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TMI Tax Updates - e-Newsletter
November 12, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Central Excise
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Addition income u/s 68 - the assessee had not earned any speculation income but had merely laundered his undisclosed income for speculation profits by entering into dubious transactions in order to avail set off against brought forward unabsorbed speculation loss - additions confirmed - AT
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Long term capital gain - in case of allotment of flat under self financing scheme of Delhi Development Authority(DDA) and co-operative societies , the date of allotment shall be the date of construction for the purpose of Section 54/54F - AT
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Weighted deduction - in-house research and development - once the entitlement and eligibility of the assessee is established by strictly construing the provision of section 35(2AB), then the provision is to be liberally construed so that full effect is given of the beneficial provision to achieve the intended objective for which the beneficial statutory provision is placed on the statute. - AT
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Exemption u/s 11 - running hospital - the chemist shop is part and partial of the hospital being incidental/ancillary to achieve the objects of the hospital - exemption allowed - AT
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Late Filing Fee U/S 234E - default in submitting the TDS statements in time - AO has exceeded his jurisdiction in levying fee under Section 234E while processing the statement and make adjustment under Section 200A of the Act. - AT
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Disallowance of research & development expense - disallowance u/s 35 & 37 - the disallowance cannot be made only on the ground that results of the research were not shown by the assessee during the year under consideration. - AT
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Grant of deduction u/s 35(2AB) - till 20th September, 2004, automobile components was not an approved article for deduction u/s 35(2AB) and therefore, the approval granted after this date cannot relate back prior to this and therefore, no deduction can be granted - AT
Central Excise
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Refund - if the credit notes are issued after the assessment of the goods then at the time of assessment of the goods duty is already passed on to the purchaser and therefore the duty involved in such value which is reduced by way of issue of credit notes is hit by provisions of unjust enrichment - AT
Case Laws:
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Income Tax
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2016 (11) TMI 394
Deemed dividend under Section 2(22)(e) - Held that:- It is not the case of the Revenue that the respondent assessee company is a mere shell and Capt. Salvi and company are one and the same. In fact, the Assessing Officer proceeds on the basis that as the assessee company and M/s. Alfa Distilleries P. Ltd. and M/s. Vulcan Distilleries P. Ltd. had common shareholders, therefore, the amounts received by the respondent assessee as loans and advances from the two companies are to be considered as deemed dividend under Section 2(22)(e) of the Act. The Tribunal in the impugned order has held that as the respondent assessee is not shareholder of M/s. Alfa Distilleries P. Ltd. and M/s. Vulcan Distilleries P. Ltd. who had advanced loans to the respondent assessee. Therefore, the amount of loans made to the respondent assessee cannot be taxed in the hands of the respondent assessee as it is not a shareholder of M/s. Alfa Distilleries P. Ltd. and M/s. Vulcan Distilleries P. Ltd. It is an undisputed position as fairly submitted by Mr. Suresh Kumar that the question raised herein is concluded against the Revenue and in favour of the respondent assessee by the decisions of this Court in Commissioner of Income Tax Vs. Universal Medicare Pvt. Ltd. [2010 (3) TMI 323 - BOMBAY HIGH COURT ] and Commissioner of Income Tax Vs. Vs. Impact Containers (P) Ltd. [2014 (9) TMI 88 - BOMBAY HIGH COURT ] that deemed dividend has to be taxed in the hands of the shareholder of the company giving the loans and / or advance. In this case, admittedly, the respondent assessee is not a shareholder of the two companies i.e. M/s. Alfa Distilleries P. Ltd. and M/s. Vulcan Distilleries P. Ltd. - Decided in favour of assessee.
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2016 (11) TMI 393
Claim of interest made u/s. 24(b) disallowed - completion certificate indicating completion of the flat - Held that:- A careful perusal of the second proviso to section 24 would show that the assessee should acquire or complete construction within three years from the end of financial year in which the capital was borrowed. In the instant case, the assessee has furnished certificate from the Cooperative Society to show that the possession of the flat was taken in October 2006 and March 2007. Further, the proviso nowhere states that the assessee should furnish completion certificate from the appropriate (Government) authorities. In our view, the evidences furnished by the assessee sufficiently prove that the assessee has taken possession of the flat during the relevant financial year under consideration. Accordingly we are of the view that the assessee is entitled to claim deduction u/s 24(b) of the Act. - Decided in favour of assessee
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2016 (11) TMI 392
Disallowance of business expenses - as per AO no business income derived by the assessee and the assessee has not carried out any business activity during the year under consideration for it to be eligible to claim business expenditure - Held that:- From the details of expenditure so incurred and claimed, we find that the assessee has merely claimed the expenses which are necessary to retain the establishment. Other expenses have been suo motu added by the assessee while computing taxable income. From the P&L account we notice that the loss works out to be ₹ 1,86,69,943/- however, the assessee has claimed loss of ₹ 70,53440/- in its return of income. It means the assessee himself has disallowed the loss of ₹ 1,16,15,803/-. So, we do not find any infirmity in CIT(A) order in allowing legitimate claim of business expenditure incurred by the assessee. - Decided in favour of assessee
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2016 (11) TMI 391
Addition of Project expenses written off - decision to abandon the project - whether the assessee is eligible to claim the said expenditure in respect of a resort being developed which is being abandoned at the stage of work in progress due to the change in the govt. policy regulating the developments of such resort? - Held that:- The decision of Hon’ble Delhi High Court in case of Jay Engineering Works Ltd. (2007 (10) TMI 286 - DELHI HIGH COURT ) directly supports the case of the assessee wherein it was held that “the nature of the new business is not a decisive test for determining whether or not there is an expansion of an existing business. The nature of the business could be distinct. What is of importance is that the control of both the ventures, the existing venture as well as the new venture, must be in the hands of one establishment or management or administration. The place of business of the existing business and the new business may not be in close proximity. However, the funds utilized for the management of both the concerns must be common as reflected in the balance sheet of the company. The control over the two units is in the hands of the same management and administration.” Also see Maharaja Shri Umaid Mills (1987 (9) TMI 6 - RAJASTHAN High Court ) which also supports the case of the assessee. In light of above and given the facts that the decision to abandon the project was taken during the year due to the change in govt. Policy, the expenses relating to the resort which have been written off in the books of accounts have been rightly been claimed by the assessee as revenue expenditure. - Decided in favour of assessee Addition u/s 40A(3) - Held that:- The genuineness of the transaction as well as the identity of the payee are not disputed. Further, the appellant has explained the business expediency of making the cash payments to both the parties which has not been controverted by the Revenue. Following the decision of Gujarat High Court in case of Anupam Tele Services (2014 (2) TMI 30 - GUJARAT HIGH COURT ) and Harshila Chordia (2006 (11) TMI 117 - RAJASTHAN HIGH COURT ), the addition under section 40A(3) is deleted.- Decided in favour of assessee
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2016 (11) TMI 390
Registration to the assessee Trust under section 12AA and 80G - charitable activities - powers of CIT(A) - Held that:- The powers of ld. CIT with whom the application is filed, are limited to the aspect of examining that whether or not the objects of trust are charitable in nature and since the Trust was formed on 22.12.2014 and the application for registration was made on 07.04.2015 , though the activities commenced to some extent, there were less as such is not open for the ld. CIT to go into the quantitative aspect of the activities of the Trust. The carrying of charitable activity at the stage of commencement of institution is not relevant to decide that whether such trust/ institution is entitled for registration. So long the objects of the trust are charitable in nature, registration cannot be refused, if the trust is genuine. Therefore, we find no material on record to justify the action of the CIT vide which the assessee trust has been refused for grant of registration. - See Dharma Sansthapak Sangh (Niyas). Versus Commissioner Of Income-Tax.[2008 (8) TMI 393 - ITAT DELHI-A ] - Decided in favour of assessee
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2016 (11) TMI 389
Carry forward of business loss denied - rectification of mistake - Held that:- in the case on hand, the assessee admittedly, inadvertently, did not claim set off of business losses against certain heads of income in the return of income. While processing the assessee’s return of income for A.Y. 2008-09 under section 143(1) of the Act, the AO after accepting/ determining the business loss of the assessee at ₹ 5,04,26,202/-, was duty bound in accordance with law as laid down in the provisions of the Act to have allowed set off of the business loss to the extent permissible against other heads of income and carry forward of the eligible balance if any. The assessee is entitled to be allowed set off of business loss as determined by the AO in the order of assessment for A.Y. 2008-09 dated 10.12.2009, against his other eligible heads of income in accordance with law. In our view, failure on the part of the AO to apply these provisions of the Act in respect of set off of determined business losses, while passing the order of assessment, constitutes a mistake apparent from the record. We, accordingly, direct the AO to rectify the order of assessment for A.Y. 2008-09 dated 10.12.2009 by allowing the assessee set off of the business losses of ₹ 5,04,26,202/- against other eligible heads of income in accordance with the law. - Decided in favour of assessee
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2016 (11) TMI 388
Addition income u/s 68 - whether speculation profit was to be brought to tax in the assessee’s hands as income from undisclosed sources? - Held that:- CIT(A), on examination of the details thereof, observed that the assessee had not recorded any of the these transactions in his books of accounts; had not made any deposit with the sub-broker and not paid security transaction tax, had not got his accounts audited even though the turnover in this ‘speculation’ business activity was in excess of ₹ 40,00,000/- as required under section 44AB of the Act. CIT(A) further observed that the sub-broker M/s. Falgun Finvest, with whom the assessee entered into these alleged speculative transactions, admitted that it was engaged in the business of giving havala entries for a fee and concluded that in view of the facts on record, it is clear that the assessee laundered his undisclosed income through this sub-broker M/s. Falgun Finvest as speculation profit/income in shares. That Shri Niraj Sanghvi, husband and POA holder of his wife Smt. Charu Sanghvi, Prop. Falgun Finvest admitted to the same We find that the learned CIT(A) observed that M/s. Falgun Finvest in letter dated 13.12.2010 has confirmed that it had issued bills to the assessee in respect of certain transactions that took place in Financial year 2002-03 done “off market” and not routed through the main broker, M/s. Ventura Securities Ltd. In this factual matrix of the case, finding that assessee has not been able to bring on record any material evidence to controvert the finding of the learned CIT(A), we uphold the action of the learned CIT(A) in bringing to tax in the assessee’s hands, the undisclosed income as income from other sources, since the facts on record clearly establish that the assessee had not earned any speculation income but had merely laundered his undisclosed income for speculation profits by entering into dubious transactions in order to avail set off against brought forward unabsorbed speculation loss - Decided against assessee
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2016 (11) TMI 387
Unexplained cash credit u/s 68 - assessee unable to explain the sources of the introduction of fresh share capital/share application - Held that:- The assessee has admitted that these share capital/share application money raised by the assessee to the tune of ₹ 3,19,35,000/- were fictitious and bogus entries and in-fact no such share capital/share application money was ever raised by the assessee and the fictitious entries in the books of accounts are now removed/eliminated to reflect true and fair state of affairs of the assessee company which has now been audited by auditors of the assessee company and the same has been filed with Ministry of Corporate Affairs, Government of India O/o Registrar of Companies and receipted challans are enclosed in the paper book-II filed with the Tribunal containing additional evidences . It is settled position of law that only real income can be brought to tax and mandate is to bring income to tax as per authority of law. These additional evidences in our considered view goes to the root of the matter and needs to be admitted and adjudicated on merits in order to advance substantial justice and we admit these additional evidences filed by the assessee vide page 43-148/paper book-II . However, the contentions of the assessee and the additional evidences so filed by the assessee need verification by the authorities below and hence we are of the considered view that in order to identify and assess the real income of the assessee and to advance substantial justice, the matter/issue under this appeal need to be set aside and restored to the file of the ld. CIT(A) for de-novo determination of the issue on merits - Decided in favour of assessee for statistical purpose.
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2016 (11) TMI 386
Long term capital gain - Entitlement to indexation computed with respect to the date of actual payments of installments slab wise - date on which assessee acquired rights, title and interest in the flat - Held that:- The assessee has made the installment payments slab wise from time to time over a period of time. However, we have observed that the assessee has written a letter to the Builder Apex Hotels Enterprises Private Limited dated 10-03-2008 whereby it was stated that a beneficial right and interest in the flat was acquired by the assesssee under the allotment letter dated 01-08- 1994 issued by the Builder with respect to flat bearing No. 601 in 6th floor in the building known as Pujit Plaza situated at plot No. 67, Sector 11, Belapur, Navi Mumbai, which is now proposed to be sold by the assessee in March 2008 . The said letter dated 10-03-2008 addressed to the Builder is placed on record in paper book/page 22/25 filed by the assessee. However, the assessee has not placed the said allotment letter dated 01-08-1994 on record in the paper book filed with the Tribunal for our study and perusal to determine whether in fact the assessee acquired rights, title and interest in the flat vide the said allotment letter dated 01-08-1994. The order of the AO did mention about this allotment letter dated 01-08-1994. CBDT Circular No. 471 dated 15th October 1986 and also CBDT circular no. 672 dated 16-12-1993 stipulates that in case of allotment of flat under self financing scheme of Delhi Development Authority(DDA) and co-operative societies , the date of allotment shall be the date of construction for the purpose of Section 54/54F of the Act. Thus, by virtue of allotment letter dated 01-08-1994 , prima facie it appears that the assessee has acquired the interest , rights and title in the property but the said allotment letter dated 01-08-1994 is not placed on record by the assesssee to enable us to study detailed terms and conditions. The matter in our considered view, need to be set aside and restored to the file of the AO for re-determination of the issue on merits by the AO after examining the terms and conditions of allotment letter dated 01-08-1994 to enable the AO to determine whether the assessee has in-fact acquired rights , title and interest in the said flat by virtue of the said allotment letter dated 01-08-1994 . The assessee has sold the flat in March 2008 and hence if it is held by the AO that the assessee acquired rights, title and interest in the flat w.e.f. 01-08- 1994 i.e. the date of allotment, the gains shall be brought to tax as long term capital gains - Decided in favour of assessee for statistical purposes
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2016 (11) TMI 385
Tax on amount of interest income earned upon Non Resident External Rupee Accounts (‘NRE Accounts’) - denial of exemption claimed by the assessee u/s 10(4)(ii) - Held that:- Assessee was on deputation to India with a subsidiary of M/s Sunlife Assurance Co of Canada. It has been further held that assessee was a person not resident in India as per provisions of FEMA. It has been further held by Ld. CIT(A) that the assessee satisfied both the conditions of section 10(4)(ii) of the Act. It is further noted by us that in the year before us the assessment was done ex-parte and addition was made by the Ld. CIT(A) by way of enhancement. It is further noted that facts have not been properly analysed by Ld. CIT(A) in the impugned year. On the other hand, in the assessment year 2009-10 proper factual analysis were made by Ld.CIT(A) and his order has been accepted by the revenue as per the facts narrated before us by the ld. Counsel. Under these circumstances, we find that the interest income of the assessee is exempt u/s 10(4)(ii) of the Act and, therefore, addition made by the Ld.CIT(A) with regard to interest earned in NRE account is directed to be deleted. Sale of shares in mutual fund under Portfolio Management Scheme (PMS) - capital gain or busniss income - Held that:- Hon’ble Karnataka High Court in the case of CIT vs Kapur Investments (P) Ltd (2015 (5) TMI 616 - KARNATAKA HIGH COURT ) has decided this issue in favour of the assessee by holding that the profits earned from investment through PMS – whether directly or indirectly or though PMS, would still remain as profits to be taxed as capital gains as the same will not change the nature of investment i.e. in shares, and law permits it to be taxed as capital gains and not as business income. Taking into account the facts of this case and legal position as is brought before us and also the fact that the claim of the assessee has been accepted by the AO as well as the Ld. CIT(A) consistently in all subsequent years, we hold that the action of Ld.CIT(A) in treating the income from PMS as business income is contrary to law and facts. The AO is directed to treat the said income as income assessable under the head “Income from capital gains”. The addition proposed by the Ld. CIT(A) in this regard is directed to be deleted.
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2016 (11) TMI 384
Undisclosed income - Held that:- Nothing incriminating which is conclusively confirmed by Revenue is on record but there is no doubt possibility of leakage which can only be confirmed once patients confirmation/ verification are on record. We have observed that the matter is very old and it is now almost an impossible task to get confirmations/ verification from patients at this stage after 15 years and also that this is the second round of litigation before the Tribunal, We have also observed that the remaining addition sustained is of ₹ 12,19,055/- on this account in the hands of the assessee which is subject matter of litigation before us. The assessee has stated that she will not pursue further litigation if the matter is settled by the Tribunal and the learned counsel for the assessee has given concession in this regard. Keeping in view peculiar facts and circumstances of the case as enumerated above as well concession offered by the assessee and in exercise of our power u/s 254(1) of the Act with a view to render substantial justice to both the parties , we confirm/sustain the addition to the tune of ₹ 7 lacs as undisclosed income in the hands of the assessee as against the addition of ₹ 12,19,055/- sustained by the ld. CIT(A). Thus, the assessee will get relief of addition of ₹ 5,19,055/- as undisclosed income as confirmed/sustained by the learned CIT(A) with the conditions that the assessee will deposit all due taxes and interest accrued thereon as per provisions of the Act on the additions sustained by us within 60 days of the receipt of this order.
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2016 (11) TMI 383
Transfer pricing adjustment - TPO while passing the transfer pricing order has applied entity level benchmark - Held that:- DRP has followed the Tribunal’s order in assessee’s own case for the AY 2006-07 and 2008-09 while granting the relief, wherein, it has been directed that TPO should consider the segmental evidence submitted by the assessee. Since the operating margin is based on audited segmental financials submitted by the assessee, wherein, the assessee has earned and shown profit margin at 7.81% as against margin earned by the comparable companies of 8.3% as computed by the TPO himself in pursuance of DRP’s direction which falls within the Arm’s length price range of ± 5%. In any case, also even if entity level margins of 6.47% and the margin earned by the comparable companies at 8.3% (as per the DRP’s direction) is taken into consideration, the ld counsel before us has pointed out that, then also it falls within the variation of +/- 5%.
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2016 (11) TMI 382
Disallowance u/s 14A - Held that:- We have observed that the assessee had made investments of ₹ 226.02 lacs as at 31-03-2007 ( ₹ 226.02 lacs as at 31-03-2006) which are stated to be strategic investment. The assessee’s own funds are to the tune of ₹ 5562.13 lacs as at 31-03- 2007 and ₹ 3902.04 lacs . The audited financial statements for financial year 1997-98 to 2006-07 are filed by the assessee and are placed in paper book page 47-106. It could be observed as detailed above that the assessee’s own funds are much higher than the investments made by the assessee which are capable of yielding exempt income. The assessee received dividend income of ₹ 1,15,64,882/- which was claimed as an exempt income u/s. 10(34) of the Act. The assessee has also submitted details of various loans raised by the assessee and interest paid to contend that none of the loans raised were deployed towards investments made and these are old investments and no fresh investment are made during the impugned assessment year. The assessee has placed details of loans raised, loan agreements and details of interest paid during the previous year relevant to the impugned assessment year to contend that none of the loans raised by the assessee were directed towards acquisition of investments. Nothing incriminating is brought on record by the Revenue to prove that interest bearing funds were specifically used for making investments and hence in our considered view , addition of ₹ 10,74,405/- made by the AO is not sustainable and is ordered to be deleted. With respect to disallowance of ₹ 1,13,010/- made by learned AO towards administrative and other indirect expenses attributable to the earning of exempt income being dividend of ₹ 1,15,64,882/- received by the assessee during the previous year relevant to the impugned assessment , which disallowance of ₹ 1,13,010/- in our considered view is very reasonable and fair which we upheld and sustain and do not intend to interfere with the orders of the authorities below keeping in view of fairness and reasonability of the disallowance keeping in view facts and circumstances of the case as emanating from the records before us. Claim for deduction u/s. 35(2AB) - claim not allowed by the authorities below as the approvals from prescribed authorities were not submitted as well genuineness of the research conducted was doubted by the authorities below as evidences of conducting research in the field of drugs and pharmaceuticals were not submitted by the assessee before the authorities below - Held that:- We are of the considered view that in the interest of substantial justice, this issue need to be set aside and restored to the file of the AO for de-novo examination of the issue on merits by the AO before granting weighted deduction u/s. 35(2AB) of the Act in accordance with law. We would like to clarify and place on record that we have not made any comments on merits of the claim of the assessee for weighted deduction u/s 35(2AB) of the Act and the AO shall adjudicate this issue on merits in accordance with law uninfluenced by observation, if any made by us on this issue of claim of deduction u/s 3(2AB) of the Act in this order. The provisions of Section 35(2AB) of the Act allows weighted deduction and is a beneficial provisions and hence the same is to be strictly construed at the first stage to determine the eligibility of the assessee under the beneficial provision and once the entitlement and eligibility of the assessee is established by strictly construing the same, then the provision is to be liberally construed so that full effect is given of the beneficial provision to achieve the intended objective for which the beneficial statutory provision is placed on the statute. Disallowance of deduction being towards sundry balances written off - assessee has falied to prove the conditions laid down u/s 36(1)(vii) r.w.s. 36(2) - Held that:- CIT(A) called for remand report from the AO which was confronted to the assessee but the assessee did not submitted any explanation before the learned CIT(A) in response to remand report of the AO. It is the contention of the assessee that the assessee was not given proper and adequate opportunity by the learned CIT(A) which prevented assessee from giving reply before learned CIT(A) in response to the remand report of the AO. It is the contentions of the assessee that if the matter/ issue is set aside to the file of the AO, then the entire details will be submitted to the AO and the AO can make necessary verifications, enquiries, examination and investigation before granting the benefit of claim of deduction on account of write off advances to the tune of ₹ 14,44,832/-. The assessee has placed all documents in connection thereof in paper book page 154-262. We are of the considered view that in the interest of substantial justice, this issue need to be set aside and restored to the file of the AO for de-novo examination of the issue on merits by the AO before granting deduction on account of write off of advance of ₹ 14,44,832/- u/s. 36(1)(vii) read with Section 36(2) of the Act in accordance with law.
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2016 (11) TMI 381
Exemption u/s 11 - income from pharmacy store/pharmacy shop situated at the premises of the hospital - whether activity of running a pharmacy shop is incidental to the attainment of the objects of the trust as well as running shop is not a planned activity, though assessee is paying VAT on sales, with an intention of earning income side by side? - Held that:- Hon’ble jurisdictional High Court in Baun Foundation Trust vs Chief Commissioner (2012 (4) TMI 172 - BOMBAY HIGH COURT ) wherein, identically, the activity of chemist of was held to be incidental or ancillary to the dominant object and purpose to run a hospital. The Hon’ble Court held that running a chemist shop is not the dominant object for the purpose trust, therefore, the assessee’s application was allowed u/s 10(23C) (via) of the Act, by holding that application of approval cannot be rejected on the ground that running of a shop in the hospital is incidental for the purposes of the hospital. In the present appeal also, the chemist shop is part and partial of the hospital being incidental/ancillary to achieve the objects of the hospital, therefore we decide the sole issue urged by the assessee in his favour.
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2016 (11) TMI 380
Levy of penalty u/s. 271 (l)(c) - failure to offer rental income - Held that:- Assessee has given bonafide explanations for non-inclusion of rental income in her return of income as the said rental income was stated to belong to the son of the assessee, Mr Vivek Kohli and we find the explanation offered by the assessee as bonafide and quite reasonable keeping in view factual matrix as culled out from records placed before us. Thus as per the assessee , the sum of ₹ 2,76,250/- is chargeable to tax as income in the hands of Mr. Vivek Kohli and not in the hands of the assessee keeping in view that he is also coowner of the property. Thus, in the instant case , the penalty u/s 271(1)(c) of the Act levied by the AO and to the extent it is confirmed by the ld. CIT(A) is not sustainable in view of bonafide explanation given by the assessee in accordance with provisions of Section 271(1)(c) of the Act as the instant case is covered by explanation 1 to Section 271(1)(c) of the Act as the assessee has come out with a bonafide explanation to explain the reasons for non-inclusion of rental income in her return of income filed with the Revenue - Decided in favour of assessee
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2016 (11) TMI 379
Condonation of delay - sufficient cause - Held that:- We have observed that the assessee was prevented by sufficient cause for not presenting appeal in time before the Tribunal as the CA of the assessee , Mr Shankarlal Jain of M/s Shankarlal Jain and Associates at 12, Engineer Building, 265, Princess Street, Mumbai-400002 has not co-operated with the assessee and retained the possession of the relevant documents disabling the assessee to take appropriate action in this matter despite the assessee paying hefty fees to the said CA which has led to delay in filing appeal before the Tribunal which is supported by an affidavit of Director, Mr Manoj Shah of the assessee and also affidavit of new CA, Mr. R R Mandali and hence keeping in view peculiar facts and circumstances of the case we are inclined to condone the delay of 458 days in filing the appeal by the assessee before the Tribunal. We would at the same time like to place on record our un-happiness in the manner in which CA Sh Shankarlal Jain conducted himself professionally with the assessee company which led to the serious prejudice to the assessee as detailed in the affidavits of the Director of the assessee and new CA of the assessee , which professional conduct is not healthy for growth and development of profession of CA. We, accordingly set aside the order of the ld. CIT(A) and restore the matter to the file of learned CIT(A) for redetermination of the entire assessment in accordance with law as indicated above. The assessee is directed to co-operate in the proceedings and produce all necessary and relevant documents including the books of account etc. in support of its claim before the authorities below in accordance with provisions of law as called by the authorities below to comply with our directions. Needless to say that sufficient and adequate opportunity to the assessee of being heard in accordance with principles of natural justice in accordance with law shall be granted by the authorities below.
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2016 (11) TMI 378
Late Filing Fee U/S 234E - default in submitting the TDS statements in time - Held that:- Assessing Officer has exceeded his jurisdiction in levying fee under Section 234E while processing the statement and make adjustment under Section 200A of the Act. Therefore, the impugned intimation of the lower authorities levying fee under Section 234E of the Act cannot be sustained in law. However, it is made clear that it is open to the Assessing Officer to pass a separate order under Section 234E of the Act levying fee provided the limitation for such a levy has not expired. Accordingly, the intimation under Section 200A as confirmed by the CIT(Appeals) in so far as levy of fee under Section 234E is set aside and fee levied is deleted. See Smt. G. Indhirani, Salem, RAJAGURU SPINNING MILLS LTD., A. DHAKSHINAMURTHY , PADMA TEXTILES & MURTHY LUNGI COMPANY Versus The Deputy Commissioner of Income Tax, CPC – TDS, TDS – CPC, Uttar Pradesh [2015 (7) TMI 640 - ITAT CHENNAI] - Decided in favour of assessee
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2016 (11) TMI 377
Disallowance of research & development expense - Held that:- The copies of transportation vouchers were also submitted before us to show that all these evidences were brought before the AO evidencing transportation of saplings and other related material. Nothing has been brought on record by the lower authorities to reject these evidences. No further query was raised in this regard by the lower authorities which was left to be addressed by the assessee. We find that the disallowance has been made without brining any cogent material on record to reject the details and evidences submitted by the assessee. The disallowance cannot be made only on the ground that results of the research were not shown by the assessee during the year under consideration. The benefit of research may or may not yield in the year under consideration. But, that would not determine allowability of the expenses or otherwise. Thus, taking into account totality of facts and circumstances of the case, the action of lower authorities in disallowing these expenses was not justified and therefore, same is reversed and AO is directed to allow the claim - Decided in favour of assessee.
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2016 (11) TMI 376
Reopening of assessment - mis-match of receipts between TDS certificate and profit and loss account - Held that:- We have observed that the assessee has duly filed the return of income u/s. 139 of the Act which was selected for scrutiny and assessment u/s 143(3) of the Act was duly completed on 24th December, 2007 accepting the returned income. The case was reopened u/s 147/148 of the Act on the ground that there was a mis-match in the gross receipts as declared in return of income filed with Revenue vis-à-vis gross receipts as reflected as per TDS certificates. The reasons recorded for reopening were duly supplied to the assessee. The assessee has given reply explaining that the freight paid to the attached vehicles was reduced from the freight received from the attached vehicles and the net amount was credited to the P&L account along with the freight received from own vehicles. Thus the reason for the mis-match has been duly explained by the assessee which was accepted by the Revenue and no addition has been made by the Revenue on this ground. The Revenue has made the addition on some other ground i.e. non deduction of TDS on payment of freight. In our considered view, the ratio of the decision of Hon’ble Bombay High Court in the case of Jet Airways (I) Ltd.(2010 (4) TMI 431 - HIGH COURT OF BOMBAY ) is directly applicable to the instant case and the addition made by the Revenue cannot be sustained.
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2016 (11) TMI 375
Transfer pricing adjustment - comparability - Held that:- There is no reason given by the ld. CIT(A) regarding rejection of various comparables by the TPO and hence, we feel it proper to restore the entire matter on TP issues to the file of the ld. CIT(A) for fresh decision by way of speaking and reasoned order after providing adequate opportunity of being heard to both sides. Interest payable to Central Excise Department disallowed Trade mark expenses - Nature of expenses - revenue v/s capital - Held that:- The payment in question cannot be said to be a payment in the nature of royalty because, in the present case, fixed lump sum was paid for purchase of trade markSince the nature of asset acquired is a capital asset eligible for depreciation u/s 32 of the Act, it cannot be allowed as a revenue expenditure and therefore, this ground of the assessee is rejected. Claim of deduction u/s 80JJAA - AO held that sec.80JJAA was restricted to additional wages paid to employees who have worked for more than 300 days during the relevant period irrespective of whether they were employed on a permanent basis or otherwise - Held that:- As per provisions of section 80JJAA as reproduced above, the deduction is allowable for three years including the year in which the employment is provided. Hence, in each of such three years it has to be seen that the workmen was employed for at least 300 days during that previous year and that such work men was not a casual workmen or workmen employed through contract labour. Therefore, if some work men were employed for a period less than 300 days in the previous year then no deduction is allowable in respect of payment of wage to such work men in the present year even if such work men was employed in the preceding year for more than 300 days but in the present year, such work men was not employed for 300 days or more. In this view of the matter, we find no infirmity in the order of the ld.CIT(A) on this issue upholding the action of the DCIT in not granting the deduction u/s 80JJAA in respect of the workmen who were employed by the appellant during the year but whose duration of working in that year was less than 300 days. Grant of deduction u/s 35(2AB) - Held that:- In the present case, 21.09.2004 is the date of issuing of notification notifying the automobile components as eligible articles for deduction u/s 35(2AB) of the Act. In a case, where an industry is in the list of approved industry, but the assessee applies for approval of its unit after the start of the previous year and the same is approved by DSIR, then deduction can be allowed from April even if the approval is granted on a later date in the same year. But in the present case, till 20th September, 2004, automobile components was not an approved article for deduction u/s 35(2AB) and therefore, the approval granted after this date cannot relate back prior to this and therefore, we find no infirmity in the order of the ld. CIT(A). This ground of appeal of the assessee is rejected, because on both these aspects of the matter, there is no infirmity in the order of the ld. CIT(A) i.e. regarding netting of reimbursement of expenses and date of notification.
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Customs
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2016 (11) TMI 396
Exemption from ADD - ‘vitrified tiles’ - import from Peoples Republic of China and United Arab Emirates - ‘new shippers review’ - compliance with condition of exporter combination in the context of the duality expressed therein - Held that: - Confronted, as we are, with two entities designated exporters, the lack of a definition of ‘export’ or ‘exporter’ in Customs Tariff Act, 1975 and the contextual disconnect with the definition in Customs Act, 1962, common parlance usage compel us to perceive the transaction from the perspective of the importer; probably, there is a justification to do so as the duty in dispute is leviable on imported goods. An importer contracts with its supplier and, being a sale contract, it finds one entity at each end of sale and purchase. Likewise, place of export cannot be in plural and any other location before arrival can only be transshipment points. Patently, exclusion of one of the two entities listed in the exporter’s claim would shift the pertinent duty to sl. no. 10; both are required to be associated with the import transaction to be entitled to ‘nil’ rate of anti dumping duty. Therefore, there is no basis for Revenue to contend that the exemption is applicable only if the import originates from M/s Ableace; for if that were to be so, there is no role whatsoever for the exporter in China in the transaction between M/s RAK Ceramics Pvt Ltd and M/s Ableace. Implicitly, the transaction between M/s Joyson Ceramic Materials Co. Ltd and the importer in India has to be placed through M/s Ableace to be exempted from anti-dumping duty. Without this structuring, the international practice in documentation of shipping cannot also be complied with. Therefore, the impugned order is legal and proper in allowing the benefit of exemption from anti-dumping duty.
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2016 (11) TMI 395
Re-assessment - Notification no. 53/97-Cus dated 3rd June 1997 - Confiscation - Penalty - Misdeclaration - 100% Export Oriented Unit - Held that: - he addition of cost element to the declared value would have rendered the value of the imports to be in excess of the value of capital goods permitted for import as it was at the time of import but not in excess of the limit as enhanced subsequently. No evidence of deliberate suppression of this with intent to evade duty is on record - It is only on the expiry of the term of the Letter of Permission that liability to duty may arise if warranted and, that too, on the depreciated value. There is no liability to customs duty at the time of import and section 14 of Customs Act, 1962, along with its attendant Rules, can be invoked only in relation to payment of duty. We agree with that contention and, considering their eligibility for duty-free import as well as the deferment of any duty liability on warehoused goods, we hold that the goods are not liable for confiscation. The recourse to penal provisions under section 112 in the impugned order without a finding that the goods are liable to confiscation under section 111 is also improper - Decided in favor of the assessee.
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Central Excise
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2016 (11) TMI 412
Interest payable on delayed refund - Held that:- No substance in the contention for what the governing words are “if any duty ordered to be refunded under sub-section (2) of section 11-B to any applicant is not refunded …..”. Therefore, if that duty ordered to be refunded is not refunded within three months from the date of receipt of application under sub-section (1) of section 11-B, then, the liability to pay interest arises. We find that the order to refund duty was passed well after section 11-BB was brought on the statute book.
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2016 (11) TMI 411
Refund - unjust enrichment - Held that: - if the credit notes are issued after the assessment of the goods then at the time of assessment of the goods duty is already passed on to the purchaser and therefore the duty involved in such value which is reduced by way of issue of credit notes is hit by provisions of unjust enrichment - Appeal is rejected.
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2016 (11) TMI 410
Imposition of penalty under Rule 25 & 27 - fire accident - 1874.500 kg. P.U. Foam blocks completely destroyed - Held that: - no finding against the appellant of any contumacious conduct, negligence or operating of their factory without proper consent as required under the law’s - penalty imposed set aside - appeal allowed. Remission claim - levy of duty - Held that: - there is no dispute as to the occurrence of the fire in the factory of the appellant - the rejection of remission claim is without any justified reason - appeal allowed. Decided in favor of assessee.
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2016 (11) TMI 409
Refund - EOU - EPCG licence - Held that: - the Policy circular dated 13.5.2005 issued by DGFT which states that the matter has been consulted with CBEC and it is clarified that the goods cleared from EOU under EPCG scheme would attract central excise duty which are aggregate of effective customs duty leviable on like goods imported i.e. duty calculated after applying end use based notification and as per circular dated 15.9.1994 issued by CBEC - It was clarified that EOU can clear the goods under EPCG scheme at concessional rate of duty and there is no requirement for any other separate exemption notification in this regard. Regarding the refund of duty on finished goods, cleared for DTA, the contention of the Revenue is that during the period between date on which no dues certificate issued by the Customs and date of final de-bonding order of the Development Commissioner, unit shall not entitled to claim any exemption for procurement of capital goods or inputs - Decided in favor of the assessee.
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2016 (11) TMI 408
Cenvat credit - Consulting Engineers Services - Rule 6(1) of Cenvat Credit Rules, 2004 - Held that: - the issue involved in this case is regarding the eligibility to avail cenvat credit on the input services which are used in ERC which manufactured/ developed prototype of cars - It is seen that any service used by the manufacturer whether directly or indirectly, in or in relation to the manufacture of final products would be eligible for Cenvat credit. When a manufacturer receives “Consulting Engineer’s Service” for the design of the vehicle and utilised those services in the manufacture of prototypes, the usage is in relation to the manufacture of vehicles - Decided in favor of the assessee.
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2016 (11) TMI 407
Clandestine manufacture and removal of goods - HDPE /PPE bags - Held that : - It goes without saying that the onus to proof clandestine manufacture and removal of final product is placed heavily on the Revenue and is required to be discharged by production of sufficient, tangible and positive evidence. The allegation of clandestine removal cannot be upheld on the basis of mere entries made in certain private records recovered from the security gate of the factory. Revenue in their memo of appeal have not referred to any such evidence either coming from the raw material supplier or recipient of final product so as to come to a finding of clandestine removal. There is also nothing on record to show that the appellant had manufactured such a huge quantity of final product which stand cleared by them clandestinely - appeal dismissed - decided against Revenue.
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2016 (11) TMI 406
Suppression of facts - additional duty of excise leviable under Notification No.6/05 dated 01.03.2005 - SSI exemption under Notification No.8/2003 dated 1.6.2003 - unbranded tobacco - Held that: - the appellant was filing E.R.-I returns in which it was clearly depicting clearances of the un-branded tobacco at nil rate of duty. If the intention had been to suppress the clearance of such goods at Nil rate of duty, it would not have mentioned the details of such clearances in the ER-I returns. Extended period of limitation - Held that: - reliance placed on the decision of Uniworth Textiles Ltd. vs. CCE, Raipur [2013 (1) TMI 616 - SUPREME COURT] where it was held that mere non-payment of duties is not equivalent to collusion or willful misstatement or suppression of facts, otherwise there would be no situation for which ordinary limitation period would apply. Inadvertent non-payment is to be met within the normal limitation period and the burden is on Revenue to prove allegation of willful mis-statement. The onus is not on the assessee to prove its bonafides - sufficient grounds required for sustaining the allegation of willful misstatement/suppression of fact do not exist in this case, and therefore, extended period is not invokable. The demand pertaining to the extended period beyond one year set aside and the mandatory equal penalty under Section 11AC also set aside - Appeal disposed off - decided partly in favor of appellant.
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2016 (11) TMI 405
Requantification of Demand - Held that: - the Commissioner (Appeals) in the impugned order has held that the cakes and pastries manufactured and cleared with the brand name Hot Bread would be chargeable to duty. Further the learned Commissioner finally remanded the matter back to the adjudicating authority on the allegation of the appellant that the entire quantity of sales in the restaurant where the customers eat the food cannot be treated as value of the cakes and pastries with the brand name of Hot Bread - Appeal is allowed by way of remand.
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2016 (11) TMI 404
Demand of duty with interest - imposition of penalty - manufacture of Rubber tyres of motor vehicles classifiable under chapter 40112090 of the Scheduled to Central Excise Tariff Act 1985 - payment of duty at the time of removal of consignment - Rule 8(3A) of the Central Excise Rules, 2002 - Held that: - It is an admitted fact that the appellant had defaulted in making payment of Central Excise duty within the stipulated time frame prescribed under Rule 8 of the Central Excise Rules, 2002. It is also an admitted fact that the entire duty liability confirmed in the impugned order was paid by the appellant, partly from its cenvat account and partly from the personal ledger account. So far as payment from the cenvat account is concerned, the Hon’ble Gujarat High Court in the case of Indsur Global Ltd. (2014 (12) TMI 585 - GUJARAT HIGH COURT) have held that payment from the cenvat account during the defaulted period is to be considered as a valid payment. Therefore, we are of the view that the payment made by the appellant is to be construed as payment of duty in terms of Rule 8 of the Central Excise Rules, 2002. With regard to payment of interest on delayed payment of duty, we are of the view that no such specific provisions exist in the Central Excise Rules, providing for relaxation from payment of interest in any circumstances. Therefore, in absence of any specific provisions, we are of the considered opinion that the appellant is liable to pay interest for delayed payment of Central Excise duty. Thus, the interest liability is confirmed. Considering the overall facts and circumstances of the case, we are of the view that the penalty of ₹ 25,00,000/- imposed in the adjudication order is in the higher side and in the interest of justice, we reduce the penalty to ₹ 1,00,000/- - appeal disposed off - decided partly in favor of assessee.
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2016 (11) TMI 403
Imposition of penalties u/r 26 and 27 of the Central Excise Rules, 2002 - utilisation of CENVAT credit Cenvat credit on the basis of fake and bogus input invoices - Rule 9 read with Rule 12B of the Central Excise Rules, 2002 - whether the appellants being merchant exporters are liable for penalty under Rule 26 in connection with the offence committed by M/s. Singh Inc., manufacturer - Held that: - the supply of goods under the cover of invoice and ARE1 made to the appellant by manipulating the same was not known to the appellants therefore without the knowledge of the appellants if any fraud has been committed the appellants cannot be held responsible and consequently penalty cannot be imposed. Validity of CHA statement - the goods received in the port were transported from different place - Held that: - In this regard it could not establish that the goods were not supplied by M/s. Singh Inc. as the invoicing by M/s. Singh Inc. and payment there for by the appellant have not been disputed by the investigation, therefore the evidences is not conclusive to allege the involvement of the appellants in fraudulent activity of M/s. Singh Inc. Merely because supplier of the goods have committed fraud the buyer of the goods cannot be penalised. It is necessary to establish beyond doubt that the buyer is knowingly involved in the fraud committed by the supplier which in the present case has not been established. Therefore the appellants are not liable for penalty under Rule 26 - Since penalties u/r 26 waived, there is no need to go into the legal issues whether penalty under unamended Rule 26 is imposable for the offence committed prior to 1/4/2007 and also on the issue whether composite penalty can be imposed under Rule 26 and 27 - appeal allowed - decided in favor of appellant.
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2016 (11) TMI 402
Extended period of limitation - Classification of products namely (i) Knorr Annapurna 4 O‘Clock Tiffin - Chicken ‘n’ Spice (ii) Knorr Annapurna 4 O’Clock Tiffin - Saucy Masala (iii) Knorr Annapurna 4 O’Clock Tiffin - Tangy Twist - duty demand - Held that:- We find that irrespective of fact that the product name “Knorr Annapurna 4 O’Clock Tiffin” was prefix with the name of the product - Chicken ‘n’ spice, Saucy masala and Tangy twist but product remained same as were involved in the earlier case which was decided by this Tribunal in the appellant’s own case. Therefore the nature of product being manufacture by the appellant was very much known to the Department, therefore there is no suppression of fact on the part of the appellant. The appellant also bonafidely intimated to the Department about the manufacture of such goods. This also shows bonafide of the appellant. There is no suppression of fact or mis-declaration with intent to evade payment of duty on the part of the appellant, therefore the demand of the duty for more than one year is not sustainable. For the same reason, penalty under Section 11AC also not imposable. As per above discussion, we set aside the demand for a period more than one year from the date of show-cause notice and penalty imposed under Section 11AC is also set aside. The appeal is partly allowed in the above terms. The adjudicating authority is directed to re-quantify the duty as per the above order and recover the same, if any due from the appellant.
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2016 (11) TMI 401
Demand - Reversal of credit - Rule 3(5B) of CCR, 2004 - Penalty - the condition precedent under Rule 3(5B) of CCR, 2004 is, if the value of any inputs/goods have been written off fully or partially or where any provision to write off fully has been made in the books of accounts, in respect of value of any inputs, then the manufacturer or service provider, as the case may be, shall pay an amount equivalent to the Cenvat credit taken in respect of the said inputs - Decided in favor of the assessee.
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2016 (11) TMI 400
Discrepancy in the inventory of input on which Cenvat credit being taken - Held that:- It cannot be ruled out that in a big industry, there is always possibility of minor variations in the stock, which occurred due to human error. Moreover, in the present case neither there is any charge nor any evidence to show that differences in input inventory is either due to short receipt or cleared from factory clandestinely. In such a situation, even if there is shortage of input, the same must be lying in the factory. On the identical issue in the appellant’s own case cited by the Ld. Counsel, this Tribunal has decided the issue relying on the decision of Maruti Udyog Ltd [2004 (6) TMI 155 - CESTAT, NEW DELHI ] which was upheld by the Hon’ble Apex Court reported as [2015 (8) TMI 493 - SUPREME COURT ] that Cenvat credit cannot be disallowed in the facts and circumstances of the present case. - Decided in favour of assessee
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2016 (11) TMI 399
Classification of goods - drilling rigs mounted on motor vehicles chassis - Held that:- The issue raised in the present appeal is squarely covered by the judgment of this Court in the case of Commissioner of Cus. & Central Excise v. Vijay Mining Equipments [2015 (11) TMI 676 - SUPREME COURT] wherein held that when drilling rigs and the motor vehicles are not integrally connected, the case would not fall within Chapter Heading 8705.00. - Decided against Revenue. [Ref Case - 2007 (11) TMI 113 - CESTAT AHMEDABAD]
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2016 (11) TMI 398
CENVAT Credit - Job works - Held that:- Appeal dismissed - CESTAT orders confirmed [2015 (11) TMI 38 - CESTAT AHMEDABAD]. As assessee received the fabrics under the cover of Central Excise Challans issued under Rule 57F(4) of the erstwhile Central Excise Rules and corresponding Rule of Central Excise Rules, 2012 and after due process of fabrics returned the goods to the raw-material supplier, who used in the manufacture of finished products and cleared on payment of duty, in such cases, duty liability is required to be discharged by manufacturer and not by the job worker. Accordingly, the job worker is not eligible to avail credit in such situation. It is the case of Revenue neutral in so far as the payment of duty by the job-worker will enable the principal manufacturer to avail cenvat credit. - Decided in favour of assessee.
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2016 (11) TMI 397
Demand alongwith and equivalent amount of penalty for not reversing the amount equal to 10% of the value of goods cleared without payment of duty by claiming exemption under Notification No. 33/05 – Held that:- The civil appeals against the order of the tribunal [2012 (9) TMI 566 - CESTAT, NEW DELHI] dismissed as withdrawn.
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