TMI Tax Updates - e-Newsletter
November 25, 2016

Case Laws in this Newsletter:

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

Articles

1. PROPOSED ADMINISTRATION OF GST (PART-I)

   By: Dr. Sanjiv Agarwal

News

1. No over the counter exchange of old ₹ 500 and ₹ 1000 notes after midnight of 24.11.2016;.Certain other exemptions continued till 15th December, 2016 with certain additions and modifications.

2. Government approves four FDI proposals based on the recommendations of 241st Meeting of Foreign Investment Promotion Board (FIPB) held on 27th October 2016

3. The Union Finance Minister Shri Arun Jaitley holds Video Conferencing with Banks for major push to cash less transactions; Banks to now focus on stepping-up

4. Withdrawal of Legal Tender Character of the existing Bank Notes in the denominations of ₹ 500/- and ₹ 1000/- (Updated as on November 23, 2016)

5. RBI Reference Rate for US $

6. Deposit of old demonetized notes of ₹ 500 and ₹ 1000 in Small Savings Schemes

7. Survey on Modi App: 93 pc support demonetisation

8. Impact of WTO deliberations on services

9. Promotion of Leather Sector

10. Impact of FTA on valuation of Rupee

11. Insolvency and Bankruptcy Board (IBBI) of India notifies (Insolvency Professional) Regulations, 2016; Regulations inter alia provide for registration, regulation and oversight of insolvency professionals under the Code; These regulations to come into effect from 29th November, 2016

Notifications

Money Laundering

1. 4/2016 - dated 26-9-2016 - PMLA

Prevention of Money-laundering (Restoration of Confiscated Property) Rules, 2016.

Highlights / Catch Notes

Income Tax

• Interest on Loans for Non-Business Use Not Deductible as Business Expense u/s 37 of Income Tax Act.

  Case-Laws - HC : Assessee has raised loans and paid interest and forwarded the same for non-business consideration therefore the interest from the said amount cannot be allowed as business expenditure u/s 37 - HC
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• Tribunal Mistakenly Applies Section 32AB Deduction to Overall Business Profit Instead of Individual Units' Profit.

  Case-Laws - HC : Tribunal has committed a grave error in holding that the deduction u/s 32AB of the Act is allowable with reference to the profit of the business as a whole and not in respect of the profit of any particular unit. - HC
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• High Court Denies Taxpayer Refund Due to Invalid Return u/s 139(9) of Income Tax Act.

  Case-Laws - HC : Claim of refund of tax paid earlier since the return was treated as Invalid by the AO - delay in rectification of return u/s 139(9) - refund cannot be allowed - HC
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• Interest Imposed for Deferment of Advance Tax Payments u/s 234C of Income Tax Act for Shortfall in Payment.

  Case-Laws - HC : Interest for deferment of advance tax - Section 234C is applicable where there is shortfall in the making of payment, by the assessee, on the returned income, whether it be on account of underestimate or failure to estimate the amount of capital income or the income of the nature referred to u/s 2(24)(ix) - HC
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• High Court clarifies Section 80-O: Services must be performed abroad to qualify, ensuring Explanation (iii) remains effective.

  Case-Laws - HC : In the context of section 80-O, the services may be rendered from India, but have to be performed on foreign soil. Any other interpretation renders the Explanation (iii), in our view, otiose. - HC
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• Domestic Arm's Length Principle in Transfer Pricing Goes Beyond Tax Treaty Rules, Governing General Enterprise Taxation.

  Case-Laws - AT : ALP adjustments - there is a school of thought that a domestic arm’s length principle, which is what transfer pricing legislation represents, goes much beyond a tax treaty’s normal rule making scope since this arm’s length principle governs taxation of an enterprise in general and the tax treaties do not restrict domestic law in this respect - AT
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• Transaction with Caterer Classified as Charitable Activity, Affecting Tax Exemption Eligibility Under Income Tax Act Sections 11 and 12.

  Case-Laws - AT : Exemption u/s 11 & 12 - whether transaction with the caterer was in substance a mere passive letting of property, which could in no way be regarded as a business? - it is an activity undertaken to enable it to carry out its charitable activities in an effective manner. - AT
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• Software Upgrade Costs Deemed Revenue Expenditure Due to Rapid Obsolescence, No Long-Term Asset Acquisition Involved.

  Case-Laws - AT : Expenses incurred on up-gradation of software do not result into acquisition of any asset nor acquisition of enduring benefits as software become obsolete very quickly - allowed as revenue expenditure - AT
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Customs

• Refund Claim for 1% Extra Duty Deposit Rejected; EDD Not Subject to Unjust Enrichment Doctrine for Refunds.

  Case-Laws - AT : Rejection of refund claim - EDD - 1% extra duty deposit - EDD is in the form of security and the doctrine of ‘unjust enrichment’ is not applicable in the case of refund of EDD - AT
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• Project Import Exemption Not Applicable to Turbines Converting Heat to Kinetic Energy Under Notification No. 6/2002-CE.

  Case-Laws - AT : Project import - benefit of Notification No. 6/2002-CE dt.1.3.2002 - the exemption cannot be extended to turbine which converts heat energy into rotational energy (kinetic energy) - AT
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Indian Laws

• Old Rs. 500 and Rs. 1000 notes exchange ended November 24, 2016; limited exemptions extended until December 15, 2016.

  News : No over the counter exchange of old ₹ 500 and ₹ 1000 notes after midnight of 24.11.2016;.Certain other exemptions continued till 15th December, 2016 with certain additions and modifications.
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Service Tax

• Court Invalidates Service Tax on Restaurants Under Sub Clause (zzzzv) of Section 65, Finance Act 1994; Refunds Ordered.

  Case-Laws - HC : Constitutional validity of levy of service tax on restaurants - Validity of sub clause (zzzzv) of clause 105 of Section 65 of the Finance Act, 1994 - The declaration sought for is granted and service tax already collected shall be refunded to the respective parties. - HC
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• Broker Not Classified as Commission Agent Under Business Auxiliary Service for Tax Purposes.

  Case-Laws - AT : Business Auxiliary Service - appellant has acted as a broker and made available the details of financiers to potential operators. - such an activity will not bring the assessee under the commission agent. - AT
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Central Excise

• Denatured alcohol classified as excisable under CENVAT Credit Rules, 2004; mandates equal treatment for all manufacturers.

  Case-Laws - AT : The denatured alcohol is acknowledged as an excisable good and 'output' in terms of CENVAT Credit Rules, 2004. There cannot be discriminatory treatment in the treatment accorded to two manufacturers of the same product merely on the ground that one uses captively produced molasses and the other procures from external sources - AT
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• Refund Claim Denied: Appellant Failed to Prove Duty Burden Not Passed to Customers u/s 11B of Central Excise Act.

  Case-Laws - AT : Rejection of refund claim - the assertion of the appellant that price has been uniform is misplaced and is not correct. Section 11B of the Central Excise Act, 1944 put the onus of proving all the burden of duty has not been passed on to the customers and passed on claiming the refund. - AT
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• Cenvat Credit Approved for Bank Payments on GDR Fundraising in April 2008, Linked to Business Activities.

  Case-Laws - AT : Cenvat Credit - input services - payment rendered to M/s.Amas Bank for raising funds through GDRs for USD Million during April 2008 - The wordings relating to business' is also very apt for the factual scenario in this case - credit allowed - AT
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• Examining CENVAT Credit on NCCD Paid for Polyester Yarn: Duty Exemption vs. CENVAT Credit Benefits and Revenue Impact.

  Case-Laws - AT : CENVAT credit of NCCD paid on Partially Oriented Polyester Yarn (POY) - Simultaneous availment of duty exemption and benefit of cenvat credit militates against the very object of NCCD levy and would lead to huge leakages in revenue - AT
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• Penalties u/r 26 of Central Excise Rules, 2002, Can Be Imposed Without Goods Confiscation Proposal.

  Case-Laws - AT : Levy of penalty in the absence of confiscation - penalty under Rule 26 of the Central Excise Rules, 2002 even in case where there is no proposal for confiscation can be imposed - AT
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• Appellants Denied Cenvat Credit for Catering Services Provided to Employees at Factory Under Cenvat Rule.

  Case-Laws - AT : Cenvat Credit - Recovery of cost from employees - The appellants had claimed that the credit of outdoor catering services were availed by the appellant for making provision for food and beverages for employees of the appellant employed at its factory. - credit not allowed - AT
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VAT

• Penalty Imposed for Non-Compliance with Vehicle Movement Procedure Under VAT Laws; Punching Requirement Violated.

  Case-Laws - HC : Levy of penalty for not following procedure for movement of vehicle carrying goods - the punching having been introduced in VAT laws as an additional feature, it is also required to be taken care of by the assessee, that the punching is to be done and if not then there is a serious deficiency. - HC
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• Court Allows Input Tax Credit Based on VAT Invoice, Ignoring Actual Sale Value of Goods.

  Case-Laws - HC : Input Tax Credit - sale of goods at a rate lower than the price shown in the VAT invoice (purchase price) - Input Tax Credit is allowable as per VAT invoice irrespective of sale value of the goods - HC
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• Tribunal's Rejection of Applicant's Trade Discount Claim on Vehicle Sales Unjustified Under VAT and Sales Tax Laws.

  Case-Laws - HC : Valuation - sale of vehicles - discount allowed by issue of credit notes - Tribunal was not justified in rejecting the claim of the applicant by holding that the assessee is not entitled for the Trade Discount - HC
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Case Laws:

• Income Tax

• 2016 (11) TMI 1029
  Disallowance u/s 14A - Held that:- The assessee’s case is covered by sub-sections (2) & (3) of section 14A as the assessee is claiming that no expenditure has been incurred by it in relation to the exempt income. We have seen that as per the balance sheet , investment reflected in as on 31.03.2010 was of Rs. 29,98,21,124/-. Further, as per the balance sheet for AY 2009-10, the total investment of the assessee as on 31.03.2010 was Rs. 29,98,21,124/- and the assessee was having reserve and surplus amount of Rs. 1,48,60,50,942/-. The assessee has secured loan of Rs. 3,70,00,000/-. The assessee-company has own sufficient fund. We have noticed that before making disallowance the AO not made any enquiry about the nature of investment as if it was strategic or the investment were made in earlier years and the manner in which exempt income was derived and credited to the account of assessee. Similarly no such exercise was made by Ld. CIT(A). The power of ld CIT(A) is co-terminus with AO. The disallowance made by AO and sustained by ld CIT(A) is not in accordance with the procedure prescribed u/s 14A r.w.s. Rule 8D. There is no finding that assessee has sufficient fund available with him or not. Hence, we deem it appropriate to restore this ground of appeal to the file of AO to pass order afresh. Disallowance of Software Usages Charges - revenue v/s capital expenditure - Held that:- For ascertaining as to whether the expenditure of computer software gives enduring benefit to assessee, the duration of time for which assessee required right to use the software become relevant having regard to the fact that software becomes obsolete with technological innovation and advancement within a short span of time, it would be said that where the life of computer software is shorter (less than 2 years) it may be treated as revenue expenditure. In Thomas Cook (India) ltd Vs DCIT (2006 (1) TMI 176 - ITAT BOMBAY-I ) the coordinate bench of Tribunal held that expenses incurred on up-gradation of software do not result into acquisition of any asset nor acquisition of enduring benefits as software become obsolete very quickly.

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• 2016 (11) TMI 1028
  Exemption u/s 11 & 12 denied - whether transaction with the caterer was in substance a mere passive letting of property, which could in no way be regarded as a business? - Held that:- So far as assessee-trust is concerned, it has been paid by M/s. Karishma Catering Services Pvt. Ltd. for providing right to use the premises owned by the assessee. Considering the mechanics of agreement between both it would be inappropriate to hold that assessee is engaged in carrying out any business activity jointly with M/s. Karishma Catering Services Pvt. Ltd. Factually, there is no material to suggest that any facilities have been allowed by the assessee to M/s. Karishma Catering Services Pvt. Ltd. other than allowing use of the property, which in simple terms tantamount to rental arrangement. No doubt, M/s. Karishma Catering Services Pvt. Ltd. is engaged in carrying out the business activities, but so far as assessee is concerned, it is receiving a fixed sum as compensation for allowing the use of property owned by it. Therefore, qua the assessee such receipts are in the nature of rental income only. The impugned income earned by the assessee from providing right to use of a property owned by it cannot be construed to be an income from business activity and rather, it is an activity undertaken to enable it to carry out its charitable activities in an effective manner. Therefore, the action of Assessing Officer is liable to be negated.- Decided in favour of assessee

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• 2016 (11) TMI 1027
  Reopening of assessment - correctness of the reasons for reopening - Held that:- The present writ petition is premature. Accordingly, this Court while rejecting the relief sought for by the petitioner, directs the petitioner to submit its objections to the reasons for reopening as furnished by the first respondent, vide proceedings dated 10.02.2015 within a period of 30 days from the receipt of a copy of this order, in which the petitioner shall raise all issues both factual as well as legal. On receipt of the reply by the petitioner, the first respondent shall consider the same without in any manner being influenced by the observations made in this order and pass a speaking order and communicate the same to the petitioner so as to enable them to workout their remedy available under the Income Tax Act.

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• 2016 (11) TMI 1026
  Addition u/s 68 - genuineness of the claim of sundry creditors - Held that:- Most of the liabilities were of the current year or immediately preceding year and the accounts were active in nature and the transactions were being carried out for the current year as well as in the subsequent year. Considering these facts and circumstances of the case, we are of the view that the addition was rightly deleted and find no infirmity in his order which is sustained. - Decided in favour of assessee

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• 2016 (11) TMI 1025
  Addition on account of surrender during the survey under section 133A - Held that:- AO found that the pre-survey and post-survey profit and loss account of the assessee showed for the period 01.04.2006 to 07.09.2006 a net profit of Rs. 83,47,719/- and for the latter period i.e. from 08.09.2006 to 31.03.2007 net profit of Rs. 77.75 lacs which included an amount of Rs. 67 lacs as income surrendered during the survey. On this basis, it was found that the net profit for the post-survey period itself was about Rs. 10,75,832/-. Accordingly, this amount was added to the surrendered income of Rs. 1,60,00,000/-. The Tribunal confirmed the Assessing Officer’s view that by preparing the profit and loss account in a particular manner, the assessee had attempted to circumvent the undertaking given in the said letter. The Tribunal also agreed that there was voluminous incriminating material found during the survey and by surrendering the said amount, the assessee had the benefit of having the further enquiry shut. The view taken by the Assessing Officer and the Tribunal cannot be said to be perverse. The amount of Rs. 1,60,00,000/- had been surrendered for the first half of the year. The assessee itself showed a profit of the said amount of Rs. 10.76 lacs and therefore added the same to the surrendered amount of Rs. 1,60,00,000/-. It is to say the least a possible approach to the matter. Addition on account of unsecured loans under section 68 - Held that:- The income of all the creditors was below the taxable limit. All of them had their accounts with the Punjab National Bank, Dhuri Branch. We will overlook the fact that the affidavits filed by them are identical. The Tribunal analyzed all the cases individually. For instance, in respect of one of the creditors, namely, Ms. Ranjit Kaur, it was found that she earned a professional income. She opened her account on 18.08.2006 with a sum of Rs. 1500/- and then deposited a sum of Rs. 3,00,000/- in cash on 23.08.2006 and issued a cheque of the same amount on the same day i.e. 23.08.2006. As observed by the Tribunal, if she was a professional, there was no explanation why she had not opened her own account earlier. Moreover, her income was stated to be only Rs. 82,000/- per annum. There was no explanation as to how she had suddenly obtained Rs. 3,00,000/-. In this manner, the Tribunal also analyzed the case of the other alleged lenders.

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• 2016 (11) TMI 1024
  Interest paid to third party - diallowance of claim as business expenditure while estimating the net profit - Held that:- As no interest or very low rate of interest has been charged from family concerns on advances, the assessee has raised loans and paid interest and forwarded the same for non-business consideration therefore the interest from the said amount cannot be allowed as business expenditure u/s 37 of the Act being for non-business consideration, in the absence of any explanation or evidences by the assessee in support of his claim. - Decided against assessee

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• 2016 (11) TMI 1023
  The appeal is admitted on the following reframed substantial question of law :- i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in directing the Assessing Officer to treat the profit arising on the transactions carried out with borrowed funds as “Short Term Capital Gain” instead of “Business Income” ?

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• 2016 (11) TMI 1022
  Denial of exemption under Section 10(23C)(vi) - Held that:- In view of order passed by the Central Board of Direct Taxes vide order dated 16th March, 2007, which is applicable for Assessment Year 1999-2000 and onwards, the assessee/respondent is held entitled for exemption under Section 10(23C) (vi) of the Income Tax Act, 1961. Learned Tribunal has already affirmed the order of Commissioner of Income Tax (Appeals), who had allowed the exemption to the assessee/respondent, while allowing the appeal of the assessee.

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• 2016 (11) TMI 1021
  MAT computation - whether Capital gains which form part of the net profit is the profit and loss account of the assessee company, should not be taken into account for calculation of tax on book profits as per section 115JB? - Held that:- The allowance or otherwise of the claim under Section 54AC has to be seen in the context of the provisions of Section 115 JB which is a self contained code of assessment. The levy of tax is on the book profits after effecting various upward and downward adjustments as set out in terms of the Explanation thereto. The provisions of sub-section (5) of s.115 JB open the assessment to the application of all other provisions contained in the Income tax Act except if specifically barred by that section itself. S.115 JB (5) Thus, the adjusted book profits would be further eligible to the benefits set out in the other provisions of the Act and the plain language of Section 115 JB thus admits of the grant of relief under section 54 EC in an assessment thereunder. - Decided against arevenue

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• 2016 (11) TMI 1020
  Reopening of assessment - Deduction under Section 32AB allowable with reference to the profits of the business as a whole and not in respect of the profit of any particular unit - assessee is a family trust - ITAT considering the profits of the business of the assessee as a whole and not in respect of the profit of Patel Detergents (Manufacturing Division) Held that:- Considering the provisions of Section 32AB prevailing at the relevant time, assessee is entitled to the deduction under Section 32AB of the Act equal to 20% of the profit from `eligible business or profession'. Therefore, it cannot be disputed that the profits of Patel Detergents (Manufacturing Division) can be said to be profits of `eligible business'. On and after the amendment in Section 32AB of the Act and after deletion of the word `eligible', for the purpose of computation of the deduction under Section 32AB of the Act, the profits of the business of the assessee as a whole is required to be considered. Under the circumstances, considering the provisions of Section 32AB of the Act prevailing for the year under consideration i.e. Assessment Year 1988-89 the assessee shall be entitled to the deduction under Section 32AB of the Act equal to 20% of the profits of Patel Detergents (Manufacturing Division) being the profits of `eligible business', and therefore, the Tribunal has committed a grave error in holding that the deduction under Section 32AB of the Act is allowable with reference to the profit of the business as a whole and not in respect of the profit of any particular unit. The present appeal succeeds and is allowed. The impugned judgment and order passed by the learned ITAT confirming the calculation made by the Assessing Officer confirmed by the learned CIT(A) with respect to the deduction under Section 32AB of the Act by holding that the deduction under Section 32AB of the Act is allowable with reference to the profit of the business as a whole and not in respect of profit of any particular unit is hereby quashed and set aside and it is held that the assessee shall be entitled to the deduction under Section 32AB of the Act with reference to the profits of Patel Detergents (Manufacturing Division) as claimed and granted by the Assessing Officer while passing the original order of assessment. - Decided in favour of assessee

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• 2016 (11) TMI 1019
  Revision u/s 263 - tds liability u/s 194C - Held that:- AO in his order has clearly mentioned that relevant records were produced and verified on test check basis and the assessment was framed after discussions, the information/ letter supplied by the assessee stands on record. This leads to an inference that AO has considered all the relevant aspects about the assessment, and there is no case of lack of enquiry in this behalf during assessment. The level of enquiry in assessment proceedings is always a debatable proposition depending on the authority concerned. It has been held that conceptual difference on the manner of inquiry cannot make the assessment order erroneous or prejudicial to the interest of revenue. Even on merits, there is no loss to the Revenue inasmuch as it is not disputed that tanker receipts surplus has been shown by AKHK and is asssessed at same rate. All the transactions are duly disclosed and it cannot be held that AOs order is erroneous or prejudicial to the interest of revenue. The Tribunal has thus given a finding that all the transactions are duly disclosed and it cannot be held that AOs order is erroneous or prejudicial to the interest of revenue. - Decided in favour of assessee.

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• 2016 (11) TMI 1018
  Adoption of "Bright Line" Test - TPA - Held that:- This Court had categorically ruled against the adoption of the Bright Line Test while deciding host of issues, including Advertising, Marketing and Promotion expenditure (AMP) in the context of benchmarking international transactions while determining the Arm's Length Price (ALP). In the circumstances, the assessment and the order to the extent it resulted in substantial additions and the demand in question could not have been enforced pending the assessee's appeal before the ITAT. The respondents are, therefore, directed to keep the demand in abeyance and not take any coercive measures till the final decision by the ITAT in the assessee's appeal. The final order of the ITAT shall be given due tax effect. Nothing in this order shall preclude the contentions of the parties on the merits of the pending appeal.

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• 2016 (11) TMI 1017
  Deemed dividend u/s 2(22)(e) - Held that:- Advances being for trade and business considerations, assessee having not derived any benefit out of it and rather having acquired disadvantage for the betterment of the company's business cannot be saddled with additions u/s 2(22)(e)

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• 2016 (11) TMI 1016
  Legality of including the amounts received by the appellant by way of reimbursement under Section 44BB of the Income Tax Act - Held that:- Tribunal has followed the decision of the Coordinate Bench and found that the issue is covered against the appellant and dismissed the appeal. No reason to entertain this Appeal.

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• 2016 (11) TMI 1015
  Reopening of assessment - respondent has contended that AO while deciding the assessment has gone to the unamended provisions - Held that:- The AO has not applied the amended provisions and in that view of the matter, we are of the opinion that the view taken by the AO, since return was not filed under section 148 of the Income Tax Act, first question is required to be answered against assessee as the AO has not touched amended provisions and in that view of the matter, the first issue is answered against the assessee.

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• 2016 (11) TMI 1014
  Claim of refund of tax paid earlier since the return was treated as Invalid by the AO - delay in rectification of return u/s 139(9) - After declaring the above return of income as invalid return, the revenue invoking coercive action for recovery of the tax and interest - attachment orders - Held that:- This court is of opinion that the reliance on the Karnataka High Court ruling in K. Nagesh (2015 (6) TMI 217 - KARNATAKA HIGH COURT ) for saying that the amounts paid as advance tax are in fact refundable, because of Section 139 (9) read with Section 240 is inapt. That court, with respect, appears to have overlooked the salient aspect underscored by the Supreme Court, i.e., the levy of tax is under Section 4 (1); the rates may vary. Likewise, filing of return, self-assessment tax, advance tax, etc. and provisions which flesh out the mechanisms under the Act for collection cannot be construed literally. Even Section 240 presupposes an order, leading to refund. Now, it is moot whether the nullification on ground of non-compliance due- not due to denial of liability - but other reasons, automatically leads to a situation contended by the assesseee. Facially, the contention is insubstantial, because Section 139, even while obliging the officer to a course of action, i.e., declaring the return invalid, also says significantly that “and the provisions of this Act shall apply as if the assessee had failed to furnish the return.” Furthermore, as clarified by the Supreme Court, Section 240 itself is premised upon some authority of the revenue officials to decide whether the entire amount deposited, or part of it, or none at all, is to be refunded. Besides the above conclusion, this court is also of the view that the assessment is at large, given that the search resulted in a notice to the assessee under Section 153A. No doubt, it has claimed refund; yet those issues are to be adjudicated. Therefore, its claim cannot succeed.

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• 2016 (11) TMI 1013
  Double deposit of TDS - error in return - Held that:- Going through the documents available on record we find that the contention of the petitioner in the matter of depositing towards deduction of TDS in the matter of purchase of property by registered sale deed and deposit of the amount as required under Section 194IA of the Income Tax Act seems to be correct. Since the department having not taken a decision since 2014, we issue the following the directions: (a) On petitioner's filing a certified copy of this order along with relevant documents before the respondent No.3, the respondent No.3 shall look into matter and verify the allegation of the petitioner and if petitioner found entitlement to the amount, the same shall be refunded to her within a period of 45 days from today. It shall be incumbent upon the respondent No.3 to record reasons while order speaking in nature indicating the reason as to why he does not accept the contention of the petitioner.

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• 2016 (11) TMI 1012
  Disallowance u/s 14A - Held that:- The funds/reserves of the appellant were sufficient to cover the interest free advances made by it to its sister company. We are entirely in agreement with the judgment of the Bombay High Court in Commissioner of Income Tax v. Reliance Utilities & Power Ltd., (2009 (1) TMI 4 - BOMBAY HIGH COURT) para-10, that if there are interest free funds available a presumption would arise that investment would be out of the interest free funds generated or available with the company if the interest free funds were sufficient to meet the investment - Decided in favour of assessee Allowance of legal and professional expenses - ITAT allowed the claim - Held that:- It is not possible to say that the conclusion arrived at by the Tribunal is absurd or perverse. It is a possible view. The services such as of the nature mentioned in the agreement between the assessee and M/s Max UK Ltd. would not necessarily be recorded in writing. Advice, introductions, information may well be communicated orally. The possibility of this is enhanced on account of the fact that these are group companies. Even if each of the facts by itself does not support the Tribunal’s conclusion taken together they certainly do. The Tribunal has, therefore, taken a possible view.- Decided in favour of assessee

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• 2016 (11) TMI 1011
  Interest for deferment of advance tax - mandation of interest levy - Held that:- Once it is held that interest under Section 234C of the Act, is mandatory and automatic, then the reason, or the cause for the delay and justification for deferment of payment of advance tax, is immaterial. The assessee has to pay tax in advance, in respect of total income which would be chargeable to tax for the assessment year immediately following the financial year. The assessee has to estimate the income and pay the tax in three installments, as stated above. The fact that an unanticipated income accrued in the last financial year, cannot be a ground not to pay advance tax with regard to the returned income, which includes the total income, on which tax is chargeable and on the failure to pay the advance tax, in instalments as provided for, under the Act or when the less amount is paid, the assessee is liable to pay interest. Line of judgments indicate that Section 234C of the Act is mandatory, unlike earlier provisions. No discretion is left to the authority, except in those cases, for which, provision has been made under Section 234(C) of the Act. Section 234C of the Act is applicable to cases, where there is shortfall in the making of payment, by the assessee, on the returned income, whether it be on account of underestimate or failure to estimate the amount of capital income or the income of the nature referred to in sub-clause (ix) of clause (24) of Section 2 of the Act; except in the case of income from any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from any gambling or betting of any form or nature whatsoever.

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• 2016 (11) TMI 1010
  Claim for deduction under section 80-O - Whether the services rendered by the assessees are from India or in India ? - Held that:- Tribunal has erred on two counts in holding that the assessees are entitled to the benefit of deduction under section 80-O of the Act : First, mere transmission of the information to a foreign enterprise, evidently, abroad does not go to show that it is a service rendered from India, but not in India. With an element of certainty, we can as well say that once there is a contract, an Indian agent always interacts with and sends information-even technical know-how-to a foreign enterprise abroad. If that alone qualifies for deduction without reference to "the services rendered in India", the very expression in explanation (iii) becomes otiose. Trite it is to observe that statutory surplusage is not a settled canon of construction ; rather it is to be avoided. The purpose of the provision is to provide an incentive to the indigenous know-how of whatever nature that reaches the shores of foreign nations and gets applied there. The resultant fruits may percolate to India, too, as is the case in E.P.W. Da Costa [1979 (2) TMI 40 - DELHI High Court ] and Continental Construction [1992 (1) TMI 5 - SUPREME Court ], even in which the apex court has held that not all receipts can claim the concession. If we refer back to the analogy employed by the learned senior counsel for the assessees, an advocate in India may render services to a foreign client stationed abroad concerning a case pending in India. It is a service rendered not only from India, but also in India. On the other hand, if that piece of professional advice is used abroad, even involving clients of Indian origin or laws of this nation as it happens in international arbitrations, the remuneration is qualified for the benefit. Once we look at the range of services referred to in section 80-O, we can discern the thread of connectivity in all the intellectual endeavours mentioned therein : any patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to such Government or enterprise by the assessee. It can also be in consideration of technical or professional services rendered or agreed to be rendered outside India to such Government or enterprise by the assessee. They cannot be said to be entirely discrete and disparate. The services have an air of intellectuality ; as such, all and sundry services rendered to a foreign enterprise cannot be taken into account, lest it should amount to doing violence to the Explanation (iii). As seen, rendering includes both providing and performing. In the context of section 80-O, the services may be rendered from India, but have to be performed on foreign soil. Any other interpretation renders the Explanation (iii), in our view, otiose. In the alternative, if one were to assume-it is unlikely, though-that the assessees had rendered certain services which qualify for a deduction, they have, however, failed to place any material in that regard. The agreement unfailingly points out that the assessees are marine-product procuring agents for the foreign enterprises without any claim for expertise capable of being used abroad rather than in India. - Decided in favour of revenue

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• 2016 (11) TMI 1009
  Addition u/s 40(a)(ia) - disallowance of finance charges for non deduction of tds - Held that:- The amount paid by the assessee towards the finance charges include both interest and principle amount and the entire amount has been paid during the relevant previous year. As decided in case of Merilyn Shipping & Transport (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) held that no disallowance u/s 40(a)(ia) can be made if the entire amount is paid during the relevant previous year and nothing remained payable. TDS u/s 194C - Disallowance of transportation charges - Held that:- We agree with the contention of the assessee that the payment made by the assessee to the truck owners is not pursuant to any contract and therefore, provisions of section 194C are not applicable and consequently no disallowance u/s 40(a)(ia) can be made.

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• 2016 (11) TMI 1008
  ALP adjustments non permissibility under Article 9 of the Indo Dutch Tax treaty - Held that:- While the relief in the cases of economic double taxation due to application of arm’s length standards under article 9(1) is available under article 9(2), no such relief is available, under article 9(2), in respect of the juridical double taxation caused by the application of arm’s length standards. That does not, however, matter. The non availability of relief under article 9(2) does not fetter application article 9(1). In a situation in which the residence jurisdiction has yielded limited source taxation rights to a type of income of an assessee, the mere increase in quantum of such a taxable income in the source jurisdiction, due to application of arm’s length principle, need not always be visited with corresponding adjustment under article 9(2) in the residence jurisdiction. In our humble understanding, the restriction to the effect that only economic double taxation can be remedied by the scope of article 9, as learned counsel urges us to infer, does not exist. In view of these discussions, as also bearing in mind entirety of the case, we see no merits in this new plea raised by the assessee. Given our above findings, it is not even necessary to take the judicial call on whether or not article 9 of the Indo Dutch tax treaty, or, for that purpose, OECD Model Convention, restricts or regulates the domestic transfer pricing legislation. That aspect of the matter is academic as on now, because, even if we are to hold that it does restrict or regulate the domestic law provisions on transfer pricing, the application of arm’s length standard cannot be declined because it is a case of juridical double taxation and not economic double taxation. However, as we deal with this interplay between article 9 and transfer pricing legislation, it is important to bear in mind the fact that there is a school of thought that a domestic arm’s length principle, which is what transfer pricing legislation represents, goes much beyond a tax treaty’s normal rule making scope since this arm’s length principle governs taxation of an enterprise in general and the tax treaties do not restrict domestic law in this respect. - Decided against assessee

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• 2016 (11) TMI 975
  Addition on account of notional interest chargeable on the outstanding debtors (associated enterprises) balances - Held that:- Without going into the controversy as to whether the overdue receivables from associated enterprises constitute an ‘international transaction’ within the meaning of Sec. 92B of the Act or not, the assessee deserves to succeed on its alternate plea. The aforesaid discussion clearly shows that after factoring in the notional interest calculated with respect to the overdue receivables from associated enterprises, the reduced margin of assessee is more than the average margin of the comparables selected thereby showing that no further adjustment is required to be made to the stated transactions. It is also quite clear that allowing of extended credit period to the associated enterprises is otherwise closely linked to the determination of sale price, which in-turn is the basis to arrive at the margins of the assessee. Thus, on the aforesaid limited aspect, we hold that the addition of Rs. 15,82,891/- on account of notional interest chargeable on the outstanding debtors (associated enterprises) balances is not tenable and is directed to be deleted

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• 2016 (10) TMI 1003
  Appeal admitted on the following reframed substantial question of law:“ Whether on the facts and circumstances of the case and in law, the Tribunal was justified in directing the AO to treat the profit arising on the frequent and voluminous transactions initiated with borrowed funds in shares as 'Short Term Capital Gain' instead of 'Business Income'?”.

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• Customs

• 2016 (11) TMI 988
  Valuation - related party transaction - import of parts of switches - Held that: - We find that in arriving at the conclusion that the invoice value has not been influenced by the relationship of the appellant with its foreign supplier. In the order dated 15.03.2013, it has been held that the foreign supplier does not supply the same goods to any other buyer in India / other countries; that the goods were supplied pursuant to the conditions prescribed in the purchase orders; that the supplier of goods has included the profit element in the cost of the goods supplied to the appellants; that contemporaneous import of similar/identical goods were not available in the NIDB Data. On verification of the documents submitted by the appellant, since the Dy. Commissioner of Customs, SVB concluded that the relationship did not influence the price and in absence of availability of contemporaneous import of similar /identical goods in the NIDB Data for the relevant period, we are of the view that the said order is in conformity with the Customs Valuation Rules. Therefore, there was no requirement for remanding the matter to the Original Authority for re-looking into the provisions of Rule 3 (3) (b) of the Valuation Rules for ascertaining the valuation of the subject import. Appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 987
  Recovery of duty and imposition of penalty - non payment of duty on slop/waste Oil of foreign origin - whether 432.00 MT of slop/waste Oil involving a total duty of Rs. 4,97,597/- is recoverable from the Assessee-appellant and penalty of equal amount under Section 114A is imposable on them? - whether the waste/slop oil and the barge seized are liable for confiscation? - Held that: - the total quantity of oil imported against nine vessels, only the slop/waste oil discharged by the Assessee against three vessels are of foreign origin and accordingly liable to duty. Besides, the evidences which have been referred to by the learned Commissioner, in confirming the duty in arriving at the quantity of slop/waste oil have been disputed by the learned Advocate for the Assessee-appellant, but, the vital issues that has been raised by the learned Advocate is about the dutiability of the product vis-a-vis the test report and the judgment Hon'ble Supreme Court in the case of CCE Patna Vs Tata Iron & Steel Co. Ltd [2004 (2) TMI 68 - SUPREME COURT OF INDIA] referred to by him before the adjudicating authority. We find that the learned Commissioner at Para 36 of the impugned order, after analysing the relevant tariff heading, though observed that waste/ slop oil is classifiable under CTH 2710, however, not recorded/ analysed the implication of the chemical test carried out by the Department in its laboratory on the sample of slop/waste oil collected and the applicability of the said judgment to arrive at the conclusion whether the said slop/waste oil leviable to Customs duty. In these circumstances, we are of the view that it is prudent to remand the matter to the learned Commissioner to examine the said issues afresh, after giving an opportunity of hearing to the Assessee. - appeal allowed by way of remand.

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• 2016 (11) TMI 986
  Rejection of refund claim - EDD - 1% extra duty deposit - unjust enrichment - Held that: - reliance placed on the decision of the case of C.C., Bangalore Vs. Ecomaster (India) Pvt. Ltd. [2007 (1) TMI 389 - CESTAT, BANGALORE] as the issue is squarely covered. It was held in the case that the amount paid by the assessee was not Customs duty on any imported items but was only a deposit of extra amount. They are asking refund of the same. The Commissioner (Appeals) has taken a correct view that the amount deposited is more than the duty amount and the same is refundable. EDD is in the form of security and the doctrine of ‘unjust enrichment’ is not applicable in the case of refund of EDD - appeal allowed.

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• 2016 (11) TMI 985
  Refund claim - period of limitation - concessional rate of duty - N/N. 345/86 - import of polypropylene granules for manufacture of BOPP film - Held that: - eligibility to benefit of concessional rate of duty under Notification No.345/86 is subject to the condition that importer produces a certificate issued by the Industrial Advisor in the office of the DGTD, GOI. It is undisputed case in hand, the said exemption certificate was produced on 15/07/1993 while the goods were cleared from the docks during the period 04/07/86 to 18/05/1993. Since the basic condition of the notification required the importer to produce the certificate at the time of clearance of the goods from the docks which has not been complied in the case in hand, we find that the refund claim filed by the appellant has been correctly rejected on the ground of limitation and it is also on record that the goods were not assessed provisionally nor duty was paid under protest. For all practical purposes, the appellants have discharged the correct duty liability during the period 1986 to 1993, and refund claim has been filed after a period of six months from the date of payment of duty and hence, we do not find any reason to interfere with the impugned order passed by the lower authorities rejecting the refund claim of the appellant. The appeal is rejected.

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• 2016 (11) TMI 984
  Project import - denial of the benefit of Notification No. 6/2002-CE dt.1.3.2002 - import of steam turbine gearbox and spares - If while availing the concessional rate of duty under Notification No. 21/2002-Cus. dt.1.3.2002, the appellants could simultaneously availed the benefit of Notification No. 6/2002-CE dt. 1.3.2002 for the purpose of CVD? - Held that: - reliance placed on the decision of the case of Triveni Engineering & Industries Ltd. [2004 (6) TMI 128 - CESTAT, BANGALORE] where it was held that the exemption cannot be extended to turbine which converts heat energy into rotational energy (kinetic energy). Therefore, we are not convinced with the appellants plea that the turbine is eligible for nil rate of duty under Sl. No. 251 of Notification No. 6/2000, read with Sl. No. 16 of list of the said notification or under Notification 6/2002, dated 1-3-2002 read with Sl. No. 16 of List 9 - the benefit of Notification No. 6/2002-CE dt. 1.3.2002 cannot be extended to the appellants for the purpose of calculation of CVD. Appeal dismissed - decided against appellant.

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• 2016 (11) TMI 983
  Project import - denial of the benefit of Notification No. 6/2002-CE dt.1.3.2002 - import of steam turbine gearbox and spares - If while availing the concessional rate of duty under Notification No. 21/2002-Cus. dt.1.3.2002, the appellants could simultaneously availed the benefit of Notification No. 6/2002-CE dt. 1.3.2002 for the purpose of CVD? - Held that: - reliance placed on the decision of the case of Triveni Engineering & Industries Ltd. [2004 (6) TMI 128 - CESTAT, BANGALORE] where it was held that the exemption cannot be extended to turbine which converts heat energy into rotational energy (kinetic energy). Therefore, we are not convinced with the appellants plea that the turbine is eligible for nil rate of duty under Sl. No. 251 of Notification No. 6/2000, read with Sl. No. 16 of list of the said notification or under Notification 6/2002, dated 1-3-2002 read with Sl. No. 16 of List 9 - the benefit of Notification No. 6/2002-CE dt. 1.3.2002 cannot be extended to the appellants for the purpose of calculation of CVD. Appeal dismissed - decided against appellant.

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• 2016 (11) TMI 982
  Classification of imported goods - coal - classified as bituminous coal under tariff entry 2701 12 00 or as steam coal under tariff entry 2701 19 20? - Held that: - We find that the High Court decision in the case of BMM Ispat Ltd., Gandhar Oil Refinery (I) Ltd., Gupta Coal India Pvt Ltd, Finolex Industries Ltd Versus The Commissioner of Customs, Central Excise & Service Tax and Others [2015 (11) TMI 1228 - BOMBAY HIGH COURT] are squarely applicable to the present petition, where it was held that there are rival contentions and equally differing views of the Benches of the Tribunal, then, all the more this was not a case for imposition of any condition of pre-deposit. The waiver application should have been granted without imposing any conditions. If the Larger Bench of the Tribunal is to resolve the matter, then all the more, without expressing any opinion on the merits of the controversy, so also on the point whether mere reference to Larger Bench should necessarily result in total waiver and unconditional stay, we are of the view that interest of justice will be served if each of these appeals are allowed. The impugned orders of the Tribunal are quashed and set aside. There will be an unconditional waiver of the requirement of pre-deposit. The condition in that behalf need not be adhered to. There will be an unconditional stay of the recovery of tax pending appeals. Further, recently this Bench in the case of Steel Exchange India Ltd and Others Versus C.C., Visakhapatnam [2016 (11) TMI 218 - CESTAT HYDERABAD] has granted full waiver of pre-deposit on identical matters. We do not find any ground to take a different view in the present case. Following the same, we grant the appellant full waiver of predeposit. The appeal is to be listed for final hearing in due course.

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• Service Tax

• 2016 (11) TMI 1007
  Appeal filed under Section 35-G of Central Excise Act, 1944 - time bar - levy of service tax on the appellant, although payment was received before 1.7.2003, when the service was not taxable under the Finance Act, 2003 - Held that: - the question of limitation has been decided in favour of the assessee by the Ist Appellate Authority. The department thereafter went in appeal but the Tribunal has not addressed this issue at all and has proceeded to decide the matter on merits of the case. The issue of limitation definitely requires reconsideration by the Tribunal. The matter is remanded to the Tribunal for reconsideration of this issue. The Tribunal shall hear and decide the matter on merits and in accordance with law within the next three months and a copy of this order be produced before the Tribunal within the next 15 days - appeal disposed off - matter on remand.

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• 2016 (11) TMI 1006
  Constitutional validity of levy of service tax on restaurants - Validity of sub clause (zzzzv) of clause 105 of Section 65 of the Finance Act, 1994 - Legislative competency of Parliament - Sale of food and drinks - Whether "taxes on the sale and purchase of goods" in Entry 54 of List II of the seventh schedule covers service in the light of the definition of "tax on sale and purchase of goods" under Article 366 (29A) (f) of the Constitution of India - Held that: - reliance placed on the judgment of this Court in Kerala Classified Hotels and Resorts Association v. Union of India [2013 (7) TMI 431 - KERALA HIGH COURT] - That was a case relating to charge of service tax on air conditioned restaurants where they were vending liquors and has licence to serve liquor. Since this case also stands in the same footing, I am of the view that the judgment in Kerala Classified Hotels (supra) applies to the fact situation of the present case also - the matter is pending before the Supreme Court. Further, no stay has been granted in the matter. Therefore, right now, I am inclined to follow the law laid down by this Court and accordingly, this writ petition is allowed. The declaration sought for is granted and service tax already collected shall be refunded to the respective parties.

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• 2016 (11) TMI 1005
  CENVAT credit - telephone services - input service - leased circuit services - Held that: - This is the second round of litigation. In the earlier round of litigation this Tribunal directed the Adjudicating Authority to decide the issue of limitation but the same was not considered. As the facts and records are available before us, therefore, we are having the privilege to decide the issue of limitation. As admitted that the appellant had filed Cenvat credit returns regularly and the same was received by Revenue and in the knowledge of the Department, therefore, the show cause issued for invoking extended period of limitation is not sustainable - We also find that on the issue of valuation on account of sim-card was also being dispute and the same was decided by the Apex Court in Idea Mobile Communications Ltd. [2011 (8) TMI 3 - SUPREME COURT OF INDIA], therefore, extended period of limitation is not invokable during the impugned period. Demand set aside - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 1004
  Demand u/s 65(19) of the Act - levy of tax - commission/brokerage received - Business Auxiliary Service - Held that: - We find that the services rendered by the assessee are in the nature of advice given to their clients for finding the means and sources of fund of business and negotiating the arrangements of the same for use in the business of their clients. It is noteworthy that this activity is not relatable to any goods or services of the clients. Such activities will not bring the assessee within the definition of Commission Agent as given above. Consequently, the assessee cannot be held to have rendered any service under the category of BAS - reliance placed on the decision of the case of Fulchand Tikamchand Vs. CCE, Nagpur [2016 (2) TMI 772 - CESTAT MUMBAI] where it was held that the appellant has acted as a broker and made available the details of financiers to potential operators. The Tribunal held that such an activity will not bring the assessee under the commission agent. Tax not leviable - appeal dismissed - decided against Revenue.

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• 2016 (11) TMI 1003
  Recovery of refund granted - N/N. 41/07-ST dated 6.10.2007 - the taxable service namely, Terminal Handling Charges is not confirming to the port service and GTA Service availed for movement of export cargo from place of removal to the port of export prior to 19.02.2008 is not available for refund in terms of the above referred Notification - Held that: - the services towards terminal and other handling services were availed b the assessee within the port area, in connection with export of the goods. Thus, irrespective of classification of service, since the same are provided within the port for export of goods, the benefit of refund should be available under the head Port Service in terms of notification dated 06.10.2007. In this context, the Tribunal in the case of SRF Ltd., [2015 (9) TMI 1281 - CESTAT NEW DELHI] have held that irrespective of the classification of service, if the services are provided within the port, the same should qualify as port service for the purpose of benefit of refund. Thus, I am of the view that the assessee is eligible for refund of Rs. 16,72,923/- With regard to GTA service availed for transportation of goods from the place of removal to the port of export, I find that the refund claim was filed after issuance of the Notification No. 3/2008 dated 19.02.2008. I also find that in an identical situation, this Tribunal in the case of East India Minerals Ltd. [2012 (8) TMI 22 - CESTAT, KOLKATA] has allowed the refund claim to the appellant. As regards testing and analysis service, I find from the available records that the appellant had entered into the agreement with the overseas buyer for providing such service. Since, the agreement was in existence exist before exportation of goods, I am of the view that the requirement of Notification dated 06.10.2007 has been duly complied with by the assessee, for which refund claim cannot be denied There is correlation between the movement of goods from the place of removal to the port of export. However, I find that the assessee has not produced the copies of the agreements entered into between it and the overseas buyers. Since the contents of the agreements have to be verified by the Original authority, I am of the view that the matter should go back to the original authority for verification of the agreements - appeal allowed by way of remand.

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• 2016 (11) TMI 1002
  Service tax liability - manpower recruitment and supply agency service - Held that: - appellant is a charitable trust who is executing a contractual obligation to M/s Loknete Baburao Patil Sahakari Sakhar Karkhana Ltd., for carrying out the activities of harvesting and transportation of sugar cane on behalf of sugar cane producers and are paid consideration by the sugar factory. It is the finding of adjudicating authority that the payment received by appellant is taxable under the category of “manpower recruitment and supply agency services”. The issue is no more res integra as the Hon'ble High Court of Bombay in the cases CCE v. Shri Samarth Sevabhavi Trust & Ors. [2015 (3) TMI-1170 (Bom)] on identical set of facts upheld the order of the Tribunal that these kind of services are not covered under the category of “manpower recruitment and supply agency services”. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2016 (11) TMI 1001
  Classification of manufactured goods - Pan Samagrai - classified under tariff entry 24039920 or under entry No.24011090? - Held that: - the fact remains that the respondents reply are silent with regard to the requirement of Clause 8 particularly in the matter of providing of sample as has been taken at the time of inspection. Once the statutory Rules contemplated a specific provision for testing of the sample, submission of report and the right is conferred on the assessee to seek retesting by statutory prescribed process, anything done in violation to the statutory Rule cannot be upheld and this Court having considered and quashed similar notice on the ground of violation of statutory Rules, we find that against in the matter of issuing the show cause notice, the statutory provisions have been violated and the rights available to the petitioners for retesting of sample has been violated - Quash the impugned show cause notice dated 10.2.2015 (Annexure P- 6) and grant liberty to the respondents to proceed in the matter in accordance with the statute, if so advised - petition allowed - decided in favor of petitioner.

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• 2016 (11) TMI 1000
  Defect with regard to submission of demand draft/bankers cheque towards court fee during the course of the day - Held that: - the company will deposit only 15% of the amount and the appeal will be entertained on depositing 15% of the amount. Three months time is extended to deposit the amount. The appeal stands disposed of.

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• 2016 (11) TMI 999
  Remission of duty - goods lost during the period from August, 2007 to August, 2008 under Rule 21 of the Central Excise Rules, 2002 - finished goods are of volatile nature - Held that: - there is no dispute on the evaporation loss upon which remission of duty was claimed. The CBEC vide Circular No. 246/80/96-CX dated 01.10.1996 clarified that gasses falling under chapter 28 and 29 produced in a factory and allowed to escape in the atmosphere are not liable to duty. On the basis of the said Circular, the Tribunal allowed the remission application on identical situation as held in the case of CCE vs. B.O.C. India Ltd [2007 (5) TMI 13 - HIGH COURT ,DELHI]. No reason found to reject the application for remission of duty filed by the appellant - appeal allowed.

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• 2016 (11) TMI 998
  Denial of CENVAT credit availed on photo copies of the courier bill of entry - The consolidated bill of entry covering many items imported by various importers is filed by the courier and the same original bill of entry cannot be given to every importer - Held that: - the CBEC vide Circular No.56/95 prescribed the mechanism to solve such issues arising due to import by courier. Cenvat Credit is as goods as cash and allowing credit on simple photo copies can be misused. The original documents have their sanctity and it is not a case where there was no option available to the appellant. The CBEC had prescribed the method which was available to the appellant for availing the said credit. I find that decision of the Tribunal in the case of Tata Precision Industries (India) Ltd. [2005 (4) TMI 492 - CESTAT, NEW DELHI] is exactly the similar circumstances and applicable to the current situation. Appeal dismissed - decided against appellant.

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• 2016 (11) TMI 997
  Abatement and refund - closure of factory for a continuous period of 15 days - manufacturing of Chewing Tobacco and Un-manufactured Tobacco - Held that: - I find that the plea regarding consideration of continuous closure in more than one month has not been raised at lower level - the issue raised at Tribunal is not a pure question of law but a question of law as well as fact it cannot be permitted to be raised for the first time in the Tribunal - appeal dismissed.

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• 2016 (11) TMI 996
  Classification of goods - laminated safety glasses - classified under the head 84.27 or 84.28 as claimed by the appellant, or under heading 73.08/73.26 of CETA? - the decision of Gajra Gears Ltd., Vs. CCE [2015 (5) TMI 629 - SUPREME COURT] referred where it was held that Fork-lift truck is operational without pallets and as such pallets are not parts of the same. If the contention of the Respondent is accepted, motor sprit will be part of a motor car as the same cannot be used without it. Once it is held that pallets are not parts of fork-lift truck, Note 2 to Section XVI is not attracted as it only provides guidance for the classification of parts and not all goods which are used or to be used with the machineries falling in Section XVI of the Tariff. - the impugned pallets, being not part of fork-lift trucks, are not classifiable under Heading 84.31 of the Tariff - it was also held in the case It is an admitted position, as explained by the appellant itself, that these pallets which are manufactured/assembled in the factory of the appellant are in the nature of material handling equipment, to keep and carry work in progress goods from one machine to the other. Thus, the use of the pallets is for carrying out the material from one machine to the other. It cannot, therefore, be said that these goods are used in relation to the manufacture in or in relation to the manufacture of the final products. We are, therefore, of the opinion that column (2) of Notification shall also not be attracted. The issue is squarely covered by the Hon’ble Supreme Court decision in the case of Gajra Gears Ltd., - appeal dismissed - decided against appellant.

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• 2016 (11) TMI 995
  Denial of CENVAT credit - input service distributor - input service credit distributed by the ISD were availed in a different manufacturing unit i.e. the sister concern of the appellant - Held that: - I find that the appellants have availed credit on the strength of an ISD document issued in respect of services availed by their sister unit located at Bangalore - there is no final finding in respect of the disallowance of credit availed in respect of services availed by their sister unit at Banagalore. The said order only states that there are some entries mentioning Bangalore Plant, Insurance policy of other unit which “needs detailed verification”. This cannot be considered as denial of credit and therefore, the argument of learned AR does not hold much force. Reliance placed on the decision of the case of Commissioner of Central Excise, Bangalore-I Commissionerate Versus Ecof Industries (P.) Ltd. [2011 (4) TMI 560 - KARNATAKA HIGH COURT] where similar issue was decided and it was held that the assessee is entitled to distribute the cenvat credit on the input services on its manufacturing unit or other units providing the output services Appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 994
  CENVAT credit - molasses - Denatured spirit - utilization of credit taken on the input under CENVAT Credit Rules, 2004 and the non-compliance with the conditions governing the Rules when exempted goods are manufactured using duty paid inputs on which credit has been taken - whether denial of credit of duty paid on molasses during this period and to seek recovery of credit utilized for clearance of denatured rectified spirit justified? - Held that: - The molasses was eligible for exemption from duty upon being captively consumed for manufacture of de-natured spirits under N/N. 67/95-CE dated 16th March 1995. No separate accounts were being maintained even though the molasses was also used to manufacture and clear rectified spirit which is non-excisable - reliance placed on the decision of the case Godavary Sugar Mills Ltd and Others v Commissioner of Central Excise [2006 (11) TMI 497 - CESTAT, BANGALORE] where it was held that Where the final product is ethyl alcohol and other spirits denature of any strength, it is sufficient if the Cenvat credit attributable to inputs in the exempted product is reversed or paid Therefore, the appellants are entitled to the benefit of Notification No. 67/95 in respect of molasses used captively for manufacture of Rectified Spirit and Denatured Spirit - There is an option for the manufacturer not to maintain two separate accounts. The denatured alcohol is acknowledged as an excisable good and 'output' in terms of CENVAT Credit Rules, 2004. There cannot be discriminatory treatment in the treatment accorded to two manufacturers of the same product merely on the ground that one uses captively produced molasses and the other procures from external sources - rectified spirit is an exempt goods and as the appellants do manufacture dutiable goods also, CENVAT Credit Rules does permit them to take credit of duty paid on molasses subject to compliance with Rule 6 of CENVAT Credit Rules, 2004. There is no finding that they have not reversed the CENVAT Credit taken on inputs that have gone into the exempt goods. This is sufficient compliance of Rule 6. They are, consequently, not required to be subject to recovery of duty on goods cleared by utilization of CENVAT Credit and not required to make good the credit taken on inputs. Appeal allowed.

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• 2016 (11) TMI 993
  Rejection of refund claim - Benefit of Notification No.6/94 dated 01/03/94 - benefit of concessional rate of duty - unjust enrichment - Held that: - From the Chartered Accountant’s certificate it has been submitted by the appellant for the first time in Tribunal. I find that the claim of the appellant that the price to the dealer before and after the period in dispute is the same is incorrect. It can be seen from the certificate that the price for sale in outside Maharshtra have in fact reduced and changed a number of times during this period - the cum duty price of the product is not related strictly to the availment of exemption. In fact the assertion of the appellant that price has been uniform is misplaced and is not correct. Section 11B of the Central Excise Act, 1944 put the onus of proving all the burden of duty has not been passed on to the customers and passed on claiming the refund. It is clear that the simple fact that the price of the product was uniform does not lead to a conclusion that incidence of duty has not been passed on - appeal dismissed - decided against appellant.

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• 2016 (11) TMI 992
  Cenvat Credit - input services - payment rendered to M/s.Amas Bank for raising funds through GDRs for USD Million during April 2008 - Rule 2 (l) of the CENVAT Credit Rules 2004 - Held that: - the onus is on the department to seek a clarification or verify the details submitted by the appellants in their ER-I returns, cannot be faulted and the further finding that the proviso to extended period cannot be invoked is proper. The reliance on the Tribunal ruling in the case of Sundram Brake Linings Ltd is no longer good law and the same stands overruled by the Madras High Court in CMA No.314/2011 dated 13.02.2015. The appellant has failed to note that without capital expenditure, the proposed foundries would not have been established and to augment funds through GDRs, the Respondent had availed the services of M/s. Amas Bank. The definition of input service is of the widest amplitude in as much as the wording is used by a manufacturer whether directly or indirectly'. The inclusive definition has been held by various courts to be expansive and the services used in relation to setting up of the factory. Modernization and renovation are held to be eligible for input service credit. The wordings relating to business' is also very apt for the factual scenario in this case in as much as the funds were used for setting up of two units which has not been disputed by the Revenue, I do not find any infirmity in the impugned order and in view of the observations made herein above, the impugned order is upheld - appeal dismissed - decided against Revenue.

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• 2016 (11) TMI 991
  Demand - CENVAT credit of NCCD paid on Partially Oriented Polyester Yarn (POY) consumed captively for manufacture of DTY - benefit of N/N. 46/2000-CE dated 17/05/2003 - Rule 14 of the Cenvat Credit Rules read with Section 11A of the CEA, 1944 - Held that: - reliance placed on the decision of the case of COMMISSIONER OF CENTRAL EXCISE, MUMBAI Versus INDORAMA SYNTHETICS (I) LTD [2014 (10) TMI 675 - CESTAT MUMBAI] where similar issue was decided and it was held that once the exemption is availed, the question of taking any credit once again on the POY captively consumed and utilizing the same elsewhere would not arise. Though there is no one to one co-relation required between the input and output, explanation to sub-rule (7) makes it abundantly clear that if there is a conflict between the provisions of this rule and provisions of notification, the provisions of notification shall prevail - Simultaneous availment of duty exemption and benefit of cenvat credit militates against the very object of NCCD levy and would lead to huge leakages in revenue. Therefore, the impugned order is not sustainable in law. Accordingly we set aside the same and hold that the appellant is liable to reverse the credit taken along with interest thereon as correctly held in the adjudicating authority's order. However, since the issue relates to interpretation of law, imposition of penalty is not warranted. Appeal allowed - decided in favor of Revenue.

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• 2016 (11) TMI 990
  Levy of penalty in the absence of confiscation - Invocation of Rule 26 and not sub-rule 2 of Rule 26 - Held that: - the issue regarding sub-rule (2) of Rule 26 raised by the learned Counsel is irrelevant as Rule 26 has been invoked and not sub-rule 2 of Rule 26. As regards non-imposition of penalty in case where there is no proposal for confiscation of goods, the Hon'ble Supreme Court in the case of Sanjay Vimalbhai Deora [2015 (1) TMI 537 - SUPREME COURT] has upheld the decision of Hon'ble High Court of Gujarat. In the said case, the Hon'ble Supreme Court had upheld the penalty under Rule 26 of the Central Excise Rules, 2002 even in case where there is no proposal for confiscation. The third contention raised by the appellant relates to invocation of provision of sub-section (2A) of Section 11A, I find that the said provisions can be invoked only in respect of such persons on whom notices are served under sub-section (1) of Section 11A. In this case, notice under Rule 26 of the Central Excise Rules, 2002 has been served to all the appellants. The penalties are reduced from Rs. 1 lakh to Rs. 75,000/- on Shri Mahendra K Agrawal, Manish R Agrawal & M/s Diamond Roadways and from Rs. 25,000/- to Rs. 20,000/- on Shri Ramavtar K Agrawal - appeal disposed off - decided against appellant.

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• 2016 (11) TMI 989
  Cenvat Credit - Recovery of cost from employees - The appellants had claimed that the credit of outdoor catering services were availed by the appellant for making provision for food and beverages for employees of the appellant employed at its factory. This being requirement as per the provisions of the Factories Act, 1948. The appellant entered into a contract with outdoor caterer and a rent-a-cab service provider, however part of the cost was recovered by the appellant from its employees - Held that: - The sole ground for seeking relief is that the decision of the Hon'ble High Court of Bombay in the case of Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT] is based on a concession given by the Counsel - the decision has not been based on a concession given by the Counsel of the manufacturer. The Hon'ble High Court has given its findings regarding the ratio laid down by CESTAT in the case of GTC Industries Ltd. The counsel merely accepted it. No concession was granted by the Counsel in that case. I find t the appellants have not disclosed at any level to the Revenue that they are recovering the said cost from the employees, view of Hon'ble High Court decision, the appeal is dismissed.

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• CST, VAT & Sales Tax

• 2016 (11) TMI 981
  Non service of notice - Rajasthan Tax Board, a statutory body - Held that: - the declaration form ST-18C was filed before the AO himself on a show cause notice and judgment of apex court in State of Rajasthan & Another v. D.P. Metals [2001 (10) TMI 881 - SUPREME COURT OF INDIA] squarely applies, where it was held that The quantum of penalty under the circumstances enumerated in section 78(5) cannot, in our opinion, be regarded as illegal. The quantum of tax levied by the taxing statute, the conditions subject to which it is levied, the manner in which it is sought to be recovered, are all matters within the competence of the Legislature, and in dealing with the contention raised by a citizen that the taxing statute contravenes article 19, courts would naturally be circumspect and cautious" as such there cannot, in the present case, be any valid challenge to the rate of penalty provided for in section 78(5) of the Act. Petition dismissed - decided against petitioner.

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• 2016 (11) TMI 980
  Trade discount - authorised dealer of reputed motor vehicle manufacturers - applicant allows discount at the time of sale of vehicles to its customers as per the policy of the company, however, since the invoices are to be raised for full value of the vehicles, discount is allowed by issue of credit notes to the respective customers. Such discount being as per the company policy has the effect of reducing the sell price of the vehicle. The discount is described as rebate in the credit notes issued to the customers. The customer, thus, pays the net amount after reducing the rebate allowed to him by way of credit notes. The applicant, while filing its returns for the period under consideration, while computing its taxable turnover, claimed deduction of discount / rebate allowed by it to its customers - whether deduction claim of trade discount justified? Held that: - no useful purpose would be served by calling upon the Tribunal to state the case and make a reference. Thus, to avoid unnecessary wastage of time, we think it appropriate to decide the matter. Since the facts are admitted and the law has been settled by their Lordship of the Supreme Court, we think that the question as raised by the assessee has to be answered in its favour. Resultantly, we do so. It is held that the Tribunal was not justified in rejecting the claim of the applicant by holding that the assessee is not entitled for the Trade Discount and, therefore, the orders of the second Appellate Authority dated 14/08/2007 and order passed in rejecting the application under Section 70(1) dated 28/07/2016 are liable to be set aside - the matter is remitted to the Board to decide the second appeal afresh and decide the same in accordance with law - application disposed off.

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• 2016 (11) TMI 979
  Jurisdiction of AO - M. P. Commercial Tax Act - the Assessing Officer did not consider the grounds raised in the application and rejected the application on the ground that inspite of the notice, petitioner did not appear - Held that: - Keeping in view the manner in which the application has been rejected in a casual manner without adverting to consider the grounds raised in the application which is not permissible, the order dated 29/07/16 Annexure P-5 is quashed and we restore the application filed under Section 34 of the M. P. V. A. T. Act and direct the Assessing Officer to hear the petitioner and decide the application afresh by a speaking order - petition allowed - decided in favor of petitioner.

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• 2016 (11) TMI 978
  Input Tax Credit - The respondent-assessees are carrying on separate business but they sold the goods at a rate lower than the price shown in the VAT invoice keeping in view the discount/incentive received by them from the respective dealers - Held that: - reliance placed on the decision of the case of Assistant Commissioner, Circle-A Vs. Assistant Commissioner, Circle-A, Commercial Taxes, Bharatpur (Rajasthan) and others Versus Bhagwati Building Material Store and other [2016 (10) TMI 13 - RAJASTHAN HIGH COURT] where it was held that Input Tax Credit is allowable as per VAT invoice irrespective of sale value of the goods. ITC allowed - petition dismissed - decided in favor of respondent-assessee.

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• 2016 (11) TMI 977
  Levy of penalty for not following procedure for movement of vehicle carrying goods - Imposition of penalty u/Sec.76(6) of the Act - incomplete declaration in Form VAT-47 - Held that: - in view of Notification dt.08.07.2009, the goods were notified and they were required to be carried with a declaration Form VAT-47 and in fact the declaration Form VAT-47 was carried but was incomplete in all respects. It is not a case where the assessee was not carrying a declaration Form VAT-47 and same was produced and another in pursuance to a show cause notice - the original declaration Form VAT-47 was incomplete and thereafter a fresh declaration Form VAT-47 has been obtained from the department on the next day and then has been placed before the Assessing Officer which in my view has rightly been held by the Tax Board to be improper. There is also a finding recorded by the Dy. Commissioner (A) that there was no punching of the declaration Form VAT-47 and once punching is not found, this Court has already taken a view in the case of ITC Agrotech Limited, through its Manager Ramlal Verma Versus Assistant Commercial Taxes Officer, Anti Evasion 1, Circle 2, Jaipur [2016 (9) TMI 1085 - RAJASTHAN HIGH COURT] holding that the punching having been introduced in VAT laws as an additional feature, it is also required to be taken care of by the assessee, that the punching is to be done and if not then there is a serious deficiency. Penalty rightly imposed - decided against appellant-assessee.

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• 2016 (11) TMI 976
  Imposition of penalty u/s 78 (5) - declaration form ST-18A - Held that: - Though the Dy. Comm. (Appeals) has elaborately discussed that the goods were purchased from Steel Authority of India Ltd and was being supplied to Rajasthan State Electricity Board an undertaking of state and exemption certificate was also available with the driver/incharge and produced which proved that even in the case declaration form ST 18-A may not be required to be carried. There is a specific finding of fact recorded by the Dy. Comm. (Appeals) and not controverted even by the Assessing Officer about such exemption certificate being available - the order imposing penalty by the AO was not justified and had rightly been deleted by Dy. Comm. (Appeals) and upheld by the Tax Board though for different reasons - petition dismissed.

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