Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 25, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Penalty levied u/s 271G - the failure to the said extent on the part of the assessee to comply with the directions of the TPO can safely be held to be backed by a reasonable cause, which thus would bring the case of the assessee with the sweep of Sec. 273B - no penalty - AT
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Receipt of advance - Additions u/s 56(2)(vi) - A receipt cannot be taxed merely on conjecture or surmises. - The AO needs to bring on record evidence which proves that the particular receipt is taxable under the provisions of the Act - merely because the person, who paid the amount does not initiate any action for recovery of money should not be not a reason for making addition towards amount received as assessee’s income - AT
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Disallowance of short term capital Loss - the provisions of Sec.94(4) of the Act would apply only in cases where the assessee had carried on the transactions of purchase and sale of securities during the course of business and since the purchase and sale of the bonds in question was not a business activity, the provisions of Sec.94(4) of the Act was not applicable to the transaction. - AT
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Nature of amount received as award against damages for breach of contract - capital receipt or revenue receipt - The fundamental right for starting the bottling business was taken away as a result of breach of the right of first refusal by the Coca Cola Company - not taxable as revenue receipt - HC
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Addition to salary and commission payment to directors - the revenue is unable to point out as to how the payment were excessive or unreasonable having regard to fair market value of such services - AT
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Exemption u/s 10(34) availability in respect of dividend income - Merely because the assessee did not raise the claim at the time of his assessment it did not stop him from raising the claim before first appellate authority. - HC
Customs
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Applicability of IGST / GST on goods transferred / sold while being deposited in a warehouse. -reg. - Circular
Service Tax
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Commercial Training or Coaching Services - degree or diplomas issued by foreign universities are examined for recognition for further education in India or for employment. - Demand set aside - AT
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Valuation - inclusion of certain concession in the fees by way of their scholarship scheme - There is no sustainable reason to reject the scheme published by the appellants for fee concession as long as it is a bonafide trade practice - demand of service tax set aside - AT
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Business auxiliary service - accepting foreign exchange on behalf of bank - this activity is nothing but promotion of business of bank of Punjab and also acting as an extended representative of the bank for a limited purpose and getting commission for the same – demand of service tax confirmed - AT
Central Excise
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Valuation - related party transaction - there is no legal sanction to demand duty from the appellants in case the price charged by them from M/s. IOCL is higher than the price of M/s. IOCL. - Demand of duty set aside - AT
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Area based exemption - supply of printing paper for textbooks - When they sold the paper to a known publisher of educational textbook, it is apparent that they are aware of the usage of paper. They cannot take a plea that they have no control on them when end use is recognizable. - AT
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Clandestine removal - cross examination of witnesses - It is required for the departmental adjudicating authorities to first admit the statements in evidence in accordance in the procedure prescribed in Section 9D before the same can be used against asseesse even in departmental proceedings. - AT
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Manufacture - case of Revenue is that DTPL is to be considered the manufacturer since they have supplied the required raw materials and packing materials to job workers for manufacture of CFL on their account.- demand of duty confirmed - AT
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Manufacture - job-work - excisability/marketibility - the appellant were only fitting some parts in the blank cabinets for various equipments, such as, battery Management System, electrical panel, air-cooling system and similar items - revenue failed to prove marketability - demand set aside - AT
VAT
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Interest on refunds - interest would be payable after the period specified in clause (a) to sub-section (3) to Section 38 of the Act i.e. the date on which the refund becomes payable. Two sections, namely, Sections 38(3) and 42(1) do not refer to the date of filing of return. This obviously as per the Act is not starting point for payment of interest - HC
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The respondents having collected tax from TASMAC Limited, has not only failed to remit tax, due to the Government, in time, but also withheld the same for a considerable period and by filing successive writ petitions, has been gaining long time, for payment of tax, on installment basis, which the statute does not contemplate - HC
Case Laws:
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Income Tax
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2017 (11) TMI 1313
Royalty and Warranty - Deletion of Addition made by AO on account of Royalty - Held That:- The ITAT has referred to earlier year case of same assessee [2013 (4) TMI 872 - ITAT DELHI]in which appeal is decided in favor of assessee on grounds that appeal filed by revenue is delayed. Therefore this appeal of revenue is dismissed and additon made by AO of ₹ 21,35,45,197/- on account of royalty paid to SEC Korea is deleted. Deletion of Addition made by AO on account of Provision of Warranty/After Sale Service Compensation- Held That:- CIT(A) delete the addition done by AO on grounds that AO has done the same on Adhoc basis but basis the factual findings the same is made on scientific Basis. No substantial question of law arises - Decided in favour of Revenue.
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2017 (11) TMI 1312
Order of TPO - ITAT confirmed entire reimbursement received treated as its operating income - Held That:- the Court is not inclined to revisit the issue and ITAT's view in the above matter is plausible. It does not give rise to any substantial question of law warranting interference with the impugned order of the ITAT. ITAT has followed the earlier order in the case of Samsung India Electronics Pvt. Ltd. v. Department of Income Tax [2013 (4) TMI 872 - ITAT DELHI] was followed. Treatment of advertisement and sales promotion expenses on basis of "brand promotion" or "capital nature" - expenses on computer software and on recruitment and training - Held That:- ITAT has affirm the order of CIT(A)in deleting the additions made of the above expenses by treating them as not resulting in benefits of an enduring nature. Revenue appeal dismissed.
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2017 (11) TMI 1311
Nature of amount received as award against damages for breach of contract - capital receipt or revenue receipt - Compensation of a settlement for loss of its bottling rights with Coca Cola Company, USA - whether the amount partakes the character of income in terms of section 2(24) of the Act and to be taxed as income from other sources? - Tribunal held that compensation received was a capital receipt, that was not taxable - Held that:- Tribunal concluded that the receipt of compensation amount must be considered in the backdrop of the master agreement. Under the master agreement, the right of first refusal was vested with LFFL to carry out the bottling activities in the territory of Bangalore. There was a clear indication that there would be formation of Bangalore subsidiary and there would be an investment agreement also between the parties for this purpose. The necessary guidelines as to how the subsidiary would be formed, various assignments of the bottling rights only to such a newly formed company and to be held and formed by Parle Group and later on the Coca Cola Company will join in after subscribing 30% of the shares, are the provisions or guidelines in the master agreement itself. It was to this subsidiary company that the bottling rights were to be given in the territory of Bangalore. This subsidiary company was formed as Parle Soft Drinks Pvt. Ltd. Thus, the assessee company was formed only for carrying out bottling activities in the territory of Bangalore. There was, thus, no dispute that the assessee was entitled to receive the compensation amount on the breach of this agreement from Coca Cola Company. Thus, even though the right of first refusal was with LFFL, but it was always agreed upon by the parties that the same should be for the newly formed subsidiary at Bangalore. That Bangalore subsidiary is the assessee company only. Once these bottling activities were to be carried out for the Coca Cola Company and the Bangalore territory that the assessee was formed. It was not necessary that the assessee should have installed entire plant and machinery for carrying on such business. The right of first refusal itself stated a substantial right and foundation on which the assessee could have built its bottling business. If such right would have been assigned to the assessee, it would have been the source of assessee's income and profit making apparatus. The assessee has also submitted its business plans and various modes for carrying out the bottling business to the Coca Cola Company. There is no dispute that the Coca Cola Company has breached the agreement and particularly the right of first refusal by not assigning the rights. It was on account of breach of this agreement that the compensation amount was settled between the parties. The fundamental right for starting the bottling business was taken away as a result of breach of the right of first refusal by the Coca Cola Company. That is the reason why the Coca Cola Company paid this amount to the assessee and not to LFFL. To our mind, therefore correct conclusion has been arrived. See Hon'ble Supreme Court has in the judgment in the case of Kettlewell Bullen and Co. Ltd. vs. Commissioner of Income Tax, Calcutta (1964 (5) TMI 4 - SUPREME Court). We do not think that the view of the Tribunal is any way erroneous or illegal. Thus, it is not vitiated by any error of law apparent on the face of the record of perversity. - Decided in favour of assessee. Tribunal concluded that the Commissioner of Income Tax (Appeals) was right that sale proceeds on a capital assets cannot be held to be a revenue receipt and after the sale, the block of assets have been reduced and accordingly whatever is there in the block of assets, deprecation has to be allowed in accordance with the provisions of law. Thus, the finding of fact recorded by the Commissioner of Income Tax (Appeals) has been endorsed and confirmed by the Tribunal. We do not think that this finding of fact is perverse or vitiated by an error of law apparent on the face of the record.
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2017 (11) TMI 1310
Disallowance of short term capital Loss - provisions of Sec.94(1) applicability - Held that:- The provisions of Sec.94(4) of the Act had been introduced with a view to levy tax on the interest income, which was being sought to be avoided by certain persons by carrying on transactions in shares and securities. The intention of the Legislature was to tax the interest income in the right hands, which had been avoided by transferring the shares and then repurchasing the some after the interest was received by the other persons. Therefore, it was necessary for the AO to prove that the assessee had attempted to avoid payment of tax. Since the interest income on 9% IREC Bonds was exempt from tax, there was no question of the assessee or Harshad S. Mehta adopting any such methods to avoid tax on the income. Further, we are of the view that the provisions of Sec.94(4) of the Act would apply only in cases where the assessee had carried on the transactions of purchase and sale of securities during the course of business and since the purchase and sale of the bonds in question was not a business activity, the provisions of Sec.94(4) of the Act was not applicable to the transaction. Accordingly, We direct the AO to allow the claim of set off of loss of ₹ 2,44,62,328/- suffered from 9% IRFC Bonds, against profit from sale of shares. Unexplained investment in 9% tax free NTPC bonds - Held that:- We find from the facts of the case that the assessee has purchased 9% tax free bonds of NTPC of face value of ₹ 4.40 crores on 19.06.1991 through the broker Harshad S Mehta and these bonds have been sold on 17-12-1991. The same are reflected by the assessee in its books of accounts under account No. 2008 titled as, ‘investment in PSU bonds’. We find that the assessee has not paid any consideration on account of purchase of these bonds and these are standing as credit in the firm Harshad S Mehta. It means that holding of the assessee in NTPC bond is to the tune of ₹ 4.40 crores only and not more than that. Even now before us, the learned Counsel claimed that Revenue could not show to the assessee that it is holding NTPC bond of ₹ 4.50 crores as alleged by the Revenue and this information was never made available to the assessee and unless the said evidence is placed at the disposal of the assessee, the same cannot be explained. In view of the above facts, we delete the addition and allow this issue of assessee’s appeal. Unexplained investments in shares - proof of ingenuity of transaction - Held that:- It is noticed that the assessee made investment and the share holding in Coventry Coil is to the extent of 56,600/- shares and in ITW signode to the extent of 1500, whereas the allegation of the Revenue is that the assessee is holding 200 more shares in Coventry Coil and 1400 shares in ITW signode, which are not reflected. Before us, the learned counsel for the assessee explained that there is no such holding by the assessee as alleged by Revenue and there is no evidence qua that with the revenue. Assessee made a categorically statement that he is holding only the shares as above declared and not more than that. In our view, the onus on Revenue to prove first that there are more shares held by the assessee in the Coventry Coil and ITW signode. As the Revenue failed the same, the addition cannot be made in the hands of the assessee. This issue of assessee’s appeal is allowed. Disallowance on account of car rental expenses at 50% - Held that:- We find that the Revenue has disallowed excessive at 50%, but 15% is quite reasonable because the personal element cannot be denied. Accordingly, this issue of assessee’s appeal is partly allowed. Addition u/s 14A - Held that:- We find that the AO has disallowed expenses relatable to exempt income under section 14A of the Act amounting to ₹ 11,65,140/-. The assessee claimed the exempt income earned by the assessee from PSU bonds of NTPC amounting to ₹ 1.84 crores. Accordingly, AO attributed the expenses at ₹ 11,65,140/- as relatable to exempt income. The CIT(A) restricted to the extent of 50% of the amount at ₹ 5,82,570-/- on this account. We find that no specific finding of relation of expenses there in the orders of the lower authorities and hence, we restrict the disallowance at 1% of the exempt income. We direct the AO accordingly. Disallowance of audit fee claim - Held that:- This issue is squarely covered in assessee’s group cases as held No adverse inference can be drawn merely from the fact that audit could not be done due to seizure or the books of accounts as well as from the fact that subsequently the Court directed that audit be done through new Auditor. In view of the same and following the decision of the Tribunal mentioned above, we do not find any merit in the ground raised by the Revenue. Recompute the interest u/s 234A, 234B and 234C after taking into account the tax deductible on total income of the assessee by affording fair and reasonable opportunity of being heard to the assessee Addition on account of interest on bonds - Held that:- AO while framing assessment noted that the assessee has actually made investment in the government bonds at ₹ 50 crores and interest thereon @ 9% worked out to ₹ 2.25 crores for the period of 6 months. According to AO, the assessee has disclosed the interest to the extent of ₹ 1,84,50,000/- only, resulting into short interest of ₹ 40.50 lakhs. Accordingly, AO added the differential amount of ₹ 40.50 lakhs to the returned income of the assessee. Aggrieved, assessee preferred appeal before CIT(A), who deleted the addition for the reason that the entire investment in IFRC bonds is tax free and whatever the quantum of interest same cannot be brought to tax. According to us also this IFRC bonds interest is tax free and even differential amount cannot be brought to tax. Accordingly, this issue of Revenue’s appeal is dismissed.
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2017 (11) TMI 1309
Money received without any consideration - taxablility under the provisions of section 56(2)(vi) - Held that:-We do not find any merit in the findings of the A.O. for the reason that merely because the person, who paid the amount does not initiate any action for recovery of money should not be not a reason for making addition towards amount received as assessee’s income. The AO has to prove beyond doubt a particular receipt is taxable in the given circumstances within the meaning of the said provision. In this case, the assessee has filed all details which prove that the company is in continuous contact with the assessee for procurement of land. We further notice that the company also filed a petition before Bombay High Court for recovery of money advanced to the assessee. The Hon’ble Bombay High Court on 19th October, 2011 has passed a decree decreeing the suit on the basis of the consent terms filed by the parties and on the terms and conditions stated in the decree. As per the petition before the Hon’ble Bombay High Court, both the parties agreed to settle the dispute as per which the assessee has agreed to refund the money along with interest which is evident from the order of decree passed by Hon’ble Bombay High Court. We further notice that SPCL has filed an execution petition before Raigad Court for recovery of dues from the assessee. All these facts go to prove an undisputed fact that SPCL has paid advance to the assessee for procurement of land on certain terms and conditions. Therefore, we are of the considered view that the AO was erred in bringing to tax the impugned advance received from SPCL under the provisions of section 56(2)(vi). The CIT(A), without appreciating the fact has reiterated the findings of the AO to confirm the addition made by the AO. Therefore, we set aside the order passed by the CIT(A) and direct the AO to delete the addition made towards advance received from SPCL u/s 56(2)(vi) of the Act. - Decided in favour of assessee Addition u/s 68 - as per AO if the assessee taken a plea that the impugned amount revceived by the assessee is an advance, then the money received by the assessee represents loan which raises serious doubts about the genuineness of the transactions and section 68 of the Act come into operation - Held that:- We do not find any merits in the observation of the AO for the reason that to make addition towards a particular receipt under the provisions of section 68, the AO has to examine three ingredients, i.e. identity, genuineness of transaction, and creditworthiness of the parties. In this case, the assessee has proved the identity of the parties, genuineness of transaction and creditworthiness of the parties which is evident from the fact that SPCL has filed all evidences to prove impugned amount is an advance paid for procurement of land. We further notice that SPCL has filed its financial statement wherein the money paid to the assessee has been disclosed as business advances. ITAT, in the case of SPCL [2015 (7) TMI 447 - ITAT MUMBAI] has given a categorical finding that the impugned amount paid to the assessee is business advance and hence, the AO was incorrect in disallowing proportionate interest u/s 36(1)(iii) of the Act. Though the findings of the co-ordinate bench is under different aspect, the amount involved is the same which is paid to the assessee, therefore, once a particular finding has been reached by the Tribunal on facts, a different conclusion cannot be reached at this stage. Thus we are of the view that the AO was incorrect in making an alternate finding in the light of provisions of section 68, as well as section 28(iv) of the Act. Accordingly, we reject alternate findings of the A.O. to make additions - Decided in favour of assessee Income from other sources in respect of consultancy charges received from SDCL - AO has made addition on the ground that the assessee has failed to prove providing any consultancy services to SDCL - Held that:- The evidences filed by the assessee in the form of appointment letter issued by SDCL dated 07-02-2007 and further consultancy agreement entered into between the parties on 29-08-2008 clearly goes to prove the undoubted fact that there existed a service agreement between the parties and that SDCL has paid consultancy fee. The agreement filed by the assessee has narrated the nature of service to be provided. In fact, SDCL has accepted before AO during the assessment proceedings that the assessee has provided consultancy services. We further notice that SDCL also deducted tax at source @10% on total payments. All these facts lead to an undoubted conclusion that the AO has made addition merely on the basis of conjectures and surmises without there being any material to show that amount received from SDCL is income of the assessee. Therefore, we are of the view that the AO was incorrect in treating the amount received from SDCL as income of the assessee under the head ‘Income from other sources’. The assessee has incurred various expenditures which have been debited to his P&L Account. Though, the assessee claims to have incurred various expenditures, failed to file complete details of expenditures incurred, to the satisfaction of the AO. Under these circumstances, what needs to be done is reasonable estimates of net profit from the business, taking into account the facts & circumstances. In this case, the assessee is in the business of providing consultancy services. In the case of professional and consultancy services, section 44AD provides for taxation of income from profits and gains of profession on presumptive basis. Though, provisions of section 44AD strictly not applicable to the present case, the analogy provided under the said provisions can be taken as basis for determining the profit. In the cases of profession, profit ranging from 10% to 25% is reasonable. Therefore, taking into account overall facts and circumstances of the case, we deem it appropriate to direct the AO to estimate net profit of 20% on total gross receipts received from SDCL. We, ordered accordingly. Addition towards opening capital - It is the contention of the assessee that he was earning since the age of 18, however, he did not file return of income because his income for the previous years was below the taxable limits - Held that:- We do not find any merit in the arguments of the assessee for the reason that the assessee has filed to file any evidence to prove the existence of opening capital of ₹ 5 lakhs. The assessee has filed return of income for the first time, therefore, carry forward of opening balance of ₹ 5 lakhs is not justified with any evidence. Therefore, we are of the view that the AO was right in making addition towards opening capital u/s 68 of the Act. The CIT(A), after considering relevant submissions of the assessee has rightly upheld the addition made by the AO. We do not find any error or infirmity in the order of CIT(A). Hence, we are inclined to uphold the findings of the CIT(A) and reject ground raised by the assessee. Addition towards interest income from FD - Held that:- We do not find any merits in the argument of the assessee for the reason that at no stretch of imagination, interest from FD can be considered as business receipts of the assessee. Though the assessee has earned interest income out of money received from the business, interest on FD is not generated from the core business activity of the assessee. Therefore, we are of the view that AO was right in treating interest on fixed deposit under the head ‘Income from other sources’. The CIT(A), after considering the relevant submissions has rightly upheld additions made by the AO. We do not find any error in the order of CIT(A). Hence, we are inclined to uphold the order of the CIT|(A) and reject ground raised by the assessee. Denial of carry forward of closing work in progress - assessee has failed to prove any business activity - Held that:- We find that the issue of carry forward emanates from the impugned issue of treatment of amount received from SDCL under the head ‘Income from other sources’. Since we have already given our finding in the preceding paragraph regardeing amount received from SDCL and directed the AO to estimate income from the receipts, the issue of carry forward of WIP becomes academic in nature. Hence, we reject grounds raised by the assessee.
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2017 (11) TMI 1308
Disallowance U/s 40(a)(ia) - no certificate as prescribed under proviso to Section 201(1) r.w. Rule 31ACB of the Rules certifying that the taxes in respect of interest income were duly paid by NBFCs was filed - Held that:- CIT(A) was not justified in sustaining the addition in respect of interest amount paid to Religare Finvest Ltd.. Further the payment of ₹ 22,52,810/- disallowed by the Assessing Officer paid to Religare Finvest Ltd. also includes a sum of ₹ 2,10,765/- which was towards pre EMI payment which is the payment towards principal amount, therefore, no tax deduction was required. As far as the other payments of interest without making any TDS are concerned, we hold that the assessee had not submitted certificate as required by law, therefore we sustain the addition to that extent. Accordingly grounds No. 1 of the assessee’s appeal is partly allowed. Addition made by the A.O. U/s 40A(3) - payment to two sellers of the land in cash under the business exigency - Held that:- The payment of ₹ 1,82,40,000/- to Shri Ashok Agarwal, power of attorney holder of his daughter, the amount was paid on Sunday and also the seller has given the notice to release the payment by 25/3/2012, which was Sunday. Sunday was a bank holiday. Under these compelling situations, the assessee had to make payment in cash. The revenue has failed to controvert these facts, therefore, we find no merit in this ground of revenue’s appeal. The same is dismissed. As far as the assessee’s appeal is concerned, we have noticed that the evidences have been filed which establishes that the documents for registration submitted after the banking hours in respect of land purchased from Hira Lal Khetan for ₹ 13,62,658/- and from Smt. Shanta Devi Mittal for ₹ 11,75,000/-. No such evidence is available on record in respect of other purchases. The assessee has also sold his property on 15/09/2011 for which a deed was also executed in favour of M/s Ocean Seven Buildtech (P) Ltd., Gurgaon on the same day after banking hours. It was submitted that Director of M/s Ocean Seven Buildtech (P) Ltd. reached to Jaipur on 15/9/2011 after the banking hours, therefore, the payments against the sale deed were received in cash due to closure of the banking hours and the same cash received from this party was further paid to these two parties from whom the land was purchased by the assessee. These facts are verifiable from these two purchase deeds, which were duly filed before the Assessing Officer. Therefore, it is established that the assessee has to make payment to these two sellers of the land in cash under the business exigency to safeguard the interest and also for genuine and bonafide needs of assessee’s business. It is also a fact that these purchases and sale deeds were put forth before the Registrar on the same day after banking hours which strengthen the contention of the assessee. The cash received on the sale of the land was utilized for making payment to two parties. These deeds were registered after 4.00 P.M., which is usually the banking hours. Therefore, considering all these facts and circumstances, we partly allow this ground of assessee’s appeal.
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2017 (11) TMI 1307
Penalty levied u/s 271G - assessee has only furnished the entity level margins which consists of overall profits on AE and significant non-AE transactions and not profit of the international transaction as requiring under TNMM adopted by the assessee - Held that:- in light of the aforesaid practical difficulties which were being faced by the diamond industry, the TPO should have exercised the viable option of determining the arms length price of the international transactions of the assessee, either by making some comparison of realisation of prices in respect of export sales to AEs and non-AEs by comparing prices of diamonds of similar size, quality and weight to the best extent possible, or in the alternative could have asked for the copies of the Profit & loss accounts and the Balance sheets of the AEs in order to make an overall comparison with the gross profitability levels of the assessee with its AEs, which would had clearly revealed diversion of profits, if any, by the assessee to its AEs. We are further unable to comprehend that as to on what basis the TPO expected the assessee to have carried out the benchmarking by following CUP method. We are of the considered view that as the comparison by internal CUP method could only be made if two lots of diamonds were similar in size, colour, shape and clarity, which we are afraid, as observed by us at length hereinabove, in light of the peculiar nature of the trade of the assessee would not be possible. We find ourselves to be in agreement with the CIT(A) that if one lot had diamonds of variety of size, colour, shape and clarity, the prices would vary from diamond to diamond and lot to lot, and further, now when the entire lot of diamonds had a common price tag per carat for the whole lot, therefore, it was not possible to evaluate the price of each diamond The assessee had substantially complied with the directions of the TPO and placed on his record the requisite information, to the extent the same was practically possible in light of the very nature of its trade. We though are not oblivious of the fact that the assessee may not have effected absolute compliance to the directions of the TPO and furnished all the requisite details as were called for by him on account of practical difficulties as had been deliberated by us at length hereinabove, but however, in the backdrop of our aforesaid observations, we are of the considered view that the failure to the said extent on the part of the assessee to comply with the directions of the TPO can safely be held to be backed by a reasonable cause, which thus would bring the case of the assessee with the sweep of Sec. 273B of the ‘Act’. We thus in the backdrop of our aforesaid observations find ourselves to be in agreement with the view taken by the CIT(A,) and finding no reason to dislodge his well reasoned order, therefore, uphold the same. We thus uphold the order of the CIT(A) and the resultant deletion of the penalty imposed by the TPO. - Decided in favour of assessee.
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2017 (11) TMI 1306
Disallowance of interest paid on the funds which were advanced interest free - Held that:- It is an undisputed fact that the assessee had interest free funds available with it at the time when advances were given which ranged between ₹ 38.60 crores to ₹ 39.21 crores right from assessment year 2009-10 to 2011-12. On the other hand, amount advanced to the related parties/sister concerns was only ₹ 8.24 crores which far exceeded the interest free funds available with the assessee, as has been incorporated in the foregoing paragraphs. Once that is so, then the ratio laid down by the Hon'ble Bombay High Court in the case of CIT vs. Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT), as relied upon by the ld. Counsel for the assessee before us, gets squarely applicable. Accordingly, the order of the ld. CIT (A) in deleting the disallowance of interest is upheld - Decided in favour of assessee. Disallowance u/s 14A r.w.r. 8D - Held that:- From the perusal of the nature of expenditure and also total expenditure debited under the head “administrative expenses”, we find that first of all, total expenditure debited itself is ₹ 13 lakhs which also contains major expenditure on account of legal and professional expenses which has nothing to do with earning of dividend income. Similarly, registration & filing fees, etc. also cannot be said to be linked with earning of exempt income. Thus, having regard to the nature of accounts and expenditure debited, the amount disallowed by the assessee at ₹ 2,33,444/- is quite reasonable and fair and the Assessing Officer without finding any defect, either in the nature of account or in the claim of the assessee, has erroneously proceeded to arbitrarily compute the disallowance under rule 8D(2)(iii), especially when disallowance has been worked out far excess than the total expenditure debited. Accordingly, the order of the ld. CIT(A) deleting the said disallowance is upheld and the Revenue’s appeal is dismissed.- Decided in favour of assessee.
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2017 (11) TMI 1305
Reopening of assessment - invalid notice - Held that:- SLP dismissed - HC order confirmed [2017 (11) TMI 1221 - DELHI HIGH COURT] concluding that pre-requisite for existence of tangible material has not being fulfilled before issuing the notice - Decided in favour of assessee.
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2017 (11) TMI 1304
Disallowance made under Section 36(1)(vii) - Scope and ambit of the proviso to Section 36(1)(vii) - whether deduction of the bad and doubtful debts actually written off in view of Section 36(1)(vii) limits the deduction allowable under the proviso to the excess over the credit balance made under clause (viia) of Section 36(1) – Held that:- This issue has been specifically considered in the decision of the Supreme Court in Catholic Syrian Bank Vs. Commissioner of Income Tax reported in (2012 (2) TMI 262 - SUPREME COURT OF INDIA) wherein, in similar circumstance, the Supreme Court considered the provision of Section 36(1)(vii) and 36(1)(viia). It was thereafter held that for the purpose of sub-section (viia) which applied to district cooperative bank that had made rural advances, it is not a requirement of law that the debt should have been written off before an allowance could be made. It was thus held that in such cases even it appears that an allowance has been made to write off a bad debt the assessee could claim such expenditure. - Decided in favour of the assessee and against the revenue. Exemption u/s 10(34) availability in respect of dividend income - claim not raised at the time of assessment - Held that:- In so far as it is not disputed to the department that the assessee received dividend income, it cannot be said that the same would become taxable at the hands of the assessee. It was also open to the Assessing Officer to have examined the correct aspect himself and to grant the benefit, if the said amount was not taxable. Merely because the assessee did not raise the claim at the time of his assessment it did not stop him from raising the claim before first appellate authority. In that regard it is not disputed that as a fact an additional ground was raised in the first appeal and that was allowed. Even at present, the department had been required to verify the correctness of the claim and to grant benefit to the assessee if the claim is found to be verified. - Decided in favour of the assessee
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2017 (11) TMI 1303
Denying benefit of investment allowance/development rebate - assessee has not stated and is not able to establish and show that the machinery had continued to be in use for a period of eight years - Held that:- There is no evidence or material on record and it is not even the claim of the appellant-assessee that Raja Singh had continued to use the said machinery for the balance period to satisfy the mandate of Section 35A of the Act. In fact, no such contention or claim was made before the Assessing Officer and the appellate authorities. This being the position, we do not even know whether or not the machinery had remained in the custody and use of Raja Singh for the period of years as per requirements of Section 35A of the Act. In the absence of even a claim or assertion to the said effect, the appellant-assessee cannot succeed. Assessing Officer had rightly withdrawn benefit of the investment allowance/development rebate by passing an order under Section 155(4A) of the Act, once he came to know that machinery of value of ₹ 5,20,838/- on which the investment allowance/development rebate of ₹ 1,30,210/- was claimed and allowed was “transferred”. In the absence of even oral assertion that Raja Singh had continued using and operating the machinery, the appeal must fail. - Decided against assessee.
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2017 (11) TMI 1302
Disallowance of claim of deduction under section 80IB(10) - ‘built up area’ of the villas constructed by the assessee is 1772.81 Sq. Ft. that exceeds the limit of 1500 Sq. Ft. - taking the open terrace as balcony / verandah rejecting the claim of the assessee - Held that:- In the judgment of Gujarat High Court in Amaltas Associates (2016 (10) TMI 359 - GUJARAT HIGH COURT ) is very clear and in our considered opinion even after amendment the legislature has included the balcony and projection but not the “Terrace”. Unable to uphold the stand of the Assessing Officer to include area of terrace as a part of the 'builtup area' in a case where such terrace is a projection attached to the residential unit and there being no room under such terrace, even if the same is available exclusively for use of the respective unit- holders In our considered opinion, the terrace is to cover the room which is available on the ground floor therefore, terrace is different then balcony which is provided in addition to the facilities whereas terrace goes with the projection of the room. - Decided in favour of the assessee and against the department.
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2017 (11) TMI 1297
Interest u/s.234B not leviable in respect of payments to the non-resident assessee being subject to tax deduction at source u/s. 195 - Held that:- As decided in assessee's own case for previous AYs we hold that interest u/s. 234B is not leviable as all payments to the nonresident assessee are subject to tax deduction at source u/s. 195. Hence, the decision of the Ld. CIT(A) in directing the AO to delete the interest levied u/s. 234B is correct, which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground raised by the Revenue. - Decided in favour of assessee.
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2017 (11) TMI 1293
Revision u/s 263 - deduction under section 80IB on the interest income was not allowable because the interest on fixed deposit was not derived from the industrial undertaking and there was no direct nexus between the interest income and the industrial activity carried out by the assessee - Held that:- We conclude that no enquiry of any kind was carried out by the Assessing Officer on the issue of availability of deduction on interest income and it is a case of complete “lack of Inquiry” by the Assessing Officer. Before Ld. CIT, the assessee failed to establish direct nexus between the borrowed funds and the purchase of fixed deposits, and thus, he is correct in holding that interest on fixed deposit was not derived from the industrial undertaking. The Assessing Officer committed error in allowing deduction on such interest income without carrying out any enquiry. In view of the facts and circumstances of the case, we do not find any error in the order of the Ld. CIT. Accordingly, we uphold the finding of the Ld. CIT in setting aside the order of the Assessing Officer and directing to re-compute the income. The grounds of the appeal are accordingly dismissed.
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2017 (11) TMI 1290
Rentals received during the period of project completion - taxability under what head? - nature of income - Held that:- In view of the clear distinction of interest earned on surplus funds deposited during the completion of project and the receipts which are inextricably connected to setting up of the project, the law is very clear. In the present case, the rents are received on a property purchased for setting up of the project and is inextricably linked to the completion of the project. Considering the fact that the assessee had taken steps to evict tenants and also paid compensation to them while getting vacant pocession for completing the project, the rental receipts received during the period have to be set off to the cost of project. Accordingly, it is of the opinion that the said amounts cannot be brought to tax as ‘income from house property’, and as assessee has rightly treated them as ‘capital receipts’ and set off to work-in-progress, the stand of the assessee is consistent with the principles governing such receipts. Accordingly, the orders of the Ld. CIT(A) and A.O. are set aside and assessee’s grounds on the issue are treated as allowed. The receipts are to be considered as capital receipts only. In the light of the above decision of treating the “rental receipts” as “capital receipts” during the impugned years, hereby direct the A.O. to exclude the rent received from M/s. Ramdharam Kanta only as capital receipt. Since the proceedings initiated are u/s 147 of the Act, on the return of income filed by the assessee declaring house property income following the principles laid down by the Hon’ble Supreme Court in the case of CIT vs. Sun Engineering Work P. Ltd., (1992 (9) TMI 1 - SUPREME Court) the amounts already offered cannot be excluded. The proceedings u/s 147 are for the benefit of the revenue aimed at gathering the escaped income of the assessee, as held by the Hon’ble Supreme Court. To that extent, in AY 2008-09 assessee’s offering of rental income in the return filed is to be accepted and cannot be excluded. In other years, the rental receipts are to be treated as capital receipts and therefore gets excluded to be adjusted in capital work in progress of the project. Appeals of assessee are partly allowed.
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2017 (11) TMI 1286
Disallowance of commission - CIT-A deleted addition for the reason that the assessee itself had voluntarily offered the disallowance of commission in the return of income as well as admitted during the course of survey under section 133A - Held that:- AO himself allowed the payment of commission @ 5% by the assessee to Hitesh Trading company and accepted the genuineness of payment & services rendered and this has been consistently allowed earlier years also. Only disallowance made is qua excess of 5% i.e. claimed by the assessee @ 8%. We find that RBI specifically approved the 8% of the commission payment. This was with a view to expand business further, as the assessee desired to do penetration in other emerging markets and accordingly, a fresh agreement was entered with Hitesh Trading Co., with expanded scope of services to be rendered. Unlike the earlier agreement, where the scope of the services by the said company was confined to USA and Canada, the scope was increased tremendously in this new agreement so as to cover entire Europe, Australia, Middle East, Asia, Hongkong and Singapore. Apart from the increase in the area of coverage, another additional duty cast was to source right quality of diamonds at competitive price as per the requirement. Since, there was a considerable expansion of the scope, the activities and the responsibilities on the part of the said company the rate of commission was enhanced from 5% to 8%. Hence, we find no infirmity in the claim of commission @ 8% and we allow the same. The orders of the CIT(A) is confirmed and appeal of the Revenue is dismissed
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2017 (11) TMI 1285
Reopening of assessment - income chargeable to tax which has come to notice subsequently in the course of proceedings - Held that:- We find that the issue is squarely covered in the given facts of the case by the decision of Hon’ble Bombay High court in the case of CIT vs. Jet Airways (I) Ltd. (2010 (4) TMI 431 - HIGH COURT OF BOMBAY) on the proposition of that the AO could not assess the income chargeable to tax which has come to his notice subsequently, in the course of proceedings under section 147 of the Act, even though the same was not the basis for reopening under section 147 of the Act. As in the present case before us, the AO reopened the assessment on the issue of excess claim of depreciation and export earning received was not offered to tax but subsequently no addition was made on these two accounts and the additions were made on account of short term capital gain and disallowance of expenses for non-deduction of TDS by invoking the provisions of section 40(a)(ia) of the Act. It means that the issue is squarely covered by the decision of Hon’ble Bombay High court in the case of Jet Airways (I) Ltd. (supra) and this being a jurisdictional high court decision, respectfully, following the same, we quash the reassessment proceedings and allow the appeal of the assessee.
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2017 (11) TMI 1284
Addition being 2/3rd of the expenditure incurred by the assessee towards advertisement in media/magazine - Held that:- The facts are not in dispute that the assessee has incurred this expenditure mainly on brand promotion during the year including advertising in Media/ Magazine. It is also not disputed by Revenue. Now before us, that this expenditure is not a corporate advertising films, is in respect of ongoing business. Once, this is for the business and expenditure incurred on brand advertisement, the same is to be allowed as Revenue in nature. Respectively, following Hon’ble Bombay High Court in the case of Asian Paints India Limited (2016 (11) TMI 258 - BOMBAY HIGH COURT) we confirm the order of CIT(A) allowing the claim of the assessee and dismiss this issue of Revenue’s appeal. Revenue’s appeal is dismissed. Disallowance of expenses relatable to exempt income invoking the provisions of section 14A read with rule 8D - Held that:- AO despite the fact that all the books of accounts were produced before him, he could not point out any nexus with the exempt income and that of the expenditure relatable to this exempt income. Even the Hon’ble Supreme Court in the case of Godrej & Boyce Mfg. Co. Ltd. (2017 (5) TMI 403 - SUPREME COURT OF INDIA ), has clearly laid down the principle that the satisfaction of the AO must be there for making disallowance under section 14A of the Act read with Rule 8D of the Rules. In the present case, the satisfaction is missing in all the years. Accordingly, we allow the appeals of the assessee on this issue except suo moto disallowance of a sum of ₹ 3,81,528/-in AY 2008-09 be enhanced to as sum of ₹ 6,48,945/- as it has revised the disallowance. The AO will recompute the income accordingly in all these years.
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2017 (11) TMI 1283
Disallowance of the claim of long term capital loss on account of sale of unquoted equity shares - claim of the of the assessee for set off long term capital gain on the sale of property against the long term capital loss on sale of unquoted equity shares has been rejected on the ground that the same is not genuine - Held that:- The investment in the two companies sold was made with a long-term view. These companies were venturing into mining in Goa and had plans to be listed in next 3 to 4 years. As the assessee wanted to exit earlier some differences arose with the majority shareholders who refused to give more than the face value ₹ 10/-. Assessee was therefore at the mercy of the Purchaser as the assessee was a minority shareholder. Hence assessee had no option but to exit at face value. Assessing Officer has not accepted the transaction as genuine since these companies were having decent profit. However Assessing Officer has not alleged that the assessee has received back cash on account of the sale. The Purchasers of the shares from the assessee are not related in any way to the assessee. The Purchaser have not been examined by the Assessing Officer to verify the genuineness of sale. The Assessing Officer has failed to appreciate that shares of private limited companies cannot be sold in the open market and hence the seller is at the mercy of the Purchaser. Merely because the assessee had sold the shares at face value in a distressed situation it cannot be presumed that the assessee had engineered the transaction is to manage its tax liability. The assessee states that the sale is genuine out of urgent financial needs and also on account of the fact that differences had arisen between the assessee and the majority shareholders. Assessee also produced even the date of payment for purchase of shares, which was made only at the time of purchase of shares. Also the assessee has transferred the shares back to the Ankola Paper Mills Private Limited and VRKP Steel Industries Private Limited and received the payment of ₹ 10,00,000/-. This ₹ 10,00,000/- was invested by the assessee in international export corporation of ₹ 32,00,000/-. It means that the assessee was in need of money and hence, for this purpose he sold the investments. As the transaction is genuine, we find that the lower authorities erred in disallowing the long term capital loss incurred by the assessee in the sale of unquoted equity shares. We allow the claim of the assessee and direct the AO to recompute the income accordingly - Decided in favour of assessee.
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2017 (11) TMI 1282
Bogus purchases - addition u/s 40(A)(3) - proof of unaccounted payments - Held that:- We find from the facts of the case that the assessee had obtained bogus bills from various hawala parties but payments are made by account payee cheques and recorded in the books of account. It means that the payments are accounted for and not unaccounted. The assessee to avail the benefit of VAT and to obtain other benefits like lower market price of goods purchased material from grey market and obtained these bogus bills. This fact has not denied by either Revenue or Assessee. In such facts, the provisions of section 40(A)(3) of the Act cannot be invoked because the payments are accounted for and material is purchased which is accounted for and sales are not doubted by the Revenue. The only alternative left with is to assess the profit rate on the bogus bill obtained by assessee and purchases are made from grey market. In such circumstances, we estimate the profit rate at 5% of the bogus bills of purchase, as estimated in similar circumstances by co-ordinate Bench in the case of ITO vs. Priti Gold (India) Private Ltd. 2017 (11) TMI 1197 - ITAT MUMBAI]. - Decided in favour of assessee.
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2017 (11) TMI 1278
Addition to salary and commission payment to directors - Held that:- The provisions of Section 36(1)(ii) has no applicability since the commission payment are not in proportion to the respective shareholdings and moreover, the commission has been paid only to two directors out of four directors. The assessee has asserted that the commission has been paid in proportion to the performance achieved by respective branches being controlled by them and this fact is nowhere controverted by the revenue. Undisputedly, the provisions of Section 198 of the Companies Act, 1956 could not be applied to assessee since the same was applicable only to Public Companies and not to Private Companies. Lastly, in terms of provisions of Section 40A(2)(a), the disallowance could be made only if the Assessing Officer was of opinion that such expenditure was excessive or unreasonable having regard to the fair market value of goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom. However, the revenue is unable to point out as to how the payment were excessive or unreasonable having regard to fair market value of such services. - decided against revenue Addition made on account of commission paid to sister concern - Held that:- Upon perusal of the paper book, we find that the assessee has paid the said commission @5% of net sales achieved by Bangalore Gamma Facility pursuant to agreement dated 09/04/2007, which is effective for a period of five years starting from 01/04/2007. Apparently, the commission is being paid by the assessee over past several years and which is also evident from the fact that the assessee has debited similar commission of ₹ 22,45,962/- in immediately preceding Assessment year. The assessee, in the paper book, has placed complete details of commission payment viz. agreement, month-wise calculations, ledger extracts, respective invoices & detailed calculations of the amount of commission on Page Numbers 78 to 125, which establishes the claim of the assessee. Therefore, we are of the opinion that the impugned addition qua commission is not warranted for and therefore, we delete the same.- decided against revenue
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2017 (11) TMI 1269
Carry forward of unabsorbed depreciation relating to non-exemption years - deduction u/s 10A - Held that:- Restoring the assessee’s appeal to the ITAT that the intent of the Legislature while making these amendments was certainly not to curtail relief to an assessee, who had not availed double benefit. It is not the Department’s case that any double benefit has been availed by the assessee. Also, the question as to whether section 10A is an exemption provision or a deduction provision is also no longer res integra in view of the judgment of the Hon’ble Delhi High Court in the case of CIT v. Tei Technologies Pvt. Ltd (2012 (9) TMI 47 - DELHI HIGH COURT) as well as CIT v. Yokogawa (2011 (8) TMI 845 - Karnataka High Court), which the Hon’ble Delhi High Court has discussed in the case of CIT v. Tei Technologies Pvt. Ltd (supra). Therefore, respectfully following the ratio of the said judgment of the Hon’ble Delhi High Court, we are of the considered opinion that the assessee will be eligible for set off of unabsorbed depreciation for the assessment years 1993 – 94 to 1995-96 against the income of the assessee for the assessment year under consideration. Therefore, we set aside the order of the Ld. CTT (Appeals) on this issue and direct the AO to allow set off of unabsorbed depreciation to the assessee as discussed hereinabove. - Decided in favour of assessee.
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2017 (11) TMI 1236
Trading addition - gross profit rate determination - rejection of books of account - Held that:- Undisputedly, the books of account have been rejected under section 145(3) and the assessee has not challenged such rejection of books of account. Regarding the estimation of gross profit rate, the assessee has not satisfactorily explained the reason for the fall in the gross profit rate from 7.3 per cent. last year to 6.04 per cent. this year except for the fact that the turnover has increased over the last year which has put pressure on the gross margins in the business. The Assessing Officer has compared the results with another liquor contractor who has declared a gross profit of 13.92 per cent. and has applied the same in the instant case without highlighting the comparability parameters. The learned Commissioner of Income-tax (Appeals) has accepted the assessee's contention regarding pressure on the gross margins in view of increase in the turnover and at the same time, looking at the past history, estimated the gross profit rate of seven per cent. In the peculiar facts and circumstances of the case where there is no satisfactory explanation to substantiate the fall in the gross profit rate, we find the approach of the learned Commissioner of Income- tax (Appeals) was reasonable where he has followed the past history of the assessee. In the result, the grounds taken by both the assessee and the Revenue are dismissed. Additions under section 68 - Held that:- The cash deposits in the bank account has been examined by the jurisdictional Assessing Officer of Shri Mahendra Singh and the same has been accepted as evidenced by order passed under section 143(3) read with section 147 of the Act dated February 23, 2016 which is available on record. Apparently, the said order under section 143(3) read with section 147 has been passed subsequent to the order of the learned Commissioner of Income-tax (Appeals) but facts remain that the cash deposited has been found duly explained in his own assessment proceedings. In light of the same, there cannot be any basis to add the same amount in the hands of the assessee under section 68 of the Act. In the result, the Department's appeal to this extent is dismissed. Not allowing set off of trading additions against the addition of cash credit confirmed by him confirmed.
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2017 (11) TMI 1235
Disallowance u/s 14A r.w. Rule 8D - Held that:- We find ourselves in agreement with the proposition that if sufficient interest-free funds are available for making the investment in exempt income, disallowance u/s 14A is not justified. See CIT v. Reliance Utility & Power Limited (2009 (1) TMI 4 - BOMBAY HIGH COURT ) Furthermore, the assessee’s plea that assessee has not actually incurred any expenditure in earning the said exempt income also needs consideration in view of the Hon’ble Apex Court decision in the case of Godrej & Boyce Mfg. Co. v. DCIT (2017 (5) TMI 403 - SUPREME COURT OF INDIA ) In view of the aforesaid discussion, in our considered opinion, the issue is to be remitted to the file of the Assessing Officer to consider the issue afresh keeping in mind the discussion hereinabove and the case laws referred above. Needless to add, the assessee should be granted adequate opportunity of being heard. - Decided in favour of assessee for statistical purposes.
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2017 (11) TMI 1234
Estimating net profit margin of 12.5% in respect of bogus purchases - Held that:- After discussing various judicial pronouncements and applying the same to the facts of instant case, the CIT(A) reached to the conclusion that estimation of profit at 17.5% were meeting the end of justice, accordingly AO was directed to reduce 5% of average GP shown by assessee from the estimated profit of 17.5% of total bogus purchase. Accordingly, net addition sustained was to the tune of 12.5% of bogus purchases. The detailed finding so recorded by CIT(A) are as per material on record and the same was not controverted by learned DR by bringing any positive material on record. Accordingly, we do not find any infirmity in the order of CIT(A) for upholding the net addition of 12.5%. - Decided against revenue
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2017 (11) TMI 1233
Eligible for exemption u/s 54 - denial of claim as long term capital gain is not on account of sale of residential house but from sale of right in the property - whether the gain in question is long term capital gain or short term capital gain? - Held that:- In the present case, admittedly, the letter of allotment was issued in favour of the assessee on 26.11.2006 and agreement was entered into on 21.08.2012. Further agreement to sell the said property was entered into on 27.08.2012. Therefore, the Ld. CIT(A) has rightly, held the gain as long term gain by computing the holding period from the date of allotment of letter and not from the subsequent agreement. Hence, in the light of the cases discussed above, we uphold the findings of the Ld. CIT(A) and direct the AO to treat the gain in question as long term capital gain. As has been held by the Hon’ble Bombay High Court in CIT vs. Tata Services Ltd.[1979 (1) TMI 26 - BOMBAY High Court ] the word “property” used in section 2(14) of the Act is a word of the widest amplitude and the definition has emphasized the same by the words “of any kind”. Therefore anything which can be called property will be included in the definition of capital asset. Therefore, in the light of the ratio of law laid down by the Hon’ble High Court, we hold that the assessee’s rights and interest whatsoever in the flat in question is an asset within the definition of section 2(14) of the Act. Hence, the Ld. CIT(A) has rightly held that the assessee’s right to obtain property being capital asset gives rise to capital gain. No doubt, the asset sold by the assessee, is not a building or land appurtenant thereto and a residential house, the income of which is chargeable under the head “income from house property” within the meaning of section 54 of the Act so as to get benefit of the said section. Section 54F clearly says that where the assessee being an individual, earns capital gain from transfer of any long term capital asset, not being a residential house and purchases residential house within a period of one year before or two years after the date from the date of such transfer, the capital gain shall be dealt with in accordance with the provisions of this section. Since, we have held the transfer of asset by the assessee as transfer of long term capital asset and the consequential gain as long term capital gain and since the assessee has invested the said capital gain for purchasing residential house in the same year, the assessee fulfills all the conditions contemplated under section 54F of the assessee. Although it appears from the record that the assessee has not taken the alternative plea of section 54F in the first appeal before the Ld. CIT(A) however, the benefit of the provisions of this section cannot be denied on this ground. We accordingly, modify the order of the Ld. CIT(A) to that extent and allow the benefit u/s 54F of the Act to the assessee. Accordingly, we direct the AO to compute the claim of the assessee in accordance with the provisions of section 54F of the Act. Since, we have allowed the assessee’s claim u/s 54F of the Act by holding the gain as long term capital gain we also direct the AO to allow the benefit of indexation of cost of acquisition from the date of each payment. - Assessee appeal allowed.
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2017 (11) TMI 1232
Disallowance on account of bogus purchase - Held that:- The facts of the present case indicate that assessee has made purchase from the grey market. Making purchase through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. In similar situation on the facts and circumstance of the case a disallowance of 12.5% of the bogus purchase has been considered to meet the ends of justice in a number of cases at the Mumbai Tribunal following Hon’ble Gujarat High Court decision in the case of Simit P.Seth (2013 (10) TMI 1028 - GUJARAT HIGH COURT). Accordingly, hold that the disallowance in this case should be restricted to 12.5% of the bogus purchase. - Decided partly in favour of assessee.
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2017 (11) TMI 1231
Unexplained investment in gold/silver jewellery - retraction of the statement recorded u/s 132(4) - retraction of statement recorded was not proper being made after an inordinate delay.Held that:- Once a statement is recorded under Section 132(4), such a statement can therefore be used as a strong evidence against the assessee in assessing the income. However, as held by the Hon’ble High Court in case of Ravi Mathur (2016 (5) TMI 1304 - RAJASTHAN HIGH COURT) before the Assessing officer take a final view in the matter, he can travel beyond even the seized papers to come to a logical conclusion and can even examine the entries recorded in the books of account. The assessee has to offer an explanation even of the recorded transaction and the genuineness of the same is also required to be proved. In the instant case, the assessee claims that he has made detail explanation as to how the jewellery is fully disclosed and the AO, without pointing out any discrepancy in the explanation and evidence filed, brushed aside the same holding that since there is lapse of 357 days in filing the affidavit retracting the statement recorded u/s 132(4), the retraction is not possible and made the additions. We find that the said approach of the AO is not correct and the ld CIT(A) however has taken a correct approach. The ld CIT(A) in his order has stated that the addition cannt be made simply on the basis of the statement recorded in search. The same has to be decided on the basis of all the evidences on record. He accordingly, proceeded to decide the issue on the basis of the evidences filed and available on record before the AO. We donot firm any infirmity in the said approach of the ld CIT(A) and the same is in tune with the legal proposition laid down by the Hon’ble Rajasthan High Court. - Decided against revenue
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Customs
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2017 (11) TMI 1300
Refund of SAD - N/N. 102/2007-CUS dated 14th September, 2007 - whether limitation period specified under Section 27 of the Act would apply to claims for refund made under the notification of 2007? - Held that: - the issue is covered by the decision of the Delhi High Court in the case of Sony India Private Limited versus Commissioner of Customs [2014 (4) TMI 870 - DELHI HIGH COURT], where it was held that With the introduction of the circular and then amended notification (No. 93), the Customs authorities started insisting that such limitation period which was prescribed w.e.f. 01.08.2008 by notification became applicable. There is a body of law that essential legislative policy aspects period of limitation being one such aspect cannot be formulated or prescribed by subordinate legislation. Circular dated 28th April, 2008 specifically states the view and understanding of the Revenue that Section 27 of the Act is not made applicable to the N/N. 102/2007 and the time limit prescribed under the said Section would not be applicable. The Revenue notwithstanding the said understanding and their Circular, now seeks to contend and urge to the contrary. Appeal dismissed - decided against appellant.
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2017 (11) TMI 1292
Penalty u/s 112 (a) of the CA, 1962 - Rule 5 was invoked in remand proceedings with reference to similar goods - SCN invoked Rule 9 and proposed market enquiry as the sole basis for re-determination of assessable value - Held that: - it is not open to the Original Authority to take recourse to an entirely different basis for re-determining the assessable value without due notice to the appellant - resorting to value of similar goods could be an admitted process of re-determining the assessable value only if the conditions of Rule 5 are fulfilled and the appellants were provided due opportunity to defend their case, which has not happened in the present case - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1275
Provisional release of goods - alteration in the order for release of goods - Held that: - the undisputed fact is that on 23.03.2017 initially the order for provisional release of the goods was passed with certain conditions as enumerated in Para 2 hereinabove and the same are not repeated for the sake of brevity. Thereafter, the show cause notice was issued to the applicant and the same was adjudicated. The said adjudication order was remanded back by this Tribunal to the adjudicating authority for fresh adjudication and order dated 09.08.2017 was passed by this Tribunal for provisional release of the goods on the conditions enumerated in Para-3 hereinabove and the same are not repeated for the sake of brevity. The Id. Commissioner of Customs, Ludhiana has altered the condition of the interim order dated 09.08.2017 passed by this Tribunal. Therefore, the said officer appears to have committed the contempt of this Court - he Id. Commissioner of Customs, Ludhiana is to show cause as to why the proceedings for contempt of court under the said act, should not be referred to the Hon’ble Punjab & Haryana High Court.
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2017 (11) TMI 1274
Import of prohibited goods - smuggling - Refrigerant R-22 gas - Ozone Depleting Substance - Held that: - All the appellants have been found to hatch a conspiracy along with other persons and had engineered the import of prohibited goods in the form of R 22 gas. Such gases are known to cause irreparable environmental damage by destroying the ozone layer. Smuggling of such gases in such huge quantities is a very serious matter and but for the interception of such consignment before its release by DRI, the smuggling could not have been stopped - impugned order upheld - decided against appellants.
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2017 (11) TMI 1267
100% EOU - Benefit of N/N. 53/1997-CUS dated 03/06/1997 - compliance with remand directions - Held that: - On a close examination of the present impugned order, we are clear that the Original Authority passed the order in respect of certain aspects showing indifference, if not defiance, towards the remand directions of the Tribunal as contained in the final order dated 28/10/2016. We are not in agreement with the submissions of the learned AR to the effect that the remand directions are for deciding the case afresh in all aspects. A plain reading of the final order of the Tribunal makes it abundantly clear that the only role for the Original Authority in re-deciding the case is to find out the duty liability against the appellant limited to the gap between the foreign exchange outgo for the imports and foreign exchange earned on account of exports made. Non-submission of documents by the appellant in support of their claim for export/deemed export - Held that: - in case of any doubt, the Original Authority could have referred to the concerned bank authorities to counter verify the genuineness of the documents. Further, the fact of export or DTA clearance against foreign exchange realization can also be collaborated by various other contemporaneous documents, which the appellant submits, will establish to the satisfaction of the Original Authority, the facts as claimed by the appellant. Matteris remitted to the Original Authority to comply with the directions as contained in the final order dated 28/10/2016 of the Tribunal - appeal allowed by way of remand.
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2017 (11) TMI 1258
Misdeclaration of description and value of goods - view of Revenue is that the invoice which was filed alongwith the bill of entry was a fabricated one and the invoice which was found in the E-mail account should be considered as invoice for transaction which will establish the attempted mis-declaration of the appellant - Held that: - when the bill of entry declared the products correctly alongwith value with supporting invoice, the charge of mis-declaration cannot be sustained on the basis of certain documents retrieved from the E-mail account of the appellant, which was never used for customs clearance - The failure of the appellant to get the IGM and bill of lading amended was construed as a mis-declaration by the Original Authority. We note that these two documents were not to be filed by the importer/appellants. Re-determination of declared value - Held that: - Considering the nature of the goods and possible variation in appraising the case by different persons, we note that there is no case of misdeclaration of value. The duty difference comes to around ₹ 73,000/- only. When considering the total liability of duty being more than ₹ 70 lakhs such difference is mainly attributable to appraisal method and variation in opinion - rejection of declared value not justified. Even if the appellant had purported intention of mis-declaration the same has not manifested in their act. No confiscation or penalty can follow on an intend only, without an actual act of violation of the provisions of law. Appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1256
Exemption under N/N. 26/2000-CUS dated 01/03/2000 - denial on the ground that condition of Rule 7 of the said Origin Rules not fulfilled as the value addition in Sri Lanka fall below 35% - case of appellant is that there is no evidence to the effect that the certificate of origin issued by the Competent Authority was based on incorrect information or the said certificate has been withdrawn or amended later, and thus exemption cannot be denied - Held that: - certificate of origin and the data submitted to get such certificates cannot be questioned based on statements of the importers. There are no record to the effect that the country of origin certificates issued by the Sri Lankan Government has been questioned by the Indian Authorities and follow up after import was done in order to cancel or recall the same. The issue regarding country of origin certificate and questions of bonafideness was discussed in the bilateral meeting of working group between the two countries on 05/06/2002 it was agreed that no detention or hold up of cargo is to be ordered on the question of bonafideness of certificates. Verification, if any, can be done post-facto with the concerned local nodal focal points at the respective headquarters. In the presence of valid certificates of origin issued by Competent Authority, the assessing authorities in India are not right in denying the benefit of exemption notification - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1254
Mis-declaration of goods - goods are neither detained nor seized by the customs authorities - Held that: - there is no legal support to confiscate the goods, which were neither detained nor seized and thereafter released with a conditional bond. As such, the question of confiscating the goods, which are neither in custody nor bound to be presented as per the bond, is not legally sustainable - confiscation set aside. Applicability of Section 28 (5) as per the new amendment carried out in Finance Act, 2015 - compliance of payment of 15% within 30 days of enactment of the Finance Bill 2015 - Held that: - Admittedly, in the port of import now under consideration the customs operations are not available on 13.06.2015 being second Saturday. As such, the possibility of getting endorsement and paying the penalty of 15% on 13.06.2015 was not available to the appellant - Considering such factual position and applying the provisions of Section 9 & 10 of General Clauses Act, 1897, we find that the compliance is to be taken as in time. Accordingly, in terms of Sub-Section (6) of Section 28 the proceedings against all the parties involved in the case shall conclude on payment of full differential duty with applicable interest along-with 15% of penalty. Appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1253
100% EOU - Extended period of limitation - demand of customs duty - debonding of unit - Held that: - it cannot be said that the facts of the assessee-appellant in context with de-bonding and payment of duties was not within the knowledge of the department. Hence, in such an eventuality, the SCN should have been issued within one year from the relevant date - In this case, since the same was issued beyond the period of one year, the duty demand cannot be confirmed against the assessee-appellant on the ground of limitation alone. Identical issue decided in the case of M/s Century Denim Versus CCE, Indore [2015 (1) TMI 1031 - CESTAT NEW DELHI], where it was held that when all the facts are fully disclosed to the Department, extended period of limitation cannot be invoked for confirmation of duty demand. Appeal allowed - decided in favor of appellant-assessee.
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2017 (11) TMI 1250
Import of restricted goods - import of old and used Digital Multifunction Printers Copiers/Scanners etc. without a valid license - confiscation - redemption fine - penalty - Held that: - the Commissioner (Appeals) has held that, for violation of Para 2.17 of Foreign Trade Policy, 2009-14, the goods are not liable for confiscation, in that circumstance, redemption fine and penalty are not imposable. Scope of SCN - Held that: - ld. Commissioner (Appeals) has imposed the redemption fine and penalty on the charge of undervaluation and the same is not the allegation in the show cause notice - ld. Commissioner (Appeals) has travelled beyond the scope of show cause notice. In that circumstance, redemption fine and penalty on the charge of under valuation is not sustainable. Appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1247
Classification of goods - Heavy Melting Scrap - Revenue formed an opinion that inasmuch as the goods are rail line length of below 1.5 meter, they are properly classifiable under tariff item 7302 10 90 of CTA, 1975 - whether the rail cut length below 1.5 meters are to be assessed under chapter heading 72.04, as claimed by the assessee or the same are classifiable under chapter heading 73.02, as contended by the Revenue - Held that: - the Hon’ble Supreme Court’s decision in the case of Union of India Vs. Madras Steel Re-Rollers Association [2012 (8) TMI 788 - SUPREME COURT OF INDIA] referred, wherein the Hon’ble Madras High Court decision reported in [2007 (6) TMI 222 - HIGH COURT OF JUDICATURE AT MADRAS] as also the Hon’ble Punjab & Haryana High Court decision in GURUDEV OVERSEAS LTD. Versus CENTRAL BOARD OF EXCISE & CUS., NEW DELHI [2007 (11) TMI 317 - HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH] vide which the Circular No.8/2006-Cus dated 17.01.2006 was quashed and set aside, vide which that said decisions of High Courts were set aside and the matters were remanded back to the lower authorities, without expressing any opinion on the merits of the issue - matter to the original adjudicating authority for fresh decision in the light of the observations made by the Hon’ble Supreme Court - Supreme Court has held in the said decision that Such orders are required to be passed by exercising independent mind and without impartiality and while doing so, such Authorities are required to consider various evidences made available to them - appeal allowed by way of remand.
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2017 (11) TMI 1244
Valuation - freight charges - Revenue entertained a view that the freight incurred is less than what was recovered from their customers and such differential amount is required to be added in the assessable value - Held that: - reliance placed in the case of Indian Sugar & General Engg. Corpn. Vs. CCE, Panchkula [2016 (2) TMI 145 - CESTAT NEW DELHI], where it was held that excess freight collected from the customers more than actually incurred will not be includible in the assessable value when goods are sold ex-factory. The freight charges for transportation of the goods to the buyer’s premises are shown separately. It is further seen that the freight charges are separately shown in the contract - appeal allowed - decided in favor of appellant.
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Corporate Laws
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2017 (11) TMI 1301
Winding up order eligibility - Copy of the said Company Petition was sought to be served at the address of the Respondent Company appearing in the record of the Registrar of Companies - the address mentioned of the Respondent Company was an address in Koparkhairane, Navi Mumbai however, the packet which was sent at the said address camhe back with the remark that the company is 'not available' - Held that:- As per R.28. Service on company the requirement is that a copy of the Company Petition along with notice in the prescribed form is to be lodged with the Company Department of this Court for facilitating the service to be effected on the Company of which windingup is sought. At this stage, it is required to be noted that on behalf of the Petitioner as many as three affidavits of service have been filed. However, the said affidavits of service are predating the admission of the Company Petition. The said affidavits disclose the three addresses at which the notice prior to the admission of the Company Petition was sought to be served on the Respondent Company. Insofar as the third address is concerned, the said address has been furnished to the Petitioner after a search was taken by the Petitioner in the office of the Registrar of Companies. The said address forms part of the 'Company Master Details' of the Respondent Company. In the extract furnished by the office of the Registrar of Companies, the address mentioned is the aforesaid third address namely Koparkhairane, Navi Mumbai. It is required to be noted that the preadmission notice was sought to be served at the said address. However, the packet came with remark as 'not available at the said address'. As indicated above, the Company Petition came to be admitted on 30/07/2012 and in terms of Rule 28, it was required on the part of the Petitioner that the notice be once again served on the Respondent at the said address i.e. Koparkhairane, Navi Mumbai. Admittedly, this has not been done. It is not possible to accept the contention urged on behalf of the Petitioner that since the packet which was sought to be served on the Respondent Company at the Koparkhairane, Navi Mumbai address had returned with the remark that the Company was not available at the said address, the Petitioner was not required to amend the causetitle so as to incorporate the said Koparkhairane, Navi Mumbai address in the causetitle. In our view, in a matter as serious as a Company Petition which seeks direction for windingup of a Company which obviously has a serious consequence for the Company, the procedure cannot be shortcircuited as in the matter sought to be contended by the learned Counsel for the Petitioner i.e. the Appellant herein. Since the Koparkhairane, Navi Mumbai address was the address appearing in the 'Company Master Details' of the Registrar of Companies, the Appellant was required to take steps to serve the notice post the admission of the petition at the said address. It is also not possible to accept the contention of the learned Counsel for the Petitioner that Rule 28 (2) provides for service to be effected at the last known address. The said provision would apply only if there is no registered address of the company. In our view, therefore, there is no merit in the above Appeal. The order passed by the learned Single Judge, in the facts and circumstances of the case, condoning the delay whilst setting aside / recalling the order dated 14/11/2014, cannot be found fault with.
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2017 (11) TMI 1260
Corporate insolvency procedure - proper compliance of Section 9 (3) (c) of the Code by the operational creditor - Held that:- Section 9 (3) (c) of the Code says that the operational creditor shall, along with the application furnish a copy of certificate from the financial institutions maintaining account of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor. In fact the Operational Creditor has filed copy of the statement of its account maintained in the Corporation Bank for the period with effect from 11.05.2016 upto 14.08.2017. This statement of account shows the deposit of an amount of ₹ 10,01,586.04 received from the respondent on 12.05.2016. In view of this, the certificate required under Section 9 (3) (c) was to be for the period 12.05.2016 onwards only and therefore, there is proper compliance of Section 9 (3) (c) of the Code by the operational creditor. Other contention that the claim is barred by time cannot be sustained because part payment was also made on 12.05.2016 as depicted in the bank statement filed by the petitioner to start a fresh period of limitation. Dispute raised by the respondent disentitling the petitioner to an order of admission - As referred to email dated 06.01.2016 at the bottom of page 626 of Annexure VI sent by the respondent, wherein it was admitted that an amount of ₹ 70,53,180/- was still to be paid to the petitioner and invoices worth ₹ 34.68 lacs were adjusted against the advance payment. It was further stated that invoices worth ₹ 22.32 lacs were rejected and invoices for ₹ 1.05 lacs were not submitted. The petitioner responded to this email and after more than 1 ˝ years, vide email dated 11.08.2017 as at page 626 claiming outstanding amount of ₹ 2,18,19,462/-. In view of the facts discussed above, there is clearly an existing dispute between the parties disentitling the petitioner to an order of admission. Whether the demand notice sent by the petitioner is valid in the eyes of law? - It is well settled principle of law that entries in the ledger account of the petitioner cannot fasten liability on the respondent. The basic documents were only the invoices for establishing the claim of debt and to support the contention that there was no scope of a possible dispute. At serial No.7 of Form No.3, ‘Operational Creditor’ is required to attach the list of documents in order to prove the existence of operational debt and the amount in default. For these reasons, I would hold that the demand notice was not valid. The instant petition deserves to be rejected.
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2017 (11) TMI 1238
Condonation of delay - reasons for delay - Held that:- Only after rectification of the mistake a party is allowed to file an appeal. Thus the date of filing of the appeal being 16th June, 2017 which is beyond” the further period of forty five days (total 90 days), the Appellate Tribunal has no jurisdiction to condone the delay. As suggested, if we treat the date of filing as 8th June, 2017, in such case also, we are not inclined to condone the delay as the explanation for delay in filing the appeal is not satisfactory. The appellants have not stated as to what the appellants were doing for one month between 13th March to 12th April, 2017 i.e. the date when the impugned order was passed and served and the uncle of 1st appellant died. Even their action for the subsequent period from 12th April, 2017 to 8th June, 2017 has not been explained. For the reasons aforesaid, the application for condonation of delay is rejected.
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2017 (11) TMI 1237
Oppression and mismanagement - Tribunal directed the Appellant company to sell its shares to the 3rd party ‘Libra' - Held that:- Tribunal has no jurisdiction to direct sale of shares to an outsider particularly while there are other shareholders, who may agree to purchase the same, a wrong doer also cannot get any relief. For the reason aforesaid, we set aside the last para of the order dated 7th April 2017 and as quoted at paragraph 3 above and affirm the rest part of the finding, whereby ‘oppression and mismanagement’ as alleged by the Appellant has been upheld.
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Insolvency & Bankruptcy
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2017 (11) TMI 1273
Corporate Insolvency Resolution Process - whether the petitioner has been able to satisfy the requirement of Section 7 of the Code? - Held that:- From the perusal of the record, we are satisfied that the ‘Financial Creditor’ has proved by overwhelming evidence that default has occurred, which meets the requirement of Section 3(11) and (12) read with Section 7(3)(a) and Section 7 (5) of the Code. A copy of CRILC Report (Annexure-FC33), a copy of Banker’s Book as per Banker’s Evidence Act, 1891 (Annexure- FC30), various letters issued by Financial Creditor including the one declaring the account as NPA show overwhelmingly the default committed by the ‘Corporate Debtor’. We further find that the application is complete in all other respects as the Insolvency Professional, Mr. Mukesh Mohan has been duly proposed and he has also made full declaration stating that no disciplinary proceedings are pending against him. The other objection by referring to the provisions of SICA and SARFAESI would also not detain us from admission of the petition because Section 238 of the Code contained a non-obstante clause in the widest terms possible. The parliament in its wisdom is presume to have knowledge of the provision of various statues prevailing earlier to the enforcement of the Code. Thus this petition is admitted. Shri Mukesh Mohan who is duly registered with Insolvency and Bankruptcy Board of India IBBI/IPA-001/IP-P00018/2016- 17/10042) has been proposed as an Interim Resolution Professional. He is hereby appointed as an Interim Resolution Professional. He has filed his certificate of registration with Insolvency and Bankruptcy Board of India. He has also filed his written communication dated 23.08.2017 in connection with the application to initiate Corporate Insolvency Resolution Process. The disclosure has been made in the letter dated 23.08.2017. No disciplinary proceedings are pending against him.
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2017 (11) TMI 1268
Corporate insolvency procedures - existence of dispute - Held that:- It is mandatory requirement for the petitioner as per clause (b) of sub-section (3) of Section 9 of the Code that the Operational Creditor has to furnish along with the application an affidavit to the effect that there is no notice given by the corporate debtor relating to the dispute of unpaid operational debt. The affidavit filed by the petitioner company as at Annexure-9 states about issuing notice under sections 433 and 434 of the Companies Act, 1956 and reply thereto sent by the respondent but it is alleged that the respondent approached the petitioner to settle the issue. It is stated in para-5 of the affidavit dated 14.07.2017 that operational creditor reaffirms that there is no dispute, but the requirement of the affidavit is to state that there is no notice given by the corporate debtor relating to a dispute of unpaid operational debt. So such an affidavit would not fulfil the requirement of the aforesaid mandatory requirement. The present cannot be said to be a case where there is no dispute, which was even raised in reply to the notice under Section 434 of the Companies Act, 1956. The remedy to the petitioner may lie elsewhere and not by invoking insolvency resolution process under the Code.
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Service Tax
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2017 (11) TMI 1296
Business Auxiliary Services - Revenue proceeded against the appellant to hold that such consideration received from Bank of Punjab shall be liable to service tax under the category of Business Auxiliary Service in terms of Section 65 (19) of the Finance Act, 1994 - Held that: - The Bank of Punjab’s agreement with the appellant clearly stipulates the conditions and the scope of activities of the appellant. A reading of the agreement makes it clear that the appellant is engaged as an extended facility of Bank of Punjab though only for a limited purpose of accepting foreign exchange at the rate specified by the said bank. All the foreign exchange received by the appellant are to be transmitted without any change to the Bank of Punjab who will pay certain consideration for this service - this activity is nothing but promotion of business of Bank of Punjab and also acting as an extended representative of the bank for a limited purpose and getting commission for the same - demand upheld for normal period. Extended period of limitation - penalties - Held that: - appellants acted in pursuance of an agreement in buying foreign exchange from the customers. The title of the agreement stating the same as franchisee agreement and the nature of business in dealing with foreign exchange might have given a bonafide reason for the appellant regarding their non-liability to service tax for this activity - extended period of limitation not invokable - penalties set aside. Appeal allowed in part.
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2017 (11) TMI 1291
CENVAT credit - subsidiary of M/s Gail India Ltd. - Revenue's contention is that in as much as the appellant was not undertaking any taxable service by transportation of goods through pipelines, the availment of credit by them was not justified, whereas case of appellant is that they were paying service tax on the activity of transportation of the said gas through pipelines and as such the entire credit availed by them stands utilized - whether the appellant is entitled to avail the credit of service tax paid by M/s Gail India Ltd. or not? - Held that: - Such credit stands utilized by the appellant for payment of service tax on their activity of transportation even though there was no requirement to do so. By paying service tax, the appellant has utilized the entire Cenvat Credit and as such it can be concluded that the credit paid by the assessee stands reversed. In such a scenario, confirmation of the same for the second time is neither justified nor warranted. There is no warrant for confirmation of Cenvat Credit availed and already utilized by the appellant for payment of service tax on their activity of transportation of gas through pipelines - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1279
Cargo Handling services - non-payment of service tax - Held that: - It is clear that the assessee/appellant are engaged in unloading iron ore from railway racks at Bilaspur siding, loading of such iron ore into the trucks, transportation upto the factory and thereafter unloading the said iron ore in the premises of the client’s factories - Considering the quantification of consideration received alongwith the quantum of cargo handled, we are of the view that the assessee/appellant are essentially involved in cargo handling service and the transport being incidental to said activities - It is also noted that the assessee/ appellant did collect service tax from various clients under cargo handling service and upon enquiry by the Revenue, deposited an amount of ₹ 9.98 lakhs under the said category. It would appear that the assessee/appellant treated the said services as cargo handling services and are contesting the tax liability only after the proceedings have been initiated by the Revenue. Extended period of limitation - Held that: - appellant have collected service tax under Cargo Handling Service from various clients and deposited the same upon initiation of enquiry by the Revenue - it is not open to the assessee/appellant to contest the demand for extended period on the ground of their bonafideness. Penalties - Held that: - the impugned order fell in error in stating that simultaneous penalties cannot be imposed on the assessee/appellant for the same case - the impugned order is legally not sustainable with reference to non-imposition of penalty under Section 76. Appeal allowed - decided in favor of Revenue.
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2017 (11) TMI 1277
Business Auxiliary services - commission and incentive received for business brought in by the appellant for transport of cargo - Held that: - the commission agents are shown in the inclusive part of the definition such agents are not to be treated as only involved in promotion and marketing. Though commission agents do end up promoting or marketing the services the arrangement and manner of payment of consideration decides their scope of activities and brings them under the category of commission agent - In the present case, there is no sale or purchase of goods on behalf of clients. It is the service which the appellant are dealing with - the appellants are liable to service tax under BAS w.e.f. 16/06/2005 only. Regarding the contention of the appellant that incentives are to be treated separately, we note that the same is not a tenable position. Valuation - reimbursement of expenses on actual basis - Held that: - When the expenditure is incurred on behalf of the client and reimbursed on actual basis the same are to be excluded from the taxable value. Penalties - Held that: - this is a fit case for invoking provision of Section 80 for setting aside the penalty on appellant - penalties set aside. Appeal allowed in part.
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2017 (11) TMI 1276
Valuation - inclusion of certain concession in the fees by way of their scholarship scheme - Revenue entertained a view that the difference between the actual tuition fee paid by these candidates who were offered concession and the normal fee paid by the other candidates should be considered as a taxable value by applying Rule 3 of Service Tax Valuation Rules, 2006 - Section 67 - Held that: - In terms of Section 67, the service tax liability will arise on gross value - there are no reason to consider the concessional portion of fee which is as per the pre-declared publicity material, as part of non-monetary consideration requiring addition to the monetary consideration to arrive at the gross value - there is nothing to hold that the scheme is other than a bonafide practice - valuation rules cannot be invoked - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1271
Commercial Training or Coaching Services - view of the Revenue is that the course, B.Sc (Hon.) in Business and Management Studies, conducted by the appellant asessee is not recognized by any statutory authority in India - scope of service. Held that: - degree or diplomas issued by foreign universities are examined for recognition for further education in India or for employment. It is clear that the courses conducted by the appellant assessee results in award of degree of B.Sc (Hon.) by the Bradford University. The said university is an accredited university by the Association of Common Wealth Universities - The Ministry of Human Resource Development, Govt. of India, clarified that AIU is entrusted with recognition of degrees or diplomas awarded by accredited universities in India and abroad for the purpose of admission to higher courses at Indian Universities. The Tribunal while examining a similar dispute in the case of M/s ITM International Pvt Ltd [2017 (11) TMI 1230 - CESTAT NEW DELHI (LB)] held that Ministry of HRD vide Notification dated 13.03.1995 stated that the Govt. of India had decided that those foreign qualifications which are recognized/equated by the AIU are treated as recognized for the purpose of employment services under the Central Government. No separate orders for recognition of such foreign qualification is needed to be issued. The Tribunal also noted that UGC had advised Indian students to ascertain information regarding equivalence of the degrees and diplomas awarded by accredited Universities abroad. While examining these facts, The Tribunal in the said case held that the course offered by appellants resulting in the issue of certificate by the University of London, which is treated as equivalent to degree or diploma issued by Universities in India, the appellant was held to be falling outside the scope of definition for “Commercial Training or Coaching Centre”. The appellant-assessee is falling under the excluded category for tax purpose - appeal allowed - decided in favor of appellant-assessee.
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2017 (11) TMI 1270
Security agency service - Non-payment of service tax - demand of duty with penalties - Held that: - The appellants did not pay the service tax at least for two years during the material time neither they filed any returns during this time. The reasons for the same are not at all tenable. Admittedly, the business continued and the appellants earned income. They also collected service tax along with their charges. Their failure to deposit service tax especially when the same has been collected from the client, clearly brought out the deliberate intent of non-payment of service tax. Valuation of taxable service - Held that: - identical issue decided in the case of Neelav Jaiswal & Brothers Versus CCE, Allahabad [2013 (8) TMI 147 - CESTAT NEW DELHI], where it was held that Section 67 of the Act dealing with valuation of taxable service for charging Service Tax specifies that where the provision of service is for a consideration in money, the taxable value would be the gross amount charged by the service provider for such service provided or to be provided by him. Pure agent service - reimbursement of expenses towards Uniform Allowance, Bonus, PF, OT allowance, ESIC, Insurance, etc - includibility - Held that: - We find no merit in such claim as clearly brought out in the impugned order. The appellants could not produce any contractual agreement with the clients and details of bills raised to indicate as per pre-arrangement that there are reimbursable expenditure Extended period of limitation - penalty - Held that: - the non-payment of service tax, even after collection of the same from the client, non-filing of returns, when the appellant is in this business for long time, is not supporting the claim of the appellant against imposition of penalty or demand for extended period - extended period and penalty rightly invoked. Appeal dismissed - decided against appellant.
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2017 (11) TMI 1263
Site Formation and Clearance - Excavation and Earthmoving and Demolition service involving horizontal drilling for passage of cables without the use of machines - demand of service tax - Held that: - As there are contrary views and difference of opinion between the Members, therefore, the matter be placed before the Hon'ble President to appoint the Third Member for resolving the following issues: - (a) Whether the Member (Judicial) is correct in holding that there is an evidence to the effect that the respondent has executed the work without HDD machines, therefore, the demand of service tax is not sustainable except in the case of M/s. Tata Tele Services or not?, (b) Whether Member (Judicial) is correct in holding that the activity is not preparatory in nature for construction of building and other contractors or not?, (c) Whether the learned Member (Technical) is correct in holding that the activity of the respondent is clearly covered under Sr.No.(iii) of the definition of service under Section 65 (97a). The definition in no way and nowhere implies that only such horizontal drilling is covered thereunder which is done using drilling machines or not? - matter referred to Third Member to be appointed by Hon'ble President.
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2017 (11) TMI 1252
Refund of excess paid service tax - The impugned order held against the appellant only on the ground that the original authority should have awaited the outcome of appeal filed by the Revenue against order dated 30.08.2012 of the Commissioner - Held that: - the said appeal has no direct relevance regarding the fact of excess payment by the appellant. Even otherwise, the appeal by the Revenue was dismissed by the Tribunal, on 09.02.2017. As such we find no legal justification in the finding recorded by the Commissioner (Appeals) in the impugned order - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1251
CENVAT credit - taxable as well as exempt services - non-maintenance of separate records - Rules 6 (3) (c) of CCR, 2004 - the Cenvat Credit was restricted to 20% of the output taxable services provided by them, the respondent has availed credit in excess - Held that: - the case of the Revenue is not sustainable as Revenue has calculated month wise whereas Cenvat Credit is available to them up to the limit of 20% of the input services as per return wise as held by this Tribunal in the case of Vodafone Essar Digilink Ltd. Vs. CCE, Jaipur [2011 (6) TMI 586 - CESTAT, NEW DELHI] - as per the return wise, the respondent has correctly availed the Cenvat Credit up to 20% of the input services credit - appeal dismissed - decided against Revenue.
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2017 (11) TMI 1243
Classification of services - works contract - Department issued SCN alleging that the services rendered by the appellant will not fall under Erection, Commissioning and Installation service but would fall under Commercial or Industrial Construction service - Held that: - From the records it is observed that the contract is composite contract. The period involved is between 10/2005 and 3/2007. The issue whether works contract service is subject to levy of service tax prior to 1.6.2007 is settled by the judgment of the Hon’ble Supreme Court in the case of Commissioner Vs. Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT], where it was held that Works contract were not chargeable to service tax prior to 1.6.2007 - appeal dismissed - decided against Revenue.
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Central Excise
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2017 (11) TMI 1295
Clandestine removal - search was conducted on 06.05.1994 and since then the case has travelled widely for more than 23 years - Held that: - not even a single bill portraying fictitious sale was located by the investigating team - nothing will come out even on remand when no additional material/evidence is available with the Department and that too after a lapse of considerable period. Hence, in the interest of justice and to put the controversy at rest, by giving benefit of doubt, and, more particularly, when the allegations are not corroborated by supporting documents, we set aside the impugned order and allow the appeals - decided in favor of appellant-assessee.
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2017 (11) TMI 1294
Manufacture - job-work - excisability/marketibility - the appellant were only fitting some parts in the blank cabinets for various equipments, such as, battery Management System, electrical panel, air-cooling system and similar items - It is the claim of the appellant that the goods which are being cleared after job work are incomplete goods and are not marketable at that stage - Held that: - Perusal of the photographs indicate that the appellant has only populated some of the components in the enclosures supplied by the principal manufacturer. These are undoubtedly in the form of incomplete systems of various equipments and definitely cannot be marketed - There is nothing on record produced by Revenue that the incomplete goods are capable of being marketed without further processing. Since marketability is a very important aspect of manufacture, we are led to conclude that the goods cannot be considered as manufactured in the form in which they are cleared from the appellant’s factory. Appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1289
Valuation - freight - includibility - goods cleared from the warehouse and sold from the depot - Held that: - in terms of Rule 5 of Central Excise (Determination of price of Excisable goods) Rule 2005, if the goods are sold for delivery at a place other than the place of removal, then the cost of transportation up to the place of delivery shall be excluded - As per the sample invoices perused by us, freight is not included in the transaction value and sale is ex-warehouse, consequently we find no justification for adding the freight amounts recovered separately from the customers - demand set aside. In the light of the claim of the assessee that the depot price includes the element of freight from warehouse to the depot; there appears no justification to add further amount towards freight. However, we are unable to extend such relief in the absence of verification of such claim - appeal allowed by way of remand.
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2017 (11) TMI 1288
Private bonded warehouse license - it was alleged that M/s Adarsh diverted the duty free materials procured by them against the CT-3 certificates into the domestic market with the sole intention to evade Central excise duty and take undue advantage of the concessions provided to hundred percent EOUs for export promotion - penalties - Held that: - The main kingpin was identified as Shri Mohammed Anwar General in the activities of the fraudulent 100% EOU. In his voluntary statements recorded on several dates, he admitted that the duty free inputs procured in the name of M/s Adarsh were illicitly removed into the domestic market. He also outlined the modus operandi employed for such diversion and named the persons who had helped them in this nefarious activity. Certain portion of the illegally diverted materials were seized from various premises of the buyers which confirmed the fact of diversion of the duty free raw material. The investigation established that Sh. Mohammed Anwar had fabricated the clearance documents to show fake deemed exports to other units- viz. M/s G N Rubber Tech and M/s Konark fashion - the diversion of raw materials was established - demand upheld. Penalties imposed on various persons - Held that: - Since their active participation in the evasion of duty stands established, we find no reason to interfere with the penalties imposed on all the above persons - penalty upheld. Appeal dismissed - decided against appellant.
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2017 (11) TMI 1287
Manufacture - case of Revenue is that DTPL is to be considered the manufacturer since they have supplied the required raw materials and packing materials to job workers for manufacture of CFL on their account. Such CFLs manufactured have subsequently been sold to buyers. Hence, DTPL is liable for payment of excise duty on the same - Held that: - From the statements recorded from various persons such as Supervisors working at the various premises were manufacture of CFL was found to be taking place, reveals that they were paid employees receiving salary from the DTPL. It is also confirmed from the record that raw materials as well as packing materials bearing the brand names were supplied by DTPL which were used for manufacture and packing of CFL at the various premises - it is evident that DTPL is to be considered as manufacturer of the CFL made at the various premises - Accordingly, DTPL will be liable for payment of duty on the quantity manufactured at the various premises - demand upheld. SSI exemption - brand names - N/N. 8/2006 - Held that: - The SSI notification specifically denies the benefit of the notification to goods cleared bearing the brand name of other persons. The appellant has nowhere claimed that the brand names affixed on the CFL cleared by them were belonging to them. The brand names itself suggest that they belong to somebody else - appellant not entitled to SSI benefit. Appeal dismissed - decided against appellant.
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2017 (11) TMI 1281
CENVAT credit - iron and steel items used for fabrication of various capital goods/plants and machineries/support structures - Held that: - an identical issue has come up before the Tribunal in the case of Singhal Enterprises Pvt. Ltd. vs Commissioner Customs & Central Excise, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit - credit allowed - appeal allowed - decided in favor of appellant-assessee.
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2017 (11) TMI 1280
Clandestine removal - cross examination of witnesses - principles of natural justice - Held that: - The fact that cross-examination of witnesses sought by the appellant has been denied is a serious breach of the Principles of Natural Justice. The Section 9D of the Central Excise Act, 1944 lays down the conditions for a statement made by a person before any Central Excise Officer during the course of inquiry to be admitted as evidence. It is required for the departmental adjudicating authorities to first admit the statements in evidence in accordance in the procedure prescribed in Section 9D before the same can be used against asseesse even in departmental proceedings. The matter is remanded to the adjudicating authority - appeal allowed by way of remand.
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2017 (11) TMI 1272
Abatement - closure of factory - chewing tobacco pouches - additional machine installed in the three months for the full month - Held that: - Rule 8 provides that if any new machine is installed on any day during the month, it is to be considered as operating for the full month. However, Rule 10, which deals with abatement, provides for non-payment of duty in respect of the factory which is closed for more than 15 days - In respect of the three months in dispute, it is not in dispute that the factory was closed for more than 15 days. By reading together Rule 8 and 10 we reach the conclusion that in respect of the new machines added, duty is required to be paid for the entire period for which factory was working. Since, the demand has been confirmed by the Adjudicating Authority only on the above basis, we uphold the same. Appeal dismissed - decided against appellant.
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2017 (11) TMI 1266
SSI Exemption - Ramming Mass Normal - excisability - Held that: - “Ramming Mass Normal” is not useable as such for lining the furnace and hence, cannot be defined as Refractory materials - the Original Authority concluded that these products are not to be considered for calculating SSI exemption and only “Ramming Mass Premix” is dutiable as a excisable product under Heading 38160000. “Ramming Mass Normal” and “Nali Top” would remain in the same heading “CETH 2506”. As such, these are not manufactured goods and do not fall under the excisable category. Appeal dismissed - decided against Revenue.
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2017 (11) TMI 1265
Benefit of N/N. 214/86-CE dated 25.03.1986 - Revenue entertained a view that M/s Bajrang Wire Products (India) Pvt. Ltd. are not eligible for exemption under N/N. 214/1986 as the final product manufactured by the principal manufacturer are exempt under N/N. 50/2003-CE - Held that: - the letter of letter of the jurisdictional authority of the principal manufacturer would make it clear that the benefit of N/N. 214/1986 cannot be denied to either of the appellants. The finished goods manufactured by M/s Sterlite Technologies Ltd using the job work processed goods by M/s Bajrang Wire Products (India) Pvt Ltd were claimed to be cleared for export or deemed export. These were excluded categories of clearance of finished goods which will not bar the eligibility for the said notification. This aspect has been categorically asserted by the Jurisdictional Commissioner of principal manufacturer. However, the original authority in Jaipur still proceeded to confirm the demand by denying the exemption. As such, the impugned order is unsustainable. The original authority should re-examine all the aspects and in consultation with the jurisdictional authority of the principal manufacturer, should verify the facts as claimed by the appellants regarding the export and deemed export of finished goods before taking a fresh decision - appeal allwoed by way of remand.
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2017 (11) TMI 1264
Area based exemption - N/N. 49/2003 dated 10.06.2003 - writing or printing paper for printing of educational textbooks - Held that: - the entry in the negative list of the exemption notification is based on end use of the manufactured paper. There is no other technical specification to identify the writing or printing paper which will fall under the excluded category for exemption. The exclusion is based on end use, namely, for printing of educational textbooks - Admittedly, the paper can be used for printing of books of any kind. The bar of exemption will operate only when the paper is used for printing of educational textbooks. When the appellant had received purchase orders and sold the paper directly to the publishers of education textbook, it is clear that they are running the risk of losing the exemption under Notification No.49/2003. There can be no contest on the grounds that the end use is not in their control. When they sold the paper to a known publisher of educational textbook, it is apparent that they are aware of the usage of paper. They cannot take a plea that they have no control on them when end use is recognizable. Quantification of duty liability - Held that: - not all papers cleared by them to the 11 publishers can be considered as used for printing educational textbooks - When the Revenue proceeded to demand duty on this ground, it is necessary to categorically establish and calculate the duty liability only with reference to paper for printing educational textbooks. This aspect requires re-look by the original authority - Re-quantification of duty liability has to be done based on the documents and verification regarding the paper cleared by the appellant for printing of educational textbooks - In case of reduction in the duty liability based on re-verification, the penalty also shall accordingly be re-quantified. Time limitation - Held that: - the appellants cannot take a plea that they are filing returns and regular check by the officers will absolve them from the duty liability for extended period - It is only in the knowledge of the appellant that they are selling printing paper to the publishers/printers of educational textbooks, which is an excluded category for exemption - extended period rightly invoked. Decided partly against appellant and part matter on remand.
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2017 (11) TMI 1262
Refund of excess paid duty - closure of machinery - abatement of duty - Held that: - machine which was operated during 16.07.2014 to 31.07.2014 for packing pouches of MRP ₹ 2.80 per pouch, for which the duty has been paid on pro-rata basis - the appellant is not entitled to claim refund of the same. The payment of duty for the machine manufacturing/ packing pouches having MRP of ₹ 5.00 each is a separate proceedings and duty has been paid separately for that and for the machine packing pouches having MRP of ₹ 2.80, the duty has been paid separately and separate refund claim has been filed by the appellant. Therefore, two claims of the appellant filed separately cannot be clubbed together in these proceedings, especially in a situation where the first issue has already been settled. Appeal dismissed - decided against appellant.
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2017 (11) TMI 1261
Clandestine removal - MS ingots - whether the appellant, during the impugned period, has actually manufactured MS ingots in excess of what was recorded in their records and removed the said quantity clandestinely without payment of duty? - demand was raised mainly on the ground of Technical Opinion, which was prepared based on the electricity consumption - Held that: - electricity consumption cannot be the only factor for determining the duty liability that too on imaginary basis without having tenable evidence of clandestine manufacture and clearance of goods - The excess consumption of electricity, no doubt raises suspicion with regard to quantum of action. However, mere suspicion cannot lead to demand. Electricity consumption can vary from one unit to another and can vary in the same unit in different conditions. There is no justification for upholding the duty demand only on the basis of projected production based on electricity consumption figures. The other evidences submitted by the Revenue, by itself do not lead to conclusion of clandestine manufacture or clearance. At best it can raise doubt in our mind regarding the actual production accounted However, suspicion, however grave, cannot take the place of tangible evidence. Reliance placed in the case of R A Castings Pvt. Ltd. Vs. CCE [2008 (6) TMI 197 - CESTAT NEW DELHI]. Appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1259
Valuation - MRP based valuation - demand of duty on additional quantity packed in jar - Held that: - identical issue decided in appellant's own case M/s Perfetti Van Melle India Pvt Ltd Versus Commissioner of Central Excise, Delhi-III [2015 (10) TMI 1554 - CESTAT NEW DELHI], where it was held that these free supplies are within the jar and on the MRP of Jar, the appellants are correctly paying duty under Section 4A of the Central Excise Act, 1944 - on these additional supplies made free, the appellant is not required to pay duty - appeal allowed - decided in favor of appellants.
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2017 (11) TMI 1257
Captive consumption - denial of benefit of N/N. 67/95 CE - intermediate products, armoured cable - whether the appellants are liable to pay the duty on intermediate product i.e. armoured cable, which has been used for manufacture of power cables which is ultimately cleared on payment of duty in the open market and to Mega Power Projects without payment of duty? - Held that: - identical issue decided in the case of M/s. KEI Industries Ltd., N Hashmi Versus Commissioner of Central Excise [2016 (12) TMI 532 - CESTAT NEW DELHI], where relying in the decision in the case of Thermo Cables Ltd. [2012 (12) TMI 942 - CESTAT BANGALORE] wherein this Tribunal held that a conjoint reading of sub-rule (6) of Rule 6 of the CCR 2004 and clause (vi) under the proviso to N/N.67/95-CE ibid would show that the assessee’s claim for exemption from payment of duty on copper wire under the Notification was not hit by the opening portion of the proviso to the Notification, held that assessee was not liable to pay CE duty on copper wire manufactured and captively used in the manufacture of insulated (power) cables in the factory during the material period. - appeal dismissed- decided against Revenue.
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2017 (11) TMI 1255
Waste - Manufacture or not? - At the time of storage of soya bean oil the sludge was settled in the bottom of the storage tank - whether demand of excise duty on such sludge justified or not? - Held that: - in the assessee’s own case identical issue has come up before the Tribunal in the case of CCE Vs. Ambika Refinery [2013 (9) TMI 821 - CESTAT NEW DELHI], where it was held that Soya Gum which was settled at the bottom of storage tank and was removed gently along with some oil cannot be held to be an excisable item emerged as a result of manufacturing process - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1249
Valuation - It is alleged that the appellants did not discharge duty on some of the clearances based on the sale value of similar goods from the depot at or about the same time, when the goods were cleared from the factory - Rule 7 of Central Excise Valuation Rules, 2000 - Held that: - in terms of Rule 7, the transaction value shall be based on goods sold from depot. Though, the appellants may have a circular fixing the price for a particular fortnight, in the absence of any sale, the nearest sale price is correctly adopted by the Revenue - differential duty, if any for normal period upheld. Extended period of limitation - penalty - Held that: - Admittedly, the appellants followed uniform practice and in a few instances, which they claimed to constitute less than 1% of the transaction, a situation of short-levy, by strict enforcement of Rule 7 has arisen - Delay, if any, in submission of such documents cannot by itself sustain the reason for invoking willful suppression, fraud, collusion etc. - extended period and penalty cannot be invoked. Appeal allowed in part.
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2017 (11) TMI 1248
N/N. 67/1995-CE, dated 16.03.1995 - intermediate goods - captive consumption - processed fabrics (intermediate goods) used in the manufacture of exempted final products [Knitted Garments] cleared/availing SSI exemption - Held that: - In a similar situation, the exemption available to cement clinker used in the manufacture of cement, which was cleared without payment of duty availing area-based exemption was the subject-matter of discussion by the Hon'ble Supreme Court in the case of M/s. Ambuja Cements Ltd. [2015 (11) TMI 1413 - SUPREME COURT]. It was held in the case that There may be different final products manufactured by the same manufacturer. The final products may be made out of the same product or out of different products. Clause (vi) does not contemplate that the manufacturer should manufacture only ‘one final product’ or that if he manufactures only one product that product itself should be both dutiable and exempted. The basis adopted by the CESTAT that the ‘same final product’ should be partly dutiable and partly exempt, is neither a requirement of clause (vi) nor a requirement of Rule 6. The exemption available to intermediate products in the present case cannot be denied - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1246
Valuation - related party transaction - case of the Revenue is that the value shown in the document of clearance by appellants to M/s.IOCL should be considered as transaction value for Central Excise duty - The appellant's claim is that since their clearance is exclusively to a holding company and the transaction is between related party, the value cannot be determined in terms of main section 4(1)(a) - Held that: - when the excisable goods are not sold except through an inter-connected undertaking, the value should be determined as per Rule 10(a) read with Rule 9 of Valuation Rules - there is no legal sanction to demand duty from the appellants in case the price charged by them from M/s. IOCL is higher than the price of M/s. IOCL. - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1245
Valuation - job-work - Revenue entertained a view that the duty is required to be paid by the appellant not only on job charges but by including the value of the raw materials/inputs supplied by the principal manufacturer or their customers - Held that: - if the appellant is following the due procedure for undertaking the job work for other manufacturer, who were using the said intermediate goods in the manufacture of their final products, the appellant is entitled to benefit of the job work scheme in terms of Rule 4(5)(a) of Cenvat credit Rules, even though they were, inadvertently, discharging their duty liability - matter needs verification - appeal allowed by way of remand.
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2017 (11) TMI 1242
Valuation - section 4 or section 4A of CEA - HLL as part of marketing promotion intended to give 400 ml pack of Vanilla Gold Ice-cream along with 500 ml/750 ml of Sundae - Revenue's case is that Vanilla Gold Ice-cream should also should suffer duty under Section 4A and not under Section 4 - Held that: - Admittedly the goods cleared by the appellants are in retail sale packs intended for retail consumers through their client HLL. They have discharged correct duty on the printed MRP on such retail packs. The fact that there are certain free supplies along with frozen dessert in the form of vanilla gold ice-cream does not change valuation of such products for duty purpose - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1241
Penalty - CENVAT credit availed on input 'base oil', which was cleared as such to other unit - amount paid on being pointed out before issuance of SCN - Held that: - the appellant has paid the short-paid immediately on being pointed out by the department and well before issuance of the show cause notice - Section 11(2)(AB) states that no show cause notice shall be issued if the duty along with interest as pointed out by Central Excise officer is paid by the appellant - penalty imposed u/s 11AC of the Act r/w Rule 15(2) of CCR, 2004 set aside - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1240
Refund claim - reversal of CENVAT credit - waste and scrap - case of appellant is that they are not liable to reverse the credit, since they are not manufacturing any exempted products and that waste and scrap cleared by them under nil rate of duty is not exempted goods manufactured by them - Held that: - waste and scrap which arises during the course of manufacture of the final products cannot be considered as a product intended to be manufactured by the appellant. It is merely a by-product that emerges as inevitable consequence of manufacturing process and therefore the appellant is not liable to pay duty on such waste and scrap - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1239
Benefit of N/N. 67/95-CE dated 16.3.1995 - whether the appellants are eligible for exemption under Notification No. 67/95-CE dated 16.3.1995 on clinker used captively in the production of cement cleared without payment of duty to units at Special Economic Zone? - Held that: - the issue is squarely covered in favour of the assessee by the decision of the Tribunal in the case of Ultratech Cement Ltd. [2015 (10) TMI 1058 - CESTAT CHENNAI], where it was held that clinkers used captively for manufacture of cement cleared to SEZ is covered under Notification 67/95 from exemption of excise duty - the appellants are eligible for exemption under N/N. 67/95 on clinker used captively in the production of cement cleared without payment of duty to units at Special Economic Zone - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (11) TMI 1299
Delay in payment of tax - TNVAT Act and TNVAT Rules - sale of liquor - Form U notice / garnishee order - payment of arrear of tax in instalments - Held that: - the respondent cannot seek indulgence everytime to make the payment in instalments by stating one reason or the other, and further observed that once the tax liability is fixed and also admitted by the respondents, it is the bounden duty to pay without dragging the matter. As per Rules 7(1)(a) and 7(1) (b), respondent has to pay tax due along with the monthly returns in Form I, as prescribed - As per the statutory provisions, tax has to be paid, before the 12th day of the succeeding month. Contention of the appellant in the grounds of appeal that even after receiving the tax amount along with the sale price from TASMAC Limited, well before the date of filing of the return, the respondent has not remitted the tax to the government, has not been refuted by filing any counter in this appeal. As per the statute, tax has to be paid in time, failing which interest is levied. There is no provision in the statute to pay tax in installments. The respondent has suppressed collection of tax from the buyer, and failed to remit the same to the government in time - It is thus clear that though the appellant- Company had approached the High Court under Article 226 of the Constitution, it had not candidly stated all the facts to the Court. The High Court is exercising discretionary and extraordinary jurisdiction under Article 226 of the Constitution. Over and above, a Court of Law is also a Court of Equity. It is, therefore, of utmost necessity that when a party approaches a High Court, he must place all the facts before the Court without any reservation. If there is suppression of material facts on the part of the applicant or twisted facts have been placed before the Court, the Writ Court may refuse to entertain the petition and dismiss it without entering into merits of the matter. The respondents having collected tax from TASMAC Limited, has not only failed to remit tax, due to the Government, in time, but also withheld the same for a considerable period and by filing successive writ petitions, has been gaining long time, for payment of tax, on installment basis, which the statute does not contemplate - Taking note of the averments in the supporting affidavit to W.P.No.24657 of 2017 as regards financial constraint, respondent seemed to have persuaded the writ Court to exercise discretion in favour of the respondent, which on the facts and circumstances of the case, not entitled. Section 45 (1)(b) of TNVAT Act, 2006, states that any person who holds or may subsequently hold money for, or on account of the dealer or other person who has become liable to pay any amount due under this Act, to pay to the assessing authority either forthwith upon the money becoming due or being held at or within the time specified in the notice - When the dealer had collected the tax from the buyer, the tax should be paid to the Government, within time. Retention of the same, would amount to unjust enrichment and as rightly pointed out would pave way, to similar request. The action of the 3rd appellant in issuing 'U' Form dated 31.08.2017, cannot be set at naught, by granting liberty to the respondent to pay tax in installments - Appellants are empowered to collect the amount from the buyer, due and payable by respondent - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1298
Interest on refunds - relevant date for computation of interest - Section 42(1)(a) of the Delhi Value Added Tax, 2004 - interpretation of statute - case of the respondent authorities is that the petitioner/ IJM Corporation Berhad would be entitled to refund in terms of Section 42(1)(a) of the Act after a period of one or two months, as the case may be, from the date of filing of the Return and not from the date of filing of the return - Held that: - When we harmoniously read Sections 38 and 42 of the Act, which relate to processing of claim for refund and payment of interest, it is crystal clear that the interest is to be paid from the date when the refund was due to be paid to the assessee or date when the overpaid amount was paid, whichever is later. The date when the refund was due would be with reference to the date mentioned in Section 38 i.e. clause (a) to sub-section (3). This would mean that interest would be payable after the period specified in clause (a) to sub-section (3) to Section 38 of the Act i.e. the date on which the refund becomes payable. Two sections, namely, Sections 38(3) and 42(1) do not refer to the date of filing of return. This obviously as per the Act is not starting point for payment of interest. Under sub-section (2) of section 39, interest would begin from the period specified in clause (a) to sub-section (3) to Section 38 of the Act, albeit the quantum of refund would depend upon the adjudication. In the present context, we would not like to go into the multifarious situations which may arise when an assessee files the revised return. It would be more appropriate and proper for the authorities under the Act to examine each and every case wherein a revised return has been filed and thereafter, determine whether the assessee would be entitled to interest and, if so, from which date, on the findings. We leave the question/issue open. It is directed that the authorities will examine the question of interest payable on refund and the date from which it is payable in accordance with the aforesaid dictum and principles - petition allowed by way of remand.
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