.1 return shows clearance of quantity of 61,000 quintals and accordingly whatever duty was paid was correct and no refund arises. I find that superintendent (Appeals) has conducted verification of the records by visiting factory of the respondent and from his report it is found that on verification of RG 1 register, invoices, etc. it was established that against 61,000 quintals for which duty was paid, only quantity of 17329 quintals were cleared and even no further production has taken place. With this undisputed facts, it is clear that the respondent has paid excess duty and they were legally entitle for refund. - Decided against Revenue. 2015 (11) TMI 359 CENVAT Credit - suo moto re-credit of Cenvat credit which was reversed at the instance of Audit Team on GTA service - Held that:- As regard the admissibility of the Cenvat credit of GTA and in respect of invisible loss, as submitted by Ld. Consultant that the entire transportation was used for export of goods and invisible loss is during the process at the job worker’s end and in both the cases Cenvat credit should be allowed. I find that the lower authority has decided the issue merely on the point of suo moto credit and fact that the GTA in respect of credit was taken is whether for export or otherwise has not been verified. I am of the considered view that if Cenvat credit in respect of service tax paid towards GTA and said GTA used for export of goods, the place of removal stands extended up to the port of export and therefore transportation from factory to port of export is clearly covered by the term ‘up to the place of removal’ and if it is so, appellant is entitle for Cenvat credit. Cenvat Credit on invisible loss - Held that:- invisible loss unless and until it is proved that the goods were diverted so far it is invisible loss, Cenvat credit cannot be denied. Invisible loss is process loss on which Cenvat credit is admissible in terms of para 3.7 of Chapter 5 of Supplementary instruction of Central Excise manual The Cenvat credit admissible in respect of amount of input contained in waste, refused or by product. Similarly, Cenvat is not to be denied if the inputs are used in any intermediate of the final product even if such intermediate is exempt from payment of duty. - provisions the quantity of input which shown as invisible loss has been used in or in relation to the manufacture of final product though the part of manufacturing has taken place at the job workers end. Therefore in view of the above clear instruction, if at all it is found that input used has been lost in the manufacturing process, either with the appellant or with the job worker of the appellant, credit should be allowed. However adjudicating authority has to verify quantum of input lost in the process. - since both the lower authority have not verified properly the admissibility of the Cenvat credit on the factual aspect, matter needs remand to the original authority - Decided in favour of assessee. 2015 (11) TMI 358 Denial of rebate claim - Reduction in rate of duty - Held that:- Appellant after filing rebate claim for ₹ 5,82,202/-, informed the sanctioning authority that their claim be sanctioned as per revised rate (which is 8%BED as against 10% BED paid by the Appellant) vide their letter dated 28.05.2009 - From the letter it is amply clear that the Appellant themselves proposed to the sanctioning authority to restrict the rebate claim as per revised rate i.e. 8% BED by which rebate amount comes to ₹ 4,65,761/- and the same amount was sanctioned by the Adjudicating Authority. This clearly shows that though the Appellant initially filed the rebate claim for ₹ 5,82,202/- but subsequently, before sanctioning the same, restricted the claim to ₹ 4,65,761 - Since the Appellant paid duty @10% BED instead of effective rate of 8% BED, the difference amount is not part of the rebate, that s why Appellant filed a separate claim for that and the Assistant Commissioner sanctioned the refund of the same by way of cenvat credit and not by way of cash for the reason that the said difference amount of ₹ 1,16,441/- is not treated as rebate but excess payment, therefore the same was sanctioned as refund of excess payment of duty. - Appellant was not required to file appeal against the order dated 24.06.2009 and they rightly filed a separate refund - Therefore the impugned order is not sustainable, the same is set aside - Decided in favour of assessee. 2015 (11) TMI 357 Reversal of cenvat credit on goods lost / written off - returned goods - Held that:- demand in respect of the loss booked under the balance sheet has to be sustained for the reason that if explicitly assessee booked loss is nothing but value which was written off. Therefore on written off value, Cenvat credit is not admissible. Therefore demand of ₹ 1,21,701/- in respect of loss credit is not admissible. CENVAT Credit - returned goods - Rule 16 - Held that:- In the whole proceedings Revenue could not adduce a single evidence by which it can be established that out of the goods covered under five invoices, goods were cleared from the factory without payment of duty. Even if it is accepted that part of the returned goods were defective and cleared as scrap, same was cleared on payment of duty. However, the loss booked in the books of account is on account of said defective parts, credit is not admissible as already held above. - Decided partly in favour of assessee. 2015 (11) TMI 356 Availment of CENVAT Credit - Capital goods - MS Roads - Held that:- Issue was raised that M.S. Rod is not used in or in relation to the manufacture of the final product, whereas the Commissioner (Appeals) have decided revenue s appeal going completely beyond the show cause notice on the ground that the tote boxes which are manufactured within the factory are exempted from payment of excise duty therefore in terms of Rule 6(1) of CCR Cenvat credit is not admissible. - Even if it is presumed that on the findings of the commissioner whether the Cenvat credit is admissible or not, I find that even if capital goods manufactured within the factory of the appellant and admittedly it is exempted, Cenvat credit in respect of input used in the manufacture of such exempted capital goods is permissible. As per CCR, 2004 the Cenvat Credit is allowed on the input as per the Rule 2K explanation (2) “input includes goods used in the manufacture of capital goods which are further used in the factory of the manufacture” In view of this provisions in the present case M.S. Rod have been used in the manufacture of the capital goods and the capital goods in the manufacture of the final product, Cenvat credit on M.S. Rod is admissible as input. In the fact of the present case, it is undisputed that the final product manufactured by the appellant is cleared on payment of duty and no exemption was availed, therefore contention of the Ld. Commissioner (Appeals) is wrong as Rule 6(1) is applicable only when the final product is cleared under exemption. - appellant is legally entitle for the Cenvat credit in respect of M.S. Rod, therefore impugned order is not sustainable, hence the same is set aside - Decided in favour of assessee. CST, VAT & Sales Tax 2015 (11) TMI 355 Challenge to coercive recovery of alleged Value Added Tax even before the assessments have been completed and liability ascertained - Held that:- The petitioners are regularly assessed by the authority under the Value Added Tax Act, 2003. It is not the case of the respondents that regular returns are not filed by the petitioners. Undisputedly, however, for the year under consideration, no assessments have been framed by the adjudicating authority. Thus, the attempt on the part of the respondents to collect disputed tax would amount to recovery before adjudication. - The competent authority can take certain measures to protect the interest of revenue, even before liability has been crystallized by way of the assessment order. However, no provision is pointed out to us under which the department can recover disputed tax even before passing any order by competent authority - respondents are directed to return three cheques of HDFC Bank, Baroda to the petitioners and refund the amount of ₹ 5,51,187/and ₹ 6,84,747 - Petition disposed of. 2015 (11) TMI 354 Challenge to section 3C read with section 2(5B) of the Karnataka Tax on Luxuries Act, 1979 (KTL) as ultra vires entry 62 of List II of the Seventh Schedule to the Constitution - Inclusion of only those halls that are used for the purpose of marriages, receptions or matter related thereto - whether the amenities provided by the BIEC which organizes business functions or exhibitions is chargeable to luxury tax and whether it falls within the expanded definition of "marriage hall" under amended section 2(5B) - Held that:- In an unreported decision of this court, Magaji's case [2003 (5) TMI 499 - KARNATAKA HIGH COURT] was impliedly overruled. But, the fact remains that charging rent above ₹ 5,000 for marriage hall and similar activities and functions forms the basis and appears to be reasonable classification so far as charging for luxury provided similar to several other hotels, holiday resorts and clubs where luxury tax is being charged. Under the expanded definition of the amended section, the exhibitions so held with the amenities/facilities provided also has to be treated as extra comforts and when the rental is above ₹ 5,000 for providing luxuries to be charged though it is sought to be argued by the petitioner's counsel that, what is provided under section 3C of the Act is only to attract charges on luxuries provided in marriage hall. - Though the petitioner had been exempted from paying tax on the ground that there is no provision provided under the charging section 3C, the petitioner cannot seek the aid and assistance of the Division Bench judgment rendered during January 2011 as the ratio laid down therein on January 22, 2011 (Indian Machine Tool Manufacturers' Association v. State of Karnataka [2011 (1) TMI 1253 - KARNATAKA HIGH COURT] is nullified by way of amendment which came into effect from April 1, 2012 and by virtue of the same, the exhibition halls also come within the definition of section 2(5B) of the Act and as such, exigible to luxury tax. - Decided against assessee. 2015 (11) TMI 353 Claim of sales tax exemption on rice bran - The contention of the petitioner is that, rice-bran were sold to the tax exempted units, for which no sales tax was collected and, therefore, there was no justification for extra demand in assessment under Section 12 (8) of the Act. - contravention of Section 5(2)(A)(a)(ii) of Orissa Sales Tax Act, 1947 - Held that:- under Section 5(2)(A)(a)(i) of the Act the sale of any goods notified from time to time as tax free under Section 6 is deducted from the gross turnover of a selling dealer for the purpose of computation of a taxable turnover. In other words, a selling dealer, who produced evidence to show that it has sold goods covered by notification issued under Section 6 and the conditions and exceptions are complied with, is entitled to a deduction while its taxable turnover is computed. So far as Section 5(2)(A)(a)(ii) is concerned, it is found that when a selling dealer otherwise entitled to tax free purchase by giving declaration in Form XXXIV has to resell the goods in Orissa in a manner that such resell shall be subject to levy of tax under the Act. In other words, if the selling dealer in a series of sale purchases goods by giving declaration in Form XXXIV, he has to sell the same to another registered dealer in the State of Orissa in a manner that would be subject to levy of tax under the Act. It is not for the selling dealer to go after the purchasing dealer to find out as to in what manner he utilized the goods, which it has purchased on the strength of the Declaration Forms in order to be entitled to the deduction. Such a requirement would fasten an impossible burden on the selling dealer. It is the purchasing dealer, who is getting exemption on fulfillment of certain conditions. Therefore, if goods purchased on the basis of the declaration are put to a different use, the benefit of exemption is to be denied to it, i.e. the purchasing dealer. The selling dealer cannot be faulted if there is any diversion or change of user. - there is no conflict of opinion in the decisions rendered by this Court in both the aforesaid cases, i.e. State of Orissa vrs. M/s. Sahoo Traders and Tilakraj Mediratta vrs. State of Orissa, (1992 (2) TMI 338 - ORISSA HIGH COURT) - Appeal disposed of. Indian Laws 2015 (11) TMI 383 Audit of the accounts of the Distribution Companies (DISCOMs), entrusted with the work of distribution and retail of electricity in Delhi - Whether under Section 20(1) of the Comptroller and Auditor Generals‘ (Duties, Powers and Conditions of Service) Act, 1971 (CAG Act) the Comptroller and Auditor General of India (CAG) can be requested to undertake the audit of the accounts of the DISCOMs - Whether the audit so directed can be since the date of inception of DISCOMs i.e. 1st July, 2002 and if not, for what period - DISCOMs contended that once there had been privatisation of the electricity companies, CAG had no jurisdiction qua them - Held that:- The words “body or authority” in Article 149 of Constitution of India and in the CAG Act are of wide amplitude and not confined to “body or authority” which satisfy the test of ‘State‘ within the meaning of Article 12. They extend to “private body or authority also” and would cover the DISCOMs. The direction of the Administrator of Delhi for audit of DISCOMs in exercise of power under Section 20 of the CAG Act has to be on the aid and advice of the Council of Ministers, GNCTD and not eo nomine. Though the opportunity to represent against the proposal for audit, under Section 20(3) of the CAG Act, given to the DISCOMs, cannot be faulted on the ground of insufficiency of time but was not reasonable, having been given without disclosing the public interest in which audit of accounts of DISCOMs was deemed expedient and having been given before consultation with CAG and before the terms and conditions of audit were agreed between the GNCTD and the CAG. Such consultation and agreement are essential components of the proposal for audit, opportunity to represent whereagainst is required by Section 20(3) to be given. Audit under Section 20(1), for the reasons stated i.e. for determination of tariff is not expedient in public interest as the determination of tariff is on the sole domain of DERC which is well empowered to itself conduct the same or have the same conducted and the report of CAG of audit of DISCOMs has no place in the Regulatory Regime brought about by the Electricity Act and the Reforms Act. Thus, the impugned direction for audit of DISCOMs under Section 20(1) of the CAG Act is quashed / set aside. We therefore allow the petitions of the DISCOMs by quashing the impugned directives of the GNCTD and dismiss the PIL. Needless to state, all actions undertaken in pursuance to impugned directive are also rendered inoperative and to no effect.
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