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TMI Tax Updates - e-Newsletter November 29, 2016 Case Laws in this Newsletter: Income Tax Customs Corporate Laws PMLA Service Tax Central Excise CST, VAT & Sales Tax TMI SMS An optional scheme for Levy of Tax and Penalty on Amount Deposited in the Bank Account which was undisclosed / unexplained Articles An optional scheme for Levy of Tax and Penalty on Amount Deposited in the Bank Account which was undisclosed / unexplained PROPOSED ADMINISTRATION OF GST (PART-II) News IT Dept will not seek source of bank deposits: Adhia Pay 50% tax on unaccounted deposits, or 85% if caught: govt Export of Gems and Jewellery Merchandise Exports from India Scheme Import Clearance Certificate India's Share in Global Trade SEZs in Uttar Pradesh Taxation Laws (Second Amendment) Bill, 2016 introduced in Lok Sabha; A scheme namely, ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) proposed in the Bill Quarterly Report on Public Debt Management for the Second (Q2) Quarter (July-September, 2016) released; During Q2 of FY17, the Government issued dated securities worth ₹ 176,000 crore taking the gross borrowings during H1 FY17 to ₹ 341,000 crore or 56.8 per cent of BE, vis-a-vis 58.5 per cent of BE in H1 FY 16; Net market borrowings during H1 FY 17 was at ₹ 124,777crore i.e. 55.1 per cent of BE THE TAXATION LAWS (SECOND AMENDMENT) BILL, 2016 Ease of Doing Business further enhanced for the Importers and Exporters by reducing/eliminating physical print-outs/paper documents for customs clearance; These instructions will become operational from 1st December, 2016; Will help the Importers and Exporters to move towards electronic messaging and paper–free environment RBI Reference Rate for US $ Income Declaration Scheme 2016 – Grievance regarding non-acceptance by banks of payments under IDS, 2016 through ITNS-286 FM: Asks Captains of Indian Trade and Industry to come forward and make increased Private Investment especially in Infrastructure Sector ; FM: Present Government to make an extensive social welfare system which will focus primarily on better education system and effective healthcare especially for the children, women and senior citizens of the country; Notifications Customs 139/2016 - dated 25-11-2016 - Cus (NT) Amendment in Principal Notification No. 12/97-Customs (N.T) dated 02.04.1997 FEMA F. No. 1/3/EM/2016 - G.S.R. 1089(E) - dated 25-11-2016 - FEMA CORRIGENDUM - Notification No. FEMA. 362/2016-RB dated February 15, 2016 SEZ G.S.R. 1094(E) - dated 21-11-2016 - SEZ Special Economic Zones (Amendment) Rules, 2016 Highlights / Catch Notes Income Tax An optional scheme for Levy of Tax and Penalty on Amount Deposited in the Bank Account which was undisclosed / unexplained - Income Tax Visit to Get Source Taxability of reimbursement of salary - Once the salary cannot be taxed in India the same cannot be brought in the ambit of FTS under Article 12(5). - AT Visit to Get Source Cash payment for purchase of fruits - the payment in cash for purchase of agricultural commodities is covered by Rule 6DD(e) of the Rules and in such a situation merely because the cash payments have been made, no disallowance could be made - AT Visit to Get Source Addition on account of secretarial, accounting & other support services - the addition was made by the A.O on the ground that, this is not authorized by the partnership deed. Such ground of the disallowance cannot be sustained - AT Visit to Get Source Addition u/s 68 - loose paper in coded word. - the explanation given by the assessee, which is after 13 days of survey is a plausible one, it cannot be brushed aside without giving any specific reasons. - AT Visit to Get Source Customs Valuation - rejection of transaction value of the import of “Lux” brand soaps declared by the appellant - Once misdeclaration of the value of import is established, confiscation was warranted - AT Visit to Get Source Indian Laws Taxation Laws (Second Amendment) Bill, 2016 Visit to Get Source Service Tax Enhancement of penalty - if the adjudication order has been challenged before the learned Commissioner (Appeals), the learned Commissioner of Service Tax seized his power to review the adjudication order. - AT Visit to Get Source Levy of penalty u/s 76 and 78 of the Finance Act, 1994 - taxability of Sale of Space or Time for Advertisement - it is a case of bonafide mistake - no penalty - AT Visit to Get Source Central Excise When the Rule itself, does not permit drawback in case of inputs on which duty has not been paid, the appellant ought to have maintained some procedure/ segregation / accounting method for the inputs used in manufacture of products exported, if the appellant intended to claim drawback. The rejection of drawback claim on this ground holds merit. - AT Visit to Get Source CENVAT credit - whether appellant is eligible for CENVAT Credit availed on Capital goods when at the time of availing credit appellant was manufacturing only exempted product? - Held No - AT Visit to Get Source Reversal of CENVAT Credit on inputs contained in the waste pharmaceuticals destroyed are governed by the provisions of Rule 21 of Central Excise Rules 2002 read with sub-rule 5C of Rule 3 of CENVAT Credit Rules 2004 - Refund of credit reversed not allowed - AT Visit to Get Source The grant of notification should not be loosely interpreted and public grant should not be abused. But the spirit of the notification in question appears to be beneficial in nature. Revenue failed to demonstrate that the device is not capable of using agricultural waste. - AT Visit to Get Source Valuation - assessable value - ex-factory sales - so long as there is a genuine ex-factory price there can be no question of taking into account the depot price for arriving at the assessable value are on all fours with the facts of this case. - AT Visit to Get Source The anchor rings and load spreading plates are parts of tower specially designed for wind operated electricity generators and are eligible for exemption under Notification No. 6/2006, dated 1-3-2006 - AT Visit to Get Source Levy of duty - paper waste and aluminium waste generated during the making and packing of cigarettes classified under CETH 4702.90 and CETA 7602.90 respectively - cigarette waste paper, aluminium foil waste and oil/sludge waste are not excisable - AT Visit to Get Source Cenvat credit - duty paid job work - whether the denial of Cenvat credit on the ground that job worker should have carried out job work under Rule 4(5)(a) of Cenvat Credit Rules, 2004, hence was not supposed to pay the duty, is justified? - Held No - AT Visit to Get Source Refund - Principles of unjust enrichment - periodical revision of the price depending on the price prevailing in the market - appellant is entitled to refund since not received a single rupee more than the settled amount - AT Visit to Get Source VAT Mobile Battery Chargers (MBC), cannot be treated as part of the Mobile Phones itself and they are mere accessories of the Mobile Phone and are to be taxed separately irrespective of their packing in the common package with Mobile phones - HC Visit to Get Source Case Laws: Income Tax 2016 (11) TMI 1257 Settlement Commission order validity - Held that:- It is not open to the petitioners to argue that the Income Tax Department or the Settlement Commission ought to be only concerned with the income tax to be collected on the income disclosed and not the nature of the transactions even if they amounted to a criminal act. The provisions of Section 245C make it very clear that not only full and true disclosure of income has to be made but also the manner in which the income has been derived. It is true that grounds of criminality may not lead to a situation where the Settlement Commission shall refuse to go ahead with the settlement, otherwise there would have been no occasion to confer upon it powers under Section 245H to grant immunity from prosecution and penalty, but the same does not mean that the applicant before the Settlement Commission can choose to evade the requirement of disclosing the manner in which the income has been derived. The only fact that has been admitted by the respondents even in the counter affidavit is that the source of income of the petitioners is from the BCCL. This Court does not find any cogent material produced by the petitioners with regard to the manner in which the income has been derived and thus we see no reason to consider the conclusion of the Commission as suffering from any infirmity. For the aforesaid reasons we also do not find any substance in the submission of learned counsel for the petitioners that the Settlement Commission has shirked its responsibility by leaving it to the Assessing Officer to decide the issue on the same facts. Since the basic requirements of Section 245C have been found to have been not met by the Settlement Commission in view of the materials before it, there could have been no question of the Settlement Commission to have proceeded further in the matter except to reject the applications of the petitioners. 2016 (11) TMI 1256 Revision u/s 263 - Disallowance of provision made for contribution to Solatium Fund - whether the payment was made to the Solatium fund only in September 2005 at 0.1%. Therefore, during the subject Assessment Year, the provision could not be allowed as an expenditure as it was a contingent liability? - ITAT delted revision orders - Held that:- We note that the impugned order of the Tribunal has after elaborate discussion come to the conclusion that in facts of this case, the order passed by the Assessing Officer dated 24th December, 2008, cannot be said to be erroneous in law. The provision made for contribution to the Solatium fund during the subject Assessment Year were as per the scheme introduced by the Central Government and as directed by IRDA. This provision was to be made at the rate of 1% of the premium received during the subject Assessment Year as done in the earlier Assessment Year also. This was to provide for contribution to a fund to be formed to make payment to victims of hit and run accident. In this case, the liability of making a contribution to the Solatium fund at 1% of premium received, is a certain liability in view of IRDA letter dated 13th May, 2004. Therefore, it is not a contingent liability during the subject Assessment Year. In fact, this Court in Shrikant Textiles v/s. CIT [ 1970 (3) TMI 40 - BOMBAY High Court ] has held that whether a liability is ascertained or contingent for a subject Assessment Year, cannot be decided/determined on the basis of the amounts paid in the subsequent/next Assessment Year. No substantial question of law. - Decided in favour of assessee 2016 (11) TMI 1255 Rental income derived from the constructed building from letting out the property - income from house property or income from business - Held that:- The income of the appellant from letting out the property of Pandooi Place at Boring Road, Patna is an income from business. See Chennai Properties and Investments Ltd. V. CIT, [2015 (5) TMI 46 - SUPREME COURT ] and Rayala Corporation Pvt. Ltd. Vs. Assistant Commissioner of Income Tax, [2016 (8) TMI 522 - SUPREME COURT] 2016 (11) TMI 1254 Genuine purchase of plants and equipments - depreciation claim - Held that:- This Court cannot readily accept the contention of the assessee that a Biogas plant, which as per one of the Chartered Engineers was having a Replacement cost only at ₹ 2.53 lakhs, was purchased by the assessee-company at ₹ 50 lakhs and claim of 100% depreciation could be made thereon. Therefore, this burden of the assessee does not seem to have been appropriately discharged by the assessee in the present case. The very purpose of remand to the Assessing Authority and the exercise to be undertaken by the fact finding bodies, including appellate forums at the level of Commissioner of Income Tax (Appeals) and ITAT, the authorities prescribed under the provisions of the I.T.Act, 1961, would be frustrated, if this Court were to undertake this exercise in writ jurisdiction of this Court. Therefore, without expressing any opinion on the valuation of the plant and machineries purchased by the assessee-company and its right to claim depreciation thereon, the petitioner-company is relegated back before the first appellate authority namely, the Commissioner of Income Tax (Appeals). It goes without saying that if the assessee-company leads appropriate evidence to support its claim even before the first appellate authority, who undoubtedly has the co-extensive powers as are available to the Assessing Authority under the Act, the said first appellate authority is expected not to shirk its responsibility, but decide the appeal on merits weighing such evidence and he is expected to record his own appropriate findings of fact, because multiple rounds of litigation and remands have already taken place in this case. 2016 (11) TMI 1253 Interest u/s 234(B) and 234(D) levied by AO u/s.154 - Held that:- Demand of interest under section 234(B) was set aside by the learned CIT(A) vide order dated 28/11/2002. It is an admitted position that thereafter the matter was not carried to appeal by the revenue against the order passed by the learned CIT(A) dated 28/11/2002 setting aside demand of interest under section 234(B) of the Act. If that be so, thereafter it was not open for the A.O. to again levy / charge interest under section 234(B) of the Act in exercise of powers under section 154 of the Act. Under the circumstances, as such, no error has been committed by the learned tribunal in confirming the order passed by the learned CIT(A) deleting levy of interest under section 234(B) of the Act, which was passed by the A.O. in exercise of powers under section 154 of the Act, which was passed after the learned CIT(A), in exercise of appellate jurisdiction setting aside the levy of interest under section 234(B) of the Act vide order dated 28/11/2002. Now, so far as deletion of interest, charged under section 234(D) of the Act by the learned CIT(A), by the learned tribunal is concerned, Mrs.Bhatt, learned counsel appearing on behalf of the department has stated at the bar that as the amount involved is ₹ 97,009/- only, on the smallness of the amount only she does not press the present appeal qua deletion of interest charged under section 234(D) of the Act is concerned 2016 (11) TMI 1252 Validity of the order of the ITAT - Descanting views between two members of the Tribunal - Pronouncement of order by any one Member of the Bench - Held that:- Since both the parts of order one for allowing the application and another for dismissal of the application are duly signed by both the members of the bench, we find that there is apparent self contradiction and in our view, apparent self contradiction of order which comprises of two parts, cannot be sustained in the eye of law. The aforesaid is coupled with the circumstances that in both the parts of order though duly signed by both the members of Tribunal. There is no dessentment recorded in their respective part, may be first part or second part. But in the second part, judicial member has concurred with the view of administrative member irrespective of his earlier part of view for allowing of the application, which is also signed by the administrative member. Hence, we find that both the parts of order are / and can be read comprising of only one common order and self contradiction are apparent on the face of it. If both the parts are simultaneously pronounced, one for allowing of the application and another for dismissal of the application, it is not possible for us to accept the contention that first part of the order was within the jurisdiction and when second part was simultaneously pronounced, the Tribunal had already become functus officio. On the contrary, in our considered view that we do find that both the parts of the order when simultaneously pronounced would comprise of one order but with self contradictory view expressed by both the members of the Tribunal.In view of the aforesaid, we find that the order passed by Tribunal comprising of both the parts cannot be sustained. Hence, the impugned order dated 28.04.2016 comprising of both the parts of order, one for allowing the application and another for dismissal of the application, is set aside with the direction that the main OA shall stand restored to the Tribunal. 2016 (11) TMI 1251 Claim of weighted deductions u/s 35(2AB) - disallowance of claim for the reasons that the items manufactured and supplied by the assessee to Indian Railways are in the nature of office machines and apparatus used in Railway stations for office work and for data processing, therefore, these items are clearly falling in Eleventh schedule - Held that:- A.O. was erred in disallowing the weighted deduction claimed by the assessee under the provisions of section 35(2AB)(1) of the Act, despite the assessee s R D facility was approved by the competent authority. We further was of the view that the goods manufactured by the assessee are not a mere office machines or apparatus as listed in Eleventh schedule, but they are specially designed electronic equipments meant for use by Indian Railways to monitor smooth movement of trains. The assessee has categorically proved by filing necessary evidences of approval granted by the prescribed authority and also returns filed annually to the prescribed authority to justify the expenditure incurred towards R D expenditure. In our considered view, the competent authority has to decide whether a particular expenditure is eligible for deduction u/s 35(2AB) of the Act or not, but not the assessing officer. In the present case, the A.O. without following the due procedure laid down under the provisions of the Act and rules there under, simply disallowed the expenditure claimed by the assessee. Therefore, we direct the A.O. to allow the weighted deduction claimed by the assessee under the provisions of section 35(2AB)(1) of the Act. TDS u/s 194C - disallowance of direct expenses for non-deduction of tax at source - Held that:- We are of the view that no disallowance can be made u/s 40(a)(ia) of the Act, for the amounts which have been already paid during the financial year. However, the facts relating to paid and payable are not emerging from the records, therefore, we set aside the issue to the file of the A.O. and direct the A.O. to examine the issue paid and payable with reference to books of accounts of the assessee and if the expenditure incurred by the assessee is paid within the same financial year, then the A.O. is directed to delete the additions made u/s 40(a)(ia) of the Act. In other words, the A.O. is directed to restrict the disallowances to the extent the amount remaining payable at the end of the financial year. TDS u/s 194H - disallowance of bank guarantee charges under the provisions of section 40(a)(ia) for non deduction of tds - Held that:- This issue is covered by the decision of ITAT, Visakhapatnam in assessee s own case for the assessment year 2009-10 and submitted that the coordinate bench of this Tribunal, under similar circumstances deleted the additions made by the A.O. See Kotak Securities Ltd. Vs. DCIT [2012 (2) TMI 77 - ITAT MUMBAI] wherein held 'guarantee commission' is not in the nature of 'commission' as it is understood in common business parlance and in the context of the section 194H. This transaction, in our considered view, is not a transaction between principal and agent so as to attract the tax deduction requirements u/s 194H. 2016 (11) TMI 1250 Initiation of revision proceedings u/s 263 - estimation of income - non maintenance of proper books of account - Held that:- While giving a finding that income is to be estimated on the basis of the survey, the AO has accepted the income returned which is at 1.97% of the gross receipts. The reasons for accepting the income returned on the basis of the books of account are not forthcoming from the order. Therefore, we are of the opinion that Ld. Pr.CIT exercised his jurisdiction u/s. 263 validly as there is an error in the order itself as can be seen on the face of it. This is certainly an order erroneous and prejudicial to the interest of Revenue. However, we are not convinced with the direction of the CIT to adopt 5% of the gross receipts, without giving an opportunity to assessee. In fact, assessee’s submission is that it had maintained books of account. Therefore, in our opinion, the veracity and correctness of the books so maintained should have been examined by the AO afresh. Thus we modify the order of CIT directing the AO to enhance the income, to set aside the impugned order of the AO and restore the entire assessment proceedings to the file of AO to examine assessee’s contentions in detail a In case of rejection of books of account, however, we make it clear that any estimation of income should not exceed 5% as determined by the Pr.CIT/or admitted by assessee in the course of survey. Consequently, the direction to initiate penalty proceedings also stands modified. AO is free to consider whether to initiate penalty proceedings or not on the basis of examination of assessee’s business affairs. He is directed to pass a detailed order so that there will be no confusion, as arising in this case on the impugned assessment order. Assesse should be given due opportunity in the consequential assessment proceedings. With these directions, while upholding initiation of proceedings on 263, the grounds of assessee are partly allowed. 2016 (11) TMI 1249 Taxability of “Management Service Fees” - whether amount received by the assessee from its Indian entity as “royalty” under Article 12(4) of Indian- Netherlands Treaty - Held that:- As highlighted above, with regard to various streams of services like providing of information technology; operational support; marketing; quality, health, safety and environment; estimating and engineering; and personal and organization, administration and legal services, there is no imparting of any kind of knowledge, skill or experience by way of information concerning industrial, commercial or scientific which is made available to VOIPL.For rendering of these services, there is no element of imparting of any “knowhow” or there is transfer of any knowledge, skill or experience. Thus, in our opinion, none of the services provided by the assessee in the term of “service agreement” falls within the scope and ambit of “royalty” as defined in Article 12(4) of the DTAA. We ourselves have analyzed each and every aspect of services rendered by the assessee in terms of the “service agreement” and also analyzed the definition of “royalty” as given in Article 12(4) and have reached to a conclusion that the said services and reimbursement of cost does not fall under the realm of “royalty”. Moreover here in this case, the revenue’s main thrust is that the payment received by the assessee from VOIPL is “royalty” and here it is not the case of FTS by the department and, therefore, we are refraining ourselves from going into the aspect of FTS qua the services rendered in terms of the service agreement. Taxability of reimbursement of salary as FTS under Article 12(5) - Held that:- Assessee has given the employee-wise break-up of salary along with respective days of stay in India for the crew members on Volvox Atlanta and it is amply evident that stay of none of the crew members in India has exceeded 90 days. Similarly, with respect to reimbursement of salary of crew members Volvox Delta also it is seen that the days of stay again does not exceed 90 days. Rather it is only for the period of 35 days. This is evident from the certificate issued by the ‘Director General of Shipping’ dated 10th September, 2009 given to VOIPL. Once that is so, then in terms of section 10(6)(viii) the salary paid to such non-resident cannot be taxed in India. Once the salary cannot be taxed in India the same cannot be brought in the ambit of FTS under Article 12(5). Thus, on this ground alone, we are of the opinion that the reimbursement of salary paid to the non-resident is exempt from taxability in India by virtue of section 10(6)(viii) and, therefore, same cannot be held to be FTS. Accordingly, the addition made by the Assessing Officer on this score stands deleted. Set off of unabsorbed depreciation and losses - Held that:- In light of our finding given above, we direct the Assessing Officer to follow the provision of section 115A(3) and 32(2) after giving the effect to our decision as above. 2016 (11) TMI 1248 Profits and Gains from Business or Profession - assessment of income - business activity - claim of depreciation on assets - Held that:- The assessee in our considered view is involved in a systematic activity of exploiting its asset, which in turn it had taken on lease , is thus involved in carrying on business activity. Thus, the income arising there from such business activity is to be assessed to tax in the hands of the assessee under the head ‘Profits and Gains from Business or Profession’ as income from business. The assessee is entitled for claim of expenditure including depreciation of assets but not on the building , as the building was leased by the assessee wherein the assessee is not the owner as deduction against such business income . The case of the assessee is covered by the decision of Mumbai Tribunal in the case of Shreenath Balaji Computech Private Limited v. ACIT [2015 (6) TMI 1089 - ITAT MUMBAI] wherein the Tribunal held the said income from leave and license fee as well maintenance charges as income from business to be brought to tax as ‘Profit and Gains of Business or Profession’ and also allowed the claim of depreciation on assets except on building which was leased by the tax-payer in that case , as the facts in the instant case are similar. Treatment to loss - sale of securities under ‘Portfolio Management Services’ - Business loss or short term capital loss - assessee is aggrieved that the learned CIT(A) enhanced assessment without affording opportunity of being heard to the assessee - Held that:- The power of learned CIT(A) is co-terminus with powers of the AO which include power of enhancement of the assessment by the learned CIT(A) but principles of natural justice are to be adhered to and the learned CIT(A) ought to have given proper opportunity of being heard to the assessee in accordance with principles of natural justice before enhancing of the assessment. Thus in order to do complete justice in the matter, this issue is to be set aside and restored to the file of the learned CIT(A) to de-novo adjudicate the issue on merits after affording opportunity of being heard to the assessee. Needless to say that proper and sufficient opportunity of being heard shall be provided by learned CIT(A) to the assessee in accordance with principles of natural justice in accordance with law. 2016 (11) TMI 1247 Levy of fees under section 234E in intimation issued under section 200A(1) - Held that:- Where the amendment to section 200A(1) of the Act is procedural in nature, then the Assessing Officer while processing the TDS statements / returns in the present set of appeals for the period prior to 01.06.2015, was not empowered to charge fees under section 234E of the Act. Accordingly, intimation issued by the Assessing Officer under section 200 A of the Act in all the appeals does not stand and the demand raised by charging the fees under section 234E of the Act is not valid and the same is deleted. - Decided in favour of assessee 2016 (11) TMI 1246 Claim of deduction under section 80IB(10) - prorata deduction under section 80IB(10) on such flats which complied with the conditions laid down under the said section i.e. where the area was less than 1500 sq.ft. - whether the area of the flats is within limits prescribed under the Act in order to avail the deduction under section 80IB(10) of the Act and in case it is so, then the said deduction cannot be denied to the assessee? Held that:- Assessee is entitled to prorata deduction of the completed flats, which fulfill the conditions laid down in section 80IB(10) of the Act. Upholding the order of CIT(A), we dismiss the grounds of appeal raised by the Revenue.See Income Tax Officer, Ward-2, Ratnagiri And Others Versus M/s. Paras Builders And Others [2015 (6) TMI 286 - ITAT PUNE] The Assessing Officer had confronted the assessee with the report of the DVO, who in turn, submitted another report claiming that the measurements made by its Valuer were correct as against the approximation of the DVO. In the totality of the above said facts and circumstances and in order to meet the ends of justice, we are of the view that the issue needs to be looked into at the level of Assessing Officer, who shall direct the DVO to measure each of 16 flats which, according to him exceeds area of 1500 sq.ft. The Assessing Officer shall also consider the valuation report submitted by the assessee in this regard and after providing reasonable opportunity of hearing to the assessee decide the issue in accordance with law. The grounds of appeal raised by the assessee are thus, allowed for statistical purposes. 2016 (11) TMI 1245 Reduction of amount of subsidy received from the block of assets for claiming depreciation - Held that:- We find that the ld. CIT(A) has given a finding that assessee had received subsidy from State Government under Capital Incentive Scheme on the basis of cost of capital asset acquired by the assessee and it was relatable to the cost of asset and was therefore required to be reduced from the cost of asset as per the provisions of Explanation-10 to section 43 of the Act. The ld. CIT(A) has further relied upon the decision of Pune Bench of the Tribunal in the case of Alfa Laval India Ltd. vs. DCIT, (2007 (2) TMI 277 - ITAT PUNE-B ) and had held that the decisions relied by the assessee in support her contention were not applicable to the present fact. Before us, no material has been placed on record by the assessee to controvert the findings of ld. CIT(A). - Decided against assessee. 2016 (11) TMI 1244 Disallowance of depreciation on the cost of Wind Turbine - Held that:- We direct the Assessing Officer to grant depreciation @ 80% and thus decide the issue in favour of the assessee - Decided in favour of assessee Addition on account of shortage - Held that:- The entire purchases of the fruits and vegetables are not exported but only the good quality of fruits which are acceptable to the customers are exported. It is also a fact that during the process of collection of fruits and the final export, damages takes place and the fact that similar shortage and damages have been accepted by the Department in earlier years i.e. assessment years 2006-07 to 2008-09 in the assessment framed under section 143(3) of the Act is not in dispute. Before us, Revenue has not placed any material on record to demonstrate that the shortage shown by the assessee has been sold without recording it in the books of accounts. It is also a fact that books of the assessee are audited and no adverse comments on account of shortage has been made by the statutory auditors in their report or in the tax audit report. In view of the aforesaid facts, we are of the view that Assessing Officer was not justified in making an ad-hoc disallowance of shortage. We thus direct the deletion of disallowance.- Decided in favour of assessee Cash payment for purchase of fruits - Held that:- It is an undisputed fact that the assessee has purchased fruits for which the payment was made in cash. We find that the sellers of goods have confirmed about the supply of goods to the assessee and the payments for sale being received by them in cash. The Assessing Officer has not brought out any instance of purchase transactions which were not verifiable and had merely proceeded to disallow the expenses on ad-hoc basis. Further, we are of the view that the payment in cash for purchase of agricultural commodities is covered by Rule 6DD(e) of the Rules and in such a situation merely because the cash payments have been made, no disallowance could be made. We are of the view that in the aforesaid facts and without bringing any material on record of the purchases being not verifiable, the Assessing Officer could not have resorted to make an ad-hoc disallowance. We therefore set-aside disallowance made by Assessing Officer - Decided in favour of assessee Disallowance of loading and unloading charges - Held that:- We find that out of the total expenses ₹ 18.95 lakhs on account of loading and unloading expenses, the Assessing Officer had disallowed only ₹ 75,000/-. Before us, assessee has not placed any material to controvert the findings of Assessing Officer. Considering the totality of facts and in the absence of any material placed by the assessee to controvert the findings of Assessing Officer, we are of the view that the Assessing Officer was justified in disallowing ₹ 75,000/- and therefore we are of the view that no interference to the order of Assessing Officer is called for. - Decided against assessee Disallowance on account of expenditure being of personal in nature - Held that:- We find merit in the plea of the assessee. The company being juristic person, it is difficult to accept the basis for disallowance of the Revenue. A company is incapable of having any personal user of the facilities. The directors are separate from the company. Even assuming that facilities were occasionally used for personal purposes, it is a business expenditure in so far as company is concerned. Such usage of facilities at any rate can be possibly taxed in the hands of the user as perquisite alone. Therefore, no estimated disallowance on account of personal user is called for. - Decided in favour of assessee 2016 (11) TMI 1243 Fees payable under section 234E charged - Intimation issued under section 200A - Held that:- Where the amendment to section 200A(1) of the Act is procedural in nature, then the Assessing Officer while processing the TDS statements / returns in the present set of appeals for the period prior to 01.06.2015, was not empowered to charge fees under section 234E of the Act. Accordingly, intimation issued by the Assessing Officer under section 200 A of the Act in all the appeals does not stand and the demand raised by charging the fees under section 234E of the Act is not valid and the same is deleted. The grounds of appeal raised by the assessee are thus, allowed. 2016 (11) TMI 1242 Disallowance of loss on share transaction - Held that:- We find during the impugned assessment year the assessee has shown the purchase of share and sale of shares in the profit and loss account. As mentioned earlier, in the preceding year the shares were shown under the head “loans and advances” and not under the head “investment”. No dividend or other income was received by the assessee from Western Medical Solutions Pvt. Ltd. It is also an admitted fact that none of the Directors of the assessee company are in no way related to the Directors of Western Medical Solutions Pvt. Ltd. or M/s. Dev Constructions Pvt. Ltd. It is also noticed from the submissions made by the assessee that during A.Y. 2009-10 the assessee had claimed loss in futures and options share trading at ₹ 7,79,122/- as per page 64 of the paper book which is the profit and loss account for the year ended 31-03-2009. We find the AO in the order passed u/s.143(3) dated 15-12-2011 has accepted such loss as business loss and nothing was brought on record that any action either u/s.147 or 263 has been taken. Therefore, we find merit in the argument of the Ld. Counsel for the assessee that the loss incurred by the assessee on sale of shares cannot be treated as non-genuine loss. It has been held in various decisions that AO cannot enter into the shoes of the assessee and it is the businessman who knows better how to conduct its business. The Hon’ble Bombay High Court in the case of CIT Vs. Salitho Ores Ltd. (2010 (9) TMI 849 - Bombay High Court ) has held that an expenditure incurred for purpose of business cannot be refused on the ground that the expenditure was imprudent. The Hon’ble High Court held that when it was not the case of the revenue that the expenditure was not bonafide or that it was incurred by way of diversion of profits to a related person or a sister concern of the assessee the revenue could not have gone into the question of expediency of expenditure incurred and/or expediency of hiring of 4 dozers that was a matter of commercial expediency and the assessee was the best judge of it. It was accordingly held that the expenditure was an allowable expenditure. So far as the argument of the AO without prejudice that the loss can be allowed as a long term capital loss since buying and selling of shares is not the business of the assessee company is concerned, we have already noted from clause 19 of the memorandum of association of the assessee company that the assessee can acquire, take up and hold shares, stocks, debenture stock bonds, obligations and securities or guaranteed by any company constituted or carrying on business in India etc. etc. Since the shares are of unlisted company and have been held for less than 36 months, therefore, it is not a capital asset. In view of the above discussion, we are of the considered opinion that the CIT(A) was not justified in disallowing the claim of business loss - Decided in favour of assessee. Revaluation of stock of land at Hyderabad at net realizable value rejected - Held that:- Additional documents were not produced before the AO and the CIT(A) and since these documents go to the root of the matter, we admit the same. Considering the totality of the facts of the case, we are of the considered opinion that the matter requires a revisit to the file of the AO in view of the above additional evidences. The AO shall decide the issue afresh 2016 (11) TMI 1241 Assessment u/s 153C - Held that:- In the absence of any satisfaction recorded by the Assessing Officer of the searched person before initiating proceedings under section 153C of the Act against the assessee i.e. before handing over the documents relating to the assessee and starting the proceedings under section 153C of the Act, the assessment proceedings completed against the assessee under section 153C of the Act are invalid, hence, the same are held so. Accordingly, the assessment order passed under section 143(3) r.w.s. 153C of the Act does not stand and the same is annulled. - Decided in favour of assessee. 2016 (11) TMI 1240 Unexplained income under section 69A - unexplained cash deposits - Held that:- On perusing the affidavit that has been filed by the assessee before us, we find that if the assessee has inter-alia contended that the source of cash deposits to be out of agricultural activities and sale of agricultural land and that he was never told by his tax consultant that proceeds of agricultural land had to be co-related with the cash deposits in bank and that assessee has now found link of cash deposits with supporting documents of sale of land, receipt of cheques, deposits in bank and withdrawal from one bank and deposit it another bank account. We find that the aforesaid affidavit has been furnished before us for the first time and therefore the lower authorities did not have an opportunity to examine the contents of the affidavit. Considering the submissions of ld. AR, the additional evidences submitted are admitted. However, since these evidences were not available before the lower authorities, we are of the view that in the interest of justice and fair play, the issue raised in appeal needs to be considered afresh in the light of additional evidences submitted by the assessee. - Decided in favour of assessee for statistical purposes. 2016 (11) TMI 1239 Addition on account of excess stock of Gems - Held that:- Admittedly, there are two valuation reports, one given by the valuer appointed by the department and the other one given by the valuer appointed by the assessee. The report of the valuer appointed by the assessee was given to the DDIT (Investigation) on 25-11-2002 which is after the search proceedings. We find there is no reason whatsoever has been given for either accepting or rejecting the said valuation report. Since the valuation report given by Shri Parag Gadgil, the valuer appointed by the assessee, gives the details of weights of the stones, purity of gold, gross/net weight etc. whereas such details are not given in the report of the departmental valuer, therefore, we find no reason why the report of the valuer appointed by the assessee should not be accepted. Since the report given by the valuer appointed by the assessee shows the difference of ₹ 2,21,783/-only, therefore, we restrict the addition to ₹ 2,21,783/-. - Decided partly in favour of assessee Addition on account of the stock of sun glasses, Uktamal, perfumes, watches etc. - Held that:- The main grievance of the assessee is that 7% deduction given by the AO on account of bargain which has been upheld by the CIT(A) is very low since these are of fancy items and with the arrival of latest designs these items become obsolete and the assessee allows higher bargaining. It is also the submission of the Ld. Counsel for the assessee that the assessee gives higher discount to VIP and privileged customers. While we find some force in the above argument of the Ld. Counsel for the assessee, however, the plea to allow 25% reduction for bargaining appears to be very high whereas the 7% allowed by the revenue appears to be slightly low. Considering the totality of the facts of the case, we direct the AO to allow 15% reduction on account of bargain as against 7% considered by him which has been upheld by the CIT(A). The AO is directed to recompute the addition accordingly. Addition of unaccounted stock - Held that:- No reason in the order of the CIT(A) that shortages are there because of the unaccounted sales carried out by the assessee regularly. Since he has not appreciated that for the unaccounted sales separate addition has been made by the AO, therefore, we find merit in the arguments advanced by the Ld. Counsel for the assessee that the reasoning given by the CIT(A) is devoid of merit. In view of the above, we set aside the order of the CIT(A) and direct the AO to give the set off of the shortage in gold and diamond stock found during the course of search to the extent of excess stock found. According to the Ld. Counsel for the assessee out of the addition of ₹ 59,10,467/- set off of shortage of gold comes to ₹ 29,18,113/- and short of diamond comes to ₹ 19,18,000/- and gold bar of Late Shreepal Ranka comes to ₹ 6,01,520/- leaving net addition of ₹ 4,72,834/- The AO is directed to verify the above and give consequential relief. Addition on unaccounted purchase and sales - Held that:- On the basis of the unaccounted purchases and sales found for the period from 21-08-2002 to 24-09-2002 the AO estimated the sales for the entire period from 01-04-2002 to 24-10-2002 on the basis of the sales for 28 days at ₹ 12,22,95618/- and estimated the profit at 13% at ₹ 1,58,98,430/-. So far as the other years of the block period are concerned the AO determined the unaccounted turnover at 5% of the disclosed turnover for F.Y. 1996-1997 to F.Y. 1997-1998 at 7.5% for F.Y. 1998-1999 at 10% for F.Y. 1999-2000 at 15% for 2000-01 and at 25% for F.Y. 2001-02. We find based on the arguments advanced by the assessee the Ld.CIT(A) while upholding the action of the AO in proceeding for estimation of the unaccounted turnover for the block period, however, has given some consequential relief on account of undisclosed turnover. He however upheld the GP rate adopted by the AO. The detailed reasoning given by the CIT(A) while deciding this issue has already been reproduced in the preceding paragraphs. The order of the CIT(A) is quite exhaustive and deals with each and every aspect of the arguments advanced by the Ld. Counsel for the assessee. In our opinion, the order of the CIT(A) is a reasoned one under the facts and circumstances of the case. Therefore, we do not find any infirmity in the same - Decided against assessee Addition of initial investment in unaccounted stock - Held that:- CIT(A) while deciding the issue has followed the order of the Tribunal in the case of sister concern of the assessee and since he has also given detailed reasoning justifying the addition made by the AO and since the Ld. Counsel for the assessee could not controvert the factual findings given by the CIT(A), therefore, we do not find any infirmity in the order of the CIT(A) on this issue - Decided against assessee Addition on account of excess stock of gold - Held that:- We find the CIT(A) accepted the genuineness of the bill on the ground that the bill issued by M/s. H. Kumar Gems International to the assessee was found in the assessee’s premises. Shri Anil Ranka and Shri Omprakash Ranka had also purchased jewellery from the said party which were duly recorded in their books before the date of search. Therefore, the AO should not have disbelieved the bill issued to M/s. Ranka Jewellers Pvt. Ltd. i.e., the assessee. Further, M/s. H. Kumar Gems International had accepted that the jewellery was sold to the assessee and the sale was found recorded in his books of account. M/s. H. Kumar Gems International has given their confirmation. M/s. H. Kumar Gems International is a registered dealer in State and Central Sales Tax Act and the sales tax on this transaction has been paid by M/s. H. Kumar Gems International which are regularly assessed to tax and have disclosed the above transaction in their books of account. - Decided in favour of assessee Adition on account of excess stock of silver when the valuation of the stock was done by a qualified Government valuer - Held that:- We find the Ld.CIT(A) considering the submission of the assessee that the weight of plastic bags have not been properly considered by the search party as well as the valuer accepted the contention of the assessee and deleted the addition which has already been reproduced in the preceding paragraph. We find the order of the CIT(A) in the instant case is a detailed and well reasoned one which does not call for any interference from our side. We therefore uphold the same and the ground raised by the revenue on this issue is dismissed.- Decided in favour of assessee Addition on account of undervaluation of stock, when, in fact the Assessing Officer has followed the well established method of valuation of stock - Held that:- Since identical ground has been decided by the Tribunal in the case of sister concern of the assessee which has been followed by the CIT(A) while deleting the addition made by the AO on this issue, therefore, in absence of any contrary material brought to our notice against the order of the Tribunal in the case of the sister concern of the assessee on identical issues we find no infirmity in the order of the CIT(A) deleting the addition. - Decided in favour of assessee Agreement to working of the undisclosed turnover - Held that:- We find the Ld.CIT(A) in his order has given a finding that the method adopted by the AO and the auditor is faulty because they have not taken into consideration the fluctuation of business normally happening in different months. He, therefore, adopted his own formula and came to the conclusion that since the assessee was indulged in unaccounted transaction, therefore, the method becomes more proximate to determine the profit on the basis of the unaccounted purchases which were systematically recorded by the assessee as against the estimation of turnover by the AO and the special auditor. This reasoned finding of the CIT(A) in our opinion does not call for any interference. Accordingly, the same is upheld - Decided in favour of assessee 2016 (11) TMI 1238 Disallowance of provision created towards non-performing asset under section 36(1)(vii) - Held that:- As per the decision of the hon'ble apex court in the case of Vijaya Bank v. CIT reported in [2010 (4) TMI 46 - SUPREME COURT ] it has been held that if an assessee debits an amount of doubtful debt to "profit and loss account" and credits "sundry debtors account" the same should be allowed as a deduction. This decision being the law of land has to be meticulously followed by all the relevant authorities. However, at the same time, an effective control has to be exercised and established before the Revenue so that the same debtors are not claimed as bad debts again and again because the debtors towards which such bad debts are claimed are not written off in the books of account. Since these aspects have not been considered by the learned Assessing Officer, we hereby remit back the matter to the file of the learned Assessing Officer for fresh consideration, accordingly the issue with respect to computation of deduction under section 36(1)(viia) of the Act is also remitted back for fresh consideration. Further, since the assessee has raised an additional issue in regard to the claim of deduction under section 80P of the Act for the first time, the issue is also remitted back to the file of the learned Assessing Officer for de novo consideration. 2016 (11) TMI 1237 Revision u/s 263 - Eligibility of claim u/ section 80IA(4)- Held that:- The income from sale/lease of plots has been in very categoric terms been held to be eligible for deduction under clause (a) of Explanation to section 80IA(4). We further note that in para 57 considering the gamut of business activities on the basis of the Agreements and documents on record which admittedly had accepted that the only aim and object of the assessee was developing infrastructure facility the Co-ordinate Bench in para 57 held that the business activities of the assessee company fell within the ambit of clause (a) of Explanation to Section 80IA(4). The source of the Bank interest admittedly is income from the sale/lease of plots in banks temporarily till the payments are due; or TPO funds temporarily in Banks; or the funds sourced through the development activity by way of sale and development of plots which were to be utilized for developing the infrastructure facility having been temporarily parked in banks and used for raising loans from the banks against Guarantees etc. The utilization of these amounts admittedly is again for the very same sole purpose of infrastructural facility. In the circumstances, we find the income is necessarily, directly and inextricably linked with the eligible business of the assessee. Considering the character of the same, the facts and circumstances of the specific and peculiar nature of assessee’s business, the nexus is direct. The income can be said to be inseparably linked with the sole business purpose of the assessee which is the infrastructural facility. The acceptance of this fact by way of precedent is not only evident from the fact that the income was included in eligible business by two different Assessing Officers in two separate assessment orders but is also evident from the order of the Co-ordinate Bench in the base year itself. Interest income is not derived from eligible business - Held that:- interest income is to be treated as business income of the assessee. The miscellaneous income qua sale of scrap etc. again being directly and inextricably linked with the development of infrastructural facility it is to be treated as business income. Same is the position for money forfeited in the peculiar facts of the present case. However, on these last two sources of income since supporting evidences are not available the issue is restored for verification on facts. The claims principally we find are directly linked to the only business activity of the assessee in terms of the Agreement and findings thereon and principally it deserves to be allowed. Similarly gains from foreign exchange fluctuations arising directly out of the sole business activity of the assessee which is the infrastructural facility development we hold is inextricably linked and having a direct first degree nexus with the sole business of the assessee thus income therefrom we hold has to be allowed and treated as business income. Disallowance of depreciation - Held that:- On a consideration of the reasoning qua depreciation recorded by the AO and upheld by the CIT(A), we find that the only reasoning taken is that since the project of toll road construction was in progress where from no receipt was declared the profit being solely from sale/lease of plots the claim was disallowed. In view of the categoric finding of the Co-ordinate Bench that the business has commenced the reasoning adopted cannot be sustained. Subject to verification of ownership and user principles the claim has to be allowed. We note that disallowance of the said expenditure anyway would go to inflate the income and result in an enhanced deduction on a fact which may have escaped the tax authorities. Accordingly, we hold that principally depreciation on assets used in the developing of infrastructural facility and owned by the assessee has to be allowed. We restore the issue for verification on facts. Non deduction of tds for payment of interest u/s 194A and for payment of lease rent in term of section 194I - disallowance u/s 40(a)(ia) - Held that:- where the assessee has not claimed it as an expense the occasion to make an addition by way of a disallowance does not arise and if at all it had to be made it could be limited only to ₹ 10,149/- which is the amount claimed as an expense. We also find that reliance has been placed on the decision of the Jurisdictional High Court to argue that as far as the assessee is conceded nothing was payable in terms of the decision of the Jurisdictional High Court in CIT vs Vector Shipping Services [2013 (7) TMI 622 - ALLAHABAD HIGH COURT]. The applicability of which decision has not been disputed by the Revenue. Accordingly, we direct that subject to verification on facts that no amount is payable as per assessee’s books at the end of the year the relief in principle has to be allowed. We note that the arguments that per se section 194A and 194I itself are not applicable is left open as the issue becomes academic at this stage. Appeal partly in favour of assessee for statistical purposes. 2016 (11) TMI 1236 Deduction of license fee paid as per the agreement of license for the use of goodwill in the Remfry & Sagar - Held that:- We have to necessarily hold, that the argument of Revenue that the arrangement was for avoidance of tax and diversion of profits and hence the deduction was rightly denied by the Assessing Officer, has to be rejected. Even otherwise, it has been demonstrated by the assessee that the Revenue has accepted that both the entities i.e. the assessee as well as RSCPL, pay taxes, at the maximum rate and that there is no loss of Revenue on account of this arrangement. The taxes due to the Government have not been avoided or evaded by this arrangement. Thus the disallowance made on the ground of diversion of profits is devoid of merit. The assessee firm had to seek permissions and licences to coneinue and carry on this profession under this name as it is run doing. Hence obtaining a license is a must for assessee firm to continue and carry on its profession as the goodwill is not owned by it the payment made in pursuance of an agreement which enables the assessee firm to carry on its profesions, in the manner in which it is now doing, is definitely an expenditure laid down wholly and exclusively for the purpose of business or profession. The argument of the Ld. Special Council that the purpose test contemplated u/s 37 of the Act is not satisfied is devoid of merit. Irrespective of whether the gift of Dr. V.Sagar to RSCPL being ethical or not and irrespective of the fact whether the gift is legally valid or not, from the view point of the assessee firm, as it could not have continued and carried on the profession of Attorneys-at-Law in the name of “Remfry & Sagar” and use its goodwill and all its associated rights without the impugned agreement with RSCPL. Hence the payment has to be held as that which is incurred wholly and exclusively for the purpose of business or profession. Thus the deduction claimed by the assessee of license fee paid to M/s RSCPL has to be allowed as a deduction U/s 37 of the Act.- Decided in favour of assessee Addition on account of secretarial, accounting & other support services - Held that:- we uphold the same as Ld. Departmental Representative could not controvert the factual finding. The CIT(A) at page 56 has recorded that the addition was made by the A.O on the ground that, this is not authorized by the partnership deed. Such ground of the disallowance cannot be sustained. - Decided in favour of assessee 2016 (11) TMI 1235 Addition u/s 68 - undisclosed share capital - Held that:- The value of each share is worked out at ₹ 40,616/-. Thus, apparently, higher share premium of ₹ 39,900/- is justifiable because of limited number of shares of the assessee company who are actual owner of assets of worth more than ₹ 60 crores. Moreover, in the earlier year also, the shares were allotted at a premium of ₹ 39,900/- per share and in AY 2006-07, the Assessing Officer even got the verification made through the Investigation Wing of Kolkata and the ITAT has accepted the credit in the form of share capital after considering the report of Investigation Wing of Kolkata. Hon'ble Jurisdictional High Court has also upheld the order of the ITAT in assessee’s own case for assessment year 2006-07 after taking due note of high share premium. In view of the above, we are of the opinion that considering the facts of the case, the genuineness of the transactions is duly established. In view of the above, we hold that the assessee has duly discharged the onus of proving the credit of share capital in its account and learned CIT(A) was fully justified in accepting the same and in deleting the addition. Addition u/s 14A - Held that:- No investment was made for earning of exempt income. That various Benches of the ITAT have taken the view that where the investment has been made for acquiring the controlling interests in the group companies, then the disallowance cannot be made u/s 14A. He also stated that no expenditure was incurred by the assessee for earning of exempt income because no borrowed money was invested and moreover, it is a permanent investment in the few group companies. Thus, no expenditure was incurred. Learned DR stated that no such claim was made before the Assessing Officer. All these aspects would require verification at the end of the Assessing Officer, thus restore the matter to the file of the Assessing Officer. 2016 (11) TMI 1234 Reopening of assessment - accommodation entry receipt - Held that:- It is admitted fact that in Para 3 of the reasons recorded the A.O alleged that the entries has to ₹ 85.5. lakhs have been taken during Assessment Year 2003-04 and he is intending to initiate re-assessment proceedings for Assessment Year 2003-04 which is clear non application of mind. In Para 4 also the A.O alleged that the assessee has back unaccounted money of 85.50 lakhs in its business through he accommodation entry and thus there was a failure on the part of the assessee to disclosed fully and truly all material facts necessary for its assessment for AY 2003-04 but the allegations made in Para 3 as stated above, are clearly contradictory and pertaining to Assessment Year 2003-04 relating to Assessment Year 2004-05 which cannot be taken for consideration for re-initiation of re-assessment proceedings and issuance of notice u/s 147 & 148 of the Act for Assessment Year 2003-04. In view of above noted facts and acquisition, we Assessment Year of the considered view that the A.O initiated re-assessment proceedings u/s 147 of the Act and issue notice u/s 148 of the Act in a mechanical and casual manner and by considering the irrelevant and incorrect facts and thus assumption of jurisdiction for initiation of re-assessment proceedings and issuance of notice u/s 147 and 148 of the Act cannot be held as valid and thus we are inclined to quash the same. - Decided in favour of assessee 2016 (11) TMI 1233 Commission income earned in cheque discounting activity- Held that:- AO has been emphasizing that he called for information from the bank disclosing that the assessee has made transaction, but the assessee has been refuting this information of the AO. The information is not available on the record. The assessee has challenged the AO as well as took a specific plea before the CIT(A). But the AO is silent in his remand report. Therefore, we deem it appropriate to set aside this issue to the file of the AO for re-verification and re-adjudication. The ld.AO shall provide copy of the bank statement exhibiting the turnover between January 2008 to 30th September, 2008. If the transaction is there, in these accounts, then he will be at liberty to make addition of commission income at the rate of 0.1%. But if there is no transaction in these accounts, as alleged by the assessee, then, there would not be any income on account of commission income earned in cheque discounting activity. This ground of appeal is allowed. Addition on business income - Held that:- There is no evidence with the Revenue to conclude that the assessee was doing business in textile. The AO has assumed business only on the basis of availability of two seals. To our mind it is too hypothetical. In spite of survey, the Department was not able to lay its hand on any incriminating material indicating that active business was conducted by the assessee in retailed trading of textile items. The AO has simply assumed that since two seals are available, and assessee has shown income for two years earlier, therefore, he should have income in this year also. This observation is not based on any material. If this type of thump rule is being upheld, then there will be no end, therefore, we allow this ground and delete the addition. Unexplained investment shown as receivable - Held that:- The copy of the balance sheet is available at page no.91 of the paper book. The major amount in this loose paper is a sum of ₹ 7,81,100/-. According to the assessee, this amount was receivable from one Shri Suresbhai Nareshbhai. The assessee had entered into agreement for sale of flat at Rivera Towers. Copy of the agreement to sell was filed before the AO. This flat has been shown by the assessee in fixed assets in the balance sheet. The ld.AO has never tried to verify the facts in this connection. If it was sale proceeds, which was to be received by the assessee, then how it could be an unexplained investment at the end of the assessee ? The flat was with the assessee and has been reflected in the books, which was agreed to be sold to Shri Sureshbhai and token money was taken by the assessee. Similarly, the assessee has explained each and every entry and how these have duly been accounted in the books. They cannot be treated as unexplained investment at the end of the assessee. We allow this ground and delete this addition. Addition u/s 68 - Held that:- Evidence possessed by the Revenue is the loose paper in coded word. As far as loose paper is concerned, there is no dispute about this fact. The dispute is, what inference one could draw from the page. For drawing inference, we have three statements and nature of assessee’s business plus evidence produced during assessment i.e. confirmation etc. As far as statement of the assessee dated 6.3.2009 is concerned, it was only a corroborative statement, because, it was taken without oath. In rest of two statements, the assessee has explained his position with more clarity. If it was a loan, then it must have been reflected in some of the transactions either at asset side along with liability. No such things were found. Therefore, in our opinion, the explanation given by the assessee, which is after 13 days of survey is a plausible one, it cannot be brushed aside without giving any specific reasons. The amount cannot be treated as loan taken by the assessee. We allow this ground of appeal and delete addition. Unexplained investment - Held that:- AO did not examine the issue with the angle assessee has given explanation. According to the assessee he has a capital balance of ₹ 30,88,195/-. Under the current assets, he has shown advance for property at Ratan Astha of ₹ 2,50,000/-. The AO has treated this amount as unexplained investment on the ground that on the date of survey the assessee failed to produce books and failed to explain this investment as accounted for in the books. The survey was conducted on 6.3.2009. The account ought to be closed on 31.3.2009. It was not necessary for the assessee to complete entries upto 6.3.2009. Thus, the AO ought to have examined this aspect from the books of accounts when the assessee has produced. The assessee has also pointed out that he is an old assessee. Even in the Asstt.Year 2007-08 assessment was framed under section 143(3) r.w.s. 147. This assessment was made on 26.12.2011 i.e. after the survey. Thus, it cannot be said that the investment was not recorded in the books, and therefore, it is an unexplained one Unenvestments made through other persons - Held that:- he shares will not be available in physical form in the name of the assessee. Had the shares were available there, then, the assessee could have taken plea that these are not in his name. Thus, once the details of investment was found and the assessee has admitted the investment through other persons, then he cannot take such type of plea. As far as addition on merit is concerned, the AO has made addition on the ground that books were written upto 31.3.2008, and therefore, these investments are unexplained one. The assessee has contended that he has duly accounted these investments. These are reflected in the balance sheet. He has been filing regular return. Conclusion drawn by the AO that investment was made out of books is not sustainable. Therefore, the AO was not justified to treat the investment, which has duly been accounted in the books as out of books and explained one 2016 (11) TMI 1232 Disallowance of stitching and washing charges - genuity of expenditure - Held that:- AO disallowed the amounts which were paid to the M/s. Sticher Co. without considering the fact the TDS on such amount was deposited with Government proof of which a certificate to that effect was furnished before the AO, inspite of which making disallowance is unwarranted. Therefore, it shows the transactions are genuine and reliable to the fact, that, as per the submissions of the Ld.AR that they are all skilled workers and cause effect job works entrusted to them are being performed at their residential premises and all are from moffusil areas, if that is the case, we noticed that most of the parties are conducting their business under the name and style as M/s. Sticher Co, M/s Hollywood Bolywood and M/s Nisha Laundry etc.., therefore, we are of the opinion the identity of the parties are very much available before the AO and with regard to genuineness of business transaction also proved to be correct in the context of the business activity of the assesse and in connection thereto the job works performed by the parties therein mentioned in page-2 of order of AO and the AO could not bring on record any evidence contrary to the evidence produced by the Assessee. Therefore, we are of the opinion, that the disallowance ought not to have made by the AO - Decided in favour of assessee Customs 2016 (11) TMI 1202 Maintainability of appeal - The Statute provides a period of limitation of 60 days to file appeals - pre-deposit - The learned counsel for the petitioners invited the attention of this Court to the circular issued by the Customs, Excise and Service Tax Appellate Tribunal dated 14.10.2014 and sought to impress upon this Court by contending that the Tribunal directed three opportunities/reminders be given so as to ensure that the predeposits are being done - Held that: - In my view, such a circular would not be a reason for this Court to issue a direction especially when the Statute does not empower the second respondent to condone the delay for more than 30 days. That apart, it has been held in several decisions that the Writ Court, exercising jurisdiction under Article 226 of The Constitution of India, cannot extend the period of limitation as prescribed under the Statute. Therefore, the only option available to the petitioners is to prefer appeals to the Customs, Excise and Service Tax Appellate Tribunal as against the orders passed by the Commissioner of Customs (Appeals) - appeal not maintainable and is dismissed - liberty granted to the petitioners to file appeals as against the orders passed by the Commissioner of Customs (Appeals). 2016 (11) TMI 1201 Valuation - mis-declaration of the description of export goods as well as the value thereof - DEPB benefit - duty drawback - Held that: - Entire contention of Revenue is substantiated from the adjudication record itself and also from the market enquiry conducted in respect of the goods attempted to be exported. Appellant failed to discard allegation of Revenue without any cogent evidence - In view of the concurrent findings by the authorities below and evasive practice adopted by the appellant misdeclaring value of export to claim higher DEPB, there is no scope at all to grant relief to appellant - appeal dismissed. 2016 (11) TMI 1200 Valuation - rejection of transaction value of the import of “Lux” brand soaps declared by the appellant - Held that: - Ld. adjudicating authority at page 18 and 19 of the impugned order, has brought out the reason for disturbance of the declared value and applied Rule 4 (1) of Customs Valuation Rules, 1998, stating reason therefor. There is no evidence led by appellant importer to controvert the action of the Authority and to rule out application of the said Rule. In absence of any material to suggest that the said Rule is not invokable, it appears that the department acted within its jurisdiction. The imported goods were found to be subject to MRP and valuation made by Department was rational considering minute details of sale price. Therefore, there is no necessity to intervene to the manner of valuation done by the department. Once misdeclaration of the value of import is established, confiscation was warranted. That has been done rightly. The levy of Customs duty on the determined value of ₹ 23,23,159/- has been levied. That is justified and does not require any interference Imposition of redemption fine - Held that: - there appears no basis provided by the authority nor the decision of that authority reasoned even though the authority looked into the weights and measures of law and also the character of the goods subject to MRP. Certain calculations were made by the authority at page-20 of the impugned as to the retail price of the offending goods. Looking to such calculation, a reasonable profit of 20% appears to be the gain made by the appellant importer. Therefore, redemption fine is reduced to 20% of the value of ₹ 23,23,159/- determined by Adjudicating Authority. Imposition of penalty u/s 112 (a) - Held that: - The penalty imposed is ₹ 1,00,000/-. The evidence recorded by the authority does demonstrate that he was the power of attorney holder of his wife to make import. He was instrumental to cause evasion of duty misdeclaring the value for which he does not deserve any reduction in penalty - appeal is dismissed. Appeal disposed off - decided against appellant. Corporate Laws 2016 (11) TMI 1191 Sanction of the Scheme in the nature of Amalgamation - Held that:- It appears that the observation made by the Regional Director and Official Liquidator have been duly replied by the petitioner. Pursuant to the report of the Official Liquidator, it is ordered that, the petitioner Company shall preserve its books of accounts, papers and records and not dispose of the records without the prior permission of Central Government as per the provisions of Section 396(A) of the Companies Act, 1956. They shall not be absolved from any statutory liability. Further, permission to amend Company Petition No. 136 of 2016 filed by Progressive Invatrade Private Limited, be amended at paragraph 2 by replacing the correct company number is granted. Paragraph 4 in the Company Petition No. 138 of 2016 filed by the Charm Trading and Investment Private Limited is also permitted to be amended in order to incorporate the correct authorized share capital. The Scheme at Clause 2(g) shall consequently be amended. Permission to amend the Scheme at Clause No. 9(a) to (f) to incorporate the correct share exchange ratio is granted and considering the above, consequently, the Scheme with the above modifications, is hereby sanctioned. The prayers made in the petitions are granted. PMLA 2016 (11) TMI 1190 Show cause notices under Section 13 of the Prevention of Money Laundering Act, 2002 (PMLA) - Held that:- No interference at the show cause notice stage is warranted in the interest of clean and honest administration. NSEL, as aforesaid, vide order dated 4th November, 2015 has already been held to be a “reporting entity” and guilty of failure to comply with the provisions of PMLA. The petitioners were admittedly Non-executive Directors of NSEL. Section 13 empowers the respondent to issue directions to any of the employees of a reporting entity to comply with specific instructions or to send reports at such intervals as may be prescribed on the measures it is taking and to impose monetary penalty on any of the employees of a “reporting entity”. In exercise of such power, in my view the respondent is within its right to issue impugned show cause notices to the petitioners. At this stage, need not say anything further for the fear of affecting the proceedings before the respondent. Service Tax 2016 (11) TMI 1231 Enhancement of penalty under Section 76 of the Act - jurisdiction of Commissioner of Service Tax - Section 84 of Finance Act - the adjudication order was challenged before the learned Commissioner (Appeals) by the appellants and the appeal was pending before the learned Commissioner (Appeals) - Held that: - As per Section 84 (4) of the Finance Act, 1994 no order under this Section shall be passed by the Commissioner of Service Tax in respect of any issue if an appeal against such issue is pending before the Commissioner of Service Tax (Appeals) . On plain reading of the above said provisions it is clear that if the adjudication order has been challenged before the learned Commissioner (Appeals), the learned Commissioner of Service Tax seized his power to review the adjudication order. As appellant has challenged the leviability of penalty itself, therefore, question of enhancement of penalty does not arise - the Commissioner of Service Tax ceased to have this power to review the adjudication order under Section 84 of the Finance Act, 1994. Appeal allowed - decided in favor of appellant-assessee. 2016 (11) TMI 1230 ROM application - principles of natural justice - Held that: - a mistake apparent on record must be an obvious and patent mistake and the mistake should not be such which can be established by a long drawn process of reasoning - power to rectify a mistake should be exercised when the mistake is a patent one and should be quite obvious - while rectifying a mistake, an erroneous view of law or a debatable point cannot be decided. We do not find any error, much less apparent error in the subject order - ROM application dismissed. 2016 (11) TMI 1229 Levy of penalty u/s 76 and 78 of the Finance Act, 1994 - taxability of Sale of Space or Time for Advertisement - Service Tax was introduced on the said category with effect from 01.5.2006 - doubt as regards taxability of the service - section 80 - whether imposition of the appellant u/s 76 and 78 of the FA, 1994 needs to be upheld or the Appellant made out a case for invoking of Section 80 of the FA, 1994? - Held that: - the appellant sought opinion from the reputed Chartered Accountant ie., M/s Talti & Talati with regard to the liability of the Service Tax on “Sale of Space or Time for Advertisement” levied for the first time with effect from 01.5.2006. On receiving a categorical opinion of non-applicability of Service Tax, they did not discharge the Service Tax. However, subsequently, on further inquiry from other sources/consultants they realized their mistake and discharged the entire amount of Service Tax alongwith interest on 05.7.2007 pertaining to the period of 01.5.2006 to 30.6.2007. Their Claim is that this argument even though advanced before the authorities below, but not considered. I find that undisputedly, the appellant is a public sector undertaking and also the amount of Service Tax due for the period of 01.5.2006 to 30.6.2007 has been paid by them after realization of the fact that the service rendered by them become leviable to service tax w.e.f 01.05.2005. Initial non payment of tax was due to a bonafided mistake and the mistake was attributed to the opinion rendered by a reputed Chartered Accountant firm M/s Talati & Talati. Thus, in my opinion, the reasons cited by the appellant for their initial failure to discharge Service Tax during the said period seems to be reasonable warranting invocation of Section 80 of the FA, 1994 - penalty set aside - appeal allowed - decided in favor of appellant-assessee. Central Excise 2016 (11) TMI 1228 Principles of natural justice - recall of decision - Held that: - We find that to render substantial justice and since this is a case of total non-application of mind, the Petition deserves to succeed. The initial order dated 23rd August, 2011 allowing the appeals of the Revenue ex-parte deserves to be quashed and set aside. It is accordingly quashed and set aside. The Appeals of the Revenue are restored to the file of the Tribunal for a decision afresh on merits and in accordance with the law. Mr. Shah, on taking instructions states that the notice of hearing of the Appeals served on the present Petitioners' advocate at Mumbai would be accepted without insistence on a personal service on the Petitioner if that notice indicates date of hearing of the Appeals by the Tribunal, the Petitioner will make all arrangements for their appearance either through their officials or legal representative / advocate - petition allowed - decided in favor of petitioner. 2016 (11) TMI 1227 SSI exemption - dummy unit - clubbing of clearances - Held that: - The case establishes that M/s.KE was a bubble. That was used as a conduit of M/s.SI to divide clearances to claim SSI benefit by both falsely. M/s.KE was neither a distinct entity nor engaged in manufacturing activity nor also cleared any excisable goods. False records of M/s.KE were maintained in the premises of M/s.SI as is revealed from para-2 of the SCN. Only spurious transactions were recorded in the name of M/s.KE in its records. Such records were recovered from the premises of M/s.SI - we are shocked to notice that a concern not manufacturing goods i.e. M/s.KE was given undue advantage by the notice issuing authority granting SSI benefit in Annexure-II to SCN. That establishes that a dummy unit of M/s.SI got the SSI benefit which is not legally tenable to it. That aspect deserves enquiry by Chief Commissioner of Central Excise so that in future undue advantage of public grant is not given by officers. If the authority finds such grant has caused prejudice to Revenue, appropriate measure may be taken. The whole case of M/s.KE was based on the falsehood which was well known to the owners and Power of Attorney holder of both the units. Such act of sabotage to Revenue calls for dismissal of both the appeals - decided against assessee. 2016 (11) TMI 1226 CENVAT credit - manufacture of ordinary Portland cement and pozzolana Portland cement falling under chapter 25 of the First Schedule to the Central Excise Tariff Act, 1985 - utilisation of cenvat credit which was wrongly availed by the appellant in the first year - Held that: - we set-aside the impugned order and remand the matter back on this issue to the adjudicating authority to decide the issue of utilisation of cenvat credit which was wrongly availed by the appellant in the first year. On this issue including the issues of interest and penalty, the Commissioner shall provide an opportunity of hearing to the appellant as per law. Ld. Counsel has assured that full cooperation will be extended to the adjudicating authority. Credit amounting to ₹ 2,73,450/- availed on invoices not issued in the name of appellant - Held that: - it appears that the issue needs fresh adjudication. Accordingly, we remand the matter back to the adjudicating authority to verify the ECC code and address and utilisation of the credit and use of the goods. These factual aspects are not emerging from the impugned order. Hence, we set-aside the impugned order and remand the matter to the adjudicating authority on this issue who will decide denovo after providing an opportunity of hearing to the appellant as per law. The next issue is regarding credit amounting to ₹ 11,90,941/- which was not admissible to the appellant since the iron & steel items such as MS channel/ flat/ beams/ angles were not input or capital goods - Held that: - it appears that the utilisation of the item in the factory is not clearly reflected in the impugned order. The position in the impugned order pertaining to the utilisation of the items is not clear; when it is so, we set-aside the impugned order and remand the matter to the adjudicating authority to decide the issue in denovo proceeding after providing an opportunity of hearing to the appellant. The next issue pertains to the total cenvat credit amounting to ₹ 3,95,10,036/-, out of which the adjudicating authority has already granted relief of ₹ 1,83,62,358/-. Thus, only dispute is regarding balance amount of ₹ 2,11,47,678/-. The adjudicating authority has confirmed this demand on the ground that these items have been used for supporting structure or civil foundation - Held that: - the issue regarding the admissibility of cenvat credit of ₹ 2,11,47,678/-, we are of the view that it needs to be re-examined in the light of the decision of the Gujarat High Court in the case of Mundra Ports & Special Economic Zone Ltd. vs. CCE&C [2015 (5) TMI 663 - GUJARAT HIGH COURT] as well as the charge made in the show cause notice. The next issue of cenvat credit amounting to ₹ 22,70,019/- which was denied to the appellant by the adjudicating authority by referring to the definition of capital goods under Rule 2(a)(A)(i) and (ii) of CCR - Held that: - it appears that the utilisation of subject goods is not clear, when it is so then we set-aside the impugned order and remand the matter on this issue also to the adjudicating authority. The adjudicating authority shall provide an opportunity of hearing to the appellant as per law. The demand is not time barred as already discussed by the Commissioner (Appeals). Appeal allowed by way of remand. 2016 (11) TMI 1225 Interest on delayed payment of interest - Held that: - Rule 8(3A) states that it shall be deemed that such goods have been cleared (during the period of default) without payment of duty and the consequences and penalties shall follow. Interestingly, though Rule 8(3A) speaks about paying duty for each consignment at the time of removal, it is seen that department has not calculated the duty accordingly. Instead, interest alone is demanded. The demand of interest is seen calculated on the duty already paid by appellant every month without any default. In the instant case, the department has accepted the duty paid by appellant even though the duty was not paid consignment wise. For reasons not known and not clear, only interest is seen demanded. If Rule 8(3A) is to be applied, there should be determination/demand of duty applying the legal fiction, and then the consequence of interest and imposition of penalty should follow. Generally interest follows the principal. Without principal amount there cannot be demand of interest alone. When there is no demand of duty for violation of Rule 8(3A), and when the duty paid is accepted by department, then the legal fiction provided in Rule 8(3A) having been not invoked in the show cause notice, I do not find the claim of interest alone would be sustainable. Extended period of limitation - Held that: - it is clear that default to pay duty in August, 2010 was only a bonafide mistake. I find that the department has not placed any evidence to show that there was any suppression of facts, wilful miss-statement or fraud on the part of appellant with intent to evade payment of duty. Therefore, I find that the show cause notice is time barred. I hold that the demand being time barred is unsustainable - appeal allowed - decided in favor of appellant. 2016 (11) TMI 1224 Rectification of mistake - section 35C (2) of the Central Excise Act, 1944 - Held that: - power to rectify a mistake should be exercised when the mistake is a patent one and should be quite obvious - the mistake cannot be such which can be ascertained by a long drawn process of reasoning - while rectifying a mistake, an erroneous view of law or a debatable point cannot be decided. Moreover, incorrect application of law can also not be corrected.. ROM application not maintainable - application disposed off. 2016 (11) TMI 1223 Duty drawback - appellant has failed to establish that the goods imported under advance licenses were not utilised on manufacture of exported goods on which duty drawback is claimed - Held that: - Duty drawback is a relief by way of refund of customs/excise duties paid on inputs or raw materials and service tax paid on input services used in the manufacture of export goods - The second proviso to Rule 3 of Drawback Rules, 1995 states that the exporter cannot claim drawback if duties have not been paid on the inputs, input services. The intention of the said Rule is not to allow drawback on inputs obtained without payment of customs or excise duty. The contention put forward by appellant is that out of the 27 inputs only 5 were imported. The remaining 22 inputs suffered duty. That being a processing industry, the input gets mixed up and it is very difficult to identify a particular input imported under Advance License and used for manufacture and the quantity of inputs imported by Advance License used in manufacture being very less the drawback may allowed. I am not able to agree with this contention of appellant. When the Rule itself, does not permit drawback in case of inputs on which duty has not been paid, the appellant ought to have maintained some procedure/ segregation / accounting method for the inputs used in manufacture of products exported, if the appellant intended to claim drawback. The rejection of drawback claim on this ground holds merit. Appeal dismissed - claim of duty drawback rejected - decided against exporter-appellant. 2016 (11) TMI 1222 Interest on delayed refund - whether the Appellants are eligible to interest on the amount refunded to them viz. ₹ 16,01,260/- and ₹ 81,984/- from 01.7.2000 i.e. the date of adjustment of the said amount from their sanctioned refund amount of Rs. ₹ 68,63,266.51 or from the date after succeeding in the Appellate proceeding, the date on which the amounts became due pursuant to the de novo Orders? - Held that: - A plain reading of the provision of section 11BB, it is clear that interest is due, if the refund is not sanctioned within three months from the date of filing of the refund claim - I find that the Division Bench of this Tribunal in the case of Jubilant Organosys Ltd [2013 (11) TMI 883 - CESTAT NEW DELHI] confronted with a similar question under more or less identical circumstances, where under after sanctioning rebate claim, the adjudicating authority instead of making payment of the same, adjusted it against the outstanding confirmed demand. Subsequently, on challenge of the confirmed demand Order before the Tribunal, the same was set aside resulting into payment of the earlier sanctioned amount adjusted against the said confirmed demand, allowing interest under Sec.11BB from the date of initial sanction of the refund. Interest is payable at the appropriate rate notified under Sec.11BB of CEA,1944 on the amounts viz. Rs. ₹ 16,01,260/- and ₹ 81,984/- from the date of its appropriation as claimed by the Appellant i.e. from 01.07.2000, till the date of payment of the said amount, pursuant to the de novo Orders - appeal allowed - decided in favor of appellant-assessee. 2016 (11) TMI 1221 Demand - clandestine removal of manufactured goods - Toughened Laminated Glass - Insulated Glass Unit - cross examination - principles of natural justice - Held that: - the appellants had requested to cross examine Shri Ram Mohan whose statement is much relied by the Department. The adjudicating authority has failed to grant permission to cross-examine Shri Ram Mohan which is noted in para 20 of the Order-in-Original. The adjudicating authority has observed that 'the request for cross-examination is only a dilatory tactics on the part of the appellants to prolong the adjudication process and that it was just a statement of facts made by Shri Ram Mohan and not related to his opinion on any matter or on a subject. That the denying of cross-examination of Shri Ram Mohan is not prejudice to the interest of the fair play and principles of justice'. When the Department relied upon the statement of Shri Ram Mohan and his acceptance with regard to emails, the appellants ought to have been given a chance to cross-examine him. The investigation is too shabby and evidences are not sufficient to establish that appellant is guilty of clandestine removal of goods, The figures in e-mail messages relied by department showing column such as Commercial/Tax figures do not tally with the figures in the books of accounts maintained by appellant which cuts the root of the Department's case. The buyers shown in the sales statement were not questioned or their stocks verified. This together with the fact that all statutory records were proper, would go to establish that Department has failed to prove the case put forward in the show-cause notice. Appeal allowed - demand not sustainable - decided in favor of appellant-assessee. 2016 (11) TMI 1220 CENVAT credit - whether appellant is eligible for CENVAT Credit availed on Capital goods when at the time of availing credit appellant was manufacturing only exempted product? - Held that: - at the time of availing credit, the appellant was manufacturing only exempted product, I have to agree that the contentions put forward by department holds merit. At the time of taking credit on capital goods i.e. December 2005 the appellant was manufacturing exempted product only. The Ld. Counsel for appellant has made a frail effort to rely upon sub-rule (2) of Rule 9 of Central Excise Rules, 2002 to canvass the proposition, that the appellant had taken Central Excise Registration, to manufacture of excisable goods, which would indicate that appellant had intention to manufacture dutiable goods later. Mere taking registration for manufacture would not make the appellants eligible to take credit on capital goods when the capital goods were exclusively used to manufacture exempted goods at the relevant time of taking credit. The crucial aspect to be considered is the use of the capital goods on the date on which credit is taken. Therefore the credit availed on capital goods in the month of December 2005 is not admissible. Credit not allowed - appeal dismissed - decided against assessee. 2016 (11) TMI 1219 Option to pay reduced penalty - job-worker to M/s. Parle Products Private Ltd. - assesee cannot be treated as own unit of M/s Parle Products Pvt. Ltd., for distribution of input service tax credits - period from 01.08.2005 to June, 2011 - time bar - whether the Commissioner (Appeals) has powers to give the benefit of 25% reduced penalty? - Held that: - the department has clarified that the benefit of reduced penalty would be available only at the stage of passing of the order by the Adjudicating Authority. In the instant case, in para 7.6 of the Impugned Order, the Commissioner (Appeals) has relied upon the judgments rendered in in K.P. Pouches Pvt. Ltd., vs Union of India [2008 (1) TMI 296 - DELHI HIGH COURT] and Shreeji Aluminum Pvt Ltd., vs CCE, Vapi [2012 (10) TMI 418 - CESTAT, AHMEDABAD] It is not in dispute that in the present case, the respondent was not given an option to pay reduced penalty of 25% of duty, In K.P. Pouches Adjudicating Authority levied an incorrect penalty without giving an option to pay reduced penalty, the assessee was left with no choice but to challenge the penalty which he would otherwise have to pay, which is statutorily not actually leviable. Since statutory authorities have themselves acted illegally and contrary to first proviso to Section 11AC ibid, the assessee cannot be faulted for challenging the order. Moreover in the present case, the Commissioner (Appeals) has set aside the demand which is hit by the limitation and has directed the Lower Authority to re-quantify the demand for the normal period. Accordingly there is a re-determination of duty. The mandatory penalty has also to be revised according to the liability determined for the normal period. In such circumstances, the respondent has to be given an option to pay the reduced penalty in respect of the re-quantified/demand. Therefore I do not find any illegality in the order passed by Commissioner (Appeals) - no error in giving option to pay reduced penalty - appeal dismissed - decided against Department. 2016 (11) TMI 1218 CENVAT credit - electricity generated used captively as well as sold outside - Held that: - any services used by a manufacturer whether directly or indirectly in or in relation to the manufacture of final products and clearance of final products upto the place of removal would be eligible for credit. The input services used for setting up of captive power plant, of which the electricity generated is not exclusively used for manufacture of final products cannot be said to be covered by the definition - The appellants in the instant case had availed credit of entire service tax on input services without maintaining separate accounts, though the electricity generated from the power plant was sold and supplied outside, and therefore, were eligible to take only proportionate credit. In view thereof, on merits, the issue stands answered in favour of the revenue. Period of limitation - Held that: - The appellants have filed E.R 1 returns regularly disclosing the credit availed by them. When all details relating to the availment of credit are available with the department, the allegation that full facts were not furnished in the documents and that respondent suppressed facts is factually incorrect. In a number of decisions, the Tribunal and courts has held that there should be conscious or deliberate withholding of information with intention to evade payment of duty to saddle the manufacturer with liability beyond the period of one year. Under the circumstances, the allegation that appellant has wilfully suppressed facts with intent to evade payment of duty is not tenable and the demand invoking the extended period is not sustainable. In view thereof, the issue of limitation is answered in favour of the respondents. Appeal dismissed. 2016 (11) TMI 1217 CENVAT credit - commercial construction service for Director’s bungalow and maintenance of guest house - input services - Held that: - I find that providing of service at guest house and repairing service of Director’s bunglow cannot be considered to be an input service and eligible to CENVAT Credit in view of the judgment of Hon'ble Gujarat High Court in the case of CCE Vs Gujarat Heavy Chemicals Ltd [2011 (5) TMI 132 - GUJARAT HIGH COURT]. However, I find that while imposing penalty under Rule 15(2) of CCR,2004 both the authorities below had not allowed the option to discharge 25% of the penalty subject to fulfillment of the conditions laid down under Sec.11AC of CEA,1944. Thus, the Appellant are entitled to discharge 25% of the penalty imposed on them, subject to fulfillment of conditions laid down under Sec.11AC of CEA,1944 in view of the decision of the Hon’ble Gujrat High Court in the case of CCE Vs Harish Silk Mills [2010 (2) TMI 494 - GUJARAT HIGH COURT] - The matter is accordingly remanded to the Adjudicating Authority to ascertain the eligibility to pay 25% penalty as per judgments in the case of Harish Silk Mills - appeal allowed - decided partly in favor of appellant-assessee. 2016 (11) TMI 1216 Refund claim - Reversal of CENAVT credit - medicines destroyed being unfit for human consumption during the period November 2011 to May 2012 - Held that: - I find that the provisions of Rule 21 of the Central Excise Rules 2002 is attracted in the present case as the Appellant by their own admission has destroyed the waste pharmaceutical, same being expired medicine unfit for consumption of human being and therefore, the Appellant were required to have applied for the remission permission from the jurisdictional Central Excise authorities. Therefore, as per the remission permission granted by the jurisdictional authorities, the Appellant should have remitted the duty payable on such goods. Therefore, I find that by not applying for remission of duty the Appellant has contravened the provisions of Rule 21 of Central Excise Rules 2002. CENVAT Credit taken on the inputs used in the manufacture or production of any goods is required to be reversed if the payment of duty is ordered to be remitted under Rule 21 of Central Excise Rules 2002. I also find that the Board, vide circular No.800/33/2004-CX, dt.01.01.2004 has clarified that the credit of Excise duty paid on the inputs used in the manufacture of finished goods, on which duty has been remitted due to damage or destruction etc., is not permissible and dues with interest should be recovered. I find that reversal of CENVAT Credit on inputs contained in the waste pharmaceuticals destroyed are governed by the provisions of Rule 21 of Central Excise Rules 2002 read with sub-rule 5C of Rule 3 of CENVAT Credit Rules 2004 (inserted vide No.33/2007-CE(NT), dt.07.09.2007). Therefore, I find that the CENVAT Credit was rightly reversed by the Appellant and the refund claim filed by them is rightly rejected by the Adjudicating Authority. Appeal dismissed - decided against appellant. 2016 (11) TMI 1215 Levy of tax - use of natural gas or gas for heating, in manufacture of the soap, is use of power for manufacturing - suppression of facts - extended period of limitation - Held that: - the ld. Commissioner have misconceived and misdirected himself by concluding that the use of gas for heating of soap chemicals by the appellant’s industry, amounts to use of power. In view of the clarification given by CBEC in their Circulars dated 22/3/68 and 25/3/68, we find that there was no reason for not following the same and drawing conclusion based on the definition in another Act, which is not cognate to the provisions of the Central Excise Act. In the facts and circumstances, we also find that there is no contumacious conduct or suppression of the part of appellants, in order to evade payment of Central Excise duty. Accordingly, we also hold that the extended period of limitation is not available to the Revenue. Accordingly, we set aside the impugned order and allow the appeals. 2016 (11) TMI 1214 Reversal of CENVAT credit - alteration in assessable value - impact of credit notes on the transaction value - Held that: - any circular issued by C.B.C. is a clarification on the existing provisions of Rules and therefore it is applicable for the entire period for which such Rules and para materia Rules existed on statute - It is very clear from the above circular that when subsequently the supplier allows some trade discount or reduces the price, without reducing the duty paid by him, the duty paid is admissible as Cenvat Credit. It is undisputed that the duty paid by the input manufacturers remained unaltered in the present case even after issue of credit notes. The circular squarely covers the issue involved. Appeal allowed. 2016 (11) TMI 1213 Imposition of penalty - genuineness of transaction - Held that: - the submissions made by the appellant that the duty paid documents issued to the buyer of the goods M/s Disco Pithampur is genuine and the goods were sold on cash transaction through bank accounts, should be acceptable as the evidence, since no contradiction has been made either in the adjudication order or in the impugned order. In view of above, I set aside the impugned order - appeal allowed - decided in favor of appellant. 2016 (11) TMI 1212 Waiver of pre-deposit - Penalty - Held that: - the Hon'ble Apex Court vide its order dated 12.12.2008 has directed the applicants to make the pre deposit within the period of 10 weeks. Admittedly, the applicants have not made compliance of the directions of the Hon'ble Apex Court. In the absence any extension of time by the Hon'ble Apex Court, this Tribunal has dismissed the appeals filed by the applicants for not compliance of provisions of Section 35F of the Central Excise Act - Application dismissed. 2016 (11) TMI 1211 Entitlement to the exemption of excise duty in terms of N/N. 6/2002-CE dt. 1.3.2002 in terms of List 9 appended to Sl.No.237 of the said Notification - steam boilers and thermic fluid heaters manufactured by it are fit to produce energy using input from the non-conventional sources i.e. from agro waste - Held that: - As per notification, the goods manufactured by the appellant should be capable of using agricultural waste to produce non-conventional energy. It may be stated that use of agricultural waste by the goods manufactured by the appellant was not ruled out by Revenue making any allegation in the SCN. Record shows that a communication dt. 18.5.2006 of the Asst. Commissioner of Central Excise, Chennai-V Division sent to the Joint Commissioner of Central Excise, R&T Section, Chennai-II made clear that the devices manufactured by the appellant are non-conventional energy producing devices. So also enquiry by the reporting officer revealed that certain customers were using appellant's goods for use of the agricultural waste to produce non-conventional energy. We are conscious that the grant of notification should not be loosely interpreted and public grant should not be abused. But the spirit of the notification in question appears to be beneficial in nature. Revenue failed to demonstrate that the device is not capable of using agricultural waste. That suffices to hold that the goods of the appellant are eligible to the notification benefit - Appeal allowed - decided in favor of assessee. 2016 (11) TMI 1210 Levy of excise duty - goods inspected by the agency of the buyer - Held that: - it appears that the inspection charges are mandatory. The appellant had made claims for the reimbursement for the inspection charges time to time. It is the mistake of the assessees Accountant who had not included this amount to be reimbursed by the buyer - It may be mentioned that the appellant cannot claim advantage of his own mistakes as per the maxim COMMODUM EX INJURIA SUA MEMO HABERE DEBET In the instant case, the inspection charges and excise duty were rightly levied. But due to the mistake of the assessee-appellant, the same were not recovered from the buyer of the goods - appeal dismissed - decided against appellant. 2016 (11) TMI 1209 Valuation - assessable value - ex-factory sales - Held that: - the factory gate sale prices or ex-factory price are the genuine price and they can be the basis for the assessment of the goods cleared from the depot, the confirmation of demand by the authority is contradictory to the conclusion reached by him and will not therefore sustain. The case laws relied upon by the assessee on settled law as laid down by Hon'ble Supreme Court, in Indian Oxygen case [1988 (7) TMI 58 - SUPREME COURT OF INDIA], that so long as there is a genuine ex-factory price there can be no question of taking into account the depot price for arriving at the assessable value are on all fours with the facts of this case. Disallowance of certain deductions claimed in the declarations - Held that: - when cash discount /sale rebate is available to all buyers, the same is permissible deduction. As regards abatements on interest on receivables, it is held that such interest is a post removal expense and hence a permissible deduction. With regard to abatement claimed on freight on sales, it is seen related to expenses incurred by appellant on account of freight charges from depot to the buyer's premises which are clearly post removal expenses and thereby a permissible deduction. The acceptability and genuineness of ex factory price is incorrect In the light of the discussions herein above, when it has been clearly held that the ex-factory prices are genuine prices and they can be the basis for the assessment of goods cleared from the depot, the department appeal will have no legs to stand on and cannot therefore survive - appeal of Department dismissed - decided in favor of assessee. 2016 (11) TMI 1208 SSI Exemption - Benefit of N/N. .9/2003-CE dt. 01.03.2003 - condition in notification to avail benefit - Held that: - the appellant have availed exemption on the clearance of the un-branded goods and have paid full rate of duty on clearance of branded goods, we hold that the appellant have not violated the provisions of Notification No.9/2003-CE dt. 01.03.2003. Accordingly, we hold that the appellant is entitled to exemption benefit under the provisions of Notification No.9/2003-CE dt. 01.03.2003 - appeal dismissed - decided in favor of respondent-assessee. 2016 (11) TMI 1207 Denial of the benefit of N/N. 6/2006, dated 1-3-2006 - anchor rings and load spreading plates - Held that: - the anchor rings and the load spreading plates are specifically designed for the purpose of attaching the tower to the ground by providing necessary bolts for the same. The anchor rings and the load spreading plates are an extension of the tower, though the same is fixed to the foundation first and later attached to the tower. Thus they are parts of the tower - the anchor rings and load spreading plates are parts of tower specially designed for wind operated electricity generators and are eligible for exemption under Notification No. 6/2006, dated 1-3-2006 - matter on remand. 2016 (11) TMI 1206 Levy of duty - paper waste and aluminium waste generated during the making and packing of cigarettes classified under CETH 4702.90 and CETA 7602.90 respectively - Held that: - with regard to the same issue, learned Commissioner for the subsequent period has decided the same issue in favour of the appellant by holding that the cigarette waste paper and aluminium foil are not subject to excise duty and the department has not filed appeal against the same. Moreover in all the judgments cited by the learned counsel supra, the issue has been squarely decided in favour of the appellant. Learned A.R. could not controvert the submission of the appellant by producing any judgments in favour of the Revenue. In view of the settled position, we are of the considered view that the impugned order is not sustainable in law and we set aside the same by allowing the appeal with consequential relief, if any. 2016 (11) TMI 1205 Valuation - Benefit of abatement of Sales Tax/VAT on equalized basis - inadmissible deduction - Held that: - both the lower authorities (of Revenue) below held that equalized or average sales tax cannot be allowed for abatement under Section 4 of the Central Excise Act 1944. Further, we find that this issue is no longer res integra in view of the various decisions of the Tribunal in the appellants own case and also the judgment of the Hon’ble Supreme Court in the appellants own case where it was held that - Considering above discussions and decision of the Hon’ble Supreme Court in the appellants own case, we hold that the impugned orders are not sustainable in both the cases and are hereby set aside - appeal allowed - decided in favor of appellant. 2016 (11) TMI 1204 Cenvat credit - duty paid job work - whether the denial of Cenvat credit on the ground that job worker should have carried out job work under Rule 4(5)(a) of Cenvat Credit Rules, 2004, hence was not supposed to pay the duty, is justified? - Held that: - firstly the manufacture of Co2 Gas and filling it into cylinder is an activity of manufacture and duty is required to be paid. Secondly, even if it is accepted that activity of job worker is not amount to manufacture but job worker after receipt of duty paid material can avail Cenvat credit and pay the duty in terms of Rule 16 of Central Excise Rules, 2002. Even though the job worker’s activity is not a manufacture, they are entitle to avail the Cenvat credit and clear the goods on payment of duty equal to the amount of Cenvat credit availed and duty so paid by the job worker is available as Cenvat credit to the recipient - CENVAT credit allowed to the appellant on the duty paid legally - appeal allowed. 2016 (11) TMI 1203 Refund - Principles of unjust enrichment - periodical revision of the price depending on the price prevailing in the market - whether the appellant have passed on the burden of Central Excise Duty and accordingly the amount found refundable to them have been rightly transferred to consumer welfare fund? - Held that: - the appellant have not received a single rupee more than the settled amount of ₹ 600/- per meter from the buyers. We further, notice that there is no dispute as regards this fact and the entitlement of refundable amount is not in dispute. So far the issue of unjust-enrichment in concerned we hold that under the admitted facts, the appellant has not received a single rupee more than the settled amount of ₹ 600/- per meter from the buyers, there is no case of unjust enrichment made out. Accordingly relying on Ruling of Apex Court in the case of HPL Socomax Ltd. [2015 (5) TMI 492 - SUPREME COURT] we hold that the appellant is entitled to refund. Allowing the appeals of the appellant we direct the revenue authority to grant the refund within 90 days from the receipt of this order along with interest as per the Rules - appeal allowed. CST, VAT & Sales Tax 2016 (11) TMI 1199 Jurisdiction of authority - period of limitation - Held that: - reliance placed on the decision of the case of Dhanani Imp. Exp. Pvt. Ltd. V/s. State of Gujarat and another [2016 (7) TMI 1150 - GUJARAT HIGH COURT] where it was held that When the petitioner's assessment thus became final and by efflux of time, even exercise of powers by the Commissioner under section 35(1) became barred by limitation, subsection (8A) was not even yet introduced in the statute book. We have serious doubt whether this provision could be applied to the periods prior to the date when the provision was enacted. However, at any rate, to apply to such a situation where the original assessment and any scope by the Commissioner to revise the tax in terms of subsection (1) of section 35 has long pass, been barred by limitation, would expose the provision to vulnerability on the ground of virus - Applying the aforesaid decision to the facts of the case on hand, the impugned order passed by the Commercial Tax Officer, Rajkot can be said to be without jurisdiction inasmuch as the assessment has been made for the period between 1.4.2006 to 31.3.2007 beyond the period of limitation, which is 4 years as prescribed under Section 34 (9) of the Act. The impugned assessment order dated 10th August, 2016 passed in exercise of powers under Sub-Section (8A) of Section 34 of the VAT Act is hereby quashed and set aside - petition allowed - decided in favor of petitioner-assessee. 2016 (11) TMI 1198 Taxability - separate rate of tax on the ‘Mobile Battery Chargers’ (MBC) sold along with the Mobile phones itself - KVAT Act, 2003 - Held that: - reliance placed on the decision of the case of case of State of Punjab and others –versus- Nokia India Private Limited [2014 (12) TMI 836 - SUPREME COURT] where it was held that the Mobile Battery Chargers (MBC), cannot be treated as part of the Mobile Phones itself and they are mere accessories of the Mobile Phone and are to be taxed separately irrespective of their packing in the common package with Mobile phones - The said binding precedent from the Apex Court is binding on all Courts/authorities in the Country. It is not based only on particular entry for tax rate under any particular State. Therefore, this Court is not inclined to entertain this contention of the assessee. The other issues of assessment have already been left open to be raised before the appellate authorities under the Act, as the petitioner has an alternative remedy against the impugned assessment orders and therefore they have been left free to agitate those points before such appellate authorities - petition dismissed. 2016 (11) TMI 1197 Validity of ex parte assessment order - revision application - on account of the fact that inspite of notice, the assessee petitioner herein did not appear on 28/07/15, 16/09/15 and 17/12/15 and by giving a justification for nonappearance, the writ petition has been filed seeking review of the order and its setting aside i.e. Annexure P-1 rejecting the application under Section 34 of the M. P. V.A.T. Act - Held that: - against the order of assessment, a remedy of appeal and second appeal is available. Petitioner should take recourse to the said remedy and the grounds raised in this writ petition are left open to be considered and decided by the appellate authority on an appeal being filed along with an appropriate application for condonation of delay - petition disposed off - decided against petitioner. 2016 (11) TMI 1196 Imposition of penalty u/s 78 (5) of the Act - Held that: - merits of the case not considered and decision reached, which is not permissible - penalty can be levied on the owner as well. Penalty imposed by AO is upheld - decided against Assessee. 2016 (11) TMI 1195 Levy of penalty u/s 76(6) of the Act - declaration form VAT 47 - declaration not fully filled - punching of form - Held that: - Even the subsequent declaration form, though produced by the assessee, in my view can be said to be incomplete, defective or not duly filled in, particularly taking into consideration the additional mandate of law of punching the declaration form, though the learned counsel contended that it is technical error, but in my view it cannot be said to be mere technicality particularly when it is an additional feature introduced by the Government to avoid misuse or reuse of declaration forms and to avoid manipulations by the assessees. To say that it is a technical error, in my view, is not proper. Once the apex court says that declaration form should be complete in all respect, then punching having been introduced as one of the additional feature later, is required to be taken into consideration. What is to be punched is date, month of use and value, which neither the earlier Form nor the new Form was punched and, therefore, in my view the subsequent declaration form can also be said to be incomplete or not duly filled in and is not sufficient compliance of the mandate of law. The judgment of Guljag Industries [2007 (8) TMI 344 - SUPREME Court] of which relevant paras have been reproduced hereinbefore, is applicable in the facts and circumstances of the instant case and when the additional feature of punching which has been noticed hereinbefore, the declaration form can be said to be deficient in the light of the judgment rendered in the case of Guljag Industries. The declaration form has to be complete in all respect and finding the subsequent form even incomplete in respect of material particulars and punching, the order of Tax Board is reversed and that of the AO as well as Dy. Com. (Appeals), are upheld - petition succeeds - decided in favor of Revenue. 2016 (11) TMI 1194 Demand - the assessee was allowed exemption to the extent of the business carried on as per the registration with the KVIC. However, it was noticed that in the garb of the said certificate, the assessee also ventured in stone business which was not as per registration - Held that: - Both the appellate authorities also took into consideration the notification of the Commissioner dt.26/05/1995 which clarified that there shall be no sales tax where such entities are registered with the KVIC and therefore, the assessee was under the bonafide belief that it was competent to have advantage granted by the KVIC to promote such entities and accordingly, both the appellate authorities taking into consideration the principles of promissory estoppel allowed the same. The Tax Authorities ought to allow benefits covered by such registration/norms and should not create such technicalities in rejecting the benefits - In so far as the sale through 'C Form' is concerned, both the appellate authorities have also expressed that if the assessee produced the necessary 'C Form' before the AO within the stipulated period, then the claim may be reconsidered by the AO and in my view, there is nothing adverse in it because the principles of natural justice demand that opportunity was to be allowed and it has been allowed and it was for the AO to take a decision after 'C Form' is filed. Both the appellate authorities have come to a finding of fact based on the notification and circulars and therefore, I do not find any error, illegality or perversity in the order impugned so as to call for interference by this Court, particularly when it has been decided on a finding of fact based on the material available on record - revision petition dismissed. 2016 (11) TMI 1193 Liability of VAT - entry tax - principles of natural justice - Held that: - the fact remains that the liability of more than ₹ 14 Crores has been imposed upon the petitioner and the orders have been passed ex parte and, therefore, interest of justice requires that at lease one opportunity should be granted to the petitioners to submit their account books and other documents to give their say in the matter and then only the assessment should be finalized - petition disposed off by way of remand. 2016 (11) TMI 1192 Release of seized goods - perishable goods - inspite of deposit of penalty u/s 55 (6)(ea) of 'the Act, the goods not released - Held that: - this Court is of the opinion that a prima facie case is made out for grant of interim relief as the petitioner has already paid the penalty imposed against him - Resultantly, the respondents are directed to release the goods seized from the petitioner within a week from today. It is also made clear that the Department shall proceed with the assessment in accordance with the provisions of law - petition disposed off - decided against petitioner.
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