Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 2, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
News
Notifications
Customs
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83/2017 - dated
31-10-2017
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Cus
Seeks to amend notification No. 16/2017-Customs dated the 20th April, 2017
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102/2017 - dated
1-11-2017
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Cus (NT)
Amendment in Notification No. 97/2017-CUSTOMS (N.T.), dated 24th October, 2017
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101/2017 - dated
31-10-2017
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Cus (NT)
Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver- Reg.
GST - States
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EXN-F(10)-33/2017 - dated
9-10-2017
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Himachal Pradesh SGST
Exemption intra state supply of heavy water and nuclear fuels Department of Atomic Energy to the Nuclear Power Corporation of India Ltd from the whole of the state tax.
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EXN-F(10)-33/2017 - dated
9-10-2017
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Himachal Pradesh SGST
Amendments in the Notification No. 1/2017- STATE TAX (RATE), dated the 30th June, 2017
Income Tax
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92/2017 - dated
31-10-2017
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IT
Income-tax (Twenty-fourth Amendment) Rules, 2017
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90/2017 - dated
27-10-2017
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IT
Agreement between the Government of the Republic of India and the Government of the Republic of Slovenia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Information and documents to be kept and maintained under proviso to sub-section (1) of section 92D and to be furnished in terms of sub-section (4) of section 92D - In rules 10DA and 10DB added to the Income Tax Rules, 1962
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Business of exploration, etc., of mineral oils - inclusion of amounts received for mobilisation / demobilisation to the gross revenue to arrive at the “profits and gains” for the purpose of computing TAX u/s 44BB by AO - order of AO confirmed - SC
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Interest on Special Purpose Notes - If the promoters SPN holders and the banks and financial institutions therefore, traded in such SPNs, the same would not indicate any colourable device of tax planning. - HC
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Capital Gains - transfer by mere agreement - the transfer of the above stated property took place only in AY 2011-12, when assessee has declared the capital gain accordingly and paid the taxes.
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The assessee is eligible to claim deduction u/s 35(1) of the IT Act relating the current year expenditure on R&D.
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TPA - reimbursement of expenses - Since there are no comparable cases in the market, and also it is the business decision of the assessee to share the employee cost with other sister concerns on cost to cost basis.
Customs
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Subject: Import of toys - Amendment in Policy condition No. 2 to Chapter 95 of ITC (HS), 2017 - Schedule - 1 (Import Policy) procedure to be followed, in case goods are allowed to be warehoused- regd. - Trade Notice
Indian Laws
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CBDT extends due date for filing Income Tax Returns and Tax Audit Reports
Case Laws:
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Income Tax
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2017 (11) TMI 78
Scope and interpretation of Section 44BB - Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils - inclusion of amounts received for mobilisation/demobilisation to the gross revenue to arrive at the “profits and gains” for the purpose of computing TAX u/s 44BB by AO - Held that:- Having corrected the position in law, by emphasising that Sections 4, 5 and 9 of the Act are to be kept in mind even in those cases where assessment is done under Section 44BB of the Act, we are of the opinion that the argument of the assessee that Section 44BB is only a computation provision, is also not entirely justified. From the bare reading of the clauses, amount paid under the aforesaid contracts as mobilisation fee on account of provision of services and facilities in connection with the extraction etc. of mineral oil in India and against the supply of plant and machinery on hire used for such extraction, clause (a) stands attracted. Thus, this provision contained in Section 44BB has to be read in conjunction with Sections 5 and 9 of the Act and Sections 5 and 9 of the Act cannot be read in isolation. The aforesaid amount paid to the assessees as mobilisation fee is treated as profits and gains of business and, therefore, it would be “income” as per Section 5. This provision also treats this income as earned in India, fictionally, thereby satisfying the test of Section 9 of the Act as well. In the instant case, the amount which is paid to the assessees is towards mobilisation fee. It does not mention that the same is for reimbursement of expenses. In fact, it is a fixed amount paid which may be less or more than the expenses incurred. Incurring of expenses, therefore, would be immaterial. It is also to be borne in mind that the contract in question was indivisible. Having regard to these facts in the present case as per which the case of the assessees get covered under the aforesaid provisions, we do not find any merit in any of the contentions raised by the assessees. Therefore, the ultimate conclusion drawn by the AO, which is upheld by all other Authorities is correct, though some of the observations of the High Court may not be entirely correct which have been straightened by us in the above discussion. For our aforesaid reasons, we uphold the conclusion. Resultantly, all the appeals of the assessees are dismissed. In this batch of appeals, Civil Appeal a the solitary appeal which is preferred by the Director of Income Tax, New Delhi (Revenue) against the judgment of the High Court of Uttarakhand. The computation of income of the assessee was done under Section 44BB of the Act. However, the amount which was sought to be taxed was reimbursement of cost of tools lost in hole by ONGC. It is, thus, clear that this was not the amount which was covered by sub-section (2) of Section 44BB of the Act as ONGC had lost certain tools belonging to the assessee, and had compensated for the said loss by paying the amount in question. On these facts, conclusion of the High Court is correct.
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2017 (11) TMI 77
Grant of registration u/s 80G(5)(vi) rejected - no significant charitable activity has been started by the assessee trust as per its objects since 7 months came into existence - Held that:- What is a significant activity is a very subjective term and cannot be a sole basis for rejection of application. Where the assessee has various objectives, it is not necessary that the activities in furtherance of each of the objectives should be started simultaneously and at the same pace and level. It is up to the assessee to determine which all activities can be started initially and how the same can be expanded subsequently. And for that purposes, grant of approval under section 80G act as an enabler and a catalyst to encourage the prospective donors to look at the intended activities of the assessee and where they find the same to be acceptable, to provide financial support through donations/contributions. In our view, what is of relevance for the purposes of grant of approval under section 80G is whether the objectives are charitable or not and the activities, so started, howsoever insignificant it may be, are genuine activities or not and whether the same are in consonance with and in furtherance of the objectives of the assessee society. As the appellant has been duly registered under section 12AA which shows that CIT has already verified its objectives and its establishment for charitable purposes. Regarding fulfillment of additional conditions specified in clause (i) to clause (v) of section 80G(5), we find that there is no recording of satisfaction regarding non-fulfilment of any of the conditions so specified and the ld CIT(E) has summarily rejected the assessee’s application. We are accordingly setting aside the matter to the file of the ld CIT(E) to examine the matter afresh in light of above directions. Appeal of the assessee is allowed for statistical purposes.
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2017 (11) TMI 76
MAT provision applicability - Held that:- As noted, in our order dated 18.07.2016, while setting aside the notice for reopening, this Court had made certain observations with respect to computing the petitioner's income as per the MAT provision, in case, by virtue of petitioner's success in appeal, the said provision became applicable. When the Assessing Officer, in view of such appeal, has issued a showcause notice calling upon the petitioner why the computation of income should not be done as per the MAT provision, we see no reason to interfere. It is always open for the petitioner to oppose such proposal by filing reply.
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2017 (11) TMI 75
Unexplained cash credit in respect of loans - Held that:- CIT(A) was not right in confirming the addition made by the Assessing Officer in respect of above said loan creditors. Therefore findings of the CIT(A) is hereby ordered to be set aside and the AO is directed to delete the above said addition of ₹ 573 lakhs in view of the foregoing discussions. Disallowance of interest expenditure relating to the above said loans - Held that:- Since we have deleted the addition made u/s 68 consequently the interest expenditure claimed thereon is required to be allowed. Accordingly we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the disallowance of interest. Accordingly, we decide issue No. 1&2 in favour of the assessee and against the Revenue.
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2017 (11) TMI 74
Unexplained investments - Held that:- Commissioner estimated the availed funds likely to have been available with the assessee as a result of ₹ 15,00,000/-. In appeal the Revenue said there was no proof. The Bench found that the Commissioner had followed well-settled principles. In regard to non-proving of expenditure, the Commissioner found that all transactions were banked. The ITAT held that the Revenue in appeal was unable to dislodge the findings that the so-called assets in the hands of the assessee were agricultural land and not capital assets. It also found that there were known sources of income and these were for specific purposes where the assessee had functioned as a contractor or mediator on behalf of or at the request of two commercial entities. Having taken into account the actual status of the accounts, records, bills and vouchers, the ITAT came to the conclusion that the appeal of the Revenue called for no interference. We are unable to see any infirmity in the order of the ITAT and certainly we are unable to see how it raises any question of law at all. This is not a matter of a complete misappreciation of the records or evidence. The Commissioner in the appeal before him took a view. The ITAT held that view to be plausible. It noted no perversity. We find no perversity either in the order of the ITAT. Certainly it cannot be said that on these facts it was not possible for any body, authority or Tribunal to come to the conclusion to which the ITAT did.
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2017 (11) TMI 73
Assessment covered u/s 153A - no incriminating material qua each of the assessment year roped in under section 153A, then no addition can be made while framing the assessment under section 153A - Held that:- As admittedly no incriminating material relating to this assessment year was found during the course of search and accordingly, the originally assessed income, i.e., income disclosed by the assessee in the original return of income and reiterated in the return filed in response to notice u/s 153A deserves to be accepted and the same has to be reckoned as assessment of the income in terms of section 153A and no further addition can be made by the Assessing Officer over and above the returned income. Accordingly, the additions made by the AO are deleted on the ground that they are beyond the scope of assessments u/s 153A. Appeal of the assessee is allowed.
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2017 (11) TMI 72
Exemption u/s 10(19A) on the rental income received from Ummed Bhawan Palace - Held that:- In Section 10(19A) of the I.T. Act, the Legislature has used the expression "palace" for considering the grant of exemption to the Ruler whereas on the same subject, the Legislature has used different expression namely "any one building" in Section 5 (iii) of the Wealth Tax Act. We cannot ignore this distinction while interpreting Section 10(19A) which, in our view, is significant. In our considered opinion, if the Legislature intended to spilt the Palace in part(s), alike houses for taxing the subject, it would have said so by employing appropriate language in Section 10(19A) of the I.T. Act. We, however, do not find such language employed in Section 10(19A). As rightly pointed out by the learned senior counsel for the appellant, Section 23(2) and (3), uses the expression "house or part of a house". Such expression does not find place in Section 10(19A) of the I.T. Act. Likewise, we do not find any such expression in Section 23, specifically dealing with the cases relating to "palace". This significant departure of the words in Section 10(19A) of the I.T. Act and Section 23 also suggest that the Legislature did not intend to tax portion of the "palace" by splitting it in parts. It is a settled rule of interpretation that if two Statutes dealing with the same subject use different language then it is not permissible to apply the language of one Statute to other while interpreting such Statutes. Similarly, once the assessee is able to fulfill the conditions specified in section for claiming exemption under the Act then provisions dealing with grant of exemption should be construed liberally because the exemptions are for the benefit of the assessee. See Maharao Bhim Singh of Kota Thr. Maharao Brij Raj Singh, Kota Versus [2016 (12) TMI 418 - SUPREME COURT]
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2017 (11) TMI 71
TPA - selection of comparable - Held that:- NEC Technologies India Limited (NEC HCL) has been set up at Noida which is availing tax exemption under section 10A of the Act and is also having branch office in Japan (NEC HCL BO). The main activity of the taxpayer is with NEC group companies with regard to the contract awarded to NEC HCL. During the year under assessment, the taxpayer has entered into international transaction qua software development services, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Deduction claimed by the taxpayer u/s 10A - change of accounting policy would result in taxpayer claiming deduction in AY 2011-12 with regard to invoices to be raised in AY 2012-13 when no such deduction u/s 10A is available - Held that:- The assessee has proved before AO the date on which the invoices relating to such unbilled revenue is raised as well as date of realization of such invoices and this fact is not disputed by the AO and is otherwise in accordance with the Accounting Standard – 09. Moreover when assessee has produced relevant documents viz. copies of FIRC before the AO to prove the fact that the export proceeds were realized from the six months of the export, disallowance of the deduction u/s 10A of the Act on unbilled revenue and relatable foreign exchange gain is not sustainable in the eyes of law. Consequently, we are of the considered view that the assessee is entitled for deduction of ₹ 12,11,000/- u/s 10A of the Act.
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2017 (11) TMI 70
Proceedings U/s.153A - Held that:- The addition in the case of the assessee can be made by the Assessing Officer only on the basis of incriminating material found during the course of search. No doubt, before us learned DR has placed reliance on the decision in the case of Filatex India Ltd vs CIT (2014 (8) TMI 387 - DELHI HIGH COURT) as well as Canara Housing Development Company Ltd. (2014 (8) TMI 642 - KARNATAKA HIGH COURT) in which it was held by the respective High Court held that the assessing authority shall determine the total income of the assessee taking into consideration the materials which was the subject-matter of earlier return and the undisclosed income unearthed during search and also any other income which comes to his notice. But when we have jurisdictional High Court decision, that will be binding before us and, thus, we are bound to follow the decision in the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015 (5) TMI 656 - BOMBAY HIGH COURT) as held If there is no incriminating material found during the search, then, the power under section 153A being not expected to be exercised routinely, should be exercised if the search reveals any incriminating material. Addition u/s. 68 relate to the cash deposited by the assessee in its bank accounts - Held that:- As these bank accounts were not found during the course of the search. Even the learned DR did not produce any material showing that these banks accounts were found during the course of search. In these circumstances, we are bound to delete the addition made u/s. 68 in each of the assessment years. Thus, ground no.2 of the assessee’s appeal in each of the assessment yeas is allowed and we delete the additions made u/s. 68 of ₹ 5,85,600/- ₹ 4,31,800/-, ₹ 12,52,200/- ₹ 11,43,000/- and ₹ 2,73,850/- respectively. Addition u/s. 69C towards investment in the residential flat - Held that:- We noted that in this case, the assessee has made an investment of ₹ 61 lacs as has been disclosed by the assessee’s husband in the statement recorded u/s. 132(4). Out of the said sum of ₹ 61 lacs, ₹ 5 lacs has been paid by the assessee and ₹ 20 lacs has been paid by the assessee’s husband, which has been shown in his IT return copy of which has filed before us. For the balance amount of ₹ 36 lacs, the assessee has not proved any source. Therefore, we confirm the addition of ₹ 36 lacs as undisclosed investment u/s. 69C of the I.T Act. Thus, ground no.3 in A.Y. 2007-08 is partly allowed, thereby reducing the addition of ₹ 56 lacs to ₹ 36 lacs. Penalty imposed u/s. 271(1)(c) - Held that:- We noted that the penalty has been levied and confirmed by the CIT(A) on the additions in each of the assessment year. Since, we have deleted the additions in the preceding paragraphs while dealing with the quantum appeals, the penalty will also get deleted.
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2017 (11) TMI 69
Inordinate delay in filing the appeal - Fee for late filing the statement U/s 234E - intimation U/s 200A - not admitting the appeals filed by the assessee due to delay - sufficient cause for not presenting then appeals within the prescribed time U/s 249(2) - Held that:- Section 246A of the Act provides regarding the appealable order before the CIT(A). The outcome of processing under sub-Section (1) of Section 200A are appealable w.e.f. 01/6/2015 only. Prior to that the levy of fees U/s 234E was not an appealable order. Thus, the fees for failure to furnish the statement as per Section 200 of the Act is levied U/s 234E of the Act and the period from 01/7/2012 to 01/6/2015 is not appealable. Thus, the fees levied for default in quarter 4 of financial year 2013-14 and 2014-15 and the demand was raised on 19/06/2014, 23/06/2014 and 12/02/2015 are not appealable. However, the revenue had not produced any evidence to establish this fact. As per the assessee’s claim the demand notice had not received on e.mail as mentioned by the revenue. The relevant date of service of notice of demand is 02/2/2016, therefore, this issue raised in all these appeals is restored back to the file of the ld. CIT(A) to be decided on merit and also the issue in ITA No. 664/JP/2017 where notice of demand was served on 02/09/2015 is restored back to the file of the ld. CIT(A) to be decided on merit. - Decided in favour of assessee.
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2017 (11) TMI 68
Addition towards salary paid to the partners - AO made the addition relying on the statement of the partners who state that they have no active role in chit fund company and the Managing Partner Shri A. Venkateswarlu only looks after the chit funds - Held that:- Similar disallowance was made in AY 2004- 05 by the revenue authorities and the Tribunal had deleted the disallowance by observing that the disallowance is not warranted. First of all, the statement recorded u/s. 131 clearly indicates that Shri Mohan Reddy is aware about his partnership in the firm and admits that he is responsible as a partner for all affairs of the firm. In fact, Question No.3 itself asks him about the 'active role in the day-to-day affairs of the chit fund’ for which he replied that he has no active role as it was looked after by Shri A. Venkatesh. This answer given to a specific question does not mean that he is not a working partner. Managing Partner and Working Partner have different roles. As seen from the P&L A/ c an amount of ₹ 54,000/- was paid as salaries to partners and three of the five partners are getting ₹ 18,000/- each. Only the salary paid to Shri Mohan Reddy was disallowed on the basis of so called statement. We do not agree with the observation of the AO as the disallowance has no basis. AO is directed to allow the amount as claimed. Addition towards partners’ sitting fee - AO justification in making the said addition of excess payment of interest of ₹ 2,47,600/- being in excess in interest @12% - Held that:- Similar issue arose in AY 2004-05 , thus following it we sustain the disallowance of ₹ 65,040/-, which is bribe and in personal nature. With regard to interest, we direct the AO to allow 12% of interest on capital employed by the partners during the year, as per the provision, the excess can be disallowed. Accordingly, ground raised by the assessee is partly allowed.
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2017 (11) TMI 67
Disallowance of the lease rent expenditure - Held that:- As being in agreement with the view taken by the coordinate bench of the Tribunal while deleting the aforesaid disallowance in the case of the assessee for A.Y. 1997-98 and A.Y. 1998-99. We are of the considered view that no infirmity emerges from the order of the CIT(A) as held for allowing business expenses it is not necessary that the business should have produced corresponding income. The expenses is to be allowed if it is established that they are incurred for the purpose of the business. In this case the object and the incurrence of the expenses is not in doubt, who we find had followed the aforesaid order of the Tribunal. We are of the considered view that as the aforesaid order of the Tribunal had neither been set aside or stayed by the Hon’ble High Court, therefore, we are not persuaded to be in agreement with the Ld. D.R. that the CIT(A) had erred in following the order of the Tribunal and deleting the addition in the hands of the assessee. We thus uphold the order of the CIT(A) in respect of the deletion of the disallowance of lease expenses Claim of deduction u/s 80IA - Held that:- D.R. had not been able to dislodge the observations of the CIT(A) on the basis of which the claim of deduction raised by the assessee u/s 80IA had been allowed by the CIT(A) subject to certain modifications. We thus not finding any infirmity with the order of the CIT(A), therein uphold the view taken by him as regards the entitlement of the assessee towards claim of deduction u/s 80IA.
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2017 (11) TMI 66
Validity of order of transfer u/s 127 - whether the respondents could have transferred the files from Chennai to Mumbai? - whether the petitioner is entitled for refund of the excess tax paid by them, as per the provisions of the Act? - Held that:- As referring to the instructions given by the Central Board of Direct Taxes No.1739, dated 19.12.1986 it is evidently clear that the instructions would apply to cases, where, there is a change of residence or place of business of the assessee. The instructions (referred to above) would not apply to petitioner's case for more than one reason. Firstly, there is no allegation against the petitioner that there is any avoidance of scrutiny. Secondly, there is no change of business place of the petitioner, and only their registered office has been changed and the same has been intimated to the Department, which shows the bona fide on the part of the petitioner. Though it is the contention of the respondent that, they have obtained the consent from the Income Tax Department at Mumbai regarding transfer of the petitioner's file, they cannot take shelter on the aforesaid instructions, as the petitioner's case does not fall within any one of two categories (mentioned above). The transfer of the files of the petitioner to Mumbai is completely flawed, and it is contrary to statutory provisions and the same should be set aside. Further, it is not disputed that the petitioner has not been put on notice, prior to transfer of their files and straightaway the impugned communication dated 18.07.2017 has been issued intimating that the transfer has been effected and he may contact the Income Tax Office, Mumbai for any queries. Therefore, by the quashing the impugned communication dated 18.07.2017, it has to be necessarily held that the order of transfer, if any, is also un-sustainable. As a consequence thereof, necessary directions are required to be issued in first set of Writ Petitions where, the petitioner seeks for a direction for refund of the excess tax paid by them. In this regard, it is submitted that, several representations and letters have been sent by the petitioner, but the petitioner was not favoured with any reply. When the Act provides for a remedy for refund, in case of excess tax paid or collected, it is bounden duty for the respondent to pass orders on the petitioner's refund claim without delay.
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2017 (11) TMI 65
Reopening of assessment - interest component received as enhanced compensation taxability - Held that:- It is apparent and obvious to us that the AO in the original assessment proceedings did not examine the question of taxability of interest as this aspect appears to have completely escaped his attention. It is not even the case of the Petitioner that the AO had examined the said question in the original assessment proceedings. On the question of figures given in the reasons to believe, we would record that the AO had to proceed on the basis of documents available on record. It is not the case of the Assessee that he had not received interest amount as indicated in the reasons to believe. The figure or quantum is disputed. Even if we are inclined to accept the contention of the Petitioner that the figures of interest as indicated in the reasons to believe recorded for issue of reassessment notice are not correct, it cannot be disputed that the Petitioner was also entitled to a part of the interest. The figures may be wrong or incorrect for the reason that the interest had to be bifurcated and divided amongst several recipients and the details of such recipients was not available with the AO when he recorded the said reasons. We have considered the contention raised by the Petitioner that the interest element would partake the character of enhanced compensation and is not taxable, on the basis of the ratio in the case of Ghanshyam (HUF)[2009 (7) TMI 12 - SUPREME COURT ] but we are not giving any opinion on the same at this stage. These aspects, we believe, are matters which the AO will have to examine in detail during the course of reassessment proceedings. We would not like to comment on the issues which the AO will have to determine and decide in the course of reassessment proceedings. AO should have been more careful while disposing of the objections/representation made by the Petitioner.
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2017 (11) TMI 64
TPA - selection of comparable - Held that:- The assessee is a company engaged in the business of providing ITES [Information Technology enabled services] registered under Special economic Zones [in short SEZ] thus companies functionally dissimilar with that of assessee need to be deselected from final list. TPA on account of interest on receivables - Held that:- There cannot be any grievance where the ld Transfer Pricing Officer has considered as 30 days credit period. Even before us this credit period was not challenged. In view of this we do not find any infirmity in the order of the ld Transfer Pricing Officer of considering 30 days as normal credit period. The subsequent question arises about the benchmarking analysis and computing the arm‟s length price. In the present case the ld Assessing Officer has computed interest @14.88% applying the CUP method using external CUP. Before us as well as before the ld DRP the assessee could not demonstrate how the method employed by the ld Transfer Pricing Officer using external CUP is erroneous. In view of this we do not have any hesitation in confirming the Transfer Pricing adjustment made by the ld. Transfer Pricing Officer on outstanding receivable beyond 30 days credit period applying the interest rate of 14.88% p.a. and computing the interest receivable at ₹ 31577050/-. Miscalculation of the total amount of adjustment - Held that:- It was submitted that the assessee has filed rectification application; however, same has not been attended to. We direct the ld Assessing Officer to consider the rectification application of the assessee and if the rectification request is found in accordance with the provision of section 154 of the Act, same may be rectified within 30 days of the receipt of this order, after granting the assessee appropriate opportunity of hearing Disallowance of deduction u/s 10AA on the basis that export proceeds have not been realized within a period of six months from the end of the previous year - Held that:- The provision of section 10A (5) speaks about the audit of the accounts and submission of report of an accountant in specified Performa. In this case same has been complied with by the assessee. Further section 10A (6) speaks about the restrictions of other deduction during the holiday period, which is not the dispute in this case. In view of this it is apparent that there is no time-limit prescribed for bringing the consideration of export into India. Admittedly, the consideration has been received in India, albeit Subsequent to filing of the return by the assessee. However, merely because the consideration has been received after 6 months from the close of the financial year the deduction cannot be denied to the assessee on the sum. In view of this we direct the Ld. assessing officer to consider a sum of ₹ 4.80 crores as export turnover of the assessee and accordingly grant deduction to the assessee under section 10 AA of the income tax act. Accordingly, Ground of the appeal of the assessee are partly allowed.
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2017 (11) TMI 63
Interest on Special Purpose Notes - Held that:- The assessee's claim of deduction arises out of section 36(1)(iii) of the Act under which while computing the income under section 28 of the Act, the deduction of the amount of interest paid in respect of capital borrowed for the purposes of the business or profession would be a deductible expenditure. The first objection of the Revenue is squarely covered by the judgment in case of Core health Care ltd.(2008 (2) TMI 8 - SUPREME COURT OF INDIA ). While confirming the decision of this Court, it was held that for the said deduction, all that was necessary was that the money i.e. capital must have been borrowed by the assessee, that it must have been borrowed for the purpose of business and lastly, that the assessee must have paid interest on the borrowed amount. All that is germane is whether the borrowing was, or was not, for the purpose of the business. It was held that the provision makes no distinction between money borrowed to acquire a capital asset or a revenue asset. Preoperative expenditure of interest - Held that:- As in the context of project interest expenses of the same two projects, this Court had confirmed the view of the Tribunal that the assessee through its existing administrative mechanism had started a new facility for production of soda ash and lab for its captive consumption for the purpose of its existing business of manufacturing soaps. The Court therefore, held that the expenditure was not in the nature of preoperative expenditure of interest. Accrual of interest liability - Held that:- In the present case, however, the vital fact is that the company, investors, banks and financial institutions and all and sundry were aware that the SPNs would be foreclosed and that the company would pay out a sum of ₹ 361/per SPN. The fact that NCDs and SPNs were both freely transferable is not in dispute. If the promoters SPN holders and the banks and financial institutions therefore, traded in such SPNs, the same would not indicate any colourable device of tax planning. Mere early redemption also would not be enough to hold that from the inception there was a device created by the company to defeat the Revenue's interests.
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2017 (11) TMI 62
Reopening of assessment - addition u/s 14A - Held that:- The chronology of events leading up to the passing of the orders under Section 143(3) of the Act, clearly shows that the AO was 'satisfied with the claim of the assessee' while passing the original orders. Rule 8D is triggered only in a case where the AO is not satisfied with the deduction made by the Assessee. The reasons to believe assume and are predicated on the belief that the AO should not have accepted the Petitioner’s deduction as explained and justified, albeit should have applied Rule 8D. Thus, the view and opinion formed by the AO, while passing the original assessment orders is doubted as erroneous. This is obviously a case of change of opinion. In view of the aforesaid position, we allow the present writ petition and quash the reassessment notices dated 30th March, 2015 in the case of the Petitioner for the AYs 2010-11 and 2011-12.
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2017 (11) TMI 61
Royalty receipt - DTAA between India and Saudi Arabia - receipt in question is not Royalty and it is FTS? - PE in India - Whether there is PE or not in India because if a PE is there, income is taxable @ 40% and if no PE is there, income whether Royalty or FTS is taxable @ 10%? - Held that:- This is not a case of the revenue that any other invoice is raised by the assessee. When admittedly, the only invoice raised is in respect of stay of 4 Engineers in India on the basis of man hours spent by them in India, it cannot be said that any other service was rendered in the present case without physical presence by way of virtual modes like e mail, internet, video conference etc. and therefore, physical presence of employee is not essential. Because of these differences in facts, this tribunal order cited by the learned DR of the revenue is not applicable in the present case. We, therefore, follow the tribunal order cited by the learned AR of the assessee having been rendered in the case of Clifford Chance vs. DCIT (2001 (9) TMI 1141 - ITAT MUMBAI) and hold that in the present case, the stay in India of the assessee was only 90 days and since it is less than 182 days as required under Article 5 (3) (b) of the India SA DTAA, there is no PE. Whether the impugned receipt is Royalty or FTS? - Held that:- There are some exceptions provided in Article 22 (2) where Article 22 (1) is not applicable but those exceptions do not include FTS. Therefore, we are of the considered opinion that in view of Article 22 (1) of DTAA between India & Saudi Arabia, FTS is not taxable in India because it will fall in Article 22 (1) and as per this Article, income is taxable in the state of residence i.e. Saudi Arabia. In this regard, we find that the A.O. has noted in Para 5 of the assessment order that the exact details of the work done by the four service Engineers of ELEMAC in India were never furnished. In the absence of the complete details, this issue cannot be decided. We feel it proper to restore this after to the file of the A. O. for a fresh decision with the direction that the assessee should provide all details required by the A.O. The A. O. should decide this issue afresh after providing adequate opportunity of being heard to the assessee.
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2017 (11) TMI 60
Disallowance of depreciation claimed on wind mill @ 80% - Held that:- As in appellant’s own case for earlier years, depreciation @ 80% on Wind mill, its civil construction and electrical installation was found to be allowable by this Hon’ble Tribunal. Further, in case of CIT vs. Mehru Electricals & Mechanical Engg. (P) Ltd. [ 2016(7) TMI 708 - RAJASTHAN HIGH COURT ] has held that assessee was entitled to depreciation on a room construction along with the cost of erection and installation of electrical items covered under “Plant and machinery” for a wind mill, entitled for depreciation at the same rate as applicable to the wind mill. - Decided against revenue Non deduction of tds interest payment on NDFs - Held that:- We find that the ld. CIT(A) has followed the directions of the Co-ordinate Bench in assessee’s own case for A.Y. 2011-12 and has remanded the matter back to the Assessing Officer to verify the certificates from various NBFCs to whom the assessee has paid interest during the year in order to verify where they have offered the same in their return of income and deposited taxes thereon. Further in respect of testing charges of ₹ 1,83,732/-, the ld. CIT(A) has confirmed the disallowance on account of non-deduction of TDS following the decision of the Hon’ble Supreme Court in case of Palam Gas Service [2017 (5) TMI 242 - SUPREME COURT ] and in respect of which there is no dispute. We accordingly do not see any infirmity in the order of the ld. CIT(A) hence, the same is confirmed. The ground of appeal taken by the Revenue is dismissed Disallowance of contribution to PF & ESI beyond the prescribed time limit - Held that:- CIT(A) has given a finding that the contribution to PF & ESI has been paid by the appellant before due date of filing the return of income u/s 139(1) and the said finding remained uncontroverted before us. Further, the issues is covered in favour of the assessee by the decision of Hon’ble Rajasthan High Court in case of CIT vs. State Bank of Bikaner & Jaipur and other cases [2014 (5) TMI 222 - RAJASTHAN HIGH COURT] which has rightly been followed by the ld. CIT(A). We accordingly do not see any infirmity in the order of the ld. CIT(A) hence, the same is confirmed. Disallowance u/s 14A - Held that:- It is noted that the investment worth ₹ 45.07 lacs in equity shares of M/s Anamika Oil Pvt. Ltd. have been made by the assessee in the earlier years and further, fresh investment worth ₹ 40 lacs have been made on 29.03.2012. If we consider the availability of interest free funds during the year, it is noted that interest free funds at the beginning of the year stood at ₹ 20.38 crores and at the end of the year stood at ₹ 25.81 Cr. A presumption will therefore arise that the investment were made out of interest free funds and not out of the borrowed funds especially in view of the fact that no nexus has been established between the borrowed funds and the investment in the equity shares by the AO. In light of above, no disallowance under section 14A is called for in the instant case. The revenue’s ground of appeal is dismissed. Addition for business expenses - Held that:- Assessing Officer has disallowed 10% of the conveyance and telephone holding that the expenses are not open for verification and the element of personal use cannot be ignored, which has been confirmed by the ld. CIT(A). There is no basis for adhoc disallowance in the eyes of law. Hence, the disallowance so made by the AO and confirmed by the ld CIT(A) is hereby deleted.
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2017 (11) TMI 59
TDS u/s 194H - non deduction of tds on brokerage payment - Held that:- As relying on S.J. Investment Agencies Private Ltd [2011 (2) TMI 1427 - ITAT MUMBAI] assessee has not violated the provisions of section 194H of the Income Tax Act so as to enable the AO to make addition / disallowance under section 40(ia) of the Income Tax Act on account of non-deduction of tax from the brokerage paid to various parties. - Decided in favour of assessee. Disallowance u/s 14A under the Rule 8D - Held that:- No infirmity with order of Ld. CIT(A). He has only directed the AO to rework the disallowance u/s 14A r.w. Rule 8D in the light of the decision of the Jurisdictional High Court in the case of Maxopp (2011 (11) TMI 267 - Delhi High Court ). The decision of the Jurisdictional High Court is binding on the revenue. Therefore, the revenue should have no grievance. The ground raised by the revenue is accordingly dismissed.
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2017 (11) TMI 58
Addition relating to interest on house building and other advances - tonnage tax - AO computed the income as per the provisions of section 115 VG - receipts on account of interest earned on house building advances had been reduced from the tonnage tax receipts and assessed separately as receipts from non core activities - CIT(A) confirmed the order of the assessing officer following the ITAT's order in assessee's own case for the assessment year 2006-07 to 2008-09 - Held that:- As AR did not bring any other decision supporting the subject receipt as the receipt from the core activity. The source of receipt is the interest on house building advances given by the assessee and not from the dredging operations carried on by the assessee. The income from shipping is defined in section 115VI and the incidental activity in Rule 11R of Income tax Rules and the receipt of interest from the house building advance is not covered by the Section 115VI and Rule 11R. The Ld. CIT(A) has confirmed the addition following the order of this Tribunal. As discussed above the receipts are not from the core activity of shipping operation but from the interest on House building and other advances. Hence we uphold the order of the Ld. CIT(A) and dismiss the ground of the assessee on this issue. Liquidated damages collected from various contract parties as compensatory payment for failure to execute contract work within the stipulated time - Held that:- Profits and gains for the purpose of industrial undertaking required to be computed as per the provisions of section 28 to 43C of I.T. Act and the deduction required to be allowed u/s 80IA of I.T. Act from the business income. Whereas in the case of tonnage tax as provided u/s 115VI, the income required to be computed as per Chapter XIIG of I.T. Act at the option of the assessee. Once, the assessee opts tonnage tax scheme, the income of the assessee from shipping company required to be computed as provided in Chapter XIIG. Therefore, the decision relied upon by the Ld.AR is distinguishable and not applicable in the assessee's case. Accordingly, we hold that Ld.CIT has rightly confirmed the addition and dismiss the appeal of the assessee on this ground. Interest on arbitration award for Link Road Project, Kochi and Essar Steel Projects Ltd - Held that:- Since the income from shipping activity is clearly spelt out in section 115VI and Rule 11R, we hold that the interest on arbitration award is not from the core activity and should be separated from the core activity and to be taxed separately. Accordingly, we uphold the order of the Ld.CIT(A) and dismiss the assessee's appeal. Miscellaneous receipts - Recovery towards lease quarters,Staff car recoveries, Fee for RTI, Sale of tender documents, Mess charges,Rent for hiring quarters / offices, Late attendance receipts - Held that:- Above receipts do not form part of income from shipping within the meaning of section 115VI and Rule 11R as discussed above. During the appeal hearing, Ld.AR did not demonstrate how the above receipts are from the shipping within the meaning of section 115VI and Rule 11R of I.T.Act. The issue with regard to shipping for tonnage tax scheme was discussed in detail in para No.4 in Liquidated damages. The above receipts do not fall under the tonnage tax scheme as envisaged in section 115VI and Rule 11R of I.T. Rules. This tribunal in assessee's own case expressed the same view in the case cited (supra). Accordingly, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the assessee Miscellaneous income - Held that:- In both the years the assessee has not furnished the details to ascertain whether the receipts qualify for tonnage tax or not. Both the Ld. DR and Ld. AR agreed to remit the matter back to the file of the AO to examine the nature of receipts and to decide the issue on merits. Therefore, we remit the matter back to the file of the AO with a direction to examine the issue and decide the issue afresh on merits. Claim of expenses - Held that:- In this case, the assessee did not demonstrate that it had incurred the expenditure separately over and above the expenditure debited to the Profit & Loss Account. No separate books of accounts are maintained for non core income and core income, thus we dismiss the appeal of the assessee on this ground Liquidated damages and arbitration award - Held that:- We have elaborately discussed the issue what constitutes core income. The assessee has opted for tonnage tax scheme under the provisions of 115VI under Chapter XIIG of I.T. Act. This is known an tonnage tax scheme under which the income is computed at specified rate, net tonnage of the ship under section 115VG. The definition of core activities has been defined as activities from operating qualifying ships and other shipping related activities. Therefore, the interest received on delayed payments and other miscellaneous receipts such as recruitment fee, cancellation of DD, seminar expenses, EMD forfeited, vender registration form/tender form, transportation of pipeline guarantee amount forfeited and miscellaneous receipts (bifurcation under process) cannot be held to be received from the shipping activities. Therefore, we do not find any infirmity in the order of the Ld. CIT(A) and the appeals of the assessee are dismissed. Provisions written back - Held that:- The provisions were debited to the Profit & Loss account in the earlier years in which it was created. The provisions are not allowed as deduction as per the act while computing the income of the corresponding assessment year. However, the expenditure debited to Profit & Loss account has no relevance for computation of the income under tonnage tax, as the income is computed as per Section 115VG of the Act and the expenditure is not allowed as deduction irrespective of the expenditure debited to the Profit & Loss account. Therefore, debiting of expenditure to the Profit & Loss account and reversal of expenditure has no relevance in computation of income under tonnage tax scheme when the income is being determined under the special provisions applicable to the assessee. Therefore, there is no case for excluding the items or provision written back from the core income and to tax separately. Accordingly, we do not find any infirmity in the order of the Ld. CIT(A) and the same is upheld. Employees Contribution to PF - Held that:- Assessee would be entitled for deduction of the employees contribution of PF made before the due date for filing of the return of income u/s.139(1) of the I.TAct Computing the income under tonnage tax scheme the expenses debited in profit and loss account has no relevance - Held that:- This is an item of credit which is only reversal of debit made earlier. When it was debited to Profit & Loss Account, it was added back in the computation of income when such item was not allowed/claimed as deduction while computing the income, the same cannot be considered as an item of income. Further when the assessee has opted for tonnage tax scheme, the amounts debited to Profit & Loss account has no relevance in computation of tonnage income. Therefore, we do not find any infirmity in the order of the CIT(A) and the same is upheld. The appeal of the revenue is dismissed.
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2017 (11) TMI 57
Eligibility for exemption u/s 10B denied - delay in filing of return - Held that:- We find that in the instant case the return of income was filed on 1.10.2009 as against the due date 30.9.2009. The CBDT vide order dated 19.11.2014 u/s 119(2)(a)/119(2)(b) of the Act in F.No. 197/1/2013-ITA by DCIT-OSD (ITA. 1) has condoned the delay in filing of return, thus, once CBDT has held that return has been filed within the due date u/s 139(1) of the Act, the dispute as to allowability of claim u/s 10B on the ground of delay in filing of return has ceased to exist. Ex-consequenti, the grounds raised by the revenue are not maintainable and are, therefore, rejected. Disallowance u/s 40(a))(ia) - expenditure incurred and claimed under the head legal expenses - no sum was payable at the end of year - Held that:- The issue is to be decided against the assessee in view of the judgment of the Hon'ble Apex Court in the case of Palam Gas Service v. CIT [2017 (5) TMI 242 - SUPREME COURT ] Edifice of invoking of section 80IA(10) - Held that:- Section 80IA(10) of the Act cannot be brought into play to allocate expenses debited in the books of non eligible unit to eligible unit and restrict the claim of deduction u/s 10B of the Act. Accordingly, the grounds raised by the assessee are thus allowed.
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2017 (11) TMI 56
Assessment of short term capital gain on consideration received on sale of factory building with furniture and fixture - Held that:- Recent decision of Hon’ble Bombay High Court in the case of Chaturbhuj Dwaarakadas Kapadia vs. CIT (2003 (2) TMI 62 - BOMBAY High Court) has compelled many assessee's to rethink as to the correct interpretation of clause (v) of section 2(47) whether transaction of possession or whether transaction means transaction of possession or whether transaction means act of entering into an agreement laying down the terms and conditions about possession of immovable properties. In view of the above facts and circumstances, we are of the considered view that the AO as well as CIT(A) has gone wrong in interpreting the facts of the case and hence, we are of the view that the transfer of the above stated property took place only in AY 2011-12, when assessee has declared the capital gain accordingly and paid the taxes. Consequently, the assessee is also entitled for depreciation on the factory and its machinery in this year i.e. AY 2010-11. Accordingly, we allow this inter-connected issue of the assessee’s appeal. Disallowing unabsorbed depreciation carried forward/ brought forward - Held that:- This issue is squarely covered by the decision of Hon’ble Gujarat High Court in the case of General Motors India (P.) Limited Vs. DCIT [2012 (8) TMI 714 - GUJARAT HIGH COURT] wherein the issue regarding unabsorbed depreciation available to assessee as on 01-04-2002 will be dealt in accordance with provisions of section 32(2) as amended by the Finance Act 2001 and not by the provisions of Section 32(2) of the Act as it stood before the amendment. Thus we direct the AO to re-compute the unabsorbed depreciation without any limitation in term of the decision. This issue of the assessee’s appeal is remanded back to the file of the AO and allowed for statistical purposes. Disallowance of interest on bank loan u/s 43B - Held that:- It is not justifiable to say that no payment has been made towards outstanding interest. Further, we find that the interest of ₹ 11,53,110/- is pertaining to the A.Y. 2007-08 which was disallowed in that year and hence, the same cannot be disallowed in this year also. Further, the reliance placed on CBDT circular no. 07/2006 by the learned Counsel for the assessee, we find that the circular very categorically lays down that the amount of unpaid interest, which has been converted by the bank as the loan, is allowable as deduction in the year in which the said loan is repaid. In the present case the assessee has repaid the entire amount of interest and loan to the bank in the A.Y. 2010-I1. Thus, the amount of interest of ₹ 8,62,448/- which is included in amount of ₹ 11,53,110/- is allowable as the deduction in this assessment year. Accordingly, we allow this claim of the assessee and direct the AO to compute the income accordingly. Additions under section 41(1) - Held that:- We find that the assessee has not written off the said liability in the current year, nor Agarwal plastics has waived off the same. Thus, no disallowance is warranted merely because the liability is outstanding since several years. This issue of the assessee’s appeal is also allowed.
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2017 (11) TMI 55
Claim deduction u/s 35(1) on current year expenditure on R&D - Held that:- Any expenditure relating to business which may be relating to current year or relating to previous expenditure incurred before commencement of the business and restricted to expenses expended within 3 years immediately proceeding the commencement of the business. As per explanation to this sub-clause, the assessee has to submit certificate from the prescribed authority to get the deduction under this head for the expenses incurred before commencement of the business. There is no restriction with regard to expenses expended during the current assessment year. Hence, there is no requirement on the part of the assessee to claim revenue expenditure incurred during the current assessment year. Accordingly, the assessee is eligible to claim deduction u/s 35(1) of the IT Act relating the current year expenditure on R&D. Deferred revenue expenditure - Held that:- Even though the discount is offered in the year of subscription, the discount in fact relates to the tenure of the debentures. It can be spread over to the period of debenture holding. Whereas the nature of expenditure incurred in the given case is R&D. It is peculiar expenditure, it is not necessary that research should be successful all the time, the absorption of the cost depends upon the success rate of the project. It is prudent to absorb the revenue expenses in the year of expenditure incurred, when there is no benefit of enduring nature expected at the time of making such expenditure. It is not brought on record by the revenue authorities that assessee has expended this expenses and there is asset created by such expenditure. Since there is no asset created, which has enduring benefit to the business of the assessee, it is appropriate to allow these expenditure u/s 35(1).
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2017 (11) TMI 54
Disallowance on account of lease premium - nature of expenditure - revenue or capital expenditure - Held that:- As the issue under consideration is similar to AY 2010-11 and the ld. DR did not bring any contrary decision in this regard, following the decision of coordinate bench in AY 2010-11 wherein held that the assessee acquired the land on lease for 33 years, the capital structure did not undergo any change. The assessee has merely acquired the facility to carry on business profitably by paying nominal lease rent. The lease rent paid by the assessee was allowable as revenue expenditure, we uphold the order of the CIT(A) in deleting the disallowance made by the AO towards lease premium paid by the assessee following the order of ITAT in AY 2010- 11 and dismiss the grounds raised by the revenue. Transfer pricing adjustment with respect to reimbursements received from its Associated Enterprises (AEs') - Held that:- The concept of utilizing the expertise with other independent companies are not heard of in the market nor encouraged in the normal business. Since there are no comparable cases in the market, and also it is the business decision of the assessee to share the employee cost with other sister concerns on cost to cost basis. Accordingly, the addition of markup should be deleted. For the limited purpose of verification of transaction whether the transactions are routed through books, it is remitted to the AO. Accordingly, ground raised in C.O. is allowed for statistical purposes.
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Customs
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2017 (11) TMI 53
Release of seized goods - imported goods, copper concentrate - hazardous waste or not - Held that: - the order of the Adjudicating Authority that the samples from the consignments dated 24.12.2001 and 24.01.2002 are hazardous waste and not Copper Concentrate is open to serious doubt, the benefit of which must go in favour of the importer in the light of the totality of the materials on record - appeal of Revenue dismissed. The subject goods have been released subject to furnishing of Bank Guarantee of ₹ 10 lakhs on account of demurrage charges - as the respondent-importer had cleared/obtained release of the goods on furnishing of the Bank Guarantee of ₹ 10 lakhs in favour of the Central Warehousing Corporation in terms of the interim order of this Court dated 25.11.2016, we are of the view that the Corporation should be allowed to invoke the Bank Guarantee of ₹ 10 lakhs. Any further claim of the Corporation or any denial of any liability by the importer or the Customs Department, if raised, will be liable to be adjudicated in accordance with law. Petition dismissed - decided against Revenue.
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2017 (11) TMI 52
Confiscation of imported vehicle - right hand drive Hummer H2 SUV - allegation in the show-cause notice was that the vehicle was converted from left hand drive to right hand drive and had changed hands before being imported into India and as such was not eligible for concessional duty - also, the cost of conversion from left hand drive to right hand drive had not been included in the assessable value of the vehicle and as such duty was short paid at the time of import - main grievance of the petitioner appears to be that he has lost the opportunity of approaching the Settlement Commission. Held that: - where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute must be availed of - In the case of Whirlpool Corporation-vs.-Registrar of Trade Marks, [1998 (10) TMI 510 - SUPREME COURT], the Apex Court observed that under Art. 226 of the Constitution of India, the High Court having regard to the facts of a case, has a discretion to entertain or not to entertain a writ petition. The High Court has imposed upon itself certain restrictions one of which is that if an efficacious alternative remedy is available, the High Court would not normally exercise its writ jurisdiction. Principles of Natural Justice - Held that: - The customs law is a complete code by itself. The Customs Act and the Rules and bye-laws framed thereunder constitute a comprehensive and exhaustive code. The order passed by the respondent in this case is an appealable order. Sec. 128 provides for a statutory appeal - Mr. Khaitan argued that this statutory appeal is not an effective remedy since under Sec. 128A(3), the Commissioner (Appeals) cannot remand the matter back to the Adjudicating Officer. Even assuming the Commissioner does not have that power, in my opinion, the same does not make the statutory appeal a non-efficacious remedy. The petitioner had sufficient opportunity of contesting the adjudication proceeding on merits but it chose not to do so. The respondent granted two adjournments to the petitioner - By the notice dated 7 February, 2013 all the noticees including the petitioner were informed that no further adjournments would be allowed and if one failed to appear, the case would be decided as per the facts and evidence on record. I cannot hold that there was breach of the principles of natural justice. If the petitioner takes recourse to the alternative remedy of statutory appeal, he would not be prejudiced in any manner. It is a comprehensive remedy and he can contest the order on merits and I propose to grant him that liberty. If the petitioner has lost the opportunity of contesting the adjudication proceeding on merits in the first round, it is only himself that he can blame. Approach to Settlement commission which was rejected - Held that: - If the petitioner was serious about approaching the Settlement Commission, he ought to have been more diligent and he had sufficient time for filing a settlement application before the Settlement Commission. It appears that he took a chance of getting a favourable verdict before the respondent and now that the order has gone against him, he prays for an opportunity to approach the Settlement Commission. Application dismissed - However, if the petitioner prefers an appeal from the impugned order within four weeks from date, the petitioner shall be entitled to the benefit of Sec. 14 of the Limitation Act and the Appellate Authority shall decide the appeal on merits without going into the question of limitation.
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2017 (11) TMI 51
Penalty u/s 112(a) of the CA, 1962 - abetting smuggling - Held that: - the imposition of penalty on the appellant under the provisions of Section 112(a) of the Customs Act, 1962 is not sustainable in law, as the same has been passed without any clinching evidence against the appellant showing his involvement in abetment of clearance of imported parcels without payment of customs duty. If when disciplinary proceedings under CCS (CCA) Rules, 1965 are dropped, then the imposition of penalty under Section 112(a) of the Customs Act, 1962 on the same charges and same evidence cannot survive. Appeal allowed - decided in favor of appellant.
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2017 (11) TMI 50
100% EOU - diversion of duty free goods imported by it, into the local market - SCN was issued on 16.12.2004 making allegation of involvement of appellants in the aforesaid activities. They failed to defend on the allegations leading any cogent or credible evidence to the contrary. Therefore adjudication resulted in duty demand of ₹ 75,37,420/- for violation of condition of import. Penal consequence also arose in adjudication. Held that: - Investigation result brought out the premeditated design of Pinkesh Jain in connivance with Rakesh Jain, Dinesh Chunilal Parmar and Mangilal Jain to defraud the Government. Appellant firm misused the exemption notification meant for EOU and defeated the requirement of export of finished product from India. Although appellant firm was required to use the imported duty free goods cleared by it, in its EOU for manufacture of finished product and export the same, it diverted such goods to the local market and caused serious prejudice to Revenue. Penal provisions are enacted to suppress the evils of defrauding Revenue which is an anti-social activity adversely affecting the public revenue, earning of foreign exchange, economic and financial stability of the economy. Therefore such provisions are construed in a manner to suppress the mischief and to promote the object of the statute, preventing evasion, foiling artful circumvention thereof. Thus construed, the term fraud within the meaning of these penal provisions is wide enough to take into its fold any one or series of acts committed. Such act or acts when demonstrate to be reasonably proximate to the diversion of duty free imported goods fraudulently they should face adverse consequence of law. In view of the cogent and credible evidence came to record proving malafides of appellants as discussed above, result of investigation brought out their hand in glove to cause subterfuge to Revenue as well as adjudication findings remained unchallenged by them leading any evidence to the contrary, appellants fails to succeed in their appeal having caused detriment to the interest of public revenue. They could not rule out their ill will. Pre-ponderance of probability came to the rescue of Revenue lending credence to its case. Evidence gathered by Revenue provided reasonable basis for adjudication which could not be demolished by appellants by any means. They failed to lead any cogent evidence to rule out their role in commitment of the offence alleged when they failed to come out with clean hands, no immunity from penalty can be granted to them. Therefore irresistible conclusions that can be drawn is that Revenue having proved its case very successfully bringing out malafides of the appellants and their willful commitment of breach of law. Appeal dismissed - decided against appellant.
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2017 (11) TMI 49
High seas sale - import of Stressometer Flatness Measurement and MC 40 R Millmate Roll Force Measurement for Hitachi Mill - Original Authority rejected the High Sea Sale only on the ground that the agreement was dated and signed on 23/12/2011 on a stamp paper which was purchased on 29/12/2011 - Held that: - We are in agreement with the Original Authority that submission of such document before the Customs Authorities vitiates the claim of the importer. The plea that they have other supporting documents to establish High Sea Sale transaction becomes seriously jeopardized in the face of such untenable document filed before the authorities. Accordingly, we hold that the Original Authority has correctly rejecting such agreement. Discount of 20% - Held that: - the sale value between these two companies of the same group cannot be accepted as transaction value for Customs duty unless the relationship is examined and non-influenced nature of such transaction is brought out by evidence. In the present case, admittedly the transaction is between these two related units of ABB and the Original Authority recorded that such special discount was not recognized in the SVB order and the importer also did not submit any explanation to justify such discount. We find no reason to interfere with such finding - discount correctly denied. Penalties - Held that: - The bill of entry claimed High Sea Sale. The support for High Sea Sale is a document which was found to be mis-declared - confiscation and penalty upheld. Appeal dismissed - decided against appellant.
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2017 (11) TMI 48
Short payment of duty - Data Tapes - whether there is any short collection of duty arises as per the show cause notice? - Held that: - the importer has deliberately not disclosed the Data Tapes in the IGM and only after recording of the data in India, he had sought to clear them as imported goods and also obtained the Essentiality Certificate from the Directorate General of Hydrocarbons on the same pretext. During the period of its import, the pre-recorded Data Tapes were classifiable under CETH 8523 and the Recorded Data Tapes were classifiable under CETH 8524. Data Tapes cannot be considered as Stores in relation to the present consignment and also that the importer should have obtained the Essentiality Certificates if they intend to avail the duty exemption under Sl. No. 217 of CN. 21/2002 (as amended by CN. 26/2003) at the time of import of these goods into the country - impugned order upheld. Whether the 155 boxes of Data Tapes on which seismic activity is recorded are liable for confiscation or otherwise? - Held that: - seismic data tapes unrecorded at the time of original import their classification was appropriate under 852390, hence in our view adjudicating authority classification of product cannot be faulted, holding the data tapes are required for seismic activity particular place, accordingly it is to be held on used in a vessel hence has to be considered as ship stores in terms of Section 2(38) of the Customs Act, 1962 - impugned order upheld. Appeal dismissed - decided against Revenue.
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2017 (11) TMI 47
Misdeclaration of valuation description and quantity of imported goods - goods imported in the Semi Knock Down (SKD) conditions - Held that: - value of some of the items like parts of the calculators was not ascertained during the market enquiry. It appears that the market enquiry conducted by the Department has been questioned by the respondent as no chart of detailed process was supplied to the respondent. Regarding the valuation of the imported goods, the Hon’ble Supreme Court in the case of Eicher Tractors Ltd. Vs. CC Mumbai [2000 (11) TMI 139 - SUPREME COURT OF INDIA] has held that It is only when the transaction value under Rule 4 is rejected, then under Rule 3(ii) the value shall be determined by proceeding sequentially through Rules 5 to 8 of the Rules. Conversely if the transaction value can be determined under Rule 4(1) and does not fall under any of the exceptions in Rule 4(2), there is no question of determining the value under the subsequent Rules. The goods were in the SKD conditions for which proper entry or enquiry was neither possible nor made - impugned order sustained - appeal dismissed - decided against Revenue.
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2017 (11) TMI 46
Revocation of CHA License - forfeiture of security deposit - penalty - date of offence report - time limitation - Held that: - The Madras High Court in the case of A.M. Ahamed & Co. Vs. CC (Imports), Chennai [2014 (9) TMI 237 - MADRAS HIGH COURT] examined the scope of the “offence report”. After noting the provisions of regulation and scope of implication of offence report, the Hon’ble High Court concluded that the show cause notice issued to the petitioner with a copy to the Commissioner should be taken as a date of receipt of offence report. Consequently, the period of 90 days should commence only from that date. In the present case, the SCN dated 20.05.2013 was issued to the appellant with a copy marked to the office of the Commissioner as well as to the notice board of the DRI and the Commissioner. Following the ratio of the Hon’ble Madras High Court, the said SCN construed as offence report as the present proceedings are of the same set of facts/offences alleged against the appellant. Since the said SCN was dated 20.05.2013 and the proceedings under CBLR was initiated by notice dated 12.08.2016, the proceedings are substantially delayed and the same is in violation of Regulation 20(1) of CBLR 2013. Appeal allowed - decided in favor of appellant.
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2017 (11) TMI 45
Rectification of mistake - Penalty u/s 114A - Held that: - there is no apparent mistake in the subject Final Order of the Tribunal, which could be rectified by accepting the present ROM. The appellant actually wants us to re-appreciate and reconsider their submissions and arguments by way of ROM application, which is not allowed by law - The Hon’ble Apex Court in the case of CCE, Belapur, Mumbai vs. RDC Concrete (India) Pvt. Ltd. [2011 (8) TMI 25 - SUPREME COURT OF INDIA] has held that power to rectify a mistake should be exercised, when the mistake is a patent one and should be quite obvious - ROM Application not allowed.
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2017 (11) TMI 44
Penalty u/s 117 of CA, 1962 on CHA - Short paid duty by importer - Held that: - there is no lapse on the part of the appellant as the changes were not updated in the system and the appellants have only filed a Bill of Entry on behalf of their client and they have taken proper care to file the Bill of Entry and therefore there is no lapse on their part so as to impose penalty for the fault of the system which has not been updated as on the date of filing of the Bill of Entry - penalty set aside - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 28
Refund claim - finality of assessment - Held that: - Hon’ble High Court of Delhi in the case of Micromax Informatics Ltd [2016 (3) TMI 431 - DELHI HIGH COURT] has dealt with similar issue which is present in the case in hand, where it was held that there was indeed no assessment order as such passed by the customs authorities. Although under Section 2(ii) of the Act, the word ‘assessment’ includes a self-assessment, the clearance of the goods upon filing of the B/E and payment of duty is not per se an 'assessment order' in the context of Section 27(1)(i) as it stood prior to 8th April 2011, particularly if such duty has not been paid under protest - Even the CBEC circular presented by DR (No. 17/2011-Customs, dated 08.04.2011) may not carry Revenue's case any further as the said circular explains the factual position as to assessment prior to 4/2011 and the law on this has already been settled by Hon’ble High Court of Delhi in the case of Micromax Informatics Ltd. - appeal allowed - decided in favor of appellant.
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Corporate Laws
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2017 (11) TMI 41
Oppression and mismanagement - Non-existence of Consent Letters from the members supporting the Petitioner - Held that:- The main objection of the Respondent is that the Consent Letters were not in existence when the Petition was filed and they were later on brought into existence. The contention of the learned Counsel for the Petitioner/Applicant is that the consenting shareholders are none other than the family members of the original-Petitioner and therefore the non-existence of Consent Letters as on the date of filing of the Petition does not arise. The controversy, whether the Consent Letters were in existence as on the date of filing of the Petition or they were brought into existence subsequently, is not an issue to be adjudicated in this Application. Petitioner specifically stated in the Petition that shareholders holding 35000 equity shares gave Consent Letters. A perusal of the Consent Letters filed along with this Application show that they do not bear any date. No doubt, they are not notarized. The genuineness or otherwise of the Consent Letters also need not be gone into in this Application. Another aspect raised by the Respondent is that the persons who gave Consent Letters are not there in the List of Shareholders. This is also a matter that need not be probed in this Application at this stage. When there is an averment in the Petition that Consent Letters were filed and when they were not in fact filed, and when it is stated by the Applicant that it was due to oversight, in such circumstances, there is no point in refusing the request of the Petitioner to file Consent Letters. The question whether the filing of the Consent Letters, after the filing of the petition, is sufficient compliance of Section 399 of the Companies Act, 1956 or not, is also a matter that need not be gone into in this Application. The proposed Amendment is not going to cause any prejudice to the contentions of the Respondents. Respondents are at liberty to contend that valid consent is not there and the Consent Letters are not valid, and the contention, that Consent Letters filed subsequently and not filed along with the Petition, cannot be taken into consideration in deciding the eligibility aspect. Coming to the limitation aspect, Section 433 of the Companies Act, 2013 came into force from 1.6.2016. The Company Petition was filed on 5th October, 2015. In the Old Act, there is no provision which says that the provisions of the Limitation Act are applicable. Moreover, it is stated in the Petition that the alleged acts of oppression and mismanagement are continuous acts. Therefore, the issue of limitation may not be a ground for not allowing the proposed Amendment. Thus this Application is allowed
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Insolvency & Bankruptcy
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2017 (11) TMI 43
Corporate Insolvency resolution process - mandatory on the ‘adjudicating authority’ to issue notice to the Respondent Corporate Debtor ignored - Held that:- Before admitting an application filed under Sections 7 and 9 of the Code ex parte, it is mandatory on the ‘adjudicating authority’ to issue notice to the Respondent Corporate Debtor, in addition to the statutory notices provided under the Code and Rules. In the present case neither the Respondent Corporate debtor has appeared nor has a limited notice as stated above been issued by this Tribunal to the respondent corporate debtor in the line of precedent laid down by the Hon’ble NCLAT. As a sequel to the above discussion, let a notice be served at the registered office of the Respondent Corporate debtor by way of speed post and also on registered e-mail id of the corporate debtor returnable on 6th October, 2017. Process Dasti as well. The applicant shall file affidavit of proof of service of notice by the ensuing date of hearing.
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2017 (11) TMI 42
Corporate Insolvency Resolution Process - Initiation of corporate insolvency resolution process by financial creditor - Held that:- A conjoint perusal of the provisions of Section 7(2) and 7(5) of the Code would reveal that form and manner of the application has to be the one prescribed by the authorities. It is required to be accompanied by the prescribed fee. It is further evident that if the application is incomplete as per the requirement of Section 7(2) of the Code then this Tribunal being the Adjudicating Authority may reject it. However, proviso to Section 7(5) of the Code postulates that before rejecting the application on the ground that it is incomplete in terms of Section 7(2) of the Code the Tribunal is obliged to give notice to the applicant to rectify the defect. The defect in the application needs to be removed within seven days from the date of receipt of notice. No such situation has arisen and we find that application is complete in all respect. For the reasons, aforementioned this petition is admitted. Shri Rajesh Samson who is duly registered with Insolvency and Bankruptcy Board of India (IBBI/IPA-001/IP-P00240/2017-18/10469) has been proposed as an Interim Resolution Professional. He is hereby appointed as an Interim Resolution Professional. He has filed his certificate of registration with Insolvency and Bankruptcy Board of India. He has also filed his written, communication dated 04.08.2017 in connection with the application to initiate Corporate Insolvency Resolution Process. The disclosure has been made in the letter dated 04.08.2017. In pursuance of Section 13(2) of the Code we direct that public announcement shall be made by the Interim Resolution Professional within the statutory period with regard to admission of this application under Section 7 of the Code. We also declare moratorium in terms of Section 14 of the Code.
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2017 (11) TMI 40
Corporate Insolvency Resolution Process - default in payment of amount within due date the Invoice amount shall carry interest at the rate of two per cent - Held that:- As can be seen from the Computation Table at Annexure “A”, the amount claimed is in respect of the due amount for the Invoices from 21.7.2015 to 15.1.2016. The amount claimed in Annexure “B” is the amount claimed towards the interest on the Invoices for the period from 31.12.2014 to 31.3.2015 whereunder the actual Invoice amounts were paid with delay. A perusal of the Annexure “C” shows that it relates to the claim of interest on the Invoices from 21.7.2015 to 15.1.2016 for the delay in payments against actual invoice amount already paid. It is stated by the learned counsel for the Respondent that Invoices supplied to them along with the demand notice are not the Invoices for which the claim has been made. In the case on hand, the claim of the Applicant is in respect of Invoices for the period from 21.7.2015 to 15.1.2016 and also interest at the rate of 24% in respect of the Invoices for which the amounts were already paid and they relate to the period from 31.12.2014 to 31.3.2015 and 21.7.2015 to 15.1.2016. Moreover, in demand notice in Form-3 there is no need to enclose the Invoice. In view of the above said clarification, the point raised by the learned Counsel for the Respondent, that the Invoices furnished to them along with the demand notice are not the correct invoices, does not stand to reason and that cannot be a ground to reject the Application especially when the Respondent is admitting the operational debt. In view of the above discussion, this Application deserves to be admitted and it is accordingly admitted. The Applicant did not propose the name of the Insolvency Resolution Professional. The Applicant requested this Adjudicating Authority to appoint an Interim Resolution Professional. This Adjudicating Authority hereby order reference to Insolvency and Bankruptcy Board of India, New Delhi, to recommend the name of Insolvency Professional against whom no disciplinary proceedings are pending to this Authority within 10 (Ten) days from the date of receipt of reference to act as Interim Insolvency Resolution Professional. This Adjudicating Authority hereby declares moratorium under Section 13(1)(a) prohibiting the following as laid down in Section 14 of the Code
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Service Tax
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2017 (11) TMI 39
Refund of service tax - input service - professional indemnity insurance service - denial on the ground of nexus - whether the professional indemnity service used by the assessee, who are providing consultancy in taxation and audit service can be considered as input service in terms of definition of input service in the Cenvat Credit Rules? - Held that: - the issue is no longer res integra and has been decided in the favour of respondent in their own case in CST, Delhi-IV Vs. Ernst and Young Associates LLP [2017 (10) TMI 456 - CESTAT CHANDIGARH] wherein this Tribunal held that the professional indemnity insurance service is an essential ingredient for providing the output service and has direct nexus with the providing of output service - refund allowed - appeal dismissed - decided against Revenue.
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2017 (11) TMI 38
Maintainability of appeal - appropriate forum to file appeal - Held that: - the only and entire argument of Ld. Counsel is that they had filed the appeal in the Office of Hyderabad-IV Commissionerate which is wrong Forum, instead of Commissioner of Service Tax (Appeals), Hyderabad - appeal dismissed being not maintainable.
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2017 (11) TMI 37
Refund of service tax excess paid - GTA Service - abatement - Section 11B - Held that: - it is evident that the refund claim has been filed by the appellant under Section 11B ibid. The said statutory provision mandates the time limit of one year from the relevant date for filing the refund application - In the present case, as per clause (f) in explanation (B), contained in Section 11B ibid, the relevant date should be construed as the date of payment of duty - Since, no ambiguity arises in plain reading of the provisions of Section 11B ibid, different interpretations can not be placed by the authorities functioning under the statute and are bound to obey the dictates/ provisions contained therein. In view of the settled position of law and in view of the fact that the refund application was filed and decided under Section 11B ibid, the time limit prescribed therein should be strictly followed in entertaining the refund application. Since the adjudicating /appellate authorities are created under the statute, are duty bound to obey the provisions contained therein. Therefore, the rejection of refund application by the authorities below is in conformity with the statutory provisions. The time limit prescribed in Section 11B ibid is strictly applicable for entertaining the refund application, even if the service tax was paid erroneously, due to incorrect interpretations of the statutory provisions or the notifications issued thereunder - appeal dismissed - decided against appellant.
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2017 (11) TMI 36
Penalty u/s 76 and 78 - tax collected but not paid - tax alongwith interest paid on being pointed out - Held that: - As regards the penalty imposed under Section 76, 77 and 78, the SCN was issued to the appellant on 18.09.2008 when provisions of Section 78 were amended to impose one penalty i.e. either under Section 76 or under Section 78. Since in the case in hand penalty under Section 78 has already been imposed, the penalty imposed by the adjudicating authority under Section 76 of the Finance Act 1994 upheld by the First Appellate Authority is unsustainable and liable to be set aside. Since the amount of service tax liability stands collected but not deposited with the Government of India, question of invoking Section 80 does not arise. Accordingly the appeal as regards setting aside the penalty under Section 77 and 78 is devoid of merits and liable to be rejected. Appeal allowed in part.
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2017 (11) TMI 35
Quantification of tax liability - security and manpower supply service - Held that: - the quantification as arrived at by the impugned order is to be based on documents maintained by the assessee/appellant and as cross verified by the Jurisdictional officer. Further, various claims made by the assessee/appellant were not discussed for a conclusion. Adjustment towards service tax already paid - Held that: - the impugned order did not elaborate the basis on which such adjustment is made - In any case for both quantification of tax liability as well as adjustment towards already paid tax basic verification with the connected documents by the Jurisdictional officer is a basic requirement - Since, the issue involved is basically about factual verification and quantification, it is fit and proper to set aside the impugned order and to remand the matter to the Original Authority for a fresh decision. Appeal allowed by way of remand.
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2017 (11) TMI 34
Tour operator service - benefit of abatement - N/N. 25/2012-ST, dt. 20.06.2012 - Held that: - for a vehicle having stage carriage permit like busses owned by the appellants, to operate for private persons/marriage parties under a contract, such basis will then necessarily be required to obtain a contract carriage permit or a special permit as aforesaid. In our view, once such a contract carriage permit or a special permit is obtained, the bus will then no longer has the character of a stage carriage but will instead acquire the colour of a contract carriage/special permit garage - Viewed in this light, the busses of the appellants having become contract carriage or a special permit garage even if for temporary permit to provide them on hire for marriages/pilgrimage etc. this cannot be considered as a stage carriage for that short period and hence cannot then claim to be recovered under the negative list of services by a stage carriage or for that matter covered by the exemptions, provided under section No. 23 of notification 25/2012 since that exemption will not cover contract carriage on hire - demand with interest sustained. Penalties - Held that: - the matter is one of the unproductive and that the question of taxability on the services was mired in confusion and litigation, the penalties imposed in all these cases are set aside. Appeal allowed in part.
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2017 (11) TMI 33
CENVAT credit - providing of taxable as well as exempt services - non-maintenance of separate accounts for receipt, consumption and inventory of input/input services meant for used in output services as required in terms of Rule 6(2) of the CCR, 2004 - legality of the demand to disallow and recover CENVAT credit on input services exclusively used for exempted output services to the tune of ₹ 91,16,244/- - Held that: - whereas appellants have claimed that they have made payment of entire amount of CENVAT credit availed irregularly and accordingly the violation of Rule 6(1) of the CCR, 2004 has been made good, the adjudicating authority has noted that there is no clarity whether the payment made by the assessee has covered all the input services which are used in exempted output services - having observed that the details given by the appellants are not clear and each transaction is required to be verified, the adjudicating authority nonetheless goes ahead to confirm the disallowance of CENVAT credit of ₹ 91,16,244/- apparently taken in excess and irregularly, without any justification for that decision. In our view, such peremptory confirmation of demand without resolving the very evident confusion in the working thereof, cannot be sustained - matter on remand. Legality of demand of ₹ 34,20,440/- for the period April 2008 to March 2010 under Rule 6(3) of CCR, 2004 - Held that: - the manner of calculation of 6% or 8% on value of exempted services has not been disputed by the appellant. We also find that with effect from 01.04.2008, Rule 6(3) the CCR, 2004 was specifically amended to bring forth this method of calculation for purposes of Rule 6(3). This being the case, we do not find any infirmity in that portion of the impugned order upholding the demand of ₹ 34,20,440/-, along with interest liability thereon, for the period April 2008 to March 2010. Penalty - Held that: - the entire issue has emanated out of a dispute between the appellant and the department on the method and manner of calculating the amount of CENVAT credit that can be availed in the situation where both exempted and taxable output services were provided. In these circumstances, we are of the considered opinion that imposition of penalty in this case would be a overkill - penalty set aside. Appeal allowed in part and part matter on remand.
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2017 (11) TMI 32
Rectification of mistake - duty paying documents - Held that: - there is no error apparent on the face of the record which needs to be corrected by way of this application - whatever is being sought by this application is on the merit of the case, which is beyond the scope of rectification application - ROM application dismissed.
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2017 (11) TMI 31
Power of Commissioner (A) to remand pursuant to the amendment to Section 35A(3) w.e.f. 11.5.2001 - Refund of unutilized CENVAT credit - Held that: - there is no infirmity in the impugned order remanding the case back to the original authority to consider the claims of the appellant - Tribunal in the case of Anvil cables Pvt. Ltd. [2009 (9) TMI 142 - CESTAT, KOLKATA] has held that even after the amendment the Commissioner (A) has the power to remand - appeal dismissed - decided against appellant.
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Central Excise
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2017 (11) TMI 30
Finalization of provisional assessment - Stock Transfer - appellant's contention is that they had submitted only information for the entire year - Held that: - From the documents available on record, we are not able to understand how such month wise figures were arrived at by original authority. Appellant has also pointed out that they manufactured more than 50 varieties of horns and the cost of components for which vary from 12 paise to ₹ 65.50; that however adjudicating authority has taken an uniform cost of ₹ 4.28 for all the components - These aspects can be addressed only by having a relook on the finalization of provisional assessments, which would require remand of the matter to the original authority in both the cases - appeal allowed by way of remand.
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2017 (11) TMI 29
CENVAT credit - input services - Construction Services - Department entertained a view that such services are not eligible for credit - Held that: - the definition of "input services" as it stands after 1.4.2011, the same has two parts. The first part includes the words "services used in relation to modernization, renovation or repairs of factory". The second part has the exclusion part wherein it states that the service portion in the execution of a works contract and construction services in so far as they are used for construction or execution of works contract of a building or civil structure or a part thereof is excluded. Reliance placed in the case of M/s Sarita Handa Exports (P) Ltd. Versus CCE, Gurgaon-II [2016 (7) TMI 554 - CESTAT CHANDIGARH], where it was held that This service has been used for repair and maintenance of factory premises is specified as an admissible input service under Rule 2(l) of Cenvat Credit Rules, 2004, therefore, the same is allowed. The denial of credit is unjustified - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 27
Benefit of N/N. 108/95-CE dated 28.08.1995 - Revenue is that the goods manufactured by the appellant have not supplied to the project but to the contractors - Held that: - the Tribunal in the case of JCB India Limited [2017 (1) TMI 1227 - CESTAT CHANDIGARH] has observed that the goods which have been cleared to the contractors who are executing the work for projects Financed by the Asian Development Bank, the appellant is entitled for the benefit of exemption N/N. 108/95-CE dated 28.8.1995. Therefore, no demand is sustainable against the appellant - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 26
CENVAT credit - whether Cenvat credit availed on manpower and business support service in terms of Rule 2(l) and Rule 3(l) of Cenvat Credit Rules, 2004 is admissible or otherwise? Held that: - the appellants are being charged by the service provider towards wages of the staff/ members of the society. As the invoices dated 30.6.2013 being invoice number ‘7’ has been raised on the appellant by ‘Sun Growth Manpower Service Private Ltd.’ wherein they have raised the bill for staff service charges for the month of April, 2012 to June, 2013. To such staff charges and raised the bills which have been paid admittedly by the appellants. From the annexure to the bill, I find that it is with respect to various persons named in annexure and it is mentioned that they have been paid according to number of days of their work. The bill admittedly pertains to man power (for the wages) incurred by the appellant. Further, it is admitted fact that the appellant is engaged in the manufacture of biris which are hand rolled. As per the practice in the said industry, the workers collect the raw material from factory and roll biris at their homes and thereafter semi-finished biris are given back to the manufacturer for further processing and thereafter for packing and selling. I find that only reason given in the impugned order for disallowance of cenvat credit is that such services or input services have not been provided in the factory premises which is registered premises but outside the factory premises and as such, held to be not qualified for cenvat credit as input service. The appellant have received the ‘input service’ in question, in manufacture of final products and clearance of the same - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 25
Refund of excess amount paid - denial on the ground of time limitation - Held that: - the facts are not much in dispute and the dates as stated by the learned DR on filing of the refund claims for the relevant period in question was definitely beyond the period of limitation of one year from the date of payment of duty - The provisions of section 11B of Central Excise Act, 1944 are very clear that any refund application arising for any reason, the relevant date would be the date of payment of such an amount - appeal dismissed - decided against appellant.
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2017 (11) TMI 24
Imposition of Penalty - CENVAT credit - credit availed on photo copies of the invoices - credit availed prior to obtaining Central Excise Registration - credit availed twice on the same documents - Held that: - since almost bulk of the amount of reversal of Cenvat credit may have been successfully contested by the appellant, if they had done so on merits, the penalties imposed by the Adjudicating Authority and upheld by the first appellant authority in my considered view is unwarranted and liable to be set aside - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 23
Valuation - amortisation of tooling cost - refund of wrongly added amortization cost - Held that: - the original authority while holding that the assessee is eligible for refund of ₹ 173,040/- has observed that the assessee has wrongly paid this duty by oversight by including the value of aforesaid tool cost while debiting the duty for the month of September 2008. The original authority has also got it verified from the jurisdictional Range Officer and confirmed the same and thereafter sanctioned the refund by way of recredit in CENVAT credit account. Whereas the Commissioner(Appeals) in the appeal has totally misconstruing the facts and has raised the issue which was not before the adjudicating authority as there is no dispute with regard to amortisation of the tool cost - Appeal allowed - decided in favor of appellant.
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2017 (11) TMI 22
Whether the appellant is liable to pay Central Excise duty by way of reversal under the provisions of Rule 3(5) of Cenvat Credit Rules, 2004? Held that: - it is an admitted fact that the appellant have cleared/used capital goods which are further usable for another manufacture. Accordingly, under the provisions of Rule 3(5) of CCR, 2004, the appellant is entitled to deduction of 2.5% per quarter from the date of credit till the date of disposal on the amount of Cenvat credit taken at the time of acquisition/erection of the capital goods in question. Accordingly, the appellant is only liable to pay an amount of ₹ 44,151/- towards the duty, by way of reversal under Rule 3(5) of CCR, 2004 - the appellant is entitled to refund of the balance amount deposited under protest, which is evident on the face of the record - appeal allowed in part.
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2017 (11) TMI 21
Benefit of N/N. 214/86 CE dated 25/03/1986 - denial on the ground that the condition of N/N. 214/86 CE requiring the use of goods manufactured on job work basis in the manufacture of final product of raw material supplied, and clearance of final product on payment of duty did not get satisfied - there was an allegation of suppression of the fact and also mis-declaration of the fact - Held that: - The Notification Number 214/86-CE provides for exemption to the goods manufactured in the factory as a job work subject to conditions specified therein. One of the conditions specified under notification No.50/2003-CE dated 10.6.2003 is that such goods should be used by the principal manufacturer in the manufacture of goods which are cleared on payment of duty. This condition is not satisfied by BTL inasmuch as they were availing area based exemption. Consequently, appellant will not be eligible for clearance of goods to BTL without payment of duty under N/N. 214/86 - demand upheld. Appeal dismissed - decided against appellant.
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2017 (11) TMI 20
CENVAT credit - capital goods installed in the sister unit - Held that: - Denial of CENVAT credit on the Central Excise duty paid on the capital goods, in this case, seems to be totally unsustainable as both the lower authorities have not disputed the factual matrix that appellant had installed the capital goods in their own units at different places and was getting the goods job worked form such units and receiving it back and dispatched the same on payment of duty - demand set aside. CENVAT credit - outward transportation of the goods under GTA service - Held that: - the period during which the appellant availed CENVAT credit is September 2007 to March 2008 - the issue is now covered by the judgment of the Hon’ble High Court of Karnataka in the case of Commissioner LTU, Bangalore Vs. ABB & Others [2011 (3) TMI 248 - KARNATAKA HIGH COURT], where it was held that Credit of service tax paid on outward transportation allowed prior to 1.4.2008 - demand set aside. Appeal allowed - decided in favor of appellant.
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2017 (11) TMI 19
SSI exemption - use of Brand name of others - printing the name/logo of the customer - Held that: - Moulded plastic articles which are manufactured by the appellant but the duty had been demanded in respect of those goods on the basis that the appellant have sold them by printing the brand name/logo of the customers. Though the appellant had given the break up of the goods manufactured by them and sold from their shop and the goods purchased from outside and sold from their shop, but this plea had not been considered at all. Even though the factory as well as the shop are owned by the appellant, their factory will be entitled to SSI benefit in respect of goods manufactured there on the basis of the value of such clearances. From the facts of the case, we find that there is no allegation that goods manufactured in the factory are cleared bearing the brand name of customers - there is no reason to allege that goods have been manufactured and cleared bearing the brand name of others. Appeal allowed - decided in favor of appellant.
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2017 (11) TMI 18
Area Based Exemption - N/N. 50/2003-CE dated 10.6.2003 - denial on the ground that the benefit of notification already extended to the original unit cannot be continued to the present appellant since the appellant has set up a completely new unit with fresh machines, making use of only the land and building of the original unit - Held that: - the present appellant purchased an existing unit already availing the benefit of area based exemption w.e.f. from 28.5.2007 but they have chosen to make use of only the land and building of old unit. They installed fresh machines and started manufacture of a completely different and new commodity which has not been made by the original unit - The notification extend the benefit to new units started in the specified areas for a period of ten years from the date of commercial production. The units are required to be installed and commissioned prior to 31.3.2010. The appellant has set up a new unit after the cut off date on the same land and building which was existing in the erstwhile unit. The unit in the present form has come into existence only on 28.3.12. i.e. after the cut off 31.3.2010 and hence the benefit of N/N. 50/2003 cannot be extended to the appellant. Appeal dismissed - decided against appellant.
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2017 (11) TMI 17
Valuation - section 4 or 4A - switch gears weighing more than 25 kg. each cleared to dealers - These switch gears have been assessed by the appellants under Section 4 ibid while the adjudicating authority held that these are liable to be assessed under Section 4A ibid as they were not directly sold to the industrial consumers - Held that: - In terms of provision of Section 4A, only those commodities are required to be assessed under the Section, which are required to be affixed with MRP as per the provisions of Standards of Weights and Measures (Packaged Commodity) Rules, 1977 such required is not there in respect of certain categories of packaged goods - The investigation undertaken by the department has established that the appellants were selling all their switch gear product in packaged condition after repacking and labelling in their factory, after curing the same from their own other unit. The activity of packing/ repacking, labelling etc. on the impugned goods in their factory amounts to manufacture and in the present case are liable to duty in terms of Section 4A. Appeal dismissed - decided against appellant.
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2017 (11) TMI 16
CENVAT credit - proportionate credit on exempt goods - Bulk Drugs & P.P. Medicines - classified under CTH 2939 2090 or under CTH 2942 0090? - Held that: - an identical issue has come up before this Tribunal in the assessee-Respondents' own case for the earlier period IPCA Laboratories Ltd. Vs CCE, Indore [2015 (10) TMI 2325 - CESTAT NEW DELHI], where it was held that In view of the retrospective amendment introduced by Finance Act, 2010, the appellant were entitled to reverse the proportionate cenvat credit attributable to the quantum of input services used in or in relation to manufacture of exempted final product and by foregoing this credit, they have complied with this obligation - credit allowed. CENVAT credit - denial on the ground that Hydroxy Chloroquine Sulphate (HCQS) [medicine] is not dutiable - Held that: - when the duty has been accepted on the final product by the Department, then the assessee-Respondents are entitled for the Cenvat Credit which was rightly allowed by the adjudicating authority - credit allowed. Appeal dismissed - decided against revenue.
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2017 (11) TMI 15
Clandestine removal - parallel invoices, gate passes, challan etc - more than 80% of the clearances made by respondent are to Govt. agencies such as Markfed and MP Agro - Held that: - the impugned order is not sustainable inasmuch as it has not considered all the evidences in proper contexts. The adjudicating authority has also completely ignored the irregularity in non payment of duty on goods cleared on consignment basis to Govt. Marketing Agencies - the matter is required to be sent back to the adjudicating authority for deciding the matter afresh after proper appreciation of evidence - appeal allowed by way of remand.
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2017 (11) TMI 14
CENVAT credit - whether credit availed on capital goods used to set up captive power plant can be denied on the ground that the capacity to manufacture dutiable goods was not set up within a few years? - Held that: - Rule 6(1) and 6(4) of the Cenvat Credit Rules, 2004 lay down that no cenvat credit shall be allowed on inputs/ input services as well as capital goods which are used only in the manufacture of exempted goods or for provision of exempted services - In the present case, the capital goods on which cenvat credit has been availed, have been used only for the purpose of generation of electricity which stands wheeled out to the grid. It is on record that no part of the electricity has been used for manufacture of excisable goods since such plant was never set up. Electricity is not chargeable to any excise duty and falls within the definition of exempted goods in terms of Rule 2(d) of the Cenvat Credit Rules, 2004. Consequently, in terms of Rule 6(4), the cenvat credit availed is to be considered irregular and will be liable for recovery under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944 - appeal dismissed - decided against appellant.
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2017 (11) TMI 13
Refund of unutilized CENVAT credit - finished products supplied to projects financed by Asian Development Bank (ADB) - export/deemed export or not? - Held that: - goods cleared to a project financed by ADB, enjoying exemption in terms of notification No.108/95-CE dated 28.8.1995, are not specified under the category of ‘deemed exports’. Further, the authorities below in the impugned order, recorded that payment for such supply was not being received in foreign currency and no bill of export have also been prepared for the sale of such goods in India. Consequently, the supply to ADB project does not fall in the category of export / deemed export - appeal dismissed - decided against appellant.
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2017 (11) TMI 12
CENVAT credit - inter unit transfer of input - main reason for seeking reversal of Cenvat credit in Unit-II is that the credit has been availed in June, 2011 and in the same month, no manufacture has been reflected - Held that: - there is no dispute about the fact that the imported goods have suffered payment of CVD and the same has been received in Unit-I and subsequently transferred to Unit-II. The invoice transferring such credit to Unit-II is not being disputed for its authenticity. The explanation offered by the appellant for not reflection of any production in the month of June is also plausible and acceptable. A substantial benefit of Cenvat credit available to Unit-II cannot be denied for the procedural delays in issue of invoice and debiting the duty at Unit-I. It is also seen for delayed payment of duty at Unit-I interest has already been paid. Appeal allowed - decided in favor of appellant.
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2017 (11) TMI 11
Clandestine removal - inputs like CRGO steel - the revenue authorities were of the view that there was a excess consumption of raw materials like CRGO sheets, copper etc. and the same was intentionally done so, as to avail unintended cenvat credit on the inputs - whether the said VEL and VTSL are required to reverse the cenvat credit, allegedly having consumed inputs in excess and unrecorded and held to have been removed clandestinely or otherwise? Held that: - The provisions of Cenvat Credit Rules, 2004 more specifically rule 3 clearly indicates that cenvat credit of the duty paid on inputs and input services can be availed by appellant immediately and utilised for discharge of duty on the finished products. Various procedures are laid down in the said Cenvat Credit Rules. In our considered view, if it is not the case of Revenue that appellant has only received the documents and availed credit but did not receive the inputs, nor there are any findings that documents of receipt of inputs are ferged etc. in the absence of any such evidence it has to be held that quantum of inputs as per duty paying documents are received. There is nothing on record to show that the said Power Corporations will reject the transformers in which, if the weight transformer exceeds the wieght in technical specification. It is also surprising that in this case Revenue authorities have conspicuously refrained from recording any statement of the responsible Officers of APEPDCL and APCPDCL, which may have brought on record that excess input usage was not in their knowledge for drawing an inference against the appellant. In our view, there being absence of evidence toindicate that consumption of material was with intent to remove the same or divert the same, we have to hold that Order-in-Original fails and falls miserably. Penalties on the individuals - Held that: - since we have held that the entire demand falls on merits itself, the Revenue appeals also stands rejected. Penalty on VEL & VTSL - Held that: - the appellant has not been able to prove with concrete evidence to come to a conclusion as to the said capital goods were in fact installed in their own unit or otherwise. In the absence of any such evidence, we hold that the demand of ₹ 7,01,044/- is correct, alongwith interest and penalty imposed is also correct. Non confiscation of raw materials and semi finished goods which were found unaccounted - Held that: - the adjudicating authority has come to a conclusion that non accountal was not due to any mens rea for clandestine removal of goods. To come to such a conclusion adjudicating authority has correctly relied upon the factual matrix of the case considering that there were no antecedents - appeal of Revenue rejected. Appeal allowed in part.
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2017 (11) TMI 10
Area Based exemption - N/N. 50/2003 dated 10.06.2003 - manufacture of Motor Vehicle Parts - appellant obtained Central Excise registration in respect of Unit-I and filed a declaration on 21.04.2008 for availing area based exemption under Notification No.50/2003-CE dated 10.06.2003 in respect of Unit-II - two units located within the same premises - Held that: - an identical issue has come up before this Tribunal in the assessee-Appellants’ own case M/s Victoria Automotive Inc & Ors. Vs CCE, Dehradun [2017 (9) TMI 934 - CESTAT NEW DELHI], where it was held that All such units are necessary part of a factory, if located in the contagious area. Each division of a factory manufacturing different identifiable items or undertaking different identifiable processes will have to be considered as a unit of the factory - appeal allowed - decided in favor of appellant-assessee.
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2017 (11) TMI 9
Valuation - physician samples cleared for free distribution - physician samples cleared on sale on principal to principle basis - Held that: - In respect of physician samples cleared for free distribution inter alia res integra it has been conclusively decided that valuation of physician samples manufactured for free distribution are required to be made on the basis of pro-rata value of regular pack of comparable goods in terms of provisions of Rule 4 of Central Excise Valuation Rules, 1988 - The very issue was addressed by the Larger Bench in the case of Cadila Pharmaceuticals Ltd., [2008 (9) TMI 98 - CESTAT AHEMDABAD] where it was held that physician samples being final product not supplied for captive consumption under Rule 8 of Valuation Rules is not applicable and Rule 4 ibid only would be applicable to such goods - appeal dismissed. Physician samples manufactured and sold on P or P basis - demand of differential duty - Held that: - the controversy in this matter has been settled by the Tribunal decisions in Sidmak Laboratories India Ltd., reported in [2008 (9) TMI 360 - CESTAT, AHMEDABAD] where it was held that in such cases that valuation under Section 4 of CEA 1944 was justified - appeal allowed. Penalty - Held that: - there were clearly two views on the manner and method of valuation of physician samples supplied for free distribution - penalty set aside. Appeal allowed in part.
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2017 (11) TMI 8
Mandatory deposit - Section 35F of the Central Excise Act, 1944 - Held that: - When the assesse is one and the same, and their finances are also common, this difference of Unit-I and Unit-II should not come in way in treating the appellants deposits of ₹ 30 lakhs made way back on 20.7.2013 as the deposit for the present appeals, when it is on record that the assesse made this deposit on 20.7.2013 for which they had informed the jurisdictional Commissioner on 22.7.2013 stating that this deposit of ₹ 30 lakhs was towards the liability of Unit-II factory and for which there is an acknowledgment to prove that such a letter was given to the Office of the Commissioner of Central Excise, Mysuru. The said deposit of ₹ 30 lakhs be considered as pre-deposit against the mandatory deposit as required under Section 35F of the Central Excise Act, 1944 - application dismissed.
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2017 (11) TMI 7
Scope of SCN - SCN was issued only on the ground that the subsidy element on urea should be included while arriving at the value for proportionate reversal of cenvat credit. Whereas in the impugned order the Commissioner proceeded entirely on a fresh ground to deny a portion of the credit - Held that: - it is apparent that the whole proceedings against the appellant are only with reference to the non-inclusion of subsidy element given by the Government in the assessable value of exempted urea for the purpose of reversal of credit in terms of Rule 6 of CCR. Nowhere, the proposal regarding disallowing the dealers commission while arriving at the transaction value was alleged or discussed - such proceedings without a proposal in the show cause notice on this ground is legally not sustainable - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 6
Benefit of N/N. 67/1995-CE dated 16.03.1995 - captive consumption of clinker captively consumed in manufacture of Cement, cleared to SEZ units - Revenue entertained the view that since such cement is exempted from payment of Central Excise duty, the exemption for captively consumed clinker in terms of the above Notification is not available - Held that: - Tribunal in large number of appeals in identical set of facts has held that the clearances made to SEZ Units in terms of Rule 19 of Central Excise Rules are not to be considered as exempted clearances and such clearances will not bar the exemption available to captively consumed clinker under N/N. 67/95 - Appeal allowed - decided in favor of appellant.
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2017 (11) TMI 5
Valuation - non-woven fabrics/ sachets of chewing tobacco (Filter Khaini) of 0.25 grams each - respondent claims, that they are covered by regular transaction value based duty in terms of Section 3 read with Section 4 - Revenue entertained a view that they are covered by Chewing Tobacco and Unmanufactured Tobacco Packing Machine (Capacity Determination and Collection of Duty) Rules, 2010 read with Notification 14/2012 CE dated 17/03/2012 - Held that: - Admittedly, the said pouch is a retail package intended for retail consumer - The explanation 5 in the notification makes it abundantly clear that for the purpose of said N/N. 16/2010 ‘Filter Khaini means chewing tobacco which is packed in sachets of filter paper or fabric before being packed in pouches with the aid of packing machines’ - A plain reading of the explanation shows that packing in pouches should be with the aid of packing machines. In the respondent’s own case in identical situation the Tribunal relying on the decision of Tej Ram Dharam Paul [2013 (8) TMI 607 - CESTAT NEW DELHI] held that the Chewing Tobacco Rules, 2010 will not apply to the respondent. Appeal dismissed - decided against appellant.
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2017 (11) TMI 4
CENVAT credit - inputs used for manufacture of exempt as well as taxable goods - non-maintenance of separate set of books - Rule 6(3A)(b) of the Cenvat Credit Rules - whether the appellant has correctly reversed the cenvat credit attributable to the common inputs and input services consumed for exempted goods cleared, for the period 01.04.2008 to 28.02.2009 along with interest or otherwise? - Held that: - It is undisputed that on being pointed out by the audit party, the error in their availment of cenvat credit, appellant reversed the proportionate cenvat credit attributable to the inputs and input services consumed in the manufacturing and clearance of the exempted final products along with interest at the rate of 13% - In the case in hand the appellant has already discharged the interest at the rate of 13% on the common inputs and input services attributable to the exempted goods. In view of this, the impugned order of the adjudicating authority seeking interest at the rate of 24% is unsustainable and liable to be set aside. Penalty - Held that: - there is no reason to visit the appellant with such a penalty under Rule 15(2) of the Cenvat Credit Rules 2004 inasmuch as, it is on record that the appellant has reversed the entire amount of service tax liability with interest prior to the date on which he is supposed to do so i.e. 30th June 2009 - penalties set aside. Appeal allowed - decided in favor of appellant.
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2017 (11) TMI 3
Area Based exemption - N/N. 50/2003-CE dated 10.6.2003 - Revenue entertained a doubt about misuse of the said area based exemption by the appellant in as much as they are also manufacturing various resins namely, Melamine Formaldehyde Resin (MFR) and Phenolic Formaldehyde Resin (PFR), which are further used in the manufacture of various Laminated Boards - Office Memorandum dated 1.6.2012 issued by the Ministry of Chemicals and Fertilizers - Held that: - similar issue decided in the case of M/s Shirdi Industries Ltd. Versus Commissioner of Central Excise & S.T., Meerut-II [2017 (6) TMI 885 - CESTAT ALLAHABAD], where it was held that Once it is established that paper is quoted with certain resols which have the essential characteristics of meriting classification under chapter 39 and which according to Note-01 of chapter 39 are to be called plastics. The clarification dated 1.6.2012 given by the Ministry of Chemicals and Fertilizers has persuasive value. The impugned goods are outside the purview of the Chapter 39 - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 2
Restoration of appeal - decision of stay petition ex-parte - Revenue stated that from the very beginning the appellants were negligent and the Tribunal vide Order dated 02.02.2016 decided the stay application in the absence of the appellant after recording that the appellants have not been appearing for so many occasions - Held that: - from the very beginning the appellant has been negligent in pursuing his case before the Tribunal and the Tribunal has granted many opportunities to the applicant to appear and defend the case but when the appellant did not appear, the Tribunal decided the Stay Petition ex parte on 02.02.2016 and thereafter a miscellaneous application was filed for recalling the Stay Order and none appeared for defending the applicant - In view of these facts, we do not find any justified reasons to recall our order - restoration cannot be allowed - application dismissed.
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CST, VAT & Sales Tax
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2017 (11) TMI 1
Release of seized goods - demand of security as a condition for release of the seized goods - Held that: - the Appellate Tribunal has already reduced the amount to ₹ 3,50,000/- and in such circumstances, having heard the contentions of the parties, we refuse to go into the questions of law raised and we leave it open to the petitioner to pursue his contentions before the Authority in the statutory proceedings - revision petition dismissed.
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