TMI Tax Updates - e-Newsletter
November 18, 2016

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

TMI SMS

• CBDT Prescribes Income Tax Authority to issue notice u/s 143(2) for scrutiny assessment. AO is already empowered to issue notice u/s 143(2)

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• Conversion of paddy into rice doesn't amounts to manufacture; rice bran is not excisable since in the tariff, the rate of duty is left blank

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Articles

1. APPEAL TO HIGH COURT AND SUPREME COURT UNDER MODEL ‘GST’ LAW

   By: DR.MARIAPPAN GOVINDARAJAN

2. Black money eradication from India - white India mission

   By: CSSwati Rawat

News

1. The Central Government takes several decisions to facilitate farmers, small traders, Group ‘C’ Employees of Central Government including equivalent levels in the Defence and Para Military Forces, Railways and Central Public Sector Enterprises in the aftermath of the cancellation of the legal tender character of the old ₹ 500 and ₹ 1000 notes;

2. Banks grapple with huge rush, most ATMs run dry

3. India–USA Bilateral Competent Authority MAP/APA Meeting – Resolution of more than 100 cases under MAP and Agreement on terms and conditions of First ever Bilateral APA involving India and USA

4. RBI Reference Rate for US $

5. Can't escape law by showing sudden jump in income

6. SBI collects ₹ 1,14,139-cr in deposits in last 7 days

7. Consultations for Business Reforms

8. Efforts to Increase Share of Service Sector in GDP

9. Impact of FTAs

10. ‘Make In India’ Programme

Notifications

Customs

1. 138/2016 - dated 17-11-2016 - Cus (NT)

Rate of exchange of conversion of the foreign currency with effect from 18th November, 2016

Income Tax

2. 105/2016 - dated 16-11-2016 - IT

Income–tax (31st Amendment) Rules, 2016 - Prescribes Income Tax Authority to issue notice u/s 143(2) for scrutiny / regular assessment. [Assessment officer (AO) is already authorized to issue notice u/s 143(2)]

Circulars / Instructions / Orders

FEMA

1. 18 [(1)/12 (R)] - dated 17-11-2016

Foreign Exchange Management (Insurance) Regulations, 2015

2. 19 - dated 17-11-2016

Investment by Foreign Portfolio Investors (FPI) in corporate debt securities

DGFT

3. 44/2015-2020 - dated 15-11-2016

Amendments in Product Description in MEIS Schedule-Table 2 of Appendix 3B

Highlights / Catch Notes

Income Tax

• CBDT Grants Income Tax Authority Power to Issue Scrutiny Notices u/s 143(2), Previously Held by Assessment Officer.

  Notifications : CBDT Prescribes Income Tax Authority to issue notice u/s 143(2) for scrutiny / regular assessment. [Assessment officer (AO) is already authorized to issue notice u/s 143(2)]
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• Primary Agricultural Credit Society Exempt from Tax Deduction Obligation u/s 194A(3)(viia) of Income Tax Act.

  Case-Laws - AT : TDS liability - Since the assessee is an primary agricultural credit society, the exemption provided for non deduction of tax to primary agricultural credit society u/s 194A(3)(viia) is applicable to the assessee society - AT
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• No Penalty for Late Tax Returns u/s 271F Due to Reasonable Cause, No Deliberate Delay Found.

  Case-Laws - AT : Levying penalty u/s. 271F - delay in filing the return - assessee was prevented with reasonable cause in filing the returns and there is no deliberate attempt to file the returns belatedly - No penalty - AT
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• The assessee is eligible for claiming depreciation at a higher rate on dumpers and pay loaders.

  Case-Laws - AT : Assessee is entitled for depreciation on dumpers and pay loaders at the higher rate - AT
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Customs

• Tier-Two and Tier-Three AEO Importers Can Defer Customs Duty Payments to Simplify Trade and Enhance Compliance.

  Circulars : Prescribing procedure for the Importers certified under Authorized Economic Operator Programme as AEO (Tier-Two) and AEO (Tier-Three) to make deferred payment of duty of Customs
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• Court Rules TED Refunds Must Be Honored Despite Regulation Changes; Past Payments Still Eligible for Refunds.

  Case-Laws - HC : Refund of terminal excise duty (TED) - subsequent amendment was made to the existing regime which in effect liberalised the position further and exempted payment of TED altogether cannot surely be a reason for denying the scheme for refund of payment already made. - HC
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Central Excise

• Photo albums with paper covers aren't classified as paper products; they're under heading 39.26 in Central Excise Tariff Act, 1985.

  Case-Laws - AT : Classification of goods - Photo Albums - Only merely, covering by the paper sheet, the photo albums will not become made of paper or paper board - To be classified under heading 39.26 of the Central Excise Tariff Act, 1985 - AT
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• Rice and bran rice are not excisable goods if tariff rates are unspecified u/s 2(d) of the Act.

  Case-Laws - AT : Whether the rice/bran rice are excisable goods in terms of section 2(d) of the Act or not? - if in the tariff, the rate of duty is left blank, in that case, the goods are not excisable goods - AT
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• Paddy to rice conversion isn't "manufacture" per Section 2(f) of the Central Excise Act, 1944; de-husking doesn't qualify.

  Case-Laws - AT : De-husking - Whether the conversion of paddy into rice amounts to manufacture u/s 2(f) of CE Act, 1944 - The test of manufacture has been failed as the goods are not manufactured goods - AT
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• Duty Exemption Granted for Semi-Finished Circuit Card Assemblies Destroyed in Factory Fire.

  Case-Laws - AT : The appellant is not required to pay duty on semi-finished circuit card raw assembly destroyed in fire broke out in their factory - AT
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• SSI Units Can Claim Exemption Without Including Third-Party Job Work Goods Under Brand Name.

  Case-Laws - AT : The appellant (SSI unit) is entitled to avail the credit and the appellant is entitled for SSI exemption without including the goods manufactured on job work for third party under the brand name - AT
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• Appellants not required to reverse unutilized CENVAT credit under Notification No. 50/2003-CE exemption.

  Case-Laws - AT : At the time opting area based exemption of Notification No.50/2003-CE dated 10.6.2003, the appellants were not required to reversed the credit in their cenvat credit account lying unutilized - AT
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• Assembling Audio Cassette Components Not Subject to Excise Duty; No New Product Created Per Manufacturing Conditions.

  Case-Laws - AT : Levy of central excise duty - activities of assembling the various components of audio cassettes into C-0 cassettes on job charges - there is no new product emerging satisfying the condition for manufacture - AT
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Case Laws:

• Income Tax

• 2016 (11) TMI 669
  Benefit of deduction u/s 80P(2) - Held that:- In the instant case, the assessee is a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969. The certificate has been issued by the Registrar of Cooperative Societies to the above said effect and the same is on record. The Hon’ble High Court, in assessee’s own case and other batch of cases, had held that primary agricultural credit society, registered under the Kerala Cooperative Societies Act, 1969, is entitled to the benefit of deduction u/s 80P(2). Since there is a certificate issued by the Registrar of Cooperative Societies, stating that the assessee is a primary agricultural credit society, thus hold that the assessee is entitled to the benefit of deduction u/s 80P(2) of the Act. Addition u/s 40 (a)(ia)- disallowance of the interest payment on deposits received from non members for the reason that there was no tax deduction at source - Held that:- The assessee is a primary agricultural credit society and as such it is entitled to the benefit of deduction u/s 80P(2) of the Act. Since the assessee is an primary agricultural credit society, the exemption provided for non deduction of tax to primary agricultural credit society u/s 194A(3)(viia) is applicable to the assessee society. Accordingly, the disallowance by invoking the provisions of section 40(a)(ia) is not warranted.

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• 2016 (11) TMI 668
  Addition u/s 40a (ia) - non deduction of tds on commission expense - non-crystallization and liability being unascertained entry in the book - Held that:- Section 40a(ia) provides that as and when the assessee makes the payment of relevant TDS, the expenditure will be allowed in the year of payment. Besides, the ld. CIT(A) has given clear findings that the provision was made on whims and fancies of the assessee without any proper basis and even the genuineness of the expenditure; therefore, the ld. CIT(A) has disallowed the expenditure. In this case, the simple question is non-crystallization and liability being unascertained entry in the books at the whims and fancies of the assessee, which cannot be an allowable expenditure and having made book entries claiming the expenditure it was legal obligation of the assessee to deduct the TDS and failure thereof will render the expenditure disallowable in clear terms of Section 40a(ia). The provision of commission payment claim by the assessee is totally unascertainable, uncrystallized and fanciful. It does not assume the character of ascertained mercantile liability. Even in case of mercantile liability, Section 40a(ia) clearly mandates that the expenditure cannot be allowed in the absence of corresponding TDS payment in Government treasury. - Decided against assessee

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• 2016 (11) TMI 667
  TDS u/s 194C - Disallowance made u/s 40(a)(ia) - Held that:- There is nothing on record to suggest that the payment to labourers were paid to the contractors. On the contrary, assessee has made payment to labourers directly and in support of its claim, Ld. AR of assessee has produced the muster roll. In this regard, Ld. DR failed to bring any defect / information from the muster roll which suggested that the labour charges paid by assessee are subject to TDS. Since no cogent material has been brought on record, in our considered opinion, AO was not justified in invoking the provision of Sec. 194C r.w.s. 40(a)(ia) of the Act. - Decided in favour of assessee.

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• 2016 (11) TMI 666
  Services rendered by the non-resident assessee company to Indian company - whether would fall within the ambit of ‘Fee for Technical Services (FTS)’ - DTAA - Held that:- As find from the nature of services rendered by the assessee to the Indian group company, there is no technology or technical knowhow, skills etc that were made available by the assessee in order to enable the Indian group company to function on its own without the dependence of the assessee. It is not in dispute that the agreement entered between Outotec Oyj and Outotec India Pvt Ltd is for an indefinite period and such services are provided on recurring basis by the assessee to Outotec India Pvt Ltd. Lot of force in find in the argument of the ld AR that had the technical knowhow, skills etc being made available by the assessee to Outotec India Pvt Ltd, then there would be no need for Outotec India Pvt Ltd to recourse to the recipient for these services. We also hold that the other services such as IT Infrastructure, IT administration (collectively referred to ‘IT Support Services’ ) also do not satisfy the ‘make available’ test as no technology , knowhow, skills etc were transferred to the recipient. We also hold that the repair and supervision services provided to few other Indian parties do not satisfy the make available test as these are routine repairs and supervisory services and there is no transfer of technology or skill or experience at the time of provision of such services by the assessee. The amounts received by the assessee from Outotec India Pvt Ltd does not qualify as FTS as per the DTAA. - Decided in favour of assessee

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• 2016 (11) TMI 665
  Addition on account of interest income in relation to advances classified as Non-Performing Advances (NPAs) - Held that:- When the account becoming NPA is not disputed by the revenue, the recognition of income is to be done only on receipt basis which is in consonance with the real income theory. In these circumstances and respectfully following the decisions of Hon’ble Delhi High Court in [2010 (11) TMI 88 - Delhi High Court ] and various other decisions referred to supra, we hold that the interest income on NPA accounts should not be assessed on mercantile basis and the same is to be taxed only on receipt basis. Accordingly, the grounds raised by the assessee are allowed. Addition on account of deemed short term capital gains - Held that:- It is not in dispute before us that the renovations work carried out by the assessee in the subject mentioned building (which was sold in the year under appeal and dispute before us) was added in the 10% block by the assessee in the earlier years and depreciation claimed accordingly. We find that this depreciation had been granted by the revenue all along. Going by the principle of consistency, there is no need to disturb the said stand of the revenue. But since the entire building ( including the renovated portion) was sold during the year under appeal for Rs. 9.55 crores, we find that the assessee bank had rightly allocated the sale consideration towards 5% an 10% block on the basis of their values and computed short term capital gains u/ 50 of the Act for the 5% block and claimed depreciation u/s 32 of the Act for the 10% block. It is not in dispute that the 10% block continues to exist as on 31.3.2010. MAT applicability to assessee bank - applicability of provisions of section 115JB - Held that:- The provisions of section 115JB of the Act are not applicable to an assessee unless it is registered as a company under the Companies Act, 1956 and prepares its financial statements in accordance with the provisions of section 211 and Part II and Part III of Schedule VI of the Companies Act, 1956. We place reliance on the recent decision of the co-ordinate bench of this tribunal in the case of UCO Bank vs DCIT (2015 (12) TMI 300 - ITAT KOLKATA ) wherein held that the amendment brought in by the Finance Act 2012 in section 115JB of the Act is applicable only from Asst Year 2013-14 onwards and not earlier. Respectfully following the said judicial precedent, we hold that the provisions of section 115JB of the Act are not applicable to the assessee bank for the year under appeal. Disallowance on account of provision for gratuity - Held that:- We find that assessee had actually paid the amount of Rs. 2,18,00,000/- in the earlier year i.e in Asst Year 2009-10 itself along with other amounts. However, deduction for the same has not been claimed in that year i.e in Asst Year 2009-10 and the same has been claimed in the year under appeal i.e the year in which it had become due. We agree with the argument of the ld AR that the spirit of section 43B of the Act has been satisfied by the assessee in full TDS credit - Held that:- The circumstances in which the said TDS has been remitted to the account of the Central Government and the circumstances based on which the refund of the same is claimed by the assessee is not disputed by the revenue before us. We find that the revenue is unjustly enriched by the TDS amount paid by the assessee and since the said TDS is duly reflected in the Form 26AS of the assessee , the assessee is entitled for the credit of the said TDS in his assessment which the revenue has got no authority to deny as per law. Accordingly, we find that the direction given by the ld DRP to the ld AO to grant credit of TDS is in order and does not call for any interference.

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• 2016 (11) TMI 664
  G.P. estimation - substantial rise in the payment of job work charges to the workers - Held that:- We have observed that the assessee is not able to justify the substantial rise in the payment of job work charges to the workers i.e. @ Rs. 500/- per carat as against Rs. 108/- per carat in preceding year. The labour charges have substantially gone up as compared to the preceding year which is almost 400% without any justification. It was observed that TDS has been deducted but the assessee has to explain the abnormal rise in the job work charges per carat with cogent reasons. No cogent explanation has been brought on record by the assessee to substantiate this substantial rise in the job work charges. It is stated before us by the ld DR. that the Revenue is not in appeal against the order of the ld. CIT(A) which order of ld. CIT(A) has been accepted by the Revenue. In our considered view, the ld. CIT(A) has taken the GP ratio @ 7% as against 6.93% which in our considered view is quite justified and fair keeping in view factual matrix of the case. We do not find any infirmity in the order of the ld. CIT(A). The A.O. adopted the GP rate @ 7.79% whereas the assessee has declared GP rate @ 6.93%. The ld. CIT(A) estimated the GP rate @ 7% keeping in view the peculiar facts and circumstances of the assessee’s case. In our considered view, the view taken by the ld. CIT(A) is quite reasonable and fair considering the peculiar facts and circumstances of the case.- Decided against assessee

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• 2016 (11) TMI 663
  Nature of expense - substantial repairs - revenue or capital expenditure - Held that:- The ratio of decision of Hon’ble Bombay High Court in RPG Enterprises Limited (2016 (7) TMI 71 - BOMBAY HIGH COURT ) is directly applicable in the instant case , and by undertaking of this substantial repairs , it could not be said that no enduring benefit has resulted to the assessee as the said major and substantial renovation work has led to improvements in its trading operations which would bring enduring benefit to the assessee for long period of time and hence is capital in nature. The assessee would be entitled and qualified for availing depreciation in view of the Explanation 1 to Section 32 of the Act despite the fact that the assessee is not the owner of the said premises wherein in the assessee has taken the said premises on leave and license basis. The assessee would be entitled for treatment of expenses such as breaking old plaster, carting away, plastering, POP etc as revenue expenses which are in nature of current repairs in view of provisions of Section 30 of the Act. The AO shall verify the contentions of the assessee on facts and in the light of the afore-stated decision of Hon’ble Bombay High Court in the case of RPG Enterprises Limited(supra) on merits. The issue is therefore set aside and restored to the file of the AO for de-novo adjudication of the issue by the AO on merits.

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• 2016 (11) TMI 662
  Adoption of price for sale consideration - adoption of sale rate for land - Held that:- In view of the provisions of section 50C of the Act, we are of the considered view that in the given facts and circumstances of the case wherein assessee has shown sale consideration @ Rs. 7,301/- per sq.m., registered valuer valued it at Rs. 5,800/- per sq.m., ld. Assessing Officer estimated rate at Rs. 10,000/- per sq.m. no report from the DVO and jantri price of Rs. 8,000/- per sq.m., we are of the view that in order to meet the ends of justice, it will be justified to adopt the jantri price of Rs. 8,000/- per sq.m. for the sale consideration towards the sale of 33817 sq.m. of land. Not allowing set off of the unabsorbed business loss of earlier year against the income from other sources of current year confirmed - in view of the clear provisions of section 72(1) of the I.T. Act, it is held that the claim of the assessee in setting off business loss of earlier years against current year’s income from other sources is illegal and not allowable as per law. Allowability of deduction u/s 80P - Held that:- there is loss during the year from the business activities of the society which includes all types of income relating to marketing of agricultural produce grown by its members as well as income from letting out godown/warehouse, assessee is not eligible for any deduction u/s 80P(2)(iii) and 80P(2)(e) of the Act for the lack of positive income Deduction of claim of assessee as unabsorbed depreciation and also claim of the current depreciation by applying the provisions of section 14A for the purpose of computing total income - Held that:- We observe that depreciation is claimed as per the provisions of section 32 of the Act and sub-section (2) of section 32 allows the assessee to claim unabsorbed depreciation of earlier years. Further in order to compute the business income of the assessee society the computation of income has to pass through the provisions of section 32 of the Act so as to arrive at the correct business income. Sec. 14A of the Act refers to income which are not included in total income i.e. exempt income dividend, for example tax free interest etc. Whereas in the case of assessee deduction has to be claimed u/s 80P of the Act. Further as per section 80P(2)(a)(iii) of the Act, the deduction is allowable for the amount of profits and gain of business attributable to marketing of agricultural produce grown by the members of the society and in order to calculate profits and gains of business assessee needs to calculate business income after claiming depreciation as per provisions of sec. 32 of the Act. Therefore, ld. CIT(A) has rightly allowed the claim u/s 32 of the Act towards deduction of unabsorbed depreciation of earlier years and deduction of current year depreciation and therefore, we find no reason to interfere with the order of ld. CIT(A)

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• 2016 (11) TMI 661
  Unexplained cash deposited in the Bank - Intra-Bank Deposit - Held that:- As far as the third part, i.e., cash withdrawals from Over Draft Account in IDBI Bank and corresponding deposits in the Catholic Syrian Bank Ltd are concerned, the assessee has been able to demonstrate the nexus between the withdrawals and deposits. This evidence in the form of bank accounts cannot be rejected only on presumption that the assessee had already had cash balance and there is no need for him to withdraw from the OD account. Such presumption cannot override the written evidence in the form of bank statements and explanation of reasonable nexus. Consequently, the addition in respect of Intra Bank A/c of IDBI Bank and the Catholic Syrian Bank Ltd is deleted. Remaining two items, the assessee could not demonstrate the sources of alleged availability of opening balance. Similarly, in respect of cash loans, the assessee could not establish the creditworthiness of the depositors. In view thereof, it is held that in respect of opening cash and small loans as mentioned above, the assessee failed to discharge its onus; consequently, the additions in respect of the same are upheld, whereas the addition in respect of Intra-Bank Deposit is deleted. - Decided partly in favour of assessee. Deemed dividend u/s 2(22)(e) - Held that:- The nature of transactions reflected from the assessee’s account and company account demonstrates that it was a running current account and the transactions therein are not in the nature of loans and advances so as to be termed as deemed dividend. Therefore, respectfully following the judgment of Hon’ble Gujarat High Court in the case of Schutz Dishman Bio-Tech (P) Ltd (2016 (1) TMI 84 - GUJARAT HIGH COURT ), the addition made u/s 2(22)(e) is deleted.- Decided in favour of assessee

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• 2016 (11) TMI 660
  TDS u/s 194C - amount paid as plant repairs - non deduction of tds - whether the payment made under the head plant repair represents reimbursement of expenses? - Held that:- In our view this agreement is based on the parties having regard to the actual expenses incurred. The processing charges paid is separately billed on which TDS has been deducted. Having regard to the fact that separate bills have been given and based on various Judicial Pronouncements cited by the Ld. AR and having regard to the fact that the revenue has accepted this fact of separate bill is another case as directed by the Jurisdictional High Court. We are of the considered opinion that the assessee is not liable to deduct tax on reimbursement of expenses Addition of cleaning and forwarding charges - CIT(A) has held that M/s. Al Mustafa Agencies were carrying out various services to the assessee for the export of goods such as documentation with customs, registration, insurance, rent and other port dues - Held that:- Nevertheless all the above payment relates to payment to statutory authorities, labourers and others, on behalf of the assessee and none of them accrued to the agent. In our view the above payment will also not be liable to TDS. The Assessing Officer has neither quantified nor clear of the exact charges paid to M/s. Al Mustafa Agencies. In the absence of any material on record, we uphold the view of the Ld. CIT(A) in this regard. Vehicle loan hire charges - CIT(A) has held that hire purchase payment would not come within the meaning of section 194C for the purpose of tax deduction - Held that:- In our view merely because a claim for the hire charges portion has been made in the account, it cannot be stated that such payment are liable to TDS. Further the assessee has been claiming such payment in earlier years also which has been accepted by the department. The legislature thought it fit to introduce Form 26a with effect from 01/04/2013, for obtaining certificate from the receiver to the effect that they have included such receipts as part of their income. The verdict of Ld. CIT(A) on this score has also to be upheld. Revenue appeal dismissed.

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• 2016 (11) TMI 659
  Levying penalty u/s. 271F - delay in filing the return of the assessee i.e. beyond the stipulated period mentioned in the notice issued u/s. 153C - Held that:- In this case the assessee filed returns belatedly and there is reasonable cause in filing the return in time stating that there were 8 assessees in its group and total 55 search assessments were in progress and the returns of the entire group were also required to be filed and therefore there is little delay in filing the returns. Also that Chairman/Chief Promoter of the group was unwell/sick and was not attending to the business regularly and he was hospitalized twice and further the record does not show that assessee has acted either deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. In the circumstances, we hold that assessee was prevented with reasonable cause in filing the returns and there is no deliberate attempt to file the returns belatedly. Thus, we delete the penalty levied u/s. 271F of the Act. - Decided in favour of assessee

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• 2016 (11) TMI 658
  Reopening of assessment - Held that:- reopening of assessment in the present case is based on the stand of assessing authority for other assessment years, and thus there is enough cause and justification for invoking Sec. 147/148 of the Act and following the judgment of Hon’ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd., (2007 (5) TMI 197 - SUPREME Court ) initiation of proceedings u/s 147/148 of the Act are upheld. Thus, on this aspect also assessee fails.

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• 2016 (11) TMI 657
  Income from share transaction - short term capital gain or business income - Held that:- From the facts discussed in the assessment order, it is found that out of total 41 transactions in shares, 39 shares were held for less than a month. Further, it has been found by the Assessing Officer that in 22 scrips, the assessee had made repeated entry and exit which indicate the intention of the assessee to trade in shares rather than holding it as investment. The Assessing Officer has also observed that the assessee had used borrowed funds for investing in shares. The learned Commissioner (Appeals) has also approved the aforesaid finding of the Assessing Officer. No material has been brought by the assessee before us to controvert the aforesaid factual findings of the Departmental Authorities. In the aforesaid view of the matter, we do not find any reason to interfere with the order of the learned Commissioner (Appeals). Disallowance of interest - Held that:- Assessing Officer while treating the income derived from share transaction as business income has actually allowed the interest expenditure of Rs. 7,24,408 and assessed the net business income of Rs. 23,12,136. Therefore, the ground raised by the assessee before the learned Commissioner (Appeals) challenging the disallowance of interest expenditure by the Assessing Officer was misconceived. Similarly, the observations of the learned Commissioner (Appeals) upholding the disallowance of interest expenditure by the Assessing Officer is unnecessary and unwarranted. Before us also, the assessee has raised this ground challenging disallowance of expenditure from short term capital gain. Alternatively, assessee has claimed that even if the income from share transaction is assessed under the head “Business” the interest expenditure is allowable under section 37(1). As we have already noted, the Assessing Officer while computing income from share transaction under the head business income has allowed the interest expenditure to Rs. 7,24,408. That being the case, there is no question of disallowance of interest expenditure, therefore, the ground raised by the assessee being infructuous is not required to be adjudicated upon, hence, dismissed. Addition under section 14A r/w rule 8D - Held that:- While computing the income from share transaction under the head Business, the Assessing Officer has allowed the entire interest of Rs. 7,24,408. This action of the Assessing Officer demonstrates that the interest expenditure is related entirely to earning of taxable income from share transaction, hence, no part of it can be apportioned towards the exempt income earned by the assessee. Therefore, in our considered opinion, no disallowance out of interest expenditure can be made in terms of rule 8D(2)(ii). However, as far as disallowance of 0.5% of the average value of investment in terms of rule 8D(2)(iii) is concerned, we agree with the view of the Departmental Authorities

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• 2016 (11) TMI 656
  Disallowance of exemption claimed u/s 11(2) - Held that:- As already noted, in Form no.10, as well as resolution of the trust, the assessee has specifically mentioned the purpose of utilization of fund in construction / re–development of buildings / properties of the trust. Thus, the purpose of utilization is in consonance with the objects of the trust. That being the case, assessee’s claim cannot be disallowed. We also find merit in the submission of the assessee that disallowances envisaged on account of non–utilisation of accumulated fund cannot be made in the first year of claim. A reading of provisions contained in section 11(3) along with section 11(2) of the Act, makes it clear that only after the expiry of five years period if the Assessing Officer finds that the accumulated or set apart funds were not utilised for achieving the objects of the trust then only he can disallow assessee’s claim of exemption under section 11(2). For the aforesaid reasons, we do not agree with the conclusion of the Departmental Authorities. Accordingly, we set aside the impugned order of the learned Commissioner (Appeals) and allow assessee’s claim of exemption under section 11(2).

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• 2016 (11) TMI 655
  Non credit of tax deducted at source - TDS u/s 195 - Held that:- We have observed that the assessee has offered for taxation commission income of Rs. 1,42,98,518/- for the assessment year 2012-13 on which tax is stated to have been deducted at source of Rs. 44,15,455/- which is claimed by the assessee in the return of income filed with Revenue. The said commission income was credited to the account of the assessee by deductor Aegis Logistics Limited as at 31-03-2011 and tax was stated to have been deducted at source by the deductor u/s. 195 of the Act amounting to Rs. 44,15,455/- which was reported to the Revenue to be pertaining to the assessment year 2011-12 while the said commission was stated to be subject to approval of shareholders which approval was accorded by the shareholders of Aegis Logistics Limited only in previous year 2011-12 and hence the assessee accounted for the income as well tax deducted at source thereon only in the assessment year 2012-13 which claim of credit of tax deducted at source was denied to the assessee in the assessment year 2012-13 on the ground that tax deducted at source pertained to the assessment year 2011-12 while credit of tax deducted at source of Rs. 37,08,000/- was granted to the assessee which the assessee stated to have claimed in the assessment year 2013-14. The assessee had placed reliance on Section 199 of the Act of 1961 read with Rule 37BA of Income Tax Rules, 1962. The contentions of the assessee needs verification and we are setting aside and restoring this matter/issue to the file of learned AO/ACIT(CPC) who shall verify all the contentions of the assessee as well as return of income filed for the assessment years 2011-12 to 2013-14 to arrive at correct declaration of income and credit of tax deducted at source thereon in accordance with provisions of the Act including relied upon provisions of Section 199 of the Act read with Rule 37BA of the Income Tax Rules, 1962, specifically Rule 37BA(3) of Income Tax Rules, 1962 . - Decided in favour of assessee for statistical purposes.

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• 2016 (11) TMI 654
  Disallowance u/s 14A - investment made in foreign companies - Held that:- Since admittedly the assessee has made investments in a foreign company, the dividend income of which is taxable in India and the CIT(A) in the first para of its order has also upheld the same view holding that the investment made in company incorporated outside India, the dividend income of which is taxable in India should not be considered for calculation of disallowance under Rule 8D and the revenue is not in appeal against this part of the order and since the assessee has submitted full details of dividend income as well as the investment in foreign company, therefore, the order of the CIT(A) being self contradictory is set aside and the grounds raised by the assessee are allowed. - Decided in favour of assessee

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• 2016 (11) TMI 653
  Benefit of higher depreciation for pay loaders, dozers and water tankers - transportation of goods in its business of transportation of goods on hire - Held that:- Assessee was engaged in the business of transportation and the work of cleaning and loading were incidental to this. Having a look at Circular No.652 dated 14.6.1993 says that motor lorries used by the assessee in the business of transportation of goods on hire would be eligible for higher rate of depreciation. In other words, by virtue of this Circular, higher rate of depreciation @ 30% mentioned in Part II(3)(ii) of Appendix to the Income Tax Rules would get an extended meaning than what literally follows on their reading. The extended meaning would bring into its fold use of motor vehicles in a business of transportation of goods on hire. In our opinion, the agreement entered by the assessee with M/s Anand Transport clearly shows that its duty was to transport the goods provided by M/s Anand Transport from one place to another. We cannot say that element of ‘hiring’ was absent. The Bombay High Court in the case of CIT vs M/s SC Thakur & Bros [2009 (1) TMI 20 - BOMBAY HIGH COURT ] has clearly held that Circular No.652(supra) was admissible when the motor lorries were used by the assessee in its own business of transporting of goods on hire. Thus the assessee is entitled for depreciation on dumpers and pay loaders at the higher rate - Decided in favour of assessee

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• 2016 (11) TMI 652
  TDS u/s 194C - non deduction of tds on composite payment under the work contract - Held that:- The payment made by the assessee is only the cost of the material purchased and therefore there was no element of any income or profit of the contractor in respect of the procurement of material in question. It was found that the contract agreement in question is only in respect of labour charges for a fixed amount of Rs. 34 lakhs and further the material purchased through the contract was in the name of the assessee as the invoices were issued by the vendor of the material in the name of the assessee. When the payment in question is not forming part of the work contract and it was only a reimbursement of purchase of material that too in the name of the assessee, then the provisions of Section 194C of the Act are not applicable on such payment. Accordingly the disallowance made by the AO is not justified and the same is deleted.- Decided in favour of assessee

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• 2016 (11) TMI 651
  Unexplained cash credit u/s 68 - creditor/subscribers fails to respond to notices - Held that:- Assessing Officer has disbelieved the genuineness of the subscription received by the assessee as share application money, more specifically when the assessee provided the list of share subscribers, their PAN, source of the funds, therefore, mere suspicion is not enough to sustain the addition u/s 68 of the Act. Summons were issued to shares subscribers by the Assessing Officer and the same were not returned back, meaning thereby, the same were served upon them. The ld. Assessing Officer if was still apprehensive nothing prevented him to take the legal recourse available with him. The assessee also filed confirmation from share subscribers. The bank accounts of share subscribers were produced which establishes their identity. The existence of share holders is not in doubt, their identity is established and they invested the money in purchase of shares. The onus cast upon the assessee has been established, therefore, addition cannot be sustained. AO has not unearthed any wrong or illegal dealing, therefore, he cannot obdurately adhere to his suspicion and treat the subscribed capital as undisclosed income of the assessee. The Department would not be justified in drawing and adverse inference only because the creditor/subscribers fails or neglect to respond to its notices - Decided in favour of assessee

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• 2016 (11) TMI 650
  Order u/s 201(1) and 201(1A) - barred by limitation - order passed within reasonable time - Held that:- Statutory powers should be exercised within a reasonable time even if no time limit is prescribed. Finality of the issue is the underlying principle embedded and is the core of every action under the law. If the legislature is silent in prescribing a particular time limit, then the action can only be taken within a reasonable time Assessing Officer passed the orders after expiry of eight years from the date of issuance of notice, therefore, the order passed by the are barred by limitation. Consequently, we set aside the orders passed by the Ld. Commissioner of Income Tax (Appeal) as the orders passed by the Assessing Officer are barred by limitation. All these appeals of the assessee, are, therefore, allowed.

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• Customs

• 2016 (11) TMI 623
  Refund of terminal excise duty (TED) - Supply of manufactured goods to 100% EOU - Deemed export - Denial in terms of the provisions of the Foreign Trade Policy 2009-14 framed under the Foreign Trade (Development and Regulation) Act, 1992 - whether the petitioner is entitled for refund of the Terminal Excise Duty? - the decision in the case of KONDOI METAL POWERS MFT. CO. PVT. LTD., v. UNKON OF INDIA [2014 (2) TMI 773 - DELHI HIGH COURT] referred - Held that: - the decision of the Delhi High Court would squarely cover the case on hand, as the Court took into consideration of the fact that subsequent amendment was made to the existing regime which in effect liberalised the position further and exempted payment of TED altogether cannot surely be a reason for denying the scheme for refund of payment already made. The respondent is directed to process the refund claim in accordance with 2009 Policy, by taking into consideration the petitioner's refund Application and pass appropriate orders, within a period of three months - no necessity to test the correctness of the Policy - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 622
  Prosecution of respondent u/s 132 and 135 (1) (a) of the Customs Act, 1962 - compounding of offences - passing through green channel without declaring the goods - Held that: - The statement made by the Petitioner in Annexure-2 contains the details which have been adverted to by the Supreme Court in the said judgment while dealing with the disclosure made by the Respondent before the Chief Commissioner of Customs at the time of seeking compounding of the offences. The Court is of the view that the Settlement Commission should reconsider the application of the Respondent after taking into account the judgment of the Supreme Court dated 25th January 2008 and after giving opportunity to the Respondent to demonstrate that notwithstanding the said judgment, the statement made in Annexure-2 to the application made before the CCESC should be accepted as a full and true disclosure of all the relevant facts - the Court set aside the orders dated 27th April 2006 and 12th July 2006 and remands the application of the Respondent to the CCESC for a fresh consideration - petition disposed off - matter remanded.

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• 2016 (11) TMI 621
  Production of Export Obligation Discharge Certificate - Held that: - In view of the unrebutted categorical assertion by the petitioner that it has obtained the EODC certificate way back on 5th November, 2008 and has furnished a copy thereof to the Commissioner of Customs on 9th December, 2008, the Court considers it appropriate to set aside the impugned Order-in-Original dated 31st December, 2014 passed by the Additional Commissioner of Customs and remand the matter to the file of the concerned Additional Commissioner for a fresh determination after taking into account the EODC dated 5th November, 2008 issued to the petitioner by the Zonal Joint Director General of Foreign Trade - matter remanded - petition disposed off.

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• 2016 (11) TMI 620
  Enquiry against the officer who passed the suspension of out of charge order of the goods - enquiry entrusted to any other officer of the rank of Addl. Commissioner of Customs - Held that: - in order to instill confidence in the enquiry, if the work is entrusted to any other officer of the rank of Addl. Commissioner of Customs, no prejudice would be caused since the enquiry even otherwise is directed to be held as per the observations made by the learned single judge in the impugned order. Hence, we direct the Chief Commissioner of Customs, Bengaluru, to look into the matter and assign the work of holding of enquiry to any other officer of the rank of Addl. Commissioner of Customs (other than the Addl. Commissioner of Customs, Airport who passed the order for suspension of out of charge order of the goods.) - The nomination of the officer shall be completed by the Chief Commissioner of Customs within a period of two weeks - appeal disposed off.

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• 2016 (11) TMI 619
  Rejection of application of the partnership for granting customs broker licence - principles of natural justice - one of the partners of the firm has been visited with personal penalty - Held that: - the impugned order was passed without granting any hearing to the petitioners. The order of rejection, which results into civil consequences, was thus passed in breach of principles of natural justice. From the order, it further emerges that the sole ground on which the Principal Commissioner decided to reject the application for licence was that one of the partners of the firm has been visited with personal penalty. The impugned order dated 3-6-2015 is set aside only on the ground of non-hearing. - Matter remanded back for fresh decision after personal hearing - petition disposed off.

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• 2016 (11) TMI 618
  Incremental Exports Incentivisation Scheme (IEIS) - promotion of exports - trade and export of fish meal - Held that: - a perusal of the communication dated 1-12-2014 would disclose that the respondents have informed the petitioner that the amount paid is after restricting the growth rate to 25% as per the public notice dated 25-9-2013. Insofar as the rejection, the respondents have neither adverted to the documents and the details that had been furnished by the petitioner nor any reasons for application of mind in that regard is indicated in the communication at Annexure-J dated 1-12-2014 - the communication dated 1-12-2014 would not be sustainable. The rejection as made therein is set aside. The respondents shall now take note of the documents submitted by the petitioner, keep in view the scheme and thereafter take a decision and communicate the decision taken to the petitioner.

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• 2016 (11) TMI 617
  Release of seized consignments - provisional order - restoration of IEC number - Held that: - on deposit of Rs. 15,00,000/­ in cash within fifteen days as suggested and on furnishing a bank guarantee in the sum of Rs. 15,00,000/­, both within two weeks from today, the seized goods shall be released. The seizure as also the release is without prejudice to the rights and contentions of all the parties. Merely because a direction is issued to release the Petitioner’s goods, does not mean that the Revenue is restrained from issuing a show cause notice and passing an order of adjudication in furtherance thereof. The adjudication proceedings can be initiated and concluded on their own merits and in accordance with law, uninfluenced by any provisional release order. We expect that the Revenue would do that expeditiously for it has claimed to have unearthed a huge fraud perpetrated on public. Let the Petitioner comply with these statements and which we have accepted without prejudice to the rights and contentions of the parties and thereafter, the Additional Commissioner of Customs, Drawback Department, Nhava Sheva, Mumbai, shall take appropriate steps and unlock the IEC number as prayed in the Petitioner’s application dated 4th March, 2016 - petition disposed off.

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• 2016 (11) TMI 616
  Release of seized consignments - provisional order - restoration of IEC number - Held that: - on deposit of Rs. 25,00,000/­ in cash within fifteen days as suggested and on furnishing a bank guarantee in the sum of Rs. 30,00,000/­, both within two weeks from today, the seized goods shall be released. The seizure as also the release is without prejudice to the rights and contentions of all the parties. Merely because a direction is issued to release the Petitioner’s goods, does not mean that the Revenue is restrained from issuing a show cause notice and passing an order of adjudication in furtherance thereof. The adjudication proceedings can be initiated and concluded on their own merits and in accordance with law, uninfluenced by any provisional release order. We expect that the Revenue would do that expeditiously for it has claimed to have unearthed a huge fraud perpetrated on public. Let the Petitioner comply with these statements and which we have accepted without prejudice to the rights and contentions of the parties and thereafter, the Additional Commissioner of Customs, Drawback Department, Nhava Sheva, Mumbai, shall take appropriate steps and unlock the IEC number as prayed in the Petitioner’s application dated 4th March, 2016 - petition disposed off.

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• 2016 (11) TMI 615
  Pre-deposit - Held that: - Considering the financial stringency being faced by the petitioner and the fact that an amount of Rs. 3,60,000/- has been offered by way of security, which on maturity would amount to more than Rs. 5,00,000/- as claimed by the petitioner’s counsel, we are of the considered view that no deposit need be made by the petitioner and it is a fit case where direction for deletion of the requirement of pre-deposit would support in the ends of justice. Accordingly, we so direct. The writ application is disposed of with direction to the Tribunal to consider the Appeal on its own merit without insisting on any further pre-deposit and take up the matter for early disposal preferably, within a period of six months from today - petition disposed off.

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• 2016 (11) TMI 614
  Denial of permission to cross-examine certain witnesses during the course of adjudication proceedings initiated under Section 28 read with Section 124 of the Customs Act - Held that: - the provisions of Section 129A(1)(a) clearly indicate that any order passed by the Principal Commissioner of Customs or Commissioner of Customs as an adjudicating authority, an appeal would lie before the Tribunal - this Court is of the view that the impugned order is liable to be set aside - The Tribunal is directed to reconsider the matter afresh after giving an opportunity to the petitioner - petition disposed off.

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• 2016 (11) TMI 613
  Valuation of goods - Related person - the decision in the case of Ansaldo STS Transportation Systems India Pvt. Ltd. Versus Commissioner of Customs, Chennai [2015 (11) TMI 445 - CESTAT CHENNAI] contested - Held that: - We see no reason to interfere with the impugned order passed by Customs, Excise & Service Tax Appellate Tribunal, Chennai - The civil appeal is accordingly dismissed.

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• Service Tax

• 2016 (11) TMI 649
  Export of services - Business Auxiliary Service - input services - time bar - deployment of staff - Held that: - as the appellant has several employees and the availability of same in good health for rendering the output service, is essential for carrying on their business or providing output service as a BPO. In this nature, of activity the employees form the backbone of the organization for providing the service. Accordingly, it is essential for the appellant/assessee to ensure the availability of their personnel for providing service. Accordingly, to ensure that their personnel and staff are in good health for providing the output services, the appellant having used the services of doctors and nurses which may not be available otherwise at odd hours and may effect the performance of output services by their staff. Accordingly, I hold that such services received by the appellant is an essential input service for providing their output services as a BPO which is a taxable service. Further, there is no dispute by Revenue that the service tax have not been charged and not paid on the same. Cleaning service - Held that: - I hold that the same is an essential service for any business organization including that of the appellant. Clean office premises is definitely required for efficient working and to ensure good health of the management and staff of the organization. Accordingly, I hold the cleaning services are eligible input service for providing output service. Appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 648
  Demand - CHA services - non-inclusion of certain expenditures amounting to Rs. 94,05,527/- in the gross taxable value - Section 84 of the Finance Act, 1994 - Held that: - ld. Commissioner at Para 32 of the impugned order has observed that there was no time for verification of the data submitted by the appellant as the review notice ought to be decided on or before 10.02.2010 and proceeded to adjudicate the Notice issued by him in exercise of power vested under Sec. 84 of Finance Act,1994. In these circumstances, as both sides fairly agree, in the interest of justice, it would be prudent to remit the case to the ld. Commissioner to decide the issues afresh, after considering all the evidences on record and the evidences that would be filed by the appellant before him. Needless to mention, a reasonable opportunity of hearing be allowed to the appellant to explain their case. All issues are kept open - Appeal is allowed by way of remand.

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• 2016 (11) TMI 647
  Demand - services of financing, merger and acquisition - whether taxable under the head of Management Consultancy Services? - time bar - suppression of facts - Held that: - the show cause notice was issued on 10/4/2006 invoking extended period. At the time of issuance of show cause notice, unamended provisions of Section 73(a) existed prior to 10/9/2000 was not existing, therefore unamended Section 73(a) is not invokable in the present case. If this is so then the appeal of the Revenue which solely on the basis of this ground does not survive. As per amended provision of Section 73, extended period can be invoked only when there is suppression of facts. In the present case even in the Revenue’s appeal there is no charge of suppression of facts and infact respondent informed the department about their service activity of merger and acquisition therefore extended period was not invokable, the Ld. Commissioner(Appeals) has rightly dropped the demand on limitation. As regard the merit of the case, we find that services undisputedly are of financing, merger and acquisition, these services were specifically brought in the definition of banking and financial services w.e.f. 16/7/2001 therefore during the period 1999-2000 these services were not taxable in other heads. Appeal dismissed - decided against Revenue.

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• 2016 (11) TMI 646
  Rectification of mistake - services of transmission of financial messages through swift services - telecommunication services - Held that: - detailed order was passed by which the service was held to be classifiable under the category of "Banking and Other Financial Services". Once by detailed findings, the tribunal concluded that the services is classifiable under banking and other financial services, there is no purpose to discuss that whether the claim of the appellant on the services of telecommunication services is correct or not. Therefore by classifying the services in question under banking and financial services it stands concluded that the telecommunication services as claimed by the appellant is not relevant. Time bar - Held that: - the fact and circumstances of the present case as well as case of the bank of Baroda are absolutely identical. In the bank of Baroda case which was solely relied upon in this case, in para 7.6 it was clearly discussed that even though the penalty is not imposable under section 80 but as per first proviso to Section 73 which is independent to Section 80, extended period can be invoked. As per our above discussion, we find that applicant could not make out the case for rectification of mistake in the order as no mistake is apparently arising out of such order. We therefore dismiss the ROM application

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• 2016 (11) TMI 645
  Taxability - Operation and maintenance of power plant - Held that: - reliance placed in the decision of the case CMS Operation and Maintenance Co. Pvt Ltd. Vs. CCE [2007 (5) TMI 74 - CESTAT, CHENNAI] where it was held that Charges for operation of plant is not liable to service tax under the head of Management, Maintenance or Repair Service - activity of operation of plant does not fall under category of taxable service in the head of management, maintenance and repair service. The agreement of operation of plant is neither involved in any management of either plant or maintenance or repair. Entire plant was taken over by the appellant for operation. Therefore the same does not fall under Management, Maintenance or Repair service - Appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 644
  Demand - Rent-a-Cab - Penalty - Held that: - there is no dispute that the Service Tax along with interest was paid by the appellant before issuance of show-cause notice, there is no contest on the said payment - if the assessee pays all the Service Tax along with interest and without any contest the Department is not supposed to issue any show-cause notice - Decided in favor of the assessee.

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• 2016 (11) TMI 643
  Restoration of appeal - Condonation of delay - Held that: - I find that this Tribunal has passed the order without representation or without appearance on behalf of the appellant despite the adjournment request which was not recorded. Further on going through the finding of the Ld. Commissioner (Appeals), I find that the Ld. Commissioner (Appeals) has taken the date of dispatch of the order as a date of communication. The Ld. Commissioner also admitted that the appeal was filed against the order copy issued by the department on request of the appellant. However, the delivery of the order dispatched on 18.4.2013 and acknowledgement thereof has not been verified by the Commissioner (Appeals), therefore merely by taking the date of dispatch as the date of communication of the order does not appear to be proper. Since the vital aspect has not been properly considered, the appeal deserves to be restored. Therefore the appeal is restored in its original number. Accordingly, the stay application and COD are also restored. Registry is directed to list the matter in due course.

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• 2016 (11) TMI 642
  Receipt of income on account of Hotel Booking - ‘Business Auxiliary Service’ - whether a service is a tour operator service or otherwise, that is if the permit of the vehicle is contract carriage permit issued under Section 2(43) of Motor Vehicle Act, 1988 and as per the said Section the specification of the vehicles must be in terms of Rule 128 of Central Motor Vehicle Rules 1989? - Held that: - in order to classify the service under ‘Tour Operator’, it is necessary that the vehicle should be tourist vehicle in terms of Section 2(43) of the Motor Vehicle Act, 1988 read with Rule 128 of the Central Motor Vehicles Rule 1989. From the orders of both the lower authority, it is observed that they have not verified and given any finding on this vital aspect, therefore the matter needs to be reconsidered by the appellate authority. On the issue of quantification of demand on the ground raised by the appellant that they have not provided the tour operator service during the period 2000-01 and 2001-02 and the tax liability if any arise, it must be limited for the period 2002-03 and 2003-04 which comes to Rs. 1,12,046/-. On this issue though the appellant have made a categorical submission and the same was recorded by the Ld. Commissioner, but no finding was given, therefore this issue also needs reconsideration - the impugned order set aside and the matter remanded to the Commissioner (Appeals) for reconsideration of the entire matter taking into consideration our above observations - appeal allowed - matter remanded.

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• 2016 (11) TMI 641
  Confirmation of tax levied on commissions from banks and financial institutions - restoration of penalties - ‘business auxiliary service’ - reliance placed on the decision of case of South City Motors Ltd v. Commissioner of Service Tax [2011 (11) TMI 408 - CESTAT, NEW DELHI] where it was held that the entries for “Business Auxiliary Service” and “Business Support Service” have different objects. After the introduction of the new entry, there can be argument as to which entry covers the activity more appropriately - The Higher Courts have been taking the view that in such situations the extended period of time cannot be invoked for raising demand. Held that: - the impugned order has erred in setting aside the tax demand of Rs. 20,72,830/- for providing ‘business auxiliary services’ under section 65 (105) (zzb) of Finance Act, 1994. However, that amount has been paid before the issue of show cause notice. It is settled by the above decisions that the lack of clarity in the tax leviable under section 65 (105) (zzb) would detract from the liability to be imposed with penalties under the Finance Act, 1994. We find that the present issue is also one such. Tax on commissions from banks and financial institutions confirmed - penalties set aside - appeal disposed off - decided partly in favor of Revenue.

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• Central Excise

• 2016 (11) TMI 640
  Demand - Process amounting to manufacture - process of electro plating is akin to galvanising or zinc plating - Held that: - similar issue stands decided in the appellant's own case COMMISSIONER OF C. EX., LUDHIANA Versus DEEPS TOOLS PVT. LTD. [2010 (4) TMI 495 - CESTAT, NEW DELHI] where it was held that Merely because the scrap has been marketed, the same cannot be held to have emerged as a result of manufacture. The appellant is not required to pay duty on copper scrap generated during the course of their activity of nickel plating/electro plating which does not amount to manufacture - appeal allowed.

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• 2016 (11) TMI 639
  Classification of goods - Photo Albums - classified under Heading No. 48.20 of the first schedule to the Central Excise Tariff Act, 1985 or under Heading No. 3926.90? - Held that: - Only merely, covering by the paper sheet, the photo albums will not become made of paper or paper board in the absence of any test provided before us. We have to see the pre-dominance test for classify of such an article. In this case, the albums produced before us is made of plastic and the same has been covered by only a paper sheet. In fact, the photo albums in question has made of plastic cover. Merely, covering from the paper sheet, it does not mean that the album of paper - reliance placed on the decision of the case of A.J. Stationery (P) ltd. [2001 (2) TMI 388 - CEGAT, BANGALORE] - The proper classification of the photo albums in question is under heading 39.26 of the Central Excise Tariff Act, 1985. Extended period of limitation - Held that: - The issue of classification was in dispute therefore, it cannot be stated that the appellant having any malafide intention to classify the said goods under heading 48.20 - extended period of limitation not invokable. Imposition of penalties - Held that: - there was no mala-fide intention to evade payment of duty on behalf of the appellants - penalties not imposable The demand for the period within limitation is confirmed which shall be payable by the appellant along with interest - appeal disposed off - decided partly in favor of appellant.

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• 2016 (11) TMI 638
  MODVAT credit - declaration for input as required under Rule 57G of erstwhile Central Excise Rules, 1944 - whether recovery of credit on the ground that the input packing material viz. ‘Bitumen Drums’ was shown against the column ‘final product ’, instead of ‘input’, justified? - Held that: - the Appellant declared ‘Bitumen drum’ under the category ‘final product’, instead of as ‘input’. It is the contention of the Appellant that they are engaged in the manufacture of petroleum products and not ‘drums’, hence, the bitumen drum, which was by mistake shown as their final product, should be considered as an ‘input’ used for packing of bitumen, a fact never disputed by the Revenue. We find force in the contention of the Appellant - appeal allowed.

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• 2016 (11) TMI 637
  Abatement of appeal - the Appellant Company has been wound up and the liquidator has been appointed by Hon'ble Gujarat High Court in disposing the Company Petition No.44 of 2015 - even though the order was passed on 03.11.2015, there is no application for continuation of the appeal till date. Accordingly, the appeal is abated in view of the Rule 22 of CESTAT (Procedure) Rules, 1982 - appeal abated.

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• 2016 (11) TMI 636
  Manufacture - Whether the conversion of paddy into rice amounts to manufacture as per section 2(f) of the Act or not? - Clandestine removal - 100% EOU - export of basmati rice - section 3(1) of the Central Excise Act, 1944 read with section 12 of the Customs Act, 1962 - Held that: - reliance placed on the decision of the case of The Commissioner of Income Tax vs. M/s.Cynamid India Ltd. [1999 (4) TMI 2 - SUPREME Court] where The deductions claimed by the assessee were in respect of the expenditure incurred by it in disseminating literature, pamphlets, etc., containing information on modern techniques and methods of agriculture designed for increasing the yield of rice amongst the cultivators and farmers who grow rice - held that assessee-company was entitled to weighted deduction under section 35-C - conversion of paddy into rice is not a distinct operation and the rice and husk remain in their natural form as a result of dehusking and are covered by the term 'agricultural product. The test of manufacture has been failed as the goods are not manufactured goods as per section 2(f) of Central Excise Act, accordingly, the question of excisability does not arise - decided in favor of appellant. Whether the rice/bran rice are excisable goods in terms of section 2(d) of the Act or not? - Held that: - if in the tariff, the rate of duty is left blank, in that case, the goods are not excisable goods. Admittedly in the case in hand, the rate of duty in the tariff is left blank, therefore, we hold that the rice is not excisable goods. This view also takes support from the various RTI applications filed by the appellant wherein it has been replied by the department that no unit is manufacturing rice is paying duty on the rice being 100% EOU, we hold that the rice is not excisable goods - decided in favor of appellant. Whether the extended period of limitation is invokable in the facts and circumstances of the case or not? - Held that: - the appellant has succeeded on merits, therefore, we are not going into the issue of limitation. Therefore, the issue No.3 is kept open for the appellant. Appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 635
  CENVAT credit - job work - whether the appellants are eligible to take credit of service tax paid by job worker - Held that: - The appellants had availed the credit of the service tax paid by the job worker, and further processed the goods and cleared the final goods on payment of central excise duty. Therefore, it is not in doubt that the service tax has been paid in relation to manufacture of the goods - CENVAT credit allowed - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 634
  CENVAT credit - Rule 4(3) of the Customs (IGCRDMEG) Rules 1996 - concessional rate of duty - Held that: - Once the proper use of the goods in the specified final products have not been disputed by the Department, the exemption availed on the imported goods cannot be denied - appeal dismissed - decided against Revenue.

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• 2016 (11) TMI 633
  Whether the excise duty is payable on semi finished goods which was destroyed in the fire broke out in the factory of the appellant or not? - Held that: - Similar issue came up before this Tribunal in the case of M/s Steelbird Hi Tech India Ltd Versus CCE. Delhi-II [2015 (4) TMI 602 - CESTAT NEW DELHI] wherein it was held that appellant has taken Cenvat Credit correctly and there is also no provision in the Cenvat Credit Rules to reverse proportionately Cenvat Credit on capital goods which was lost in fire or were not used. The appellant is not required to pay duty on semi-finished circuit card raw assembly destroyed in fire broke out in their factory - appeal allowed.

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• 2016 (11) TMI 632
  Levy of duty - clinker - benefit of N/N. 67/95-CE dated 16.3.1995 - clinker, not a final product - the appellant is required to pay duty on clinker which has been captively consumed in the manufacture of final exempted product i.e. cement or not? - Held that: - the clinker which has been captively consumed in the manufacture of final exempted product i.e. cement for manufacturing final products, duty is not payable on clinkers - the appellant is not required to pay duty on clinker - appeal allowed.

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• 2016 (11) TMI 631
  Refund pertaining to the excise duty paid in excess of final product - Held that: - refund claim for cash refund rejected on the ground that when the refund sanctioned to the appellants, the appellants had not surrendered their central excise registration. It records that the manufacturing activity had just stooped but the finished goods/parts/components manufactured at that time were lying in the unit and were being cleared on payment of duty. We find that the ability of the appellants to utilize the cenvat credit has not been challenged on facts. Reliance placed on the decision of the case of Alampally Brothers Ltd. vs. CCE, Cochin [2005 (5) TMI 200 - CESTAT, BANGALORE] where it was held that where the appellant is not a position to utilized the credit, the refund should be given in cash Appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 630
  Wrong availment of cenvat credit - charges paid to a person situated abroad for the services rendered on installation of office machinery to foreign clients - reverse charge mechanism - Held that: - the appellant is not eligible to avail cenvat credit of the amount paid as service tax under reverse charge mechanism as these services are outsourced by the appellant to a person situated abroad. These services cannot be, by any stretch of imagination, considered as services which are used for the manufacturing of the final product. In my view, the cenvat credit availed by the appellant of the amount of Rs. 2,72,794/- is erroneous and has been correctly confirmed by the lower authorities. I uphold the impugned order of the confirmation of the demand along with interest. Imposition of penalty u/r 15(4) of the Cenvat Credit Rules, 2004 - Held that: - the appellant could have been under bona fide belief that they can avail the cenvat credit. Since the appellant has already discharged the demand of duty along with interest, I hold that the penalty imposed on the appellant is unwarranted. Accordingly, I set aside the penalty imposed on the appellant. The impugned order is modified to this extent. Appeal disposed off - decided partly in favor of appellant.

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• 2016 (11) TMI 629
  SSI exemption - job work - whether the manufacturer is entitled to simultaneously avail Cenvat credit and full exemption under Notification No. 8/2003 dt. 01.03.2003? - Held that: - reliance placed on the decision of the case Nebulae Health Care Ltd. [2015 (11) TMI 95 - SUPREME COURT] where it was held that It becomes apparent that so far as manufacture of branded goods of third party on job work basis by the SSI Unit is concerned, they are to be dealt with differently in the sense that they do not come within the ambit of exemption on which normally excise duty, as per the provisions of the Act, is payable. As a sequitur, it also follows that once excise duty is paid by the manufacturer on such branded goods manufactured, the brand name whereof belongs to another person, on job work basis, the SSI Unit would be entitled to CENVAT/MODVAT credit on the inputs which were used for manufacture of such goods as on those inputs also excise duty was paid. The appellant is entitled to avail the credit and the appellant is entitled for SSI exemption without including the goods manufactured on job work for third party under the brand name - appeal allowed - decided in favor of appellant-assessee.

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• 2016 (11) TMI 628
  Reversal of CENVAT credit - area based exemption under N/N. 50/2003-CE dated 10.6.2003 - whether the inputs lying in stock on the date on which exemption Notification No. 50/2003-CE dated 10.6.2003 exempted final product, the appellant is required to reverse the credit lying in their stock or not? - Held that: - reliance placed on the decision of the case HMT Versus COMMISSIONER OF CENTRAL EXCISE, PANCHKULA [2008 (10) TMI 54 - CESTAT, NEW DELHI] where it was held that when the input-credit legally taken and utilised on the dutiable final products, need not be reversed on the final product becoming exempt subsequently unless specific provision exist therefor At the time opting area based exemption of Notification No.50/2003-CE dated 10.6.2003, the appellants are not required to reversed the credit in their cenvat credit account lying unutilized - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 627
  Denial of CENVAT credit - dealer not existing - Held that: - in the absence of any investigation at the end of manufacturer/supplier or the transporter, the cenvat credit cannot be denied to the appellants - appeal allowed - decided in favor of appellant-assessee.

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• 2016 (11) TMI 626
  The decision in the acse of CCE, Bhopal Versus M/s Aristo Pharmaceuticals Limited [2009 (12) TMI 989 - CESTAT NEW DELHI] contested - Held that: - the issue that falls for determination in this appeal is clearly covered against the Revenue in the case of Commissioner of Central Excise, Mumbai v. M/s. Vikram Ispat Ltd. [2016 (5) TMI 442 - SUPREME COURT] - appeal fails and is accordingly dismissed

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• 2016 (11) TMI 625
  The decision in the case of Commissioner of Central Excise & Customs, DAMAN Versus PSL Corrosion Control Services Ltd. [2010 (10) TMI 1122 - GUJARAT HIGH COURT] contested - Held that: - Since the tax effect involved in the instant appeal is negligible, the appeal is dismissed on this ground alone, leaving the question of law open.

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• 2016 (11) TMI 624
  Levy of central excise duty - activities of assembling the various components of audio cassettes into CO cassettes on job charges - job work - audio cassettes without magnetic tape or ribbon (C-0 cassettes) - Held that: - reliance placed on the decision of the case Collector of Central Excise, Mumbai Vs. Shemaroo Video Recording P. Ltd. [1999 (2) TMI 151 - CEGAT, NEW DELHI] where it was held that assembly of video cassettes with magnetic tapes will not amount to manufacture - the various components received by the appellants were assembled by them manually assembly, the end product does not become an audio cassette as audio magnetic tapes either recorded or unrecorded. In other and even after it is not having words, the un-assembled components brought in by the appellants were cleared after assembly as C0 cassette. We find as such in such circumstances, there is no new product emerging satisfying the condition for manufacture. The department proposed classification differently in both the show cause notices whereas the Original Authority held that classification under CTH 852312, though the Board classified the components of audio cassettes under CTH 39.26. Further, we also note that valuation adopted is arbitrary and without any justification. The of principal supplier of components, who received back the assembled (C0) considered without any detailed examination - the duty demand against the appellant is held to be not sustainable - appeal allowed.

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• CST, VAT & Sales Tax

• 2016 (11) TMI 612
  Validity of the order of assessment - sustainability of the order of attachment to his Bank Account - the tax due, as determined in the assessment order dated 13.3.2015 remain unpaid and uncleared - whether the notice dated 27.1.2015 has been delivered to the assessee, at the address recorded in the certificate of registration or not? - Held that: - there appears to be some tenability behind the assertion of the writ petitioner/appellant/dealer that he has not received the pre-assessment notice and for want of knowledge, he did not participate in the assessment proceedings and that he has also not received the assessment order for him to be described to be a defaulter. Further we find that from the copies of the Tax Deduction at Source certificates, nearly around Rs. 60 lakhs of tax has already been deducted and transmitted and therefore there appears to be some basis behind the assertion of the assessee that he is not liable to pay taxes in addition and if only an opportunity of participation is accorded, he will be able to produce the original TDS certificates and establish that tax liability already stood discharged by him. The ends of the justice would be better served, if we provide an opportunity to the appellant/assessee to participate in the assessment proceedings. Hence, we set aside the order of assessment dated 13.3.2015 passed by the respondent and remit the matter back for consideration afresh.

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• 2016 (11) TMI 611
  Release of detained goods on deposit of cash security equal to 15% of the gross value of the goods - proper and genuine documents or a declaration form for import i.e. form 38/39, e-sancharan etc not accompanied with the goods - Held that: - Prima facie, it appears that the tax invoice was issued by the revisionist to cover up the interstate purchase of goods in question and sale thereof so as to give it colour of intra-state transaction. The provisions of Section 50 (1) has also been violated since the goods were not accompanied with the required documents. Under the circumstances, I do not find any infirmity in the impugned order of the Tribunal. The revision lacks merit. No question of law arises - the revision is dismissed. Liberty is granted to the competent authority to conclude the penalty proceedings without being influenced by any of the observations made in the body of this order.

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• 2016 (11) TMI 610
  Interest on additional refund granted - the first appellate authority had computed total amount payable to ONGC at Rs. 1,66,38,658/- in place of Rs. 1,20,90,342/- calculated by the Assessing Officer payable to ONGC by way of refund. Thus, under this appellate order, the ONGC would receive an additional sum of Rs. 45,48,316/- - Held that: - the assessee would receive interest on enhanced refund as per the appellate order. Prima facie, it is not suggested that the assessee would be entitled to interest on interest. Only for such clarification therefore, we would not issue notice calling upon the respondent to appear, instead we leave it to the Government to approach the Tribunal, if so desire, seeking clarification or rectification in terms of powers under sub-section (2) of Section 79 of the VAT Act - application disposed off - decided in favor of applicant.

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• 2016 (11) TMI 609
  Levy of interest u/s 42(3) of the TNVAT Act, 2006 read with section 9(2-B) of the CST Act, 1956, for the assessment years 2007-08 to 2012-13 - manufacture and sale of Batching Plan, Concrete mixtures, Concrete pump and its spares - inter-state sales - Form -C - Held that: - the petitioner themselves have preferred a Revision Petition before the First Revisional Authority, as against the earlier assessment order passed under section 53 of the TNGST Act, for the assessment year 2005-2006. However, the said Revision Petition was dismissed, confirming the order of the Assessing Authority. As against said order, the petitioner preferred Second Revision, under section 55 of the TNGST Act, before the Additional Commissioner of Commercial Taxes (Revision Petition), which was taken on file as R.P.No.J2/138/2015 and an order was passed on 24.06.2016, by which the petitioner's Revision Petition was allowed - Since for the identical transaction, the petitioner having succeeded before the Second Revisional Authority, it goes without saying that such a direction and order would bind the Assessing Officer. However, since the order of the Revisional Authority dated 24.06.2016, was passed subsequent to the impugned orders viz.28.08.2014, this Court is inclined to remit the matter back to the respondent to take note of the order passed by the Revisional Authority and redo the entire exercise by following the order passed in R.P.No.J2/138/2015 dated 24.06.2016, as it is stated that the transactions are identical - matter remanded - petition disposed off.

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• Indian Laws

• 2016 (11) TMI 608
  Auction notice - Held that:- Upon hearing the learned counsel and going through the concurrent findings of fact arrived at by the Debt Recovery Appellate Tribunal as well as the High Court, we have no doubt about the fact that undue haste was made by the creditor bank in holding the auction. The creditor bank could have waited for some time when the proceedings were pending before the Tribunal as well as the High Court before conducting the auction and confirming the sale. We do not find any reason to disturb the concurrent findings arrived at by the Debt Recovery Appellate Tribunal as well as the High Court about the irregularities committed in holding the auction. A submission had been made on behalf of the Appellant that the second application filed under Section 17 of the Act was not maintainable and therefore, it ought not to have been entertained by the Tribunal. We are not in agreement with the said submission for the reason that when another application was filed under Section 17(1) of the Act, the cause of action was different. At an earlier point of time, the issuance of notice as well as notice for sale of the flat had been challenged, whereas the subsequent application had been filed after the auction had been held. The cause of action in respect of both the applications was not same and therefore, in our opinion, the second application for a different cause of action was maintainable. Thus we do not intend to disturb the judgment delivered by the High Court. However, looking at the nature of litigation faced by the auction purchaser, we modify the order and direct that the amount already paid by the auction purchaser shall be returned to the auction purchaser with simple interest at the rate of 10% till the said amount is paid.

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