TMI Tax Updates - e-Newsletter
November 2, 2016

Case Laws in this Newsletter:

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

News

• Cabinet Secretary and the Chairman of the National Committee on Trade Facilitation (NCTF) stresses the need to continuously move towards higher standards of excellence so that the trade eco system becomes more growth oriented; Steering Committee, working under NCTF, to be co-chaired by the Revenue Secretary and the Commerce Secretary

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Highlights / Catch Notes

Income Tax

• The disallowance u/s. 14A read with Rule 8D should only be made with regard to investments and not with the regard to share held as stock-in-trade. - AT
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• Computation of capital gains - Unless the AO possesses some evidences, demonstrating the fact that full value of the consideration disclosed by the assessee was incorrect, he cannot replace that value by estimation or on the basis of his own estimation. - AT
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• When no fresh investment has been made by the assessee during the year under assessment nor it has incurred any expenditure the question of invoking provisions contained u/s 14A read with Rule 8D does not arise. - AT
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• Non granting registration u/s 12A - partition of education society without seeking necessary approvals / sanctions from competent authority in terms of societies registration act - DIT(E) failed to make out a case for rejection of registration u/s 12AA / 12A of I.T. Act - AT
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• The transaction undertaken for the sale & purchase of the shares in F&O market to safeguard the loss on account of price fluctuations of the share held by the assessee within the same script cannot be regarded as speculation transactions. - AT
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• TDS u/s 194C - non deduction of tds on catering charges - The provisions of TDS u/s. 194C of the Act are applicable for a works on contract and they do not apply on the sale-purchase of products - AT
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• TDS u/s 195 - non deduction of tds on software expenses representing reimbursement of software cost to its parent company - it cannot be held as ‘royalties’ coming into the ambit of Article 12 of DTAA or ‘fee for technical services’ u/s 9(1 )(vii) - AT
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Customs

• Re-classification of imported goods - ‘mono potassium phosphate’ with purity of 99.6% - The inclusions of the imported items in the Fertiliser (Control) Order 1985, as amended in 1995, cannot but reinforce the opinion that these are indeed fertilisers as decided by the competent department of the Government of India - imported goods are fertilizers - AT
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• Classification of goods - LED Panel Indicator - The Commissioner (Appeals) decides the classification under heading 85312000. Therefore if at all any appeal is maintainable before the Tribunal of the Revenue shall be on the issue of conflicting tariff heading between the 85318000 and 85312000. The department is not allowed to file the appeal claiming some third tariff item number 8538 - AT
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Service Tax

• When cash management services stood excluded from the purview of service tax at the hands of the Bank until 31.05.2007, service tax cannot be demanded on an activity which is essentially cash management service, by taking aid of other general charging heads, such as business auxiliary service (BAS) - AT
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• Maintainability of appeal – period of limitation - The mode of communication of order is relevant only so long as the actual receipt of the communication is not disputed. Once the receipt of communication is not disputed, the mode of communication becomes irrelevant- AT
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• Even if the service tax was collected but shown as a outstanding in the balance sheet, it can be construed that appellant had no malafide intention - appellant showed the reasonable cause for non payment of service tax on due time. - Penalty waived - AT
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• SCN did not bring forward any evidence to establish that there has been collusion between the appellant and the service provider for evasion of Service Tax and for availing inadmissible Cenvat credit - cenvat credit cannot be denied - AT
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Central Excise

• Valuation - the benefit accruing to the appellant by way of extending the benefit of concessional rate of duty for import of components is to be considered as additional consideration flowing from the buyer to the appellant. The charging of differential duty on such consideration confirmed - AT
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• Claim of refund - Interest on delayed refund - limitation bar - Section 11BB - Price variation clause - the claim is hopelessly time barred. - AT
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• Valaution - Job work /loan licensee - Physician samples - in the case of sale of samples to brand owners on a principal basis, the transaction value merits acceptance. In respect of clearances as a job worker, valuation needs to be done on the basis of CAS4 certification - AT
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• SSI Exemption - turnover cannot be clubbed together and the two units cannot be treated as one unit merely because various factors such as related partners, common use of machines, labour , employees etc. - the most important aspect about having common funding and financial flow back is missing in the instant case - AT
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• Classification of AC couplings - couplings are nothing but shorter version of pipes, which are classified in the same Tariff Headings of 6811.83 - AT
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• Classification of goods - Roop Amrit - Complete solution - cosmetic under heading 3304 or medicament under heading 3003? - - products classified as cosmetic or toilet preparations, the valuation to be done u/s 4A - AT
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• CENVAT credit - prior to 24.03.2011, no central excise duty was payable on coal produced in mine - taking of CENVAT credit of central excise duty, paid by the supplier, is in conformity with the statutory provisions - AT
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Case Laws:

• Income Tax

• 2016 (10) TMI 998
  Trademark licence fee payments - claim of expenditure u/s 37(1) - commercial expediency - Held that:- The assessee is exploiting the trademark "REDINGTON" for the purpose of carrying on its business. Therefore, there is nothing uncommon in assessee's making payment to the use of the trade-mark to M/s Redington Distribution Pte. Ltd., Singapore. It is not necessary for the TPO to go beyond this plausible explanation, since it is a widely accepted business practice around the world. This is not an unique case for the assessee company alone. Further, it is for the assessee to decide the dynamics of its business. The assessee is the best judge to decide on such issues. The Hon'ble Supreme Court in the case of S.A. Builders vs. CIT (2006 (12) TMI 82 - SUPREME COURT ) has held that any expenditure incurred by the assessee, if justified by commercial expediency, is an expenditure allowable for the purpose of taxation and what is commercial expediency is a matter to be decided by the assessee. In the facts and circumstances of the case, the said addition is deleted. Disallowance under Section 14A - Held that:- We remit the issue back to the file of the Assessing Officer to verify and exclude the investments made in subsidiary companies for the purpose of calculation of disallowance under Rule 8D(2) of the Income-tax Rules, 1962 and also verify interest expenditure whether directly attributable to the exempt income.

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• 2016 (10) TMI 997
  Addition u/s 68 - Held that:- In the instant case, we notice that the assessee has furnished copies of Certificate of Incorporation of the share applicants and the PAN numbers. The same establishes their identity. It is not in dispute that the share application money was received through banking channels. In fact, the AO himself has verified the same by calling for account copies from the respective bank accounts. Hence the genuineness of the transaction also stands proved. All the share applicants are also regularly filing return of income and the assessee has furnished copies of returns of income filed by them. It is seen that these companies have made other investments also. Thus, we notice that the assessee has discharged the initial onus placed upon it u/s 68 of the Act. - Decided in favour of assessee

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• 2016 (10) TMI 996
  Allowability of deduction u/s 80IAB on the interest - netting off of interest expenses against the interest income - Held that:- The interest income received by the assessee is inextricably linked with the business of the Assessee and is therefore eligible for deduction u/s.80IAB of the Act more so when interest income has been taxed as business income and not as “income from other sources” by the Revenue meaning thereby that the income from interest being business income has accepted by Revenue. We are of the view that the interest income is eligible for deduction u/s 80IAB of the Act. Further we also find that while deciding the issue of netting off of interest expenses against the interest income, ld.CIT(A) has allowed netting of interest income against interest expenses for the reason stated by ld.CIT(A) in his order. In such a situation the netting off of interest income against the interest expenses also does not require interference. We thus allow this ground of the Assessee. Disallowance u/s.14A - Held that:- In the present case, it is an undisputed fact that the assessee has earned exempt income of ₹ 33,01,981/- and the disallowance u/s.14A r.w.s.Rule 8D has been worked out at ₹ 4,19,65,021/- which is about 1270 times the exempt income and thus the disallowance u/s.14A of the Act worked out by the AO is much more than the income liable to tax. Considering the facts of the present case in the light of the decision of Hon’ble Delhi High Court in the case of Joint Investments (P.) Ltd. vs. CIT (2015 (3) TMI 155 - DELHI HIGH COURT ) and in the absence of any contrary binding decision pointed out by Revenue, we are of the view that the disallowance as worked out by the AO is not warranted. We therefore direct that the disallowance u/s.14A in the present case be restricted to ₹ 33,01,981/-, being the exempt income, earned by the assessee. Thus, this ground of assessee is allowed.

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• 2016 (10) TMI 995
  Disallowance of loss made on account of fire claim & loss of cylinders - Held that:- There is no dispute about the genuineness of the claim of the assessee about loss due to fire and insurance claim. Ld. Assessing Officer on presumption has held that the assessee has recouped loss without giving any cogent findings. Ld. CIT(A) has elaborately discussed the facts and circumstances; and based thereon has held that there is no evidence to substantiate the findings of the ld. AO. In view thereof, I see no infirmity in the order of the ld. CIT(A) on this issue which is upheld. Disallowance u/s.40(a)(ia) - reimbursement of export clearing & forwarding charges without TDS which had been clubbed in same bill raised for contractual payments liable to TDS - Held that:- From the record it clearly emerges that the impugned amount paid by the assessee is in the nature of reimbursement of expenses for which there is no liability of TDS u/s 194H. The ld. AO has grassed over the pertinent facts which have been rightly streamlined by the ld. CIT(A). No infirmity in the order of the ld. CIT(A) on this issue, which is upheld. Disallowance on account of Commission Expenses - Held that:- From the record it clearly emerges that the assessee has submitted full address and PAN of the commission agents. It is also observed that the amount has been paid through cheque by deducting TDS which clearly indicates that the services have been rendered by these commission agents for the appellant’s business. Therefore, find no infirmity in the order of the ld. CIT(A) on this issue, which is upheld. Disallowance of interest u/s 40A(2)(b)- Held that:- CIT(A) has duly considered the factual aspect and demonstrated that the Barclays Bank loan in effective terms cost 18.31% to the assessee as against assessee has charged 18% from the related parties. Section 40A(2)(b) is not applicable to assessee’s case. Thus, the order of the ld. CIT(A) is upheld on this issue and this ground of the Revenue is dismissed.

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• 2016 (10) TMI 994
  Determination of capital gain on transfer of land - long term capital gain v/s capital loss - Held that:- If we exclude the DVO’s report, there is no other evidence available with the AO, except the calculation submitted by the assessee based on an exercise of reverse indexation from the order of the Deputy Secretary, Revenue determining fair market value of the land in this area. Other evidence collected by the AO from Sub-Registrar was not considered by the AO himself, because, the DVO has reported value of this property at ₹ 192/- per sq.yard. Value considered by the AO at ₹ 2/- per sq.yard was not supported by any corroborative evidence. The assessee has pointed out that the rates considered by the AO were not of similar land. These were for agriculture land having different geographical locations, whereas the land sold by the assessee was of an industrial land. Therefore, the calculations made by the assessee deserve to be accepted. We set aside the orders of the Revenue authorities on this issue and direct the AO to take figure of long term capital loss of ₹ 52,50,759/-.- Decided in favour of assessee Addition on on-money received over and above, the amounts stated in the sale deed - Held that:- AO failed to bring conclusive evidence on record to say that the assessee has received on-money. It is also pertinent to mention that AO has made an addition of ₹ 1,92,06,000/- in the total income of the assessee. To our mind, the AO has erred in making a separate addition. At the most, it could be part of total sale consideration, and the capital gain ought to be computed on the basis of taking this amount. A thought struck to our mind that let it be inquired again at the level of AO, but when we appraised ourselves about the ultimate tax effect on this exercise, then it revealed that even if for argument sake this amount is added, then, long term capital gain on it will be roughly ₹ 38 lacs. It will be set off against the LTC loss accepted at ₹ 52,50,759/-. The assessee is a salaried person. No carry forward of loss would affect him. Thus, in view of the above discussion, we are of the view that addition of ₹ 1,92,06,000/- is not sustainable in the case of the assessee, because AO failed to bring conclusive evidence on record. We allow this ground of appeal, and delete this addition. - Decided in favour of assessee

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• 2016 (10) TMI 993
  Disallowances of various expenses - vouchers not produced - Held that:- We take note that in all these assessment years the assessments were completed under section 143(3) of the Act. The assessee is engaged in the same kind of business and without bringing any comparable cases and without rejecting the books of account, the estimation made on ad hoc basis cannot be countenanced. If there were any item-wise expenses, which could not have been supported by vouchers, then the Assessing Officer was at liberty to disallow the expenses item-wise and ought not to have gone for ad hoc disallowances. However taking into consideration the fact that certain vouchers regarding expenses could not be produced before the Assessing Officer to his satisfaction and taking into consideration disallowances made from assessment year 2008-09 to 2013-14, we would like to take an average of ad hoc disallowance which comes to 3%. Barring this year, we find that in assessment year 2008-09 onwards the ad hoc disallowances were @ 0.74%, 1.65%, 0.57%, 0.88% and in assessment year 2013-14 it was 2.47%. In such a scenario taking into consideration the fact that the Assessing Officer has made disallowance of 30.64% in this assessment year and the ld. CIT(A) has restricted it to 4.56%, it would be fair and reasonable if we could fix the percentage of disallowance at 3% and we order accordingly. Addition on outstanding creditors for labour, stone cutting and polishing charges and outstanding labour dues payable - Held that:- The Assessing Officer asked for name and addresses of the individuals to whom the payments were out-standing and to ascertain this fact he issued notice under section 133(6) of the Act to 200 labours at the first instance and to 51 labours after some time. Out of that notices sent, 103 notices returned back with the postal remark that no one was residing and it was incomplete address. Therefore, we find from this fact itself that 148 notices could be served, which means more than 50% notices could be served on the labours to whom the assessee has to pay outstanding dues. Therefore taking into consideration the overall facts, wherein we have already taken note that from assessment year 2008-09 to 2013-14 the assessments were infact carried out under section 143(3) of the Act and disallowances have been very less when compared to this particular assessment year, however, taking into consideration that less than 50% of the notices have been received back without being served, it would be reasonable to both sides if we restrict the disallowance to 50% of ₹ 42,58,791/- which comes to ₹ 21,29,395/- Ad hoc disallowance under the head labour charges - Held that:- Assessing Officer had sent notices to 241 labourers of which only 82 notices have come back. It means 159 notices have been served on the labourers. Therefore the list given by the assessee cannot be disbelieved in toto. There may be various reasons why the notices could not have been served on the labourers in the given addresses. These skilled labourers as we understand are mainly coming from Rajasthan and used to camp in an address/ place for some time which is adjacent to place of work and once the work is over or discontinued, they will move to other locations and thus addresses also keeps changing depending on the location of work they get. Moreover, these labourers cannot be presumed to be literate, so the address might also have some deficiencies and may be incomplete. We also take into account the fact that while adjudicating ground no. 2 of the assessee, we have sustained 50% of the outstanding credits inrespect to labour outstanding and sustained ₹ 21,29,395/-. So we are of the considered opinion that there is no need of any further disallowance and therefore, we delete the addition sustained by the ld. CIT(A) on this issue. Disallowance under the head stone joining & cutting expenses - Held that:- We take note that out of the 51 letters sent, 21 came back which means that 30 notices could be served on the addresses of the labourers. The assessee has handed over the list of 319 labourers and the Assessing Officer preferred to send notices only to 51, out of which 31 could be served. So it cannot be said that the assessee has inflated the expenses by showing huge outstanding dues to the labourers. Not only that, we have already held above that ad-hoc disallowances should not be resorted to and if the Assessing Officer finds that the assessee is unable to produce vouchers item-wise, then the said expenses on those items can be treated as non-genuine and item-wise dis-allowance can be resorted to by the AO. The ad-hoc disallowance is an arbitrary exercise of power, which cannot be countenanced. Therefore, we delete the ad-hoc disallowance made on this count. Ad-hoc disallowance with respect to business promotion of the unit - Held that:- We do not agree to the ad-hoc disallowances as made above. For the same reasons which we have reiterated hereinabove, we delete the ad-hoc disallowance sustained by the Ld. CIT(A) and, therefore, we direct deletion of ₹ 30,000/- on this issue. Non-acceptance of agricultural income - Held that:- We take note that in the Assessment Year 2011-12, assessee has shown an income of ₹ 7,95,000/- as agricultural income of which ₹ 2,50,000/- has been disallowed by the Assessing Officer and in Assessment Year 2013-14, the assessee has shown an agricultural income of ₹ 4,50,000/- and the Assessing Officer has made disallowance of ₹ 1,50,000/- taking into consideration the overall facts stated by the Assessing Officer in respect to the yield from 7.3425 hectare as well as the Department’s stand on the agricultural income claimed by the assessee in subsequent assessment years, we are of the opinion that the confirmation made by the Ld. CIT(A) of ₹ 7,40,000/- is fair and reasonable, so we sustain it ; and therefore we dismiss both the assessee’s appeal as well as that of Revenue on this issue.

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• 2016 (10) TMI 992
  Disallowance of expenses which were considered to be capital in nature by the AO - Held that:- We find that the ld.CIT(A) while deciding the issue has given a finding that considering the nature of activities undertaken by assessee, there is lot of wear and tear to the building which necessitates incurring of expenditure and the expenses were normal repair expenditure. He has further noted that going by the nature of expenses incurred it cannot be stated that any new asset has come into existence and that similar expenses were incurred by the assessee in earlier years and have been allowed by the Revenue in scrutiny assessments and that AO has not brought any material which could prove of bringing any new asset into existence or that the expenditure was towards replacement of existing assets. Before us, Revenue has not brought any material on record to point out any fallacy in the finding of ld.CIT(A). Software expenses - revenue or capital expenses - Held that:- Revenue has not placed on record any material to demonstrate that the expenditure incurred by assessee is for the purchase any new software nor has pointed out any distinguishing feature in the facts of the case in the year under consideration and the facts of the case for earlier years. Before us Revenue has also not placed any material to demonstrate that order of the Coordinate Bench of Tribunal in assessee’s own case for earlier years has been set aside by higher judicial authorities. In view of the aforesaid facts and following the reasoning given by the Coordinate Bench while deciding the issue in earlier years, this ground of assessee is allowed.

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• 2016 (10) TMI 991
  Addition on account of unaccounted receipts on the basis of certain loose papers in the form of chits found and seized during the course of search - Held that:- In the instant case, nothing is brought on record that the assessee in fact received any amount from Sh. Sohanraj Mehta. It is well settled that as per the provisions of Section 292(1) of the Act, the documents found during the course of search may be presumed to be belonging to the person in whose possession those documents were found, however, in the present case no such document was found from the possession of the assessee and in those documents which were found and seized during the course of search in Dhariwal Group of cases, there was no indication that the figures referred therein reflected any quantity of goods or amount of money which related to the assessee. It is not in dispute that the presumption available u/s 132(4A) can be drawn against the person in whose case search was authorized and from whose possession or control documents/books of account or diary etc. were found but the presumption regarding correctness of contents of those documents/books of accounts etc. can be raised against the third party only when the documents are speaking one. In the present case, no document was found from the possession of the assessee and a bunch of loose papers which were seized from the premises of third party did not indicate the unrecorded sales made to the assessee. Moreover, no opportunity was granted by the AO to cross examined Sh. Sohanraj Mehta, on the basis of whose statement the AO presumed that unaccounted sale was made by the assessee. We, therefore, considering the totality of the facts of the present case, do not see any valid reason to interfere with the findings of the ld. CIT(A) who rightly deleted the addition made by the AO. Treatment to agricultural income declared by the assessee as income received from undisclosed sources - Held that:- In the present case, the assessee furnished the documents relating to the land holding which were not doubted by the AO. The assessee entered into an agreement for cultivation of the agricultural land with Sh. Dhirender Bhati and furnished the certificate dated 20.08.2010 from Tehsilpatwari which revealed that vegetables were grown on the assessee’s agricultural land for the past many years. The AO in the present case, did not examine Sh. Dhirender Bhati with whom the assessee entered into an agreement and also did not make any enquiry from Tehsilpatwari Sh. Jagdish Prasad Sharma who issued a certificate stating therein that the vegetables were grown on the agricultural land of the assessee. Therefore, the impugned addition was made by the AO on the basis of presumption only which is not tenable in the eyes of law. In that view of the matter, we are of the view that the ld. CIT(A) rightly deleted the addition made by the AO. Addition of disallowance of interest made u/s 36(1)(iii) - interest bearing funds were diverted for non-business purposes - Held that:- In the present case, the ld. CIT(A) had given a categorical finding that the assessee advanced the money to those concerns in which he was either a director or a partner and there was business expediency, the said categorical finding of the ld. CIT(A) was not rebutted. We, therefore, do not see any valid ground to interfere with the findings of the ld. CIT(A). Share transactions - short term capital gain OR income from other sources - Held that:- In the present case, it is an admitted fact that the assessee did not produce the broker for verification of genuineness of transaction. However, it is not clear as to whether the AO asked the assessee to produce the broker. It is also not clear as to whether the shares were transferred in D-mat account of the assessee and if those were not transferred to the D-mat account what was the reason for the same. This issue was although discussed by the AO but it had not been touched by the ld. CIT(A). We, therefore, in the absence of the clear facts available on the record, deem it appropriate to set aside this issue back to the file of the AO for fresh adjudication in accordance with law after providing due and reasonable opportunity of being heard to the assessee. Addition in respect of cash found during the course of search from the premises of the assessee - Held that:- In the present case, it appears that the family members of the assessee had owned the money which was reflected in their books of accounts as cash in hand, those books of accounts were not doubted. Therefore, the ld. CIT(A) rightly deleted the addition made by the AO.

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• 2016 (10) TMI 990
  Determination of principal business of the assessee - Held that:- In the instant case, the principal business of the assessee is trading in shares as held that there was loss of ₹ 1.80 crores from the trading of the shares and income from the other activities are lower than the loss claimed by the assessee. Therefore we conclude that principal business of the assessee is the business of trading in shares.

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• 2016 (10) TMI 989
  Disallowance made by the Assessing Officer out of prepayment charges made to NHB(National Housing Bank) - NCD(non-convertible debenture) expenses - Held that:- The issue raised in these two assessment years with regard to NHB prepayment charges is the similar issue that we already dealt with while dealing the issue of NCD expenses, where following the decision of Hon’ble Supreme Court in Taparia Tools Ltd (2015 (3) TMI 853 - SUPREME COURT ), we held that assessee is entitled to the entire deduction of NCD expenditure.

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• 2016 (10) TMI 988
  Disallowance u/s. 14A read with Rule 8D - AO has invoked the provisions of rule 8D holding that the implication of the said rule is automatic and has nothing to do with the earning of income during the year under consideration - CIT(A) has upheld the addition made by the AO by holding that the provisions of section 14A are also applicable in case of stock-in-trade - Held that:- As during the year under consideration, assessee had a long term capital gain of ₹ 54,74,924/- alongwith dividend income on mutual funds and shares for ₹ 46,55,903. Also further note that the assessee has incurred bank charges and interest expense amounting to ₹ 19,42,045.95 during the year under consideration, complete details were filed by the assessee before the AO as well as Ld. CIT(A) and no loan has been taken by the assessee during the year as is evident from the balance sheet of the assessee. The said interest has been paid by the assessee to the financiers who have funded the IPOs as is evident from the records, and there is no dividend income from transaction. Since the business of the assessee is sale and purchase of shares, all the interest has been paid in relation to normal business income, and cannot be allocated for the purpose of disallowance u/s. 14A read with Rule 8D. Find considerable cogency in the contention of the Ld. Counsel of the assessee that it is a settled law that the disallowance u/s. 14A read with Rule 8D should only be made with regard to investments and not with the regard to share held as stock-in-trade. The assessee is in the business of sale and purchase of shares and mutual funds and the shares were held as stock in trade, therefore, provisions of section 14A read with Rule 8D are not applicable. - Decided in favour of assessee.

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• 2016 (10) TMI 987
  Share transactions - nature of income - LTCG or business income - Held that:- There might be various reasons for all of sudden increase in the price of the shares. One possible reason could be permission to construct a tower on the land owned by “PMCB”. Even a single transaction can be treated as a venture into a trade, but the AO failed to point out those peculiar circumstances. Reasons given by the ld.CIT(A) in the finding extracted supra would indicate that the assessee has not borrowed funds for making investment. She has not shown shares as stock-in-trade. She did not take help of experts; she did not incur any expenditure towards selling consultancy or maintaining of any office. She has not purchased shares of any other companies in this period. Thus, facts emerge out from the record, if we examine in the light of various tests propounded by the Hon’ble jurisdictional High Court as well as by the ITAT in the case of Sarnath Infrastructure Pvt. Ltd.[2007 (12) TMI 261 - ITAT LUCKNOW-B ] then it would reveal that theld.CIT(A) has taken a correct view of treating the transaction as simplicitor investment. Mode of computation of capital gain - Sale value of the shares taken - Held that:- The assessee has shown full value of the consideration as ₹ 12,500/- per share. The ld.AO intends to change this full value of the consideration. In his efforts, he made reference to the land holding owned by “PMCB”. He considered the value of such land holding, and divided that holding with total number of shares issued by the company. What is the basis of changing this pattern ? There is no evidence with the AO that the assessee has received more value than the one disclosed by her. Unless he possesses some evidences, demonstrating the fact that full value of the consideration disclosed by the assessee was incorrect, he cannot replace that value by estimation or on the basis of his own estimation. It is also pertinent to mention that his estimation is also not based on construction of facts in right perspective. The ld.CIT(A) has recorded that he failed to consider liabilities of “PMCB”. Had these liabilities been deducted against the total value of the land, and the value of the shares were worked out, that value would be lesser than the one shown by the assessee.he ld.CIT(A) has examined both these issues elaborately, and after going through the finding of the ld.CIT(A), we do not see any reason to interfere in it.

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• 2016 (10) TMI 986
  Disallowance u/s 14A - computation of amount - Held that:- When the assessee has come up with a categoric plea that there is no increase in investment during the year under assessment and has not incurred any expenditure, the question of resorting to estimation by the AO does not arise particularly when AO has neither disputed the audited books of account maintained by the assessee in respect of investment and dividend income nor AO has recorded his dis-satisfaction as to how any expenditure has not been incurred by the assessee in maintaining the investment. In the given circumstance, the disallowance u/s 14A cannot exceed the amount of ₹ 28,666/- already claimed exempt u/s 10(34). CIT (A) has also failed to appreciate the arguments addressed by the assessee that when no fresh investment has been made by the assessee during the year under assessment nor it has incurred any expenditure the question of invoking provisions contained under section 14A read with Rule 8D does not arise. Disallowance of interest - loans were utilized for non-business activities - Held that:- The complete nexus has been established between the funds borrowed and fund parked in the FDRs to be utilized for business purpose at the time of opportune time. So, in these circumstances, the revenue authority was not justified in disallowing the interest claimed by the assessee both in AY 2008-09 and AY 2009-10. - Decided in favour of assessee

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• 2016 (10) TMI 985
  Non granting registration u/s 12A - partition of education society without seeking necessary approvals / sanctions from competent authority in terms of societies registration act - DIT (E) observed that the courses run by the trust (the appellant) are neither recognised nor a part of regular curriculum of any university / education programme; and further, that these were just skill development / enhancement courses / programme which cannot be termed as education Held that:- Objects of the appellant trust included to establish, maintain, support and run schools, colleges, social service centres, industrial training centres, skill development centres, coaching institutes, boarding houses, day shelters, research and training centres and other institutions of education, having objects similar to those of this trust for imparting elementary and higher education, technical, industrial or commercial knowledge or training amongst public. These objects are clearly in the nature of charitable purposes, and more particularly, are to be regarded as “education”. We have also already held that the courses and programs actually run by the aforesaid units of the appellant trust are to be regarded as “education”. Thus, the activities of the appellant trust are genuine. We have also found that Ld. DIT(E) has failed to bring out relevant and adequate materials on the basis of which it can be reasonably held that the activities of the appellant trust were not genuine. Further, we have also noticed that on identical facts the activities of the aforesaid educational units of the appellant trust were treated as “education” when these units were being run under R.K. Convent School Educational Society before transfer to the appellant trust who was granted registration u/s 12AA on the strength of educational activities since many years including the educational activities of the aforesaid educational units transferred subsequently to the appellant trust. Thus Ld. DIT(E) failed to make out a case for rejection of registration u/s 12AA / 12A of I.T. Act. Therefore, we direct Ld. DIT(E) to grant registration u/s 12AA/12A - Decided in favour of assessee

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• 2016 (10) TMI 984
  Transfer pricing adjustment - revenue submitted that DRP has erred in directing the TPO to consider both the BPO and ERP segment relating to the comparable M/s.Jeevan Scientific Technology Ltd., for the purpose of margin computation, ignoring the fact that the ERP segment is totally different from the BPO segment and also without stating reasons for the same - Held that:- Nature of work carried on by M/s.Jeevan Scientific Technology Ltd. is IT Enabled Services, though it was called by different name. The nature of service performed by M/s.Jeevan Scientific Technology Ltd. is IT Enabled Services and when assessee itself included ERP in IT segment, TPO cannot be re-characterised without making any enquiry u/s.133(6) of the Act. In our opinion, the direction given by the DRP that ERP is nothing but ITES and to include the ERP in ITES segment so as to compute the profit margins is justified. The Direction of the DRP is upheld. TDS u/s 195 - non deduction of tds on software expenses representing reimbursement of software cost to its parent company - whether mere reimbursement of expenses on cost to cost basis without any mark-up does not attract TDS u/s.195? - Held that:- As decied inAsst. Director of Income-tax (International Taxation) Versus M/s Bartronics India Ltd. [2014 (4) TMI 569 - ITAT HYDERABAD] the assessee has acquired a readymade off - the shelf computer programme to be used in their business and no right was granted to the assessee to utilize the copy right of the programme and, therefore, consideration cannot be treated as royalty. As held by the CIT(A), the payments made by the assessee company cannot be held as ‘royalties’ coming into the ambit of Article 12 of DTAA or ‘fee for technical services’ u/s 9(1 )(vii) of the IT Act and accordingly no tax need to be deducted u/s 195 of the IT Act - Decided in favour of assessee Provision for bad and doubtful debts - treated as a non-operating expenses in computation of margins of comparables as confirmed by DRP - Held that:- In our opinion, if the provision for doubtful debts is the current operating expenses associated with the losses from normal credit sales, it will be treated as operating expenses and usually as a part of selling, general and administrative expenses. If the expense is associated with the extending credit outside of a company’s main selling activities, the loss will be non-operating expenses. With this observation, we remit the issue to the file of AO for fresh consideration after giving opportunity of being heard to the assessee.

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• 2016 (10) TMI 983
  Addition on speculation loss - Speculation transaction - Held that:- From all the foregoing discussion we find that the AO has treated the transaction of sale & purchase of shares in F&O market which was undertaken to safe guard the loss in his holdings of stocks and shares against price fluctuations as speculation. However we find that the existing transaction is falling within the exceptions provided in clause (c) to section 43(5) of the Act. As per the provisions of the section 43(5) of the Act the transaction is falling within the definition of speculation transaction but the same has been provided in the exception list as per clause (c) to section 43(5) of the Act. The transaction undertaken for the sale & purchase of the shares in F&O market to safeguard the loss on account of price fluctuations of the share held by the assessee within the same script cannot be regarded as speculation transactions. Disallowance u/s 14A - shares/securities held as stock in trade - Held that:- Provisions of section 14A read with rule 8D of the Act are squarely applicable even for the shares/securities held as stock in trade. In the instant case the shares were held as stock in trade but no disallowance of any expenditure was made. We also find that no submission or any calculation was made before the AO at the time of assessment showing that no expenditure was incurred in connection with the dividend income. In the absence of any information the AO has no option except to resort to the provisions of rule 8D of Income Tax Rules 1962. Accordingly the plea of the assessee with regard to the satisfaction is not tenable. Hence this ground of Assessee’s CO is dismissed. Addition on account of the payment of club membership fees - Held that:- As decided in case of Commissioner of Income-tax, Patiala v. Groz Beckert Asia Ltd. [2013 (2) TMI 375 - PUNJAB & HARYANA HIGH COURT] corporate membership was obtained for running the business with a view to produce profit. Such membership does not bring into existence an asset or an advantage for the enduring benefit of the business. It is an expenditure incurred for the period of membership and is not long lasting. By subscribing to the membership of a club, no capital asset is created or comes into existence. By such membership, a privilege to use facilities of a club alone, are conferred on the assessee and that too for a limited period. Such expenses are for running the business with a view to produce the benefits to the assessee. Consequently, it cannot be treated as capital asset. - Decided in favour of assessee TDS u/s 194C - non deduction of tds on catering charges - disallowance u/s 40(a)(ia) - Held that:- Assessee has organized the conferences and has purchased food items from M/s Deluxe Caters for the persons who attended the conference. From the facts of the case, we find that the instant transaction is solely purchase of food items and therefore, same is out of purview of TDS provision. The provisions of TDS u/s. 194C of the Act are applicable for a works on contract and they do not apply on the sale-purchase of products. Therefore, in our considered view, the transaction for purchase of food items is out of purview of TDS provision. - Decided in favour of assessee

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• Customs

• 2016 (11) TMI 6
  100% EOU (STPI unit) - leasing out the duty-free goods in violation of the relevant customs and central excise Notifications - Redemption fine - Penalty - Notifications No.52/2003-Cus. as well as Notification No.22/2003-CE dated 31.3.2003 - Held that: - some of the conditions of the Notifications stand violated in the process of leasing of the premises and the goods, such transfer of goods have taken place only to other STP units - It is also pertinent to record that the diversion of such units has not been made outside the EOU scheme/STP scheme. The imported as well as indigenous goods have been procured duty free by the respondent under the STP schemes, which involves obligation to export software. Transferring such duty-free goods out of their own possession would amount to de facto de-bonding of such goods. The demand of duty foregone on the imported as well as indigenous goods is in order. It is also on record that the entire duty liability along with interest stands already paid by the respondent - waiver of redemption fine and penalty confirmed - Decided against the revenue.

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• 2016 (11) TMI 5
  Levy of penalty for abetting Undervalution - retraction of statement - imposition of penalties u/s 112 of the CA, 1962 - import of body sprays - Held that: - From the statement of the appellant recorded by the DRI it can be seen that the appellant has been consistently taking a stand that the primary role in negotiating the price and undervaluation with foreign supplier was of M.L. Patwari, though he too was in contact with Pannessar. The statement however contains an admission of undervaluation on the part of the appellant. It is also a fact that information was received from Indian High Commission has not been made part of relied upon documents. Looking at the facts of the case, it cannot be said that the primary role in the undervaluation was that of the appellant, though it is apparent that he played a significant role in the execution of the undervaluation. Under these circumstances and facts, we hold that the appellant is liable to penalty under Section 112. However, the penalty of ₹ 23,08,177/- is excessive. In view of the facts of the case, the penalty is revised from ₹ 23,08,177/- to ₹ 5 lakhs - appeal disposed off - decided partly in favor of appellant.

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• 2016 (11) TMI 4
  Rectification of mistake - buyer certificate - Held that: - the certificate of buyer was indeed a part of the record before the Commissioner (Appeals) and the Commissioner (Appeals) has examined and rejected the same solely on the ground that the same has not been authenticated by any statutory authority. I also find that the said certificate was very much of part of appeal and is enclosed in the appeal memorandum as Exhibit – ‘A’. Thus, there is indeed error in the Tribunal order dated 7.1.20016 that the said certificates were not produced before the lower authorities and need to be introduced as additional evidence. In view of the above, the said certificate cannot be discarded just like that. In view of above, the rectification of mistake application is allowed.

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• 2016 (11) TMI 3
  CHA - prohibitory order - requirement of issuance of Show cause notice - The order passed by the commissioner challenged only on the ground that before passing the prohibitory order against the petitioner, an opportunity of hearing was not given to the petitioner - principles of natural justice - Held that: - this step has been taken in the light of the investigation being undertaken by the Director of Revenue Intelligence against various unscrupulous exporters. Some of these export consignments were handled by the appellant - reliance placed on the decision of the case A M Ahamed and Co. vs. CC, Tuticorin [2013 (6) TMI 91 - MADRAS HIGH COURT] by the appellant - it was held in the context of prohibition order against the CHA, that even an administrative order affecting the life of party can be passed only after following the principles of natural justice. Even though the relevant Regulation No. 23 of CBLR 2013 does not provide for issuance of notice to satisfy the principle of natural justice, the needs to be provided - matter remanded to the adjudicating authority to re-adjudge the matter after putting the appellant on notice of explaining the reasons for the action contemplated and pass a fresh order after giving them an effective hearing - appeal allowed by remand.

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• 2016 (11) TMI 2
  Re-classification of imported goods - ‘mono potassium phosphate’ with purity of 99.6% - ‘fertilizers’ classified under heading 3105.60 of the First Schedule to the Customs Tariff Act, 1975 and heading 3105.00 of the Schedule to the Central Excise Tariff Act, 1985 or separate chemically defined compound classifiable under chapter 28? - whether the imported goods are ‘fertilizers’ within the meaning of chapter 31 of the First Schedule of the Customs Tariff Act, 1975? - the decision of Commissioner of Customs (Import), Mumbai v. Pioneer Agritechoscan [2007 (2) TMI 367 - CESTAT, MUMBAI] referred - Held that: - in the case Pioneer Agritechoscan which refers to calcium nitrate which was declared for import under 31.05 which is a residuary heading whereas the present import claimed classification under 3105.60 which is a heading as specific as in chapter 28. In the referred decision, emphasis has been placed on the chapter note 1(b) which has certain exclusions that would enable classification within the ambit of chapter 28 - In the context of the present import, that particular line of reasoning may not provide the answer. The goods listed in notes 2(A), 3(A), 4(A) or 5 to which note 1(b) refer are intended to restrict the applicability under one or other of headings 31.02, 31.03, 31.04 as applicable. Note 6 of chapter in relation to the residuary category restricts classification under ‘other fertiliser’ in 31.05 to goods to be used as ‘fertilisers’ and containing one of the fertilizing elements. In view of the above arrangement of exclusions and inclusions in chapter 31, it would appear that all of the headings preceding 31.05 are to be taken as ‘fertiliser’ to the extent that these are also used as fertilizer and not excluded by note 1(b). There is no averment in the note or impugned order that that the imported goods are not fertilizer. For the above reasons, we find that the classification of the imported goods should fall under chapter 31 and not chapter 28. The inclusions of the imported items in the Fertiliser (Control) Order 1985, as amended in 1995, cannot but reinforce the opinion that these are indeed fertilisers as decided by the competent department of the Government of India - imported goods are fertilizers - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 1
  Classification of goods - whether the goods namely LED Panel Indicator imported by the respondent is classifiable under Heading 85312000 as claimed by the respondent or 85318000? - Held that: - the Revenue though classified the goods in the bill of entry under Customs Tariff Heading No.85318000 has not challenged the same before Commissioner (Appeals). It is the respondent who challenged the classification in the Bill of Entry by filing appeal before the Commissioner (Appeals). The Commissioner (Appeals) decides the classification under heading 85312000. Therefore if at all any appeal is maintainable before the Tribunal of the Revenue shall be on the issue of conflicting tariff heading between the 85318000 and 85312000. The department is not allowed to file the appeal before the Tribunal claiming some third tariff item number 8538 - appeal dismissed - decided against Revenue.

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• Service Tax

• 2016 (11) TMI 23
  Interest on delayed refund - banking and other financial services - discount/commissions received by the appellant from the merchant establishments in connection with credit card transactions liable to payment of service tax and tax paid upon the same - refund claimed afterwards, refund was allowed - whether the appellant is entitled to get interest on delayed refund? - Section 11BB - Held that: - the issue stands decided in the case of Ranbaxy Laboratories Ltd. vs. UOI & Ors. [2011 (10) TMI 16 - Supreme Court of India] where it was held that liability of the revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) of the Act and not on the expiry of the said period from the date on which order of refund is made. The appellant eligible for interest from the date of expiry of the period of three months from the date of filing of the refund claim till the date of payment of refund - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 22
  Levy of tax - activities of cash management - Business Auxiliary Service - Section 65(19) of the Finance Act, 1994 - demand of interest u/s 75 and imposition of penalties - The Banking and Other Financial Services (BOFS) was included in the statute w.e.f 16.7.2001 under Section 65(12), however, the definition as it was initially introduced specifically excluded cash management services. The definition of scope of BOFS was further amended w.e.f 1.6.2007 when cash management service was specifically included under Clause (v). It is also on record that from 1.6.2007, the appellant has been discharging service tax liabilities under BOFS. Revenue authorities have taken a view that for the period prior to 1.6.2007 such services would be covered by BAS - whether the Revenue's view justified? Held that: - The deletion of the exclusion of cash management services is w.e.f 1.6.2007. The issue whether for the period prior to this date, such services can be charged to service tax under BAS stands decided by the Hon’ble Apex Court in the case of CST vs. M/s. Federal Bank Limited [2016 (3) TMI 354 - SUPREME COURT] where it was held that Clause (12) of Section 65 covers all charging services rendered by the Banks. - when cash management services stood excluded from the purview of service tax at the hands of the Bank until 31.05.2007, the authorities cannot levy service tax on an activity which is essentially cash management service, by taking aid of other general charging heads, such as business auxiliary service. Service tax not levied - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 21
  Connivance with service provider for evasion of service tax - availing inadmissible CENVAT credit - Manpower or Supply Agency Services - Extended period of limitation - demand of duty with interest - imposition of penalty - Held that: - the Show Cause Notice did not bring forward any evidence to establish that there has been collusion between the appellant and the service provider for evasion of Service Tax and for availing inadmissible Cenvat credit. Therefore, the invocation of extended period in the said Show Cause Notice is not sustainable. We, therefore, hold that the said Show Cause Notice, so far as, relates to denial of Cenvat credit to the appellant, imposition of penalty on appellant, proposal for imposition of penalty on its Authorized Signatory & proposal of demanding interest from the appellant is unsustainable. We, therefore, modify the impugned Order-in-Original to the extent that the demand confirmed in respect of Cenvat credit of ₹ 3,32,76,600/- is set aside, order for recovery of interest on the said demand is set aside, imposition of penalties set aside - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 20
  Maintainability of appeal – limitation - order not communicated to the concerned person - mode of communication of order - Section 37C (1) (A) of the Act - service of order by speed post is not a valid service - reliance placed on the decision of AMIDEV AGRO CARE PVT LTD Versus UNION OF INDIA AND OTHERS [2012 (6) TMI 304 - BOMBAY HIGH COURT] where it was held that As per Section 37C(1)(a), it was mandatory on the part of the Revenue to serve a copy of the order of Commissioner of Central Excise (Appeals) by registered post with acknowledgment due to the assessee. - Held that: - in the case of Amidev Agro Care Pvt. Ltd. the communication dispatched by speed post was not received by the appellants whereas in the instant case it has been admitted by the appellant that the communication was received by them, although it was received by watchman and it was not delivered to the concerned people at the right time. Once it is admitted that the order has been received by the appellant, the decision of Hon’ble High Court of Bombay in the case of Amidev Agro Care Pvt. Ltd. can be differentiated on fact. The mode of communication of order is relevant only so long as the actual receipt of the communication is not disputed. Once the receipt of communication is not disputed, the mode of communication becomes irrelevant - the appeal dismissed - decided against appellant.

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• 2016 (11) TMI 19
  Levy of tax - services of ‘Promotion and Marketing’ of Car Loan and Personal Loan - Direct Sales Agent - whether the services will fall under the head Business Auxiliary services, which have been introduced from 1/7/2003 and the tax to be levied on the said service? - Held that: - decision in the case of Bridgestone Financial Services Vs. Commr of S.T. Bangalore [2007 (1) TMI 67 - CESTAT, BANGALORE] followed as well as Board Circular dated 16/11/2006 relied upon where it has been settled that service provided by the appellant to HDFC bank is classifiable as Business Auxiliary Services and liable for service tax. Time bar - as per the confusion and doubt prevailing in respect of impugned service, the appellant entertained the bonafide belief that whethe any service provided to HDFC bank is classifiable under Business Auxiliary services or Business Support Services. As regard the Business Support Service it became taxable only from 1/5/2006, even there were some judgments wherein it was held that the identical services is of Business Support Service therefore it cannot be said that the appellant has intentionally avoided the payment of service tax. The issue was not free from doubt as even the board also realized and issued a circular dated 6/11/2006 by which it was clarified that the services in question will fall under the category of Business Auxiliary Services and thus it is taxable - due to interpretation of classification of services extended period cannot be invoked - It is settled law that where in the case, the issue involved is of interpretation of law, the extended period cannot be invoked. The period involved is July,2003 to May, 2005 whereas the show cause notice was issued on 29/5/2006. As per the discussion made herein above extended period cannot be invoked therefore service tax demand upto March 2005 is hit by limitation therefore demand pertaining to the period July, 2003 to March , 2005 deserves to be set aside. As regard the demand for the period April and May, 2005 in respect of services provided to HDFC bank towards promotion and marketing of loan under Business Auxiliary Services, the same requires re-quantification on the ground that Adjudicating authority has not conclusively established that what is the actual receipt of service charges by the appellant during the period April, 2005 and May, 2005. Sales commission on vehicle - N/N. 14/2004-ST dated 10/9/2004 - Held that: - the appellant is proprietary concern therefore they are prima facie eligible for above referred exemption notification as the services is covered under ‘provisions of services on behalf of client’ which is one of the services specified under the notification. However Ld. Adjudicating authority has not given any findings as regard the claim of this notification categorically made by the appellant before him - eligibility of this Notification should be re-considered by the Adjudicating authority - As regard the penalties imposed under Section 76, 77 and 78, we find that as per our above discussion on limitation, there is bonafide belief of the appellant for non payment of service tax, the appellant has been able to reasonable cause for invocation of Section 80 - the demand being time bar penalties under Section 76,77 and 78 require to be set aside invoking Section 80. Appeal disposed off - decided partly in favor of appellant.

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• 2016 (11) TMI 18
  Demand of service tax - imposition of interest and penalties - advertising services - Held that: - As regard the tax liability of the services, we find that services provided by the appellant are indeed taxable and the same is liable for service tax. As regard the penalties under Section 76, 77 and 78, we find that the appellant though not discharged service tax in due time but they have been paying service tax in installment and almost entire demand was paid before issuance of show cause notice. The appellant given reason for non payment of service tax in time that they were in severe financial crisis. It is also fact that appellant had accounted for entire service tax payable as an outstanding in their books of accounts which shows that they had bonafide intention to discharge the service tax. Even if the service tax was collected but shown as a outstanding in the balance sheet, it can be construed that appellant had no malafide intention - appellant showed the reasonable cause for non payment of service tax on due time. Interest on the said service tax also paid by the appellant separately as per the direction of this Tribunal - appellant entitled for waiver of penalty under Section 76,77 and 78 in terms of Section 80 of the Finance Act, 1994, therefore penalties set aside - demand of tax with interest maintained - appeal disposed off - decided partly in favor of appellant.

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• Central Excise

• 2016 (11) TMI 17
  Related party transaction - transaction value - Section 4 of the Central Excise and Salt Act,1944 - Held that: - same issue decided in the assessee case P&B Pharmaceuticals (P) Ltd. V/s. Collector of Central Excise [2003 (2) TMI 68 - SUPREME COURT OF INDIA] - the same issue again raised in the assessee case P&B Pharmaceuticals (P) Ltd. V/s. Union of India [2011 (5) TMI 694 - GUJARAT HIGH COURT] - The same issue therefore, cannot be the subject matter of yet another litigation. In the result, the petition is allowed - petitioner does not press for the challenge to the constitutionality of the relevant provision - rule made absolute.

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• 2016 (11) TMI 16
  Valuation - CNC Gear hobbing machine - EPCG license issued by DGFT for import of a similar item at concessional rate of duty - invalidation of EPCG license and obtaining an advance intermediate license issued to the appellant which was used by them to import parts and accessories without payment of duty - demand of differential duty by way of advance license - Held that:- the benefit accruing to the appellant by way of extending the benefit of concessional rate of duty for import of components is to be considered as additional consideration flowing from the buyer to the appellant. The charging of differential duty on such consideration merits no interference. - Decided against the assessee. The plea of revenue neutrality comes into play when differential duty paid by one unit is available immediately as CENVAT credit to the same unit or to another unit of the same manufacturer or its sister unit. In the present case that is not so. We find that the machines have been supplied to another customer M/s. Bajaj Auto. It may well be that the differential duty, when paid, is also available to the customer. However, on such a plea the demand itself cannot be set aside - appeal rejected - Decided against the assessee.

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• 2016 (11) TMI 15
  Claim of refund - Interest on delayed refund - limitation bar - Section 11BB - Price variation clause - manufacture of LPG gas cylinders, for supply to oil companies such IOCL, BPCL, HPCL - Held that: - Refund of any amount paid as excise duty can be refunded subject to provisions of Section 11B of the Central Excise Act. This will require filing of refund claim within the time limit prescribed therein and observance of all other conditions. It is an admitted position in the present dispute that no order of provisional assessment has been made under Rule 9B of the erstwhile Rules. If the normal time limit of one year were to be considered under Section 11B, for refund of duty paid during the period 7/99 to 10/2000, the refund claim ought to have been filed within a period of one year. In view of the price variation clause, the assessments are to be considered as deemed provisional assessment even if the formalities of Rule 9B is not observed. The time limit prescribed in Rule 9B, in cases where assessments are provisional, starts from the date of finalisation of provisional assessments. In the present case, if the assessments are deemed to be provisional, then the time limit has to start from the date of its finalisation. It has been confirmed by the learned advocate appearing for the assessee that the adjustment and finalisation of the prices were completed by October 2001. We are of the view that the deemed provisional assessments are to be deemed as finalised by this date. The refund claim can at best be allowed to be filed within the period of limitation starting from October 2001. We are afraid that such a liberal interpretation would also not come to the aid of the assessee, inasmuch as the claim has been filed only as late as 24.8.2006. Therefore the claim is hopelessly time barred. Once the refund itself has been held to be not admissible on account of time bar under Section 11B, the question of payment of interest under Section 11BB does not arise - appeal disposed off - decided against Appellant.

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• 2016 (11) TMI 14
  Adjustment of excess payment of duty with the short payment of duty - Price Variation Clause - manufacture of communication equipment - freight charges - Packing and Forwarding charges - freight charged at the rate of 1% through commercial invoices in additional to the amounts of freight charged and claimed in the respective invoices (for which abatement already stands granted) - Held that: - the decision in the case of Hindustan Zinc Ltd. vs. Commissioner of Central Excise, Jaipur [2015 (11) TMI 953 - CESTAT NEW DELHI (LB)] followed where it was held that the assesse is entitled for adjustment of excess paid duty with the short-paid duty during the period of provisional assessments, upon finalization of the assessments - Revenue's view not justified - appeal dismissed - decided against Revenue.

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• 2016 (11) TMI 13
  Valaution - Job work /loan licensee - Physician samples - Held that: - The duty demand in the present case to the extent of ₹ 28,31,993/- has been raised (i) on sale of physician samples to brand name owners; (ii) on clearances of physician samples on their own account and also as a job worker on loan licensee basis - it is pertinent to record that these samples are not distributed free as part of marketing strategy by the respondent but are supplied to the brand name owners as a loan licensee who in turn distribute them free to the physicians - in the case of sale of samples to brand owners on a principal basis, the transaction value merits acceptance. In respect of clearances as a job worker, valuation needs to be done on the basis of CAS4 certification - Appeal is disposed of by way of remand.

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• 2016 (11) TMI 12
  SSI Exemption - dummy units - clubbing of turnover of two units - Clandestine removal of goods - Held that: - turnover cannot be clubbed together and the two units cannot be treated as one unit merely because various factors such as related partners, common use of machines, labour , employees etc. unless there is a clear and specific evidence that there is mutuality of business interest between the two units and that both have interest in the business of each other or they have common funding and financial flow back - no such evidence indicating mutuality of interest in each other s business and financial flow back have been placed on record by the Department. It has been neither been alleged nor been established that any of the two firms was dummy /fagade or non-existent. On the contrary, it is a fact admitted by the department that both the units were found having independent manufacturing premises/factories during the search operations conducted by the Central Excise officers and were also found engaged in the manufacture of excisable goods as per panchnamas dated 17.11.2005 drawn on the spot. From the above facts stated, it is amply clear that both the firms were engaged in the manufacture of excisable goods namely plastic extrusion machines with the help of various machines installed in their respective premises and workers employed. I find that the most important aspect about having common funding and financial flow back is missing in the instant case which is very much necessary to club the clearances of the said units and deny them SSI exemption under Notification No.8/2003-CE dated 1.3.2003 as amended - demand of duty for the year 2004-05 also does not sustain. Consequently, demand of interest and imposition of penalty on both the appellants also do not sustain - appeal dismissed - decided against the Revenue.

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• 2016 (11) TMI 11
  Imposition of penalty u/r 25 of the Central Excise Rules - 100% EOU - spices - duty free import of cloves for use in the manufacture of spices - violation of the provisions of Export Import Policy, 2002-2007 read with Foreign Trade (Regulation) Rule 1993, Customs Act, 1962 and Central Excise Act, 1944 - alleged diversion of 130.31 M.T. of imported cloves - Held that: - for making such allegation, some positive evidence should have been brought on record by the Revenue. The allegation is sought to be sustained by the various inferences like respondent not using adequate power, certain sales in DTA not admitted by the buyers, certain transports not evidenced, etc. These evidences can at best act as corroboration to a positive evidence of diversion. Otherwise, in the absence of any positive evidence, these pieces of alleged corroboration cannot by themselves legally sustain the allegation of diversion of huge quantity of imported duty free cloves. In the appeal, the Revenue has not brought out any material evidence, which will prompt us to interfere with the impugned order. We find no reason to arrive at a different conclusion based on the evidences analyzed by the Original Authority. Imposition of penalty on Shri Deepak Kumar Agarwal who is a major buyer of the product manufactured by the respondent company u/r 26 of the Central Excise Rules, 2002 - he tried to mis-lead the Department and hamper the investigation by creating firms in the name of dummy owners and in collusion with others - Held that: - in view of the main conclusion arrived at by the Original Authority, no penalty could be imposed on Shri Deepak Kumar Agarwal and as such, we find that there is no merit in the appeal filed by the Revenue on this ground also. Appeal dismissed - decided against Revenue.

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• 2016 (11) TMI 10
  Classification of AC couplings - whether to be classified as pipes - benefit of exemption notification no.6/06-CE - Held that: - Hon’ble Supreme Court in the case of Bharat Forge & Press Industries (P) Ltd. [1990 1990 (1) TMI 70 - SUPREME COURT OF INDIA] has observed that the distinction made in the above circular is not tenable, both in law as well as in facts. It is submitted that the couplings are nothing but shorter version of pipes, which are classified in the same Tariff Headings of 6811.83 - the essentiality certificate has been produced from the competent authority and the impugned goods were cleared for the intended purposes. There is no separate billing or clearance document for the couplings - Decided against the revenue.

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• 2016 (11) TMI 9
  Benefit of reduced penalty u/s 11AC of the Act - payment of penalty within stipulated time - adjustment of excess tax paid towards liability of reduced penalty - The matter has got a long history having gone up and down number of times. It went to Hon’ble High Court of Karnataka three times. It came to this Tribunal also earlier three times. Now it is before us fourth time - Held that: - Since the matter involves verification and cross-checking at the level of respective field formation with reference to the detailed claims and the submissions of the appellants, it is remanded to the Commissioner of Central Excise, Bangalore-II, who shall consider the matter afresh keeping in mind the observations made in the judgment dated 6.12.2013 by the Hon’ble High Court of Karnataka - The Commissioner shall decide the issue within three months from the date of receipt of this order after giving opportunity of personal hearing and that of production of necessary documents to the assessee-appellant within one month of receipt of this order - appeal allowed by way of remand.

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• 2016 (11) TMI 8
  Whether the appellants are eligible for credit of Special Additional Duty (SAD) of Customs, Education Cess and Secondary Higher Education Cess paid by the 100% EOU on the goods sent to the appellants - Held that: - in the case of Zabatax Textiles India Pvt. Ltd. Vs. Commissioner of Central Excise & Service Tax, Vapi 2016 (3) TMI 345 - For the purposes of arriving at the rate of duty, it has been prescribed in the said section that the rate of excise duty on goods cleared from an EOU shall be the aggregate of the customs duties leviable on like goods imported into India. Nevertheless, the levy is an excise levy and it does not in any way gets converted into a customs levy - Similarly in the case of imported goods, the additional duty paid under sub-section (1) of Section 3 of the Customs Tariff Act as well as under sub-section (5) of the said section are duties specified for availment as credit under Rule 3 of the Cenvat Credit Rules - Appeal allowed.

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• 2016 (11) TMI 7
  Classification of goods - Roop Amrit - Complete solution - cosmetic under heading 3304 or medicament under heading 3003? - Held that: - To classify a product under Central Excise tariff the first and foremost test should be the common parlance understanding, unless a specific definition is provided in the entry itself. It is nobody's case that the cosmetic or toilet preparations should not have curative property. Similarly, PP ayurvedic medicament may have incidental outcome of beauty enhancement. In such situation, it is necessary to go by the common parlance of the practice of trade - reliance placed on the decision of Puma Ayurvedic Herbal P. Ltd. vs. CCE [2006 (3) TMI 141 - SUPREME COURT OF INDIA] where it was held that cosmetic products are meant to improve the appearance of a person, whereas a medical product or a medicament is meant to treat some medical condition. The Hon’ble Supreme Court held that Puma Herbal Massage Oil (which is similar to complete solution) is not a medicament - products classified as cosmetic or toilet preparations, the valuation done under Section 4A of Central Excise Act, 1944 read with Notification No. 13/2002-CE (NT) dated 01.03.2002. Denial of SSI exemption - Held that: - the appellant-assessee had produced certificate from the local surpanch of the village which was cross verified by the jurisdictional Assistant Commissioner to ascertain the fact. In fact, the appellant-assessee also had a certificate issued by Tehsildar confirming that the factory is located in rural area. As such, we find that denial of SSI exemption to the appellant on this ground is not sustainable. Extended period of limitation - Held that: - no justification for the alleged bonafide belief. No verification or enquiry has been made by the appellant with the jurisdictional Central Excise officer regarding the correct classification or duty liability while they have taken efforts to get the registration certificate from the Drug Controller etc. It is not clear as to type of effort regarding clarifying the excise duty liability - bonafide belief alone cannot be the ground for not invoking demand for extended period. Imposition of penalties on partners - Held that: - since penalty of equal to duty amount has been imposed on the firm, there is no justification to impose penalty on the partners of the firm. In any case, we note that penalty imposed on the partners have been set-aside by the Commissioner (Appeals) in his order dated 20.12.2007. As such, the penalties on partners are liable to be set-aside. Appeal disposed off - decided partly in favor of appellant.

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• CST, VAT & Sales Tax

• 2016 (10) TMI 1002
  Recognition certificate holder u/s 8-A of the U.P. Trade Tax Act, 1948 - Section 4-B of the Act - purchases of raw material at the concessional rate of tax against Form III-B - purchases of natural gas against Form III-B at the concessional rate of tax, and manufacture of the notified goods, fertilizers, transferred outside the State of Uttar Pradesh - Whether under the facts and circumstances of the case, the Commercial Tax Tribunal were legally justified in granting the exemption on purchase of raw material against Form III-B whereas the dealer has made a stock transfer of finished goods which is not permissible under law? Held that: - Sub-section (2) to Section 4-B requires that the notified goods should be “intended” to be sold by the dealer within the State or in the course of inter-State trade or commerce or in the course of exports out of India. The expression “intended” is significant and important. It refers to the intention of the dealer after the goods are manufactured and packed. The expression “in the course inter-State trade or commerce” is quite broad and wide. An issue may arise as to whether the stock transfer outside the State in terms of directions issued by the Central Government can be considered as sale or transaction in the course of inter-State trade or commerce. Sub-section (6) is a specific provision which deals with the case of the dealer who has been issued the recognition certificate and has purchased goods without payment of tax or at concessional rates, but has sold the manufactured goods or packaged goods otherwise than by way of sale in the State, or in the course of inter-State trade or commerce or export out of India. The provision specifically deals with cases where the dealer manufactures or packs the notified goods and has taken benefit of lower/concessional or nil rate of tax on the raw material but is unable to fulfill the intendment, i.e., he has not been able to sell the notified goods by way of sale within the State or in course of inter-State state or commerce or by way of export. In such cases, the dealer is liable to pay the amount of difference on the amount of sale or purchase of such goods on which concession or nil rate of tax was paid on account of issue of the requirement certificate and the amount of tax calculated @ 4%. The sub-section is a particular and a specific section which deals with and specifies the consequences when the dealer is unable to meet and comply with intendment. The sub-section (6) would, thus, be applicable. Section 3-B undoubtedly commences with a non-obstante clause, but the provision has to be read harmoniously with sub-section (6) to Section 4-B. Any other interpretation would make sub-section (6) a dead letter, for if we accept the plea of the Revenue whenever there is violation or failure to abide with the “intendment”, Section 3-B would be invoked and applied, not sub-section(6) to Section 4-B. Section 3-B would apply when a false and wrong certificate or declaration is made. Sub-section (6) on the other hand, deals with cases where the dealer is unable to comply with the intendment, i.e., for some reason he is unable to sell the goods within the State, export them or sell them in the course of inter-State trade or commerce. Intendment of the said nature has not been treated as false or wrong declaration as consequences have been prescribed in sub-section (6). It is essential to be stated that consistency and certainty in tax matters is necessary. In cases relating to “Indirect Taxation”, this principle is even more important. Clarity in this regard is a necessity and the interpretative vision should be same. Appeal dismissed - decided against Appellant.

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• 2016 (10) TMI 1001
  Validity of order of assessment - large tax payers unit - dealer who falls within the jurisdiction of a 'large tax payers unit' has been dealt with in an arbitrary and unreasonable manner in the matter of production of C-Forms - Held that: - this Court is of the view that the assessment should be redone and the petitioner should be afforded an opportunity of personal hearing, moreso, when the petitioner would now take a stand that they have received C-Forms from their clients who are all registered dealers. In the impugned order, the respondent has not disputed the fact that the petitioner's clients are registered dealers in other States. Further, the petitioner has questioned the formula which has been adopted for reversal of the Input Tax Credit. Adequate opportunity having not been granted to the petitioner, the impugned order is held to be in violation of principles of natural justice - Writ Petition allowed - the impugned order set aside - matter remanded to the respondent for fresh consideration, who shall afford an opportunity of personal hearing, after receiving the C-Forms that may be produced by the petitioner and redo the assessment in accordance with law.

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• 2016 (10) TMI 1000
  Demand and recovery of tax after 1485 days - validity of assessment orders - the assessment for the years from 1983-84 to 1996-97 were framed by the assessing authority by passing orders on different dates in April, 2002 - limitation bar u/s 11 (4) of the Act - Held that: - the decision in the case of State of Punjab and others vs. Patiala Cooperative Sugar Mills Limited, Rakhra, District Patiala [2015 (9) TMI 1327 - PUNJAB AND HARYANA HIGH COURT] relied upon where it was held that assessments upto the years 1997-98 could not validly be passed after April, 2001 - all assessment orders barred by limitation. Condonation of delay not considered as will be a futile exercise to conduct another round of litigation as the matter is already decided on merits - appeal of state dismissed - tax cannot be recovered after 5 years - decided against Revenue.

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• 2016 (10) TMI 999
  Maintainability of appeal when AO has rectified or refused to rectify an order - validity of Return memo - return of appeal petitions filed by the petitioner against the rectified assessment orders - appeals presented after a gap of more than ten months from the date of original order of assessment - what would be the effect of a rectified order? - Section 55(4) of the Act - Held that: - similar issue decided in the case of State of Tamil Nadu vs. Sabarigir Industries [2014 (3) TMI 193 - MADRAS HIGH COURT] where it was held that When the rectification proceedings resulted in a positive action, which has the effect of destroying the finality of original assessment, thereby reopening the assessment order itself, then the provisions relating to appeal would lie. On the other hand, when the Assessing Officer refuses to interfere with the original order and that order is allowed to remain intact, the said order would not be amenable normally to appeal remedy. In so holding, this Court referred to the provisions under Section 55(4) of the Tamil Nadu General Sales Tax Act, 1959, inserted by Amendment Act No. 31 of 1972, providing for appeal and revision remedy when an order of rectification is made, and not when the authority concerned refuses to pass an order of rectification - decided against Revenue. Whether the appeal petition, which was filed after the passing of the revised order of assessment, could be held to be presented within time, in accordance with the provisions of Section 31 of the Tamil Nadu GST Act and whether remittance made by the petitioner recording the pre-depsoit was valid? - Held that: - The decision in the case of State of Tamil Nadu vs. E.P.Nawab Marakkadai [1995 (8) TMI 293 - MADRAS HIGH COURT] relied upon and it was held that limitation for filing the appeal would commence from the date of receipt of the rectified order i.e. dated 1.6.2016 and if the said date is reckoned, then the appeal petition is still within the period of limitation. Petition disposed off - impugned return memos are set aside, leaving it open to the petitioner to raise all the contentions before the Appellate Authority. The petitioner is directed to re-present the appeal along with a copy of this order and the Appellate Authority shall entertain the appeal and deal with the same in accordance with law - decided partly in favor of petitioner.

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