Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 22, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Low gross profit (GP) rate - The increase in the cost of paper itself was 60%. The quality of the paper was also different the assessee having used thicker paper. There were more colours in the assessee's publication which would in turn increase the cost of publication - no additions - HC
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Allowance of Gratuity Scheme - The assessee cannot suffer for the inaction of the Revenue authorities and the Assessing Officer ought not to have disallowed the claim merely because the Commissioner has not granted approval of the Gratuity Scheme. - HC
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Levy of penalty - had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings - HC
Customs
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Benefit of exemption N/N. 06/2002-CEX - Import of Soft Flow Dyeing Machine - the soft flow eyeing machine complete with multi function stock tank are nothing but soft flow eyeing machine complete with dye kitchen and accessories. - benefit of exemption allowed - AT
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Proceedings against the CHA - there is no provisions in CHALR, 2004 to appoint second enquiry officers but Regulation 22(7) only gives power to the Ld. Commissioner of Customs to consider the report submitted by enquiry officers and taken the decision thereon which the Ld. Commissioner failed to do so - AT
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Imposition of penalty u/s 112 of the Customs Act, 1962 - clandestine removal of goods - forgery of signatures of CHA on the bills of entry - the penalty imposed on the appellant by the adjudicating authority are on higher side - reduced to 50% - AT
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Rejection of declared value - overvaluation of imported goods - ‘beverages/carbonated soft drinks - The two proceedings leading to this appeal before us is a pathetic display of arbitrariness and ignorance. Needless to say, it fails to meet the most basic requirement of law and deserves to be set aside - AT
Central Excise
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Cenvat credit - Cryogenic Tank - capital goods - These cryogenic tanks containing liquefied gases were mounted on goods transport vehicles belonging to GTA who transported the goods from the factory to the buyer’ premises - credit allowed of Cryogenic Tank as well as GTA on its transportation - AT
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Valuation - the issue of cost of advertising, marking, publicity incurred by the dealer from their margin cannot be included in the assessable value of the vehicle. - AT
Case Laws:
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Income Tax
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2016 (11) TMI 806
Period of limitation for passing the block assessment order - review petition filed against the order in VLS Finanace Ltd. v. CIT [2016 (4) TMI 1133 - SUPREME COURT ] - Held that:- We have carefully gone through the review petition and the connected papers. We find no error much less apparent in the order impugned wherein held that in the estimation of the assessing officer special audit was essential for passing proper assessment order. If the court, while undertaking judicial review of such an order of the assessing officer directing special audit ultimately holds that such an order is wrong (for whatever reason) that event happens at a later date and would not mean that the benefit of exclusion of the period during which there was a stay order is not to be given to the Revenue. Explanation 1 which permits exclusion of such a time is not dependent upon the final outcome of the proceedings in which interim stay was granted. The review petition is, accordingly, dismissed.
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2016 (11) TMI 805
Reopening of assessment - bad debts written off - Held that:- The assessee has disclosed that the bad debts were transferred to Kotak Mahindra Bank Ltd. for realization, the authority recording the reasons prior to issuance of notice under section 148 of the Income-tax Act, 1961 has specifically recorded that there was no material available on record to indicate that the bad debts have been written off as mandatorily required under section 36(1)(vii) of the Income-tax Act, 1961 as amended with effect from April 1, 1989. If that be so, we find no fault with the notice issued. Consequently, we allow this appeal by setting aside the order of the High Court and dismissing the writ petition filed by the respondent-assessee challenging the said notice. As we have expressed no opinion on the merits of the reassessment, which has been made on December 24, 2010, and it will be open for the respondent-assessee to urge all questions as may be open, in law, in the event the assessee seeks to challenge the reassessment order dated December 24, 2010.
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2016 (11) TMI 804
Grant of interest on refund - Whether, the amendment made by insertion of subsection (1A) in Section 214 by Direct Tax Laws (Amendment) Act, 1984 providing for grant of interest is clarificatory and in any event applicable to the facts of the present case? - Held that:- In the present facts, all orders including the order passed in the regular assessment proceedings by the Assessing Officer were passed after the amended subsection 1A of Section 214 of the Act came into force w.e.f. 1st April, 1985. Moreover, the decision of this Court in Carona Sahu Co. Ltd. (1983 (10) TMI 44 - BOMBAY High Court ) was rendered in the context of Section 214 of the Act prior to the introduction of the amended subsection (1A) in Section 214 of the Act.Therefore, the issue raised herein on merits, stands concluded in favour of the applicant assessee by the decision of this Court in Godrej & Boyce Manufacturing Co. Ltd. (2005 (8) TMI 69 - BOMBAY High Court ) wherein held Section 214 deals with payment of interest on the amount of tax found to have been paid in excess of the tax determined as payable on the regular assessment. Interest will have to be paid from the first day of the relevant assessment year to the date of the regular assessment, i.e., the first assessment. - Decided in favour of assessee
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2016 (11) TMI 803
Penalty under Section 271(1)(C) - Held that:- Merely because an addition has been made during the course of the assessment proceedings would not ipso facto lead to imposition of the penalty as the condition precedent for imposition of penalty under Section 271(1)(c) of the Act is filing of inaccurate particulars of income and / or concealment of income before the penalty can be imposed. The explanation offered by the respondent assessee for not having disclosed the income on dormant contracts in the subject Assessment Year 2007-08 was that it was offered to tax in the subsequent Assessment Years 2008-09 and 2009-10 is an explanation which has been accepted by the CIT(A) and the Tribunal. In the present facts, undisputedly the income has been declared in the subsequent assessment years before the assessment proceedings for the subject Assessment Year 2007-08 was initiated. Thus, the only issue which arises is about the year of taxability of income and it is certainly not a question of concealment of income and / or filing of inaccurate particulars of income by the respondent assessee.
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2016 (11) TMI 802
Rejection of books of accounts - Held that:- We are of the opinion that the books of accounts ought not have been rejected by the Assessing Officer. We are in complete agreement with the view taken by the CIT (Appeals) and the books of accounts have been rejected on the ground of variation of production and he has not found any irregularity in the books of accounts by way of remittance of any amount or any expenses or any material which has been found by the AO during assessment. Taking into account the provisions of Section 145(2) of the Income Tax Act, the issues are required to be answered in favour of the assessee. Therefore, we are of the opinion that the view taken by the Tribunal is required to be reverted and the view taken by the CIT (Appeals) is required to be restored. - Decided in favour of the assessee
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2016 (11) TMI 801
Penalty under Section 271(1)(c) - entitled to the exemption under Section 54G - whether the explanation by the assessee that the non-reporting of income was on account of the belief held that the benefit accrued under Section 54G, on account of the advice of the CA was either a false explanation or no explanation at all [explanation 1(A)] or whether it was not bona fide [Explanation 1(B)] - Held that:- This Court is of the opinion that the exposition made in N.G. Technologies (2014 (12) TMI 481 - DELHI HIGH COURT ) has to be applied in a fact-specific manner and not in the amplitude that the learned counsel for the revenue suggests. The Court cannot be oblivious of the fact that the companies are advised by experts and CAs who, more often than not, finalise reports. To expect assessees to scan each assessment with a fine comb, as is suggested by the revenue, and thereafter be told that the explanation about its reliance upon expert advice is not bona fide, in the facts of this case, at least do not appeal to this Court. Being a finding of fact based upon broad probabilities, the Court is of the opinion that no substantial question of law arises. - Decided against revenue
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2016 (11) TMI 800
Allowance of payment made towards sub-contractors - genuity of expenditure - Held that:- In the instant case, the work said to have been executed by the sub-contractors is not found as unconcerned or unconnected to the work undertaken by the assessee and hence the claim of payment made for such work by the sub-contractors deserves to be accepted as a genuine expenditure incurred by the assessee. All payments made through banking channel need not be treated as genuine automatically on their face value. Each such transaction ought to be independently examined and considered and no formal conclusion can be drawn about the genuineness regarding the obligation to effect the said payment merely because the payment was effected through a banking channel. In the instant case, we are satisfied that the assessee has produced necessary material before the Commissioner of Income-tax (Appeals), during the course of hearing of the appeal against the order of the Assessing Officer, relating to sub-contracting a part of his work. There is nothing to doubt, in such circumstances, regarding the genuineness of payments effected through banking channels in favour of the two sub-contracting agencies. - Decided in favour of assessee
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2016 (11) TMI 799
Addition made on account of low gross profit rate - rejection of the books of account - ITAT deleted addition - Held that:- AO adopted a gross profit rate of 41.50 per cent on the basis of the gross profit rate of M/s. Pardeep Publication involved in the similar business. That, however, cannot be the only ground for the purpose of determining the gross profit rate. CIT(Appeals) has dealt with the case of M/s. Pardeep Publication in considerable detail and found substantial differences between the assessee and M/s. Pardeep Publication. The publications of the two were also produced before the authorities. The assessee's books are of a higher quality. This was accepted even by the Assessing Officer. The assessee had given greater discounts on its books than that given by M/s. Pardeep Publication. Moreover, its cost of production would be higher as the size of the paper used by M/s. Pardeep Publication in one of its books was less than that of the paper used by the assessee. The increase in the cost of paper itself was 60 per cent. The quality of the paper was also different the assessee having used thicker paper. There were more colours in the assessee's publication which would in turn increase the cost of publication. The Tribunal accepted this approach and the finding. The Tribunal also noted that in the earlier years, the assessee's gross profit rate varied between 21 per cent. to about 24 per cent. In the year in question, it was 25.34 per cent. The Tribunal did not, therefore, find the gross profit rate to be erroneous. - Decided against revenue
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2016 (11) TMI 798
Revision u/s 263 - period of limitation - Subsidy by way of sales tax incentive received - revenue or capital receipt - Held that:- Notice under section 263(1) has been issued with reference to reassessment, apparently to cover up the bar of limitation. The reason obvious is that judicial precedents have made out a difference in a case where the entire assessment is reopened and a fresh reassessment order is passed and in a case where one or two items of assessment order are reassessed and reconsidered and in other respect, initial assessment order is maintained. Considering the fact that impugned notice dated June 8, 2016 issued by the Principal Commissioner of Income- tax, NOIDA, Gautambudh Nagar is in reference to some discrepancy in original assessment order dated October 31, 2011 and not reassessment order dated March 26, 2015, therefore, limitation would run from the date of regular order of assessment and in that view of the matter, impugned notice, evidently is barred by limitation prescribed under section 263(2) of Act, 1961. - Decided in favour of assessee
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2016 (11) TMI 797
Rejection of the books of account - G.P. determination - Held that:- In this case the assessee has shown a turnover of ₹ 116,24,42,199 which was estimated by the Assessing Officer after rejecting the books of account to an amount of ₹ 127,69,28,314 which has now been reduced by the Tribunal to ₹ 120 crore. Be that as it may, even on a turnover of ₹ 116 crore which is as per the assessee himself, the assessee showed a loss of ₹ 2,92,30,610, but neither before the lower authorities nor even before this court the learned counsel for the assessee could justify as to how a loss of almost ₹ 2,92,30,610 was suffered. An assessee has to bring cogent material on record, and prove the reasons for suffering of a loss if the results are not fair or suffers a loss. A genuine loss will always have to be allowed in accordance with law. But we notice that before the three authorities no such evidence, material or reasoning was given about sufferance of loss. Once the Assessing Officer rejects the books of account, applies a particular gross profit rate or/net profit rate, the returned loss goes out of picture, rather it is effaced with what has been applied by the Assessing Officer. Had there been a plausibly reasonable basis of suffering of a genuine loss, possibly the claim of the assessee could have been well justified and reasoned, but in a case like this when admittedly the books of account have been rejected by all the three authorities and even this court found that the learned counsel at the time of arguing the appeal in the first round of litigation in the case of CIT v. Ram Singh (2014 (3) TMI 849 - RAJASTHAN HIGH COURT ), admitted about application of provisions of section 145(3) of the Act, claiming that the loss is required to be allowed, in our view is not proper. To reiterate a point which was already considered by this court about rejecting the books of account under section 145(3) of the Act, is not proper and still learned counsel for the appellants insisted that this court in Ram Singh's case (supra) did not consider this issue. Argument of the learned counsel for the assessee that loss is required to be set off, has no legs to stand, as even otherwise the justification for loss has not been proved by the assessee either before the lower authorities or before this court as to how the assessee would have suffered a loss on a declared turnover of about ₹ 116 crore, particularly in the line in which the assessee is dealing. It is one of the rare cases where we have found that an assessee is declaring such a huge loss when we have come across majority of cases where most of the assessees have declared positive income. In our view, once net profit rate is applied, it takes into consideration the overall trading result, and trading account/profit and loss account as declared, goes out of picture and the resultant figure is the ultimate net income of the assessee. No reason to deviate with the findings of the Tribunal in applying a net profit rate of only 1 per cent. to which we concur with the finding of the fact recorded by the Tribunal, which has also taken into consideration other similarly situated identical cases of liquor traders in the same line as that of the assessee/appellant.
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2016 (11) TMI 796
Interest on loan disallowed - amount utilized for non-business purposes - Held that:- There is no material which proves that there was outstanding interest as on 31.03.2004 in the overdraft account under consideration, the interest accrued on month to month basis had been paid on month to month basis as the deposit of each month was much more than the corresponding interest debited in respective month and as such no part of such interest remained which could be said to have been converted into any loan or advance as on the close of the previous year so as to be deemed not actually paid. Under the facts and the circumstances, the disallowance of interest is deleted - Decided in favour of assessee.
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2016 (11) TMI 795
Penalty under section 271(1)(c) - Held that:- The penalty under section 271(1)(c) is not sine qua non when there is no concealment of income or furnishing inaccurate particulars of income. Merely because there is difference between the income returned and income assessed as a result of disallowance made by the Assessing Officer, it cannot be said that the assessee has furnished inaccurate particulars of income. In the present case, outstanding expenses were not believed by the Assessing Officer but outstanding debt was believed. The authority ought to have either believed both or disbelieved both outstanding expenses and outstanding debt. There is no finding to the effect that the details furnished by the assessee are incorrect or false. In that view of the matter, relying on the decision of the apex court in the case of CIT v. Reliance Petroproducts Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT], no penalty can be leviable. Hence the order dated February 25, 2008 passed by the Commissioner of Income-tax, Surat, under section 264 of the Act is quashed and set aside and the penalty under section 271(1)(c) of the Act imposed by the Assessing Officer vide order dated August 30, 2006 is also quashed and set aside. - Decided in favour of assessee
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2016 (11) TMI 794
Allowance of deduction u/s 36(1)(v) - allowance of Gratuity Scheme - Held that:- Assessee is sponsored by UCO Bank, a Government of India Undertaking and duly complied with the conditions laid down for approval under section 36(1)(v). At least the Assessing Officer when this factum was brought to his notice that the assessee has filed copy of the trust-deed, application to the competent authority on September 4, 2000 then even the said letter could have been forwarded to the concerned Commissioner who ought to have taken recourse of either rejecting or approving the Gratuity Scheme created by the assessee. The assessee cannot suffer for the inaction of the Revenue authorities and the Assessing Officer ought not to have disallowed the claim merely because the Commissioner has not granted approval of the Gratuity Scheme. Once the assessee fulfils the condition laid down for approval having created a trust with the Life Insurance Corporation of India, and it is not the case of the Revenue that the assessee has not deposited money in terms of creation of the trust, therefore, in our view the Tribunal on such facts is well justified in holding that the claim is just, proper and allowable. A just and reasonable claim deserves to be allowed. We find that both the appellate authorities have found it allowable on the facts found and is essentially a finding of fact based on material and evidence on record.
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2016 (11) TMI 793
Bogus purchases - proof of genuinity of expenditure - Held that:- The books of account of the assessee, which were duly audited as per provisions of the Act, were found to be not questioned by the Assessing Officer. Although the Assessing Officer ordered deletion of the purchases made from the afore-referred to five creditors, he was found to have taken a self-contradictory stand of accepting the total declared sales of the assessee of over ₹ 2.17 crores, as also the expenses debited to the profit and loss account, which were based on the purchases ordered to be disallowed by him. Tribunal noted that the assessee had fully co-operated in the proceedings before the Assessing Officer by giving details of the disputed creditors, but such information was not acted upon by the Assessing Officer in accordance with the prescribed procedure and was wrongly brushed aside by him only on the ground that the same had been provided at a late stage of the proceedings. The Assessing Officer was found to have the necessary particulars regarding the above referred to five creditors, but for the reasons best known to him, he did not summon any of them. More importantly, the Tribunal noted that for all the purchases ordered to be disallowed by the Assessing Officer, payments had been made by the assessee through account payee cheques, which remained unquestioned by the Assessing Officer. The creditors, having been paid through account payee cheques could thus have easily been traced. - Decided in favour of assessee
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2016 (11) TMI 792
Penalty imposed under section 271(1)(c) - Unexplained investment under section 69B - business income claim rejected - Surrender of income - Held that:- There are not only documents of several unrecorded purchases coupled with the statements of not only the employees and key persons who had purchased the properties but also of the three directors accepting in unequivocal terms the undisclosed investment and detailing by way of separate annexures, the manner in which undisclosed investment was made year-wise. Therefore, the judgment of MAK Data P. Ltd. (2013 (11) TMI 14 - SUPREME COURT ) is squarely applicable wherein held that had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Thus in our view it is a proved case of concealment of income and we are also of the view that penalty was rightly imposed by the Assessing Officer and has rightly been upheld by both the appellate authorities in unison based on evidence and is a finding of fact. - Decided against assessee
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2016 (11) TMI 791
Undisclosed income - fixed deposit in the names of the assessee and his son - Held that:- The agreement was for the sale of a property, which was worth only ₹ 1.5 lakhs whereas the total sale consideration was ₹ 20 lakhs. Secondly, Mr. Kannappan, the alleged purchaser, did not have sufficient source of income or surplus income for purchase of the property. Further, admittedly, the said Kannappan did not affix his signature in the agreement. Therefore, the finding of the Tribunal that the assessee has discharged his burden of proving the source, nature and character of the credit is erroneous. The materials available would only make it very clear that the transaction in question was not genuine and the finding of the Assessing Officer that the amount of undisclosed income is sustainable. Therefore, the first substantial question of law is answered in favour of the Revenue and against the assessee and the finding of the Assessing Officer that ₹ 13.35 lakhs is undisclosed income is restored. Seizure of cash from raid - accumulation of agricultural income - Held that:- No books of account were maintained by the trust and the trust was also found to be an unregistered one and no sale bills were produced by the assessee to show that the agricultural income from the said lands amounted to ₹ 12 lakhs. The burden was on the assessee to prove that ₹ 12 lakhs got accumulated out of the agricultural income from the trust lands, by producing supportive documents, especially, when the lands were leased out to third parties. Therefore, the Tribunal erred in holding that the Revenue failed to produce material on record that the sum of ₹ 12 lakhs was out of the accumulation of agricultural income from the trust lands of the assessee. When the brothers and relatives of the assessee have categorically stated that they have not advanced any money to the assessee nor they have the capacity to do so, the Tribunal erroneously, contrary to the facts, stated that the brothers have accepted the advance amounts paid by them and that they have also established their source. The said finding is perverse. Therefore, the conclusion of the Tribunal that the assessee did not possess any undisclosed income is liable to be set aside. Further, the Tribunal was of the opinion that the assessee produced necessary materials in support of his claim and that it would be sufficient for discharge of his initial burden. But, the said finding is erroneous and contrary to law. The assessee did not produce any document and even the documents produced were not genuine, as rightly found by the Assessing Officer. No corroborative evidence was produced by the assessee to account for the income. Therefore, the second substantial question of law is also answered in favour of the Department and against the assessee and the order of the Assessing Officer is restored.
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Customs
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2016 (11) TMI 817
Denial of benefit of N/N. 06/2002-CEX - Soft Flow Dyeing Machine - Multifunction Stock Tank - Held that: - From the technical write up, we find that the soft flow dyeing machine, the multifunction stock tank is considered as service tank and is functional along with soft flow dyeing machine. We also notice that the appellant had produced a certificate from the manufacturer which indicated that the entire set of soft flow eyeing machine with multifunction stock tank was nothing but fabrics dyeing machine complete with dye kitchen and accessories. N/N. 21/2002 is applicable for the period in question, extends partial exemption from the customs duty for soft flow dyeing machine. While Notification No.6/2002 exempts payment of Central Excise duty on fabrics dyeing machine complete with dye kitchen and accessories . We find that the description as declared by the appellant and the various documents produced in respect of the said machine from the manufacturers, it indicates that soft flow dyeing machine with multifunction stock tank is nothing but fabric dyeing machine complete with dye kitchen and accessories. The write up which was produced before us and as was produced before the lower authorities, clearly indicates that the soft flow eyeing machine complete with multi function stock tank are nothing but soft flow eyeing machine complete with dye kitchen and accessories. Appeal allowed.
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2016 (11) TMI 816
Proceedings against the CHA - attempted export of non-basmati rice - prohibition under SI. No. 45A of Schedule 2 of ITC (HS) - Whether the time limit prescribed under Regulation 22(2) CHALRs 2004 are to be followed strictly or not? - Held that: - The issue of time limit came up before the Hon'ble High Court of Delhi in the case of S.K. Logistics [2016 (4) TMI 1063 - DELHI HIGH COURT] where it was held that A careful perusal of the said order reveals that no plea was urged by the said Appellant CHA before the CESTAT that the mandatory time limit under Regulation 22(5) of CHALR 2004 was violated. What has been recorded in the said order is a contention of the said Appellant that the time limit under Regulation 22(1) of CHALR 2004 was not adhered to. That time limit concerns the issuance of show cause notice "within 90 days from the date of receipt of offence report”. In that case there was no occasion for the CESTAT to consider whether the violation of the time limit under Regulation 22(5) of CHALR 2004 for submitting the enquiry report would vitiate the proceedings. The first enquiry report was submitted by the enquiry officers on 26.06.2012 which was not supplied to the appellant and the Ld. Commissioner of Customs arbitrarily appointed in another enquiry officers on 04.07.2012 who submitted the report as per the wishes of Ld. Commissioner of Customs on 10.08.2012. In fact, there is no provisions in CHALR, 2004 to appoint second enquiry officers but Regulation 22(7) only gives power to the Ld. Commissioner of Customs to consider the report submitted by enquiry officers and taken the decision thereon which the Ld. Commissioner failed to do so - No power to appoint second enquiry officer, which has been done in this case therefore, we do not find any merit in the impugned order, accordingly, the same lacks merit, hence set aside. As the appellant has succeeded on the issue of limitation as well as on the issue of appointment of second enquiry officer therefore, the impugned order is set aside - appeal allowed.
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2016 (11) TMI 815
Imposition of penalty u/s 112 of the Customs Act, 1962 - clandestine removal of goods - forgery of signatures of CHA on the bills of entry - Held that: - As the appellant ran away from the investigation and has not cooperated during the course of investigation which shows that the conduct of the appellant that the appellant was involved in the committing fraud. Therefore, the provisions of section 111 (d) and 111 (o) of the Customs Act, 1962 are applicable to the facts of the case and penalty under section 112 can be imposed on the appellant - I find that the appellant was getting a very small consideration in the huge fraud, therefore, I hold that the penalty imposed on the appellant by the adjudicating authority are on higher side. In that circumstance, the penalties imposed on the appellant are reduced to 50% in each case - appeal disposed off.
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2016 (11) TMI 814
Foreign Collaboration agreement - royalty - Held that: - the appellant are require to import from the foreign collaborator any item which appellant do not manufacture but foreign collaborator does. In respect of such goods the appellant are not liberty to buy from any other person. In view of that it is clear that the Order-in-Original suffers from lack of application of mind. The appeal is dismissed and the matter is remanded back to the Original Adjudicating authority for denovo examination.
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2016 (11) TMI 813
Imposition of penalty u/s 114 and 72 and 112 of Customs Act, 1962 - 100% EOU - duty evasion - cross examination of various persons - principles of natural justice - Held that: - Ld. Commissioner has not even dealt this request of the appellant as he neither allowed the cross examination nor even rejected the request. Therefore the Ld. Commissioner has not considered the request for cross examination in the impugned order. Therefore we find that Adjudicating authority has gravely erred inasmuch as has not followed the principle of natural justice irrespective any grave nature of offence natural justice is the foremost principle which is to be complied with in any judicial/quasi judicial proceedings. Therefore the matter needs to be remand for considering request for cross examination and passing a fresh order - appeal disposed off - matter remanded.
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2016 (11) TMI 812
Rejection of declared value - overvaluation of imported goods - ‘beverages/carbonated soft drinks - SVB - Held that: - Settled law requires acceptance of declared value as transaction value under rule 4 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 and rule 3 permits, in the event of sufficient ground for rejection of declared value, adoption of revised value but in accordance with sequential application of rules 5 to 8. The nature of relationship between importer and supplier have not been adduced and, not unnaturally, the manner in which price was influenced has not been elaborated upon. There does not appear to be any basis for the fixation of enhancement by twenty per cent over the declared value. Indeed, the failure of application of mind on the part of the two lower authorities can be gauged from their inability or unwillingness to identify the goods that were being sought to be re-valued. There is an omnibus reference to rule 9 in the order of original authority which appears to have been concurred with by the first appellate authority without comprehending the oddity of an enhancement apparently under rule 8 with reference to rule 9 which, as even the most casual perusal of the Rules would demonstrate, as applicable only when the declared value is not rejected but is adjusted for the specific circumstances enumerated therein - The two proceedings leading to this appeal before us is a pathetic display of arbitrariness and ignorance. Needless to say, it fails to meet the most basic requirement of law and deserves to be set aside - appeal allowed.
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2016 (11) TMI 811
Maintainability of appeal - Held that: - request for grant of some time to undertake research on the question of maintainability - At request, list on 27th July, 2016
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Service Tax
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2016 (11) TMI 839
Demand - GTA service - Held that: - the appellant itself has arranged for transportation and paid the transportation cost and the same has been recovered from the bottlers. The contention of the appellant is that they were under bona-fide belief that the transportation cost is borne by the bottlers and they are required to pay service tax. In this case, the appellant itself has arranged for transportation and paid transportation changes. In these circumstances, as per Rule 2(1)(d)(iv) of the service tax Rules, 1994, the appellants are liable to pay service tax as they are paying freight charges to the transporters on behalf of the bottlers and as per the said provisions, they are liable to discharge the service tax liability on the GTA services. As the appellant did not pay service tax therefore, I hold that the appellant is liable to pay service tax along with interest during the impugned period on GTA services. Whether the appellant was under bona-fide belief that they are not liable to pay service tax? - Held that: - the appellant has arranged for transportation and paid transportation changes, in that circumstances, the appellant is liable to pay service tax on GTA Service under reverse charges mechanism. Therefore, I hold that the extended period of limitation is rightly invoked in this case. Whether the appellant can be given the benefit of section 80 of the Finance Act, 1994 to impose penalty or not? - Held that: - In this case, the appellant has paid service tax along with interest and the appellant has not got any benefit. In that circumstances, the benefit of section 80 can be given to the appellant. By giving the benefit of section 80 of the Finance Act, 1994, I drop the penalty against the appellant. Matter on remand to verify the fact whether the appellant has paid the service tax along with interest or not, if Service tax has paid along with interest, the proceedings against the appellants shall come to an end otherwise the adjudicating authority is at the liberty to pass an order in terms of law - appeal disposed off by way of remand.
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2016 (11) TMI 838
Rejection of Refund claim - various input services - Rule 5 of the CENVAT Credit Rules, 2004 read with N/N. 5/2006-CE (NT) dated 14.03.2006 - Held that: - the period involved is prior to 01.04.2011 when the definition of input services had a very wide ambit as it include the words activities relating to business. In various judgments of the Tribunal as well as High Courts the subject services have been held to be eligible for credit during the relevant period. In a recent judgment the co-ordinate bench of the Bombay Tribunal in the case of M/s Reliance Industries Ltd. Versus Commissioner of Central Excise & Service Tax, LTU, Mumbai, [2016 (8) TMI 123 - CESTAT MUMBAI] has held the above services to be eligible for credit even post 01.04.2011. In view thereof, I hold that the rejection of refund claim on the ground that input services do not have nexus with the output services is against legal principles. Time bar - Held that: - Section 11B of the Central Excise Act does not mention the relevant date in case of computation of time limit for refund claim filed for refund of service tax/export of services. The Hon’ble High Court of Andhra Pradesh, in the case of CC, CE & ST, Hyderabad Vs Hyundai Motor India Engineering (P) Ltd., [2015 (3) TMI 1049 - ANDHRA PRADESH HIGH COURT] has categorically held that the relevant date for calculating the time limit for grant of refund is the date of receipt of foreign exchange/consideration and not the date when the services were exported/provided. Following the judgment laid by the jurisdictional High Court I hold that the relevant date being the date of receipt of foreign exchange, the refund claim is filed within time. Therefore denial of refund is against law. The appellant is eligible for refund and rejection of the same is unjustified. The impugned order to the extent of rejecting the claim of ₹ 15,53,977/- is unsustainable. The impugned order to this extent is modified and the appeal is allowed on above terms with consequential reliefs, if any
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2016 (11) TMI 837
Retification of mistake - while deciding the appeal filed by the assessee, the appeal of Revenue also arising out of the common impugned order being Appeal No. ST/55857/14, was not taken up for disposal - miscarriage of justice - Held that: - the arguments of the ld. A.R., the Final Order dated 20-1-2015, is recalled in the interest of justice. Accordingly, M.A. (ROM), is allowed.
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2016 (11) TMI 836
Classification of service - commission received from banks and financial institutions - Business Auxiliary Service (BAS) - suppression of disclosure of the transaction - interpretation of statute - Held that: - there was interpretational issue, as to liability to service tax in the matter, as is evident by the nature of activity and clarification by the Larger Bench of this Tribunal. Accordingly, we hold - (i)Service tax is payable under the category of BAS under Section 65(19), by the appellant for the normal period; (ii) Extended period is not invocable; (iii)Penalties imposed are set aside. Appeal allowed.
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2016 (11) TMI 835
Refund - Business Support Services - unjust enrichment - Held that: - the Ld. Counsel has taken me to various documents such as trial balance, annual report for 2006-07 & 2007-08 and schedule thereof wherefrom it is clearly observed that the amount of service tax paid in excess has been shown as ‘receivable’ under the head of ‘Loans and Advances - In my view, this is more than sufficient to show that incidence of excess paid service tax was not passed on to any other person - Decided in favor of the assessee by way of remand.
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2016 (11) TMI 834
SEZ unit - export of services - refund of tax - exemption of the Service Tax as per N/N. 09/2009-ST dated 03.03.2009 - time bar - Held that: - the refund claims of the appellant cannot be rejected for reason that services are wholly consumed within SEZ and they are time barred having been filed beyond the period of six months. It is seen from records of all these cases, refund claims are filed within six months or within a period of one year and the amount of the refund which had been sought the appellant is an amount paid by the service provider and appellant having borne the incidence is eligible to the refund claim. As regards the various discrepancies as noted in the refund claims like no proper invoice, service of hiring of air craft and air transport services not approved by approval committee, registration no. not mentioned on invoices, invoice in the name of other unit, incorrect amount, depreciation allowance, allocation of rent and electricity, bill not produced for verification; we find these things need to be factually verified by the adjudicating authority. In view of this, the refund claim to the extent indicated herein above, we remand the mater back to the adjudicating authority to arrive a conclusion after consideration of the various records that may be produced by the appellant. Appeal allowed - matter remanded.
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2016 (11) TMI 833
Levy of service tax - cargo handling services - Held that: - Firstly, the issue was between the FCI and the Government whether the service tax could be recovered from FCI directly or not. In this context, the present applicant had no direct connection. We had struck down the Central Government’s attempt of recovering the service tax from FCI for the reasons stated in the order. The grievance of the applicant that the Government cannot recover such service tax from the applicant was neither a subject matter of such petition, nor could have been examined at the hands of the applicant even if was joined as a respondent. It is an independent angle of dispute between the applicant and the Government. Likewise, we are conscious that there are multiple disputes between FCI and the contractor. Such disputes were not and at any rate could have been made part of the FCI’s petition. The request of recall of the order is refused. However, it is clarified that none of the observations made in the said order would bind the present applicant in its defense in the disputes with the Government or with FCI as the case may be - application disposed off.
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2016 (11) TMI 832
Maintainability of appeal - fee for filing appeal not paid - rejection of Rebate claim - jurisdiction of Tribunal as per proviso (b) to Section 35B(i) of Central Excise Act - Held that: - though as per the provision of first proviso to Section 35B(i), the order relates to rebate of duty paid on goods exported are not appealable to this Tribunal and in such matter revision application lies before the Revisionary Authority, Government of India in terms of Section 35EE. However in case of service tax there is a specific provision made under Section 86 - From the above Section 86 there is explicit provision by which the order relating to grant of rebate of service tax on input, service tax or rebate of duty paid on input have been carve out for appeal before this Tribunal and in such cases the assessee is required to file revisionary application under Section 35EE. However, in the said provision, the rebate of service tax paid on output service has not been carved out therefore present appeal on the issue of rebate of service tax paid on output service exported out of India is maintainable before this Tribunal. Section 35 EE is applicable but only for the cases related to rebate of service tax paid on input service or duty paid on inputs which were used in the export of services. Since there is independent provision under Section 86 in such cases Section 35 B need not to be resorted. Therefore the present appeals are maintainable. As regard the fees for filing the appeal - Held that: - in case of rebate or refund matters, payment of fees is not required for filing the appeal. Appeal allowed.
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2016 (11) TMI 831
Condonation of delay - Demand of service tax - Manpower Recruitment Service or Supply Agency Service - deputation of employees to other company - the decision in the case of Spirax Marshall P. Ltd., Forbes Marshall P. Ltd. & J.N. Marshall P. Ltd. Versus Commissioner of Central Excise, Pune I [2015 (11) TMI 978 - CESTAT MUMBAI] contested - Held that: - Delay condoned - appeal dismissed.
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Central Excise
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2016 (11) TMI 830
Valuation - inclusion of dealers margin in the assessable value on the ground as per the dealers agreement, dealer is supposed to incur expenses towards advertising, publicity, marketing, after sale services etc. which are required to be done by the respondent and the dealer is compensated for such expenses which is difference in margin and not dealer price - Held that: - the issue of cost of advertising, marking, publicity incurred by the dealer from their margin cannot be included in the assessable value of the vehicle. As regards various other expenses on aftersale services, we find that the Apex Court in the case of CCE v. TVS Motors Co. [2015 (12) TMI 874 - SUPREME COURT] has clearly held that such cost of pre-delivery inspection charges and free aftersale charges incurred by the dealer are not includable in the assessable value of the vehicle sold by the assessee. Appeal rejected - decided against Revenue.
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2016 (11) TMI 829
Recovery of excess ineligible duty draw-back along with appropriate interest - reversal of credit - 100% EOU - Held that: - the appellants have taken CENVAT Credit on inputs and input services and have not availed the CENVAT Credit used in respect of goods manufactured and exported during the period 01 October 2011 to 31st July 2012. This vital fact has not been addressed by the learned Commissioner (Appeals) in right perspective and accordingly, the appeal is allowed by way of remand. The learned adjudicating authority shall have a re-look into all aspects of the matter and shall pass a reasonable and speaking order after following the principles of natural justice - appeal allowed by way of remand.
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2016 (11) TMI 828
Denial of CENVAT credit - Housekeeping services - Held that: - the jurisdictional High Court in the case of Commissioner of Central Excise and Service Tax Versus M/s. Rane TRW Steering Systems Ltd. [2015 (4) TMI 704 - MADRAS HIGH COURT] have held that such services are eligible for cenvat credit. Therefore, respectfully following the ratio laid down in the case, I allow cenvat credit on housekeeping services on the ground that such services form an integral part in the manufacture of final products - Penalty set aside - appeal allowed.
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2016 (11) TMI 827
Denial of service tax credit - “input services” under Rule 2 (l) of CCR, 2004 - services relating to medical treatment for employees in private hospital, construction, painting and cleaning and supply of purified water to employees’ quarters - Held that: - Since the appellants are not contesting the demand for the period post 1.4.2011 and, accordingly, the demand of ₹ 32,322/- and appropriate interest is confirmed. As regards penalty, I find that appellants have acted in a bonafide manner and there is no malafide intention to evade payment of tax, and therefore penalty is not imposable in the facts and circumstances of this case. Accordingly, penalty is set aside in respect of the which is not disputed, subject to payment of interest by the appellants. As regards the demand for the period prior to 1.4.2011 - Held that: - I hold that the appellants are entitled to service tax credit availed on the services relating to the business of the appellants. Demand is accordingly set aside to the extent of ₹ 56,832/-. Since the demand itself is set aside to the extent indicated above, there is no question of levying interest and imposing penalty. Appeal allowed - decided partly in favor of appellant.
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2016 (11) TMI 826
Denial of CENVAT credit - supplier non-existent - issuance of invoice only and not goods - Held that: - M/s S.K. Garg & Sons was registered dealer during the impugned period and all the ER-I returns were filed by M/s S.K. Garg & Sons which were accepted by the department. Therefore, in the absence of any corroborative evidence to show that the appellants have not received the goods, it cannot be alleged against the appellant that they have received the invoices and not the goods merely on the ground that there was not storage facility specifically when the landlord made a statement that the godown was let out to the dealer - reliance placed on the decision of the case of Commissioner of Central Excise Ludhiana Versus M/s. Dhawan Steel Industries [2015 (10) TMI 1325 - CESTAT NEW DELHI] where it was held that Invoices issued by M/s. S K Garg and sons giving details of transporters as well as manufacturer supplier of the goods. No investigation was conducted at the end of manufacturer supplier as well as transporter of the goods to reveal the truth. The case has been made against the respondents on the presumption that supplier dealer is not existing firm therefore, there was only paper transaction. Cases cannot be booked merely on the presumption and assumption, there should be corroborative evidence to prove the allegations. In this case, allegation has not been supported with tangible evidence. Therefore, relying on the precedent decision of the Tribunal in the case of M/s Dhawan Steel Industries, I hold that in the absence of any investigation at the end of manufacturer/supplier or the transporter, the cenvat credit cannot be denied to the appellants - impugned order set aside - appeal allowed.
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2016 (11) TMI 825
CENVAT credit on capital goods - whether the ground that the appellant has not made any clearance by availing benefit of Notification No. 29/04, therefore, the appellant is not entitled to avail cenvat credit on capital goods or parts justified? - the decision in the case of Surya Roshni Ltd. [(155) ELT 481] referred - Held that: - I find that the appellant has availed cenvat credit on capital goods/parts, during the period March, 2005 to September, 2005 and not effected any clearance by availing benefit of notification 29/2004. In October, 2005 the capital goods has been used in manufacturing of goods cleared under notification 29/2004. The decision of this Tribunal in the case of Surya Roshini, Ltd. is not applicable to the facts of this case. As in the said case, at the time of procurement of capital goods, the assessee did not manufacture the any dutiable goods, they have started availing exemption w.e.f. 10.07.2004 of the notification no. 30/2004-CE - As the appellant is availing benefit of notification 29/2004 as well as notification 30/2004. In that circumstance, I hold that the appellant has correctly availed the cenvat credit on capital goods/parts, during the impugned period - CENVAT credit allowed -appeal allowed - decided in favor of appellant.
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2016 (11) TMI 824
Demand - CENVAT credit - inputs and capital goods - Rule 2(K) of the Cenvat Credit Rules, 2004 - whether on the steel items, the assessee is entitled to take cenvat credit used in manufacture of structure, capital goods, parts, accessories, components of capital goods used for joining pipes in the plants, welding etc. with the factory of production or not for the period August' 2006 to December'2008? - Held that: - user test is to be applied for structural items used for fabrication of support structure and the same would be fall within the ambit of capital goods as contemplated under Rule 2(a) (A) of the CCR, 2004, therefore, the cenvat credit of duty paid on welding electrodes was allowed - reliance placed on the decision of the case of Singhal Enterprises Pvt. Ltd [2016 (9) TMI 682 - CESTAT NEW DELHI]. I hold that as the period involved in the matter is that prior to 07.07.2009, therefore, the amended definition of input w.e.f. 07.07.2009 is not applicable to the facts of this case. Therefore, the assessee has rightly availed cenvat credit on inputs in question is allowed.
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2016 (11) TMI 823
Reversal of CENVAT credit - inputs in process, which was destroyed in fire - Held that: - the party had inadvertently reversed the cenvat credit in respect of inputs used in work in process alongwith the credit in respect of raw material in store at the time of fire accident. Later on, they realized their mistake that credit on inputs contained in the work in process was incorrect and applied for refund. The first contention of the revenue that the refund cannot be entertained under Section 11B is not correct as the Larger Bench of Hon'ble Tribunal in case of BDH Industries Ltd, vs, CCE [2008 (7) TMI 78 - CESTAT MUMBAI] has held that all types of refund will be governed by Section 11B of the Act. The second issue whether the appellant was required to reverse the cenvat credit on inputs in process which was destroyed in fire is also no longer res-integra and it has been held in the case Cc vs. Fenner India Ltd. [2014 (11) TMI 704 - MADRAS HIGH COURT] that the credit on inputs in process need not be reversed Appeal allowed.
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2016 (11) TMI 822
Valuation - whether the advertisement cost incurred by dealer and promotional materials sold to the dealers are assessable value or not? - Held that: - As the issue involved in the matter has already been dealt by this tribunal in appellant's own case M/s Maruti Suzuki India Ltd. Versus CCE, Delhi-III [2016 (8) TMI 119 - CESTAT CHANDIGARH] wherein this Tribunal held that advertisement cost incurred by the dealers and promotional materials sold to the dealers are not includible in the assessable value. The advertisement expenses incurred by the dealers and promotional materials sold to the dealers are not includible in the assessable value - appeal allowed.
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2016 (11) TMI 821
SSI exemption - benefit of N/N. 1/93 cit. 28.02.1993 - whether the appellants can exercise option in respect of one item manufactured by them and pay full duty while availing the concessional duty on the other item manufactured by them? - Held that: - a manufacturer has the option of not availing the benefit of the said exemption and to pay duty at the normal rate. Having done so, duty has to be paid on all their subsequent clearances at the normal rate in that particular financial year. Accordingly, once the appellants had exercised the option in respect of waste & scrap and paid full duty liability in respect of waste & scrap, their subsequent clearances were not eligible for partial exemption in terms of Notification 1/93 ibid. The appellants have attempted to create an artificial regime as if they are manufacturing two distinct products, one dutiable and other exempted, while is not the case. Waste and scrap have arisen in an integrated process of manufacture of patta/patti and scrap has arisen only as by product. Subsequent clearance therefore includes clearance of both patta/patti as well as the waste scrap Appeals dismissed.
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2016 (11) TMI 820
Rectification of mistake - there was no specific demand for interest in the adjudicating orders and it was raised only in the appellate stage - Held that: - reliance placed on the decision of the case of CCE, Belarpur, Mumbai Vs. RDC Concrete (India) P.Ltd [2011 (8) TMI 25 - SUPREME COURT OF INDIA] wherein it is detailed out as to when a rectification of mistake can be undertaken - it is held in the case that CESTAT should not exceed its powers and to re-appreciate the evidence, while exercising its powers u/s 35C(2) of the Act, and, therefore, the impugned order passed in pursuance of the rectification application is bad in law and, therefore, the said order is hereby quashed and set aside - following the decision of the Hon’ble Apex Court in the case of RDC Concrete (India) P. Ltd., I am of the view that the applicant is seeking reconsideration of the case which would tantamount to reopening and rehearing the matter in full which is impermissible and thus the ROM Petition is rejected.
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2016 (11) TMI 819
Cenvat credit - Cryogenic Tank - whether the central excise duty or service tax is discharged on the cost charged for use of such tanks from the customers. If the answer is in affirmative, the cenvat credit of duty paid on such tank is to be extended - Held that: - The appellants have charged separate amount from the customers for transporting Nitrogen and Oxygen in the Cryogenic Tanks and Central Excise duty is discharged on such cost collected from the customers for transporting the goods in the Cryogenic Tank designed for such storage and transportation. In the instant case, there is no dispute that appellants have paid Central Excise duty on the cost of transportation charged for the use of Cryogenic Tank and therefore the appellants are entitled for the cenvat credit of duty paid on the Cryogenic Tanks. The very same principle has been upheld in the case of Inox Air Products Ltd. Vs CCE Nagpur [2009 (7) TMI 129 - CESTAT, MUMBAI] wherein the cenvat credit of the service tax paid for GTA service availed by the assessee for outward transportation of the final product from factory to the buyers’ premises was held to be admissible to them. In that case, appellant transported liquefied gases (final product) from their factory to buyers’ premises. Since the gases were to be maintained in liquid form at sub-zero temperatures, cryogenic tanks were used for their storage. These cryogenic tanks containing liquefied gases were mounted on goods transport vehicles belonging to GTA who transported the goods from the factory to the buyer’ premises. The freight for the transportation of the goods was paid by the appellant and this amount was included in the assessable value of the goods for the purpose of payment of duty. The appellants are entitled for capital goods credit on the cryogenic tank used for transporting the liquefied gases as provider of output service - appeal allowed.
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2016 (11) TMI 818
The High Court while dismissing the appeal has not ascribed any reasons whatsoever, except stating that no substantial question of law arises for consideration. In our opinion, the High Court is required to give some reasons indicating that no substantial question of law is involved - In the absence of the reasons, we set aside the order dated 12.02.2016 and remand the matter to the High Court for fresh consideration - SLP disposed off
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CST, VAT & Sales Tax
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2016 (11) TMI 810
Attachment of property - whether the petitioner was diligent enough before the purchase of the properties and as to whether they verified the sales tax dues and other statutory dues, which are payable to the Government? - Held that: - In any event, since the petitioner states that they did not have the copies of any of the documents, this Court is inclined to direct the first respondent to furnish the copies of assessment orders for the relevant assessment years. It is made clear that this Court has not expressed any opinion on the validity of the assessments. However, on the grounds raised by the petitioner, this Court cannot set aside the recovery notice nor lift the attachment of the properties or property at this juncture. It is open to the petitioner to work out their remedies in a manner known to law after receipt of the copies of the documents from the Department - petition disposed off.
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2016 (11) TMI 809
Reversal of ITC - sales suppression - principles of natural justice - Held that: - if the Assessing Officer was of the view that the part of the objections raised by the petitioner were reasonable, then it would have been appropriate for the first respondent to have issued a notice to the petitioner to appear in person along with the records and clarify all the issues. If that had been done, the present Writ Petition itself could have been avoided. At this juncture, this Court would point out that the orders of assessment are not to be passed for statistical purpose but to ensure that the correct rate of tax and the correct quantum of tax is recovered from the dealer. By passing the orders such as the one which is impugned notice in this Writ Petition, no purpose has been served, as it can at best be taken for statistical purpose that the Assessing Officer has completed the assessment. On account of the manner in which the impugned order has been passed, the matter is before this Court and the order has been challenged. Therefore, the Assessing Officer who is a Statutory Authority under the Act, is required to independently apply his mind to all the issues and pass such an order and it would be appropriate for the Assessing Officer to call upon the assessee and direct him to explain all the transactions and after considering the records produced by the dealer the Assessing Officer should pass a detailed order. This is sufficient to hold that the impugned order has been passed in violation of the principles of natural justice - appeal allowed - matter on remand.
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2016 (11) TMI 808
Revision of Assessment - TNVAT Act, 2006 - CST Act, 1956 - purchase from the Registration cancelled dealers and availing of Input Tax Credit - principles of natural justice - Held that: - Having failed to avail the three opportunities granted, now the petitioner cannot contend that the impugned order has to be set-aside and the assessment should be re-done for the entire year. However, with a view to afford an opportunity to the petitioner, this Court is inclined to give one more opportunity to the petitioner to go before the Assessing Officer, subject to certain conditions - petition disposed off - decided in favor of petitioner.
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2016 (11) TMI 807
Failure to file objections in response to notice - request for one more opportunity of being heard - Held that: - the assessment order has been made only on surmises and conjunctures and not based on the books of accounts and the penalty is also levied more than 150% of the tax component. Therefore, in the interest of justice, we are of the view that the petitioner has to be given one more opportunity to produce the accounts before the assessing officer so as to have a fair deal in the framing of assessment. Impugned order set aside - matter remitted back to the respondent and the respondent is directed to conduct a detailed enquiry by summoning the sellers and to grant an opportunity to cross examine the sellers for establishing that the petitioner had not effected such purchases. The said exercise will be completed within a period of three months - petition allowed - decided in favor of petitioner.
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