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TMI Tax Updates - e-Newsletter November 3, 2015 Case Laws in this Newsletter: Income Tax Customs Corporate Laws FEMA Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Articles SERVICE TAX PROVISIONS IN EASE OF DOING BUSINESS IN INDIA PERSONAL PENALTY ON COMPANY DIRECTORS News Sovereign Gold Bond Scheme 2015 RBI Reference Rate for US $ Shri Deepak Singhal takes charge as New Executive Director at RBI Finance Minister Arun Jaitley to inaugurate International Conference on ‘Networking the Networks’ tomorrow; three day conference to deal with issues of Illicit financial flows from drugs, human trafficking and tax fraud etc. and establishment of a regional coordination mechanism for intelligence sharing in criminal matters Notifications VAT - Delhi No. F.3(18)/Fin(Rev-I)/2015-2016/DS-VI/886 - dated 30-10-2015 - DVAT Amendments in Central Sales Tax (Delhi) Rules, 2005 No. F.3(11)/Fin(T&E)/2009-10/DS-VI/888 - dated 30-10-2015 - DVAT Appointment of officers Circulars / Instructions / Orders Income Tax 18/2015 - dated 2-11-2015 Interest from Non-SLR securities of Banks Highlights / Catch Notes Income Tax Entitlement for interest on the amount claimed along with future interest - Bar of suits in civil courts. - since this Court has no inherent jurisdiction to try this suit in view of the bar contained in Section 293 of the Income Tax Act, the suit is therefore dismissed - HC Visit to Get Source Levy of late filing fee u/s 234E without issuing SCN - delay in submitted TDS returns - Constitutional validity challenged - the provisions of Section 234E of the Act are neither ultra vires nor unconstitutional and, thus, finding no merit in the instant writ petition - HC Visit to Get Source Advance Against Depreciation (AAD) added to Book Profit u/s 115 JB - MAT computation - AAD is a timing difference, it is not a reserve, it is not carried through profit and loss account and that it is "income received in advance" subject to adjustment in future - No addition - AT Visit to Get Source Disallowance of depreciation on cars given on lease - no depreciation is claimed by the lessee on these leased cars - assessee company has rightly claimed the depreciation on the leased assets i.e. cars - AT Visit to Get Source Disallowance u/s 40A(3) - cash payment in excess of limits prescribed - supply of country liquor is made, only when the payment is made by the assessee to the supplier - the payments in question were made in exceptional circumstances and hence fall within the exception read with rule 6DD - AT Visit to Get Source Customs Valuation – By consenting to enhancement of value and thereby foregoing need for SCN, appellant made it unnecessary for Revenue to establish valuation any further as consented value in effect becomes declared transaction value requiring no further investigation or justification and as such violation of principles of natural justice cannot be alleged - AT Visit to Get Source Denial of refund claim - Unjust enrichment - recovery of duty by encashment of the Bank Guarantee - earlier stay order was vacated due to failure comply with stay order - Held that:- It is only ₹ 17.50 lakhs which was deposited by the appellant pursuant to the interim orders of the Court. The Court had directed the appellant to deposit - SC Visit to Get Source Refund claim - Unjust enrichment - recovery of duty by encashment of the Bank Guarantee - earlier stay order was vacated due to failure comply with stay order - it had to be decided in the light of the doctrine of unjust enrichment which was clearly applicable - SC Visit to Get Source Wealth-tax Rejection of application for registration as a valuer under Section 34-AB of the Wealth Tax Act, 1957 - the basic qualifications either being Civil Engineer, Architecture or Town Planning can not be marginalized or blinked away. - HC Visit to Get Source Service Tax Credit availed on exempted services - interest earned by the bank on loans and advances, whether it is exempted service or taxable service - for the banking and financial institution under Rule 6(3) (D) the provision was available for straight 50% reversal of interest. - AT Visit to Get Source Once the service provider has paid the tax under reverse charge mechanism, service tax cannot be demanded from the appellant - demand of service with penalty set aside - AT Visit to Get Source Export of services - Nature of amount received against reimbursement of expenses - The reimbursement cannot be treated in isolation but is very much in connection with the export of services - AT Visit to Get Source Transportation of goods by air - Excess baggage charges collected by the appellant Airlines is integral part of the service provided for ‘transport of passengers by Air' - AT Visit to Get Source Whether services provided by the appellant to M/s. Hero Honda Motors Ltd. through Cricket Celebrities namely Shri. Saurav Ganguly, Shri. Virender Sehwag, Shri. Yuvraj Singh, Shri. Harbhajan Singh and Shri Zaheer Khan is advertising services or otherwise - held as advertising services liable to service tax - AT Visit to Get Source Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) - inquiry or investigation which is pending - Scope of notices correspondence between assessee and department - matter was already pending - petition dismissed - HC Visit to Get Source Central Excise Denial of refund claim - Export of goods to Nepal - There is no provision for normal rebate of duty paid on excisable goods under Section 11B of the Central Excise Act, when goods are exported to Nepal in view of Notification No. 20/2004-CE(NT) - AT Visit to Get Source Rejection of permission to remove the goods for further processing under Rule 16C of the Central Excise Rules, 2002 - permission under Rule 16C is not legally sustainable. - AT Visit to Get Source Valuation of goods - Inflation in value of export goods - . In this case the goods were directly cleared from the job workers premises for export and no processes were done by exporters in job-workers premises. It was therefore, necessary to clear the goods at export price which the processors has done - AT Visit to Get Source Activity of repacking from bulk to retail pack of refined edible oil - Claim of Exemption - When the Notification itself gives two options, the choice of the appellant to choose an option which is beneficial to him cannot be faulted with. - AT Visit to Get Source Cenvat Credit - inputs & capital goods used in manufacturing of exempted goods in first unit - such exempted goods used as inputs to manufacture dutiable goods in second unit - credit of inputs / capital goods of first unit not allowed - AT Visit to Get Source Whether the appellant s Jajpur Unit engaged in the manufacture of Iron oxide pellets, a dutiable product, are eligible to avail CENVAT Credit on inputs, capital goods used in or in relation to manufacture of exempted iron ore concentrate at their Barbil Plant, which were ultimately be transferred to their manufacturing unit at Jajpur - Held No - AT Visit to Get Source VAT Levy of VAT on set top boxes (STB) - The petitioners claim depreciation, etc., on these STBs and the valuation given by the petitioners is the value of the goods, the right to use which has been transferred to the customers - Levy of VAT upheld - HC Visit to Get Source Case Laws: Income Tax 2015 (11) TMI 26 Transfer pricing adjustment - whether Tribunal erred in replacing the PLI adopted by the Assessee to determine the ALP with another PLI despite not providing any cogent reasons for the same and in fact providing contradictory remarks while rejecting Return on Capital Employed (‘ROCE’) as the PLI? - whether the Revenue was right in rejecting ROCE as a PLI - Held that:- It appears to the Court that the rejection of ROCE as PLI by the Revenue for the AY in question is a fact that has been accepted and acted upon by JMIPL itself for the subsequent AYs when it changed its PLI to OP/TC-RCM, which appears to have been accepted by the Revenue. Question (i) is accordingly answered in the negative, i.e. in favour of the Revenue and against the Assessee. Not treating the cost of the raw material as a pass through cost - Assessee’s contention rejected that cost of the raw material should be excluded from the total cost if the alternate PLI (i.e. Operating Cost as a percentage of Total Cost excluding raw material cost) is adopted even if the raw material was ordered based on recommendations and a confirmed order by the Assessee’s customer Maruti Udyog Limited - Held that:- In the absence of any reliable comparable data, and in the absence of proper reasons, it would not be justified for the Revenue to simply reject a financial ratio adopted by the Assessee for computing the net profit margin by excluding a pass though cost from the TC in the denominator. The expression "any other relevant base" occurring in Rule 10 (1) (e) (i) of the Rules is wide enough to encompass a denominator that excludes pass through costs as long it is demonstrated to be at arm's length. It is further importantly pointed out that the very purpose of transfer pricing is to benchmark transactions between related parties in order to discover the true price if such entities were unrelated. If MUL had bought the PGM directly from JMUK there would have been no application of transfer pricing since MUL and JMUK are unrelated entities. MUL would have purchased the PGM just like JMIPL did on negotiated prices. There is merit in the contention that the prices at which JMIPL purchased PGM from JMUK were already at arm’s length and that it was for administrative convenience that MUL had outsourced this function to JMIPL. The submission of the Revenue that the accounting entries of JMUK do not treat the cost of PGM as a pass through cost fails to acknowledge that JMUK is in the business of selling PGM. It does not require to charge JMIPL for processing the raw material i.e. PGM as that is passed on to MUL's vendors and thereby to MUL. Finally, the Revenue has been unable to deny that the above alternate computation of the net profit margin by JMIPL for the subsequent AYs 2004-05, 2005-06 and 2006-07 has been accepted by the Revenue. While as a general proposition each assessment year should merit independent consideration, the Court finds no reason why for the AY in question, i.e. 2003-04, with no distinguishing features being pointed out, the Revenue would want to reject the alternate PLI adopted by JMIPL.For the above reasons, Question (ii) is answered in the affirmative, i.e in favour of the Assessee and against the Revenue. 2015 (11) TMI 25 Entitlement for interest on the amount claimed along with future interest - Bar of suits in civil courts. - inetrest on what rate and from what date? - Whether the plaintiff is entitled for decree of the sum as prayed in suit against the defendants jointly and severally? - Jurisdiction of court - Held that:- It is not disputed on behalf of the plaintiff that when this Order was passed on 20.9.2005 (or even on 27.9.2004 as argued on behalf of the plaintiff), plaintiff was aware of the fact that the three bank drafts totaling to ₹ 30,50,000/- were not encashed by the defendants and plaintiff had a right to claim interest on these bank drafts in the proceedings under Section 245(D)(6) of the Income Tax Act, inasmuch as, by June/August 2004, plaintiff had encashed the pay orders totaling to the amount of ₹ 30,50,000/-. The computation being done of amounts; payable for and against the plaintiff; and for and against the defendants, very much had to be and was the subject matter of the Order dated 20.9.2005 (or 27.9.2004) and all these were aspects with respect to the recovery from the plaintiff of the Income Tax dues payable by the plaintiff pursuant to the search and seizure operations in the premises of the plaintiff on 4.2.1995 and refund to the plaintiff on account of excess amount lying with the defendants. The plaintiff thus ought to have raised but did not raise the claim of the amount which is the subject matter of the present suit before the Income Tax Officer who passed the computation vide Order dated 20.9.2005/27.9.2004 or if the plaintiff did make the claim with respect to interest payable on three drafts, then the same stood denied in terms of the aforesaid Order dated 20.9.2005/27.9.2004. As asked the counsel for the plaintiff a specific question, as to whether the plaintiff had raised this claim which is the subject matter of the present suit being the interest payable on account of monies of the plaintiff lying dormant in suspense accounts with the banks as the three bank drafts/pay orders were not encashed by the defendants, but counsel for the plaintiff could not answer this query of the Court one way or the other in spite of taking instructions from the plaintiff. Therefore, looking at the matter from any angle, if this issue was raised and the claim was denied by the ITO or the issue was not raised at all, the claim of the plaintiff definitely stood merged in the Order dated 20.9.2005/27.9.2004 being the claim of the plaintiff with respect to interest on the amount of ₹ 30,50,000/-. If the case of the plaintiff is that the Order dated 20.9.2005/27.9.2004 wrongly disallows the claim, then plaintiff had appropriate remedy to challenge the said order in an appeal but the plaintiff failed to do so. This suit in view of Section 293 of the Income Tax Act however is not the remedy and the only remedy of the plaintiff was to challenge the Order dated 20.9.2005/27.9.2004 in the appropriate forum and which the plaintiff failed to do. The ratio of the judgment of the Supreme Court in the case of Parmeshwari Devi Sultania (1998 (3) TMI 3 - SUPREME Court) clearly applies that with respect to any claim which is made in a civil suit against the Income Tax department which will result in modification of proceedings under the Income Tax Act, then the cognizance of such a civil suit cannot be taken by a civil court in view of the categorical bar contained in Section 293 of the Income Tax Act. In Parmeshwari Devi Sultania’s case (supra), the Supreme Court has referred to a judgment of the Privy Council in Raleigh Investment Co. Ltd. Vs. Governor General-in Council [1947 (2) TMI 18 - PRIVY COUNCIL] wherein a similar issue was decided. It is settled law that under Section 9 of the Code of Civil Procedure, 1908 a suit is not maintainable once there is an express or implied bar to the suit. Section 293 of the Income Tax Act is an express bar to the present suit in view of the judgment of the Supreme Court in the case of Parmeshwari Devi Sultania (supra). In view of the above, since this Court has no inherent jurisdiction to try this suit in view of the bar contained in Section 293 of the Income Tax Act, the suit is therefore dismissed, leaving the parties to bear their own costs. 2015 (11) TMI 24 Constitutionality of Section 95 of the KVSS, 1998 - whether declaration under KVSS cannot be granted as scheme has expired? - Held that:- It is not possible for us to declare Section 95(iii) void on the ground of under inclusion. The non inclusion of others in the exclusionary Section 95(iii) of the KVSS 1998 will not render the classification done by the parliament as arbitrary or violative of Article 14 of the Constitution of India. The petitioner admittedly at the time when he filed his declaration was being prosecuted for offences of cheating under Chapter XVII of the Indian Penal Code. So far as the Petitioner is concerned, he does not fall within the class of the persons against whom proceedings have been instituted for enforcement of any civil liabilities. Therefore, only a person who has been excluded from the benefit of KVSS 1998 on the ground of prosecution for the enforcement of the civil liabilities approaches the Court, would the issue arise for our examination. This is neither a public interest litigation nor is the petitioner in any manner affected by the class of persons being excluded from the benefit of KVSS 1998 for the reason of prosecution being launched for enforcement of the civil liabilities. Furthermore, the Petitioner is seeking a relief under the KVSS 1998 and at the same time, he is calling upon the Court to strike down Section 95 thereof, which will result in all persons being entitled to the KVSS 1998. This will lead to the entire scheme being unworkable. The relief prayed for under the Scheme and the argument of the Petitioner seeking to destroy the entire scheme, is difficult to reconcile. The Petitioner was charged for offence of cheating and his class has been rightly excluded from the benefit of the Scheme. Nevertheless we have examined the challenge and not found any merit in it. Thus, the challenge to Section 95 of the KVSS 1998 mounted by the Petitioner must fail. - Decided against assessee. 2015 (11) TMI 23 Disclosure at the time of search had no basis even though the retraction was an afterthought - Held that:- Commissioner (Appeals) and the Tribunal have recorded concurrent findings of fact that the additions have no reference to the seized material and that there is no material or evidence to support the additions made by the Assessing Officer. The addition is sought to be made solely on the basis of the statement recorded under section 132(4) of the Act which has been subsequently retracted, without such statement being corroborated by any material on record. In the decisions on which reliance has been placed upon by the learned counsel for the appellant, the statement of the assessee, though subsequently retracted, was corroborated by the material seized during the search, whereas in the present case the Tribunal has recorded a categorical finding to the effect that in the assessment order, the Assessing Officer has not pointed out any defect or discrepancy in any of the documents seized from the business premises of the assessee and that the addition has been made only on account of client modification code. Under the circumstances, the conclusion arrived at by the Tribunal that the disclosure at the time of the search had no basis being based upon findings of fact recorded after appreciation of the material on record, does not give rise to any question of law. The ground of appeal raised vide question [A] is, therefore, rejected. Addition on account of suppression of profits - Whether the ITAT has erred in law in holding that the AO was not justified in invoking provisions of section 145(3) of the I. T. Act? - Held that:- The court is of the view that the same requires consideration, hence, Admit. The following substantial question of law arises for consideration: Whether the Income Tax Appellate Tribunal has erred in law and on facts in deleting the addition of ₹ 2,87,75,583/- made by the Assessing Officer on account of suppression of profits by the assessee company by way of client code modification by the broker (which is a group concern) in a large number of commodity transactions? - It is clarified that Question-C stands included in Question-B. 2015 (11) TMI 22 Levy of late filing fee u/s 234E without issuing SCN - delay in submitted TDS returns - Constitutional validity challenged - prayer has been made for quashing the assessment orders passed under Section 200A read with Section 234E of the Act - Held that:- With reference to the judgments relied upon by learned counsel for the petitioners, suffice it to notice that the principles of law enunciated therein are well recognized but in view of pronouncements of Bombay High Court in Rashmikant Kundalia's case (2015 (2) TMI 412 - BOMBAY HIGH COURT ) and Karnataka High Court in Lakshminirman Bangalore Pvt. Ltd's case (2015 (8) TMI 379 - KARNATAKA HIGH COURT), with which we express our concurrence where Section 234E of the Act has been held to be intra vires, no benefit can be derived by the petitioners from such enunciations. Further, all the pronouncments relied upon by the petitioners are prior to incorporation of Section 234E of the Act by the Finance Act, 2012 with effect from 1.7.2012. In view of the above, we find that the provisions of Section 234E of the Act are neither ultra vires nor unconstitutional and, thus, finding no merit in the instant writ petition, the same is hereby dismissed. - Decided against assessee. 2015 (11) TMI 21 Advance Against Depreciation (AAD) added to Book Profit u/s 115 JB - MAT computation - Held that:- The issue is no longer res-integra as it is covered by the decision of Hon'ble Supreme Court in the case of NHPC Vs. CIT (2010 (1) TMI 281 - SUPREME COURT)in which it was held as AAD is a timing difference, it is not a reserve, it is not carried through profit and loss account and that it is "income received in advance" subject to adjustment in future and, therefore, clause(b) of Explanation-I to section 115JB is not applicable. - Decided in favour of assessee. Teatment of catchment area treatment expenses - revenue v/s capital - Held that:- CAT expenditure is related to carrying on of the business operations of the assessee. It is an integral part of the profit earning process. Moreover the expenditure has not resulted in the acquisition of any tangible/ intangible asset. The expenditure therefore is revenue in nature. Merely because the expenditure results in enduring benefit is not enough to categorize it is capital in nature. This issue has been settled by the Supreme Court in Empire Jute Co. Ltd. Vs. CIT (1980 (5) TMI 1 - SUPREME Court) - Decided in favour of assessee. 2015 (11) TMI 20 Disallowance at 11 % Net profit on entire bogus purchases - Held that:- As the assessee had claimed that all the transaction were through banking channels the claim had to be verified to find out the trail of the cheques. It appears that because of time constraint the AO could no complete the inquiries that he had started in right direction. The fact mentioned by the FAA that it is a case of a builder and consumption of goods has not been doubted. In such cases, generally the peak investment is added to the total income of the assessee, as the whole turnover cannot be held to be unaccounted income or investment without supporting evidences. In these peculiar fact and circumstances of the case, we are of the opinion that in the interest of justice the disallowance should be restricted to 11% for the alleged doubtful purchases i.e. ₹ 3.09 Crores or to the peak investment whichever is higher. In short, we are partly reversing the order of the FAA. Effective ground of appeal filed by the AO is rejected. In light of our discussion, CO filed by the assessee is treated as infructuous. - Decided against assessee. 2015 (11) TMI 19 Addition under Section 69C - AO bringing to tax the amounts disallowed in the course of search assessment under Section 153C - Held that:- In the case of a searched person the AO of the searched person assumes possession of seized assets/documents on search of the Assessee; the seized assets/documents belonging to a person other than a searched person come into possession of the AO of that person only after the AO of the searched person is satisfied that the assets/documents do not belong to the searched person. Thus, the date on which the AO of the person other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provisions of Section 153A of the Act. We, therefore, accept the contention that in any view of the matter, assessment for AY 2003-04 and AY 2004-05 were outside the scope of Section 153C of the Act and the AO had no jurisdiction to make an assessment of the Assessee’s income for that year. Whether the concluded assessments could be reassessed on the basis of the seized assets/documents? - Held that:- In the present case, the documents seized had no relevance or bearing on the income of the Assessee for the relevant assessment years and could not possibly reflect any undisclosed income. This being the undisputed position, no investigation was necessary. Thus, the provisions of section 153C, which are to enable an investigation in respect of the seized asset, could not be resorted to; the AO had no jurisdiction to make the reassessment under Section 153C of the Act. - Decided in favour of assessee. 2015 (11) TMI 18 Reopening of assessment - Held that:- According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assesee was the beneficiary. The reasons did not satisfy the requirements of Section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. - See GKN Driveshafts (India) Ltd. vs. ITO [2002 (11) TMI 7 - SUPREME Court] and Hotel Signatures Ltd. (2011 (7) TMI 361 - Delhi High Court). - Decided in favour of assessee. 2015 (11) TMI 17 Nature of expenditure - Payment made to Citicorp Information Technology Services Limited(CITIL) for the purchase of processing contracts - Revenue v/s capital expenditure - Held that:- Assessee company vide assignment agreement effective from 01.08.1998, has acquired the service agreement entered into between CITI Bank and CITIL whereby all the liabilities, rights and obligation and interest in the aforestated agreement were acquired by the assessee company. Since these are service agreement from which the revenue is to be generated over a period of unexpired 25 months from 01.08.1998 and the assesse’s counsel has drawn our attention to the audited accounts for the year ended 30.06.1999 to the fact that the revenue of ₹ 9,06,10,908/- being transaction processing and administrative fees is received by the asssesee company out of these assigned agreement/ contracts only during the period ended 30th June 1999 and no processing division/assets under these agreements was acquired nor there is any slump sale happening in favour of the assessee company rather it is merely assignment of agreements in favour of the assessee company whereby the unexpired period revenue generated contracts are assigned in favour of the assessee company. The entire consideration of ₹ 85 lac is paid to acquire the unexpired portion of the service agreements which will generate revenue for the assessee company during the unexpired period of this service agreement ie 25 months from 01.08.1998. Keeping in view the principle of matching concepts of revenue and expenditure and also that these assignment of agreements are towards revenue field, we hold that assessee company has rightly charged as revenue expenses , 7 months expenses out of 25 months unexpired period of contract being ₹ 23,80,000/- and hence additions made by the assessing officer to the tune of ₹ 23,80,000/- to the income of the assessee company and as confirmed by the CIT(A) is hereby deleted. - Decided in favour of assessee. Disallowance of depreciation on cars given on lease - AO disallowed claim treating it to be in the nature of financing and not leasing transactions - Held that:- To claim depreciation, the asset should be owned by the assessee and it should be used for the purpose of business of the assessee. In this case, the assessee company is owning the asset i.e. cars till the same are sold to the associated concern/employees. The assessee company by giving these cars on lease is in fact using the same for its own business. The Judgment of Hon’ble Supreme Court in the case of ICDS Ltd (2013 (1) TMI 344 - SUPREME COURT) is directly applicable in the facts and circumstances of the present case and the assessee company has rightly claimed the depreciation on the cars leased by the assessee company. The assessee company has also stated that it has brought on record before the CIT(A), the evidence that no depreciation is claimed by the lessee on these leased cars and the CIT(A) has given finding of the fact that there was no basis for the assessing officer to conclude that the lessee’s have claimed depreciation on these leased assets i.e. cars. Hence in view of the above, we hold that assessee company has rightly claimed the depreciation on the leased assets i.e. cars and the disallowance of Depreciation of ₹ 3,00,52,049/- claimed by the assessee company on leased asset i.e. cars as disallowed by the assessing officer and as confirmed by the CIT(A) is hereby deleted. - Decided in favour of assessee. Depreciation @ 40% - whether should be allowed on car lease which were purchased after 1.10.1998 but before 01st April 1999 and put to use before 1st April 1999? - Held that:- The assessee company is owner of these leased cars till they are sold to employees/associated concerns . We also held that the assessee company is entitled for depreciation on these leased vehicles . Since the assessee is engaged in the business of leasing and these cars have been given on lease in the normal course of business, hence, it is to be held that the assessee company has given these vehicles on lease and they are commercial vehicles entitled for depreciation @ 40% if purchased after 01.10.1998 but before 1st April 1999 and are put to use before the 1st day of April 1999 in accordance with the entry III (2) (iia) of part A of Appendix I applicable to the assessment years 1998-99 to 2002-03 as per definition of the commercial vehicles which have been defined in Note No. 3A of the Appendix I to Rule 5 below the table of rates at which depreciation is admissible which includes ‘light motor vehicles’, for the purpose of business or profession as per amended provisions of Section 32 of the Act - Decided in favour of assessee. Disallowance of depreciation on computers leased by the assessee company - Held that:- assessee company is entitled for the depreciation on the leased assets i.e. computers @ 60% ( In this year at the rate of 30% since the asset were used for less than 180 days) of ₹ 9,86,474 on the computers purchased of ₹ 32,88,246/- during the assessment year and given on lease and the disallowance of Depreciation on the leased computers as disallowed by the assessing officer and as confirmed by the CIT(A) is hereby deleted. See case of ICDS Ltd (2013 (1) TMI 344 - SUPREME COURT) Depreciation on cars held for own use which were purchased after 1.10.1998 - Held that:- The cars which are purchased by the assessee after 1.10.1998 but before 1st April 1999 and put to use for its own office purposes before 1st April 1999 are commercial vehicle as referred to in the entry III(2)(iia) of part A of Appendix I, under the definition of commercial vehicle which include light motor vehicle as per definition contained in Motor Vehicles Act,1988 and there is no such stipulation that the cars are to be used for purpose of giving them on hire. The assessee company is using the car for its own office purpose which is for the purpose of its business and hence the assessee company is entitled for higher depreciation @ 40% and the disallowance of excess depreciation of ₹ 64,708/- claimed by the assessee which was disallowed by the assessing officer and as upheld by the CIT(A) is hereby deleted. - Decided in favour of assessee. Expenditure on repair and maintenance of the computers - Held that:- These expenses are to be fully allowed as they are incurred for the purpose of business of the assessee company and hence the disallowance as upheld by the CIT(A) is deleted. - Decided in favour of assessee. Reopening of assessment - payment of interest and details of outstanding secured loans - Held that:- The original assessment proceedings u/s 143(3) of the Act , the assessing officer has duly asked specific query regarding payment of interest and details of outstanding secured loans and its correlation with the the fixed assets pending installation which the assessee duly replied that secured loan outstanding raised by the company are for working capital loan being cash credit, demand loan and packing credit loan raised from the bank and fixed assets pending capitalization has no correlation with the secured loan raised by the assessee company and interest of is paid on secured loan raised for working capital purposes. The assessing officer passed the assessment order u/s 143(3) of the Act after applying his mind to replies submitted by the assessee company and now re-assessment proceedings initiated after four years from the end of relevant assessment is not permitted on account of change of opinion as provisio to Section 147 of the Act is applicable and hence, we hold that the CIT(A) has rightly quashed the notice dated 24.03.2008 issued u/s 148 - Decided in favour of assessee. 2015 (11) TMI 16 Disallowance of 50% of purchase value of second hand machineries - Transfer pricing adjustment - Held that:- When the Transfer Pricing Officer has failed to refer the valuation to the DVO and on the contrary has proceeded to quantify the value of the machineries at 50% by adopting a method which is not in conformity with the statutory provisions, in our view, the matter cannot be restored back to him again for giving him a second innings. Considering the fact that 50% disallowance made out of the purchase value of machineries is without any basis and in violation of statutory provision, we are inclined to delete the addition made on account of adjustment made by the Transfer Pricing Officer by disallowing 50% of purchase value of second hand machineries. - Decided in favour of assessee. Cost sharing arrangement towards information technology, commercial, finance, legal and administrative support - Transfer Pricing determined the arm’s length price of the cost sharing arrangement at “NIL” on the basis of certain general and sweeping observation - Held that:- Determination of arm’s length price at “NIL” without following the method prescribed under the statute is legally unsustainable. The DRP, in our view, has also upheld the determination of arm’s length price at “NIL” in a mechanical manner without proper application of mind. It is pertinent to mention here that in the immediately succeeding year i.e., assessment year 2007–08, the Transfer Pricing Officer, while considering the issue relating to determination of arm’s length price of similar cost sharing arrangement and I.T. support, has disallowed 20% of the total cost incurred by the assessee. This itself shows that the Transfer Pricing Officer accepts the fact that the A.E. has provided certain services to the assessee and the assessee has availed such services. In view of the aforesaid, we hold that the determination of arm’s length price of the cost sharing arrangement and I.T. support cannot be taken as “NIL” and the cost incurred by the assessee on actual basis deserves to be allowed. We order accordingly. - Decided in favour of assessee. Disallowance of depreciation on goodwill - Held that:- In view of the observations of the Co–ordinate Bench of the Tribunal in assessee’s own case for the preceding assessment year, on materially identical facts, we have no hesitation in allowing assessee’s claim of depreciation on goodwill. Insofar as the learned Departmental Representative’s contention that goodwill having not been specifically included in Explanation 3(b) to section 32 of the Act, depreciation is not allowable, we have to observe, the issue is no more res integra in view of the Hon’ble Supreme Court’s decision in SMIFS Securities Ltd. (2012 (8) TMI 713 - SUPREME COURT), wherein in no uncertain terms it has been held that goodwill being in the nature of any other business or commercial rights is an intangible asset under Explanation 3(b) to section 32(1) of the Act.- Decided in favour of assessee. Enhancing the value of closing stock of raw material by the amount of unutilized CENVAT credit - Held that:- If any adjustment is required to be made in terms with section 145A, effect to the same should be given irrespective of any consequences on the computation of income for tax purposes. The Court held for giving effect to section 145A of the Act, if there is change in the closing stock of the relevant previous year, then there must necessarily be a corresponding adjustment made in the opening stock as on the beginning of the relevant previous year. The aforesaid view was accepted in the case of CIT v/s Mahalaxmi Glass Works Pvt. Ltd., [2009 (4) TMI 182 - BOMBAY HIGH COURT]. In the present case, since the assessee has not made any adjustment to the opening stock by including the CENVAT credit, there is no need to make adjustment to the closing stock only by including the unutilised CENVAT credit. On the flip side, if adjustment is made to the closing stock, then corresponding adjustment has to be made to the opening stock of raw material for the next year. In either case, it will be revenue neutral. Hence, in our view, the adjustment made by the Assessing Officer and confirmed by the learned CIT(A) is not sustainable. Accordingly, we delete the same - Decided in favour of assessee. 2015 (11) TMI 15 Transfer pricing adjustment - determine the ALP of AMP expenses - Held that:- No detail of the AMP functions performed by the assessee is available on record. Similarly, there is no reference in the order of the TPO to any AMP functions performed by comparables. In fact, no such analysis or comparison has been undertaken by the TPO because of his applying the bright line test for determining the value of the international transaction of AMP expense and then applying the cost plus method for determining its ALP. The ld. AR also failed to draw our attention towards any material divulging the AMP functions performed by the assessee as well as comparables. As such, we are handicapped to determine the ALP of AMP expenses at our end, either in a combined or a separate approach. Under such circumstances, we set aside the impugned order and send the matter back to the file of the TPO/AO for determining the ALP of the international transaction of AMP spend afresh in accordance with the manner laid down by the Hon’ble High Court in Sony Ericsson Mobile Communications India (P.) Ltd. (2015 (3) TMI 580 - DELHI HIGH COURT). Ex consequenti, the ground raised about the TPO having no jurisdiction to determine the ALP of AMP expenses, is dismissed following the judgment in the case of Sony Ericsson Mobile Communications India (P.) Ltd. (supra). - Decided in favour of assessee for statistical purposes. 2015 (11) TMI 14 Addition made on account of alleged suppression of sales - addition based on consumption of electricity as per US standards and evasion of Excise duty by the manufacturers of TMT bars in Jalna cluster found by Director General of Central Excise and Customs - working out the addition by applying GP rate of 4% on the alleged suppression of sales, after rejecting the books of account under section 145 - Held that:- No extrapolation of sales for 300 days can be made in the hands of the assessee on the basis of the evidence found for clandestine removal of material without payment of Excise duty for few days, which in turn, has been admitted by the assessee by way of filing petition before the Settlement Commission, which in turn, has also been accepted by the Settlement Commission. Merely because the Settlement Commission accepted the claim of the assessee of additional Excise duty payable on the said clandestine removal of material without payment of Excise duty does not establish the case of the Revenue that the said figures of additional production should be utilized for extrapolating the sales in the hands of the assessee for the entire year. Admittedly, the assessee had offered additional income on the said clandestine removal of material without payment of Excise duty, which is to be added as income in the hands of the assessee. The learned Authorized Representative for the assessee fairly admitted that in case the said additional income has not been added while computing the income in the hands of the assessee for the respective years, the same may be directed to be added in the hands of the respective assessee in respective years. Accordingly, we direct the Assessing Officer to verify from the records for the respective years and include the additional income on account of such admitted clandestine removal of material without payment of Excise duty, by the assessee either before the Settlement Commission or before the Excise authorities, in the hands of the assessee. We have heard bunch of appeals and in some years, there is no admission of clandestine removal of material without payment of Excise duty and in those years in the absence of any evidence and / or any investigation or inquiry made by the Assessing Officer and where the Assessing Officer has failed to collect additional evidence, no addition can be made in the hands of the assessee, by way of extrapolation of sales for 300 days on account of any evidence found in any preceding or succeeding years. Further, no addition can be made in the hands of the assessee, where no petition has been filed by the assessee before the Settlement Commission in any of the respective years or before the Excise authorities. In the case of Bhagyalaxmi Steel Alloys Pvt. Ltd., there is no investigation by DGCEI and hence, no addition on account of extrapolation can be made, in the absence of any evidence found against the assessee. Since we have deleted the addition in the hands of assessee on both accounts i.e. addition made on account of erratic consumption of electricity and addition proposed on the basis of evidence found for the part of the year of clandestine removal of material without payment of Excise duty, next addition made in the hands of the assessee i.e. alleged investment in the purchases for effecting such sales which goods have been clandestinely removed, is not sustainable. Accordingly, we hold that no addition can be made in the hands of the assessee on account of alleged investment in purchases under section 69C of the Act. Issue remaining to be adjudicated is non issue of notice under section 143(2) after issue of notice under section 148 of the Act. In view of our order in deleting the addition on account of suppressed production/sales, the said issue is dismissed as academic. In view of our deleting the addition in the hands of the assessee the grounds of appeal raised by the Revenue i.e. against application of GP rate and allowance of expenses are also dismissed. - Decided in favour of assessee. 2015 (11) TMI 13 Rectification of mistake - non receipt of notice of hearing - Held that:- From the copy of notices available on record, it is seen that the notices were served through RPAD at the address given by the Assessee in the Form No. 36 filed by the Assessee. The acknowledgement of the RPADs as available from the record also reveals that the notices were indeed served because the acknowledgement bears the signature and the mobile number of the recipient of the notice. We further find that the order of the Tribunal against which the present M.A has been filed was also sent to the same address at which the notices were sent and therefore the submission of Assessee of non receipt of notice does not carry any force more so when the order against which the M.A. has been filed was also sent at the same address. With respect to prayer of the Assessee to recall the impugned order, we find that the order was passed on merits. Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963 also provides that when on the date of hearing, the appellant does not appear either in person nor through an authorized representative, the Tribunal may dispose of the appeal on merits after hearing the respondent. Further, when no sufficient cause for non appearance at the time of hearing of appeal has been brought out by the Assessee as noted hereinabove, and therefore we are of the view that proviso to Rule 24 of the I.T. (Appellate Tribunal) Rules, 1963 would also not be applicable in the present case and thus we find no reason to recall the order of Tribunal dated 07/11/2014. 2015 (11) TMI 12 Transaction of foreign currency loan given to the Associate Enterprise - Transfer pricing adjustment - addition made by TPO taking the rate of interest at 12.7% in respect of the foreign currency loan given to Associate Enterprise - Held that:- In the eight case laws cited by the assessee, it has been held that it is the LIBOR, which has to be applied in the case of foreign currency loan given to AE. All these case laws were cited by the assessee before the ld. DRP. However, the ld. DRP has not followed these case laws, contending that the decision in “Perot Systems TSI (I) Ltd.” [2009 (10) TMI 638 - ITAT DELHI] was not considered by the Tribunal in any of these eight cases. Now, as rightly contended on behalf of the assessee, the judicial hierarchy is to be respected and an order passed by a higher court/authority cannot be disregarded/distinguished for any reason, including for non-consideration of some case laws, as has been done by the ld. DRP in the present case. There is no gainsaying that the orders of the Tribunal are binding on the lower authorities, including the DRP. “Agarwal Warehousing & Leasing Co. Ltd.”, (2002 (7) TMI 86 - MADHYA PRADESH High Court), as pointed out, is the authority on the point. Therein, the decision of the Hon’ble Supreme Court in the case of “Kamlakshi Finance Corporation Ltd.”,[1991 (9) TMI 72 - SUPREME COURT OF INDIA] is also a case in point. - Decided in favour of assessee. 2015 (11) TMI 11 Difference between sales tax order and the sales made to the total income of the assessee - assessee submitted that there was difference in turnover disclosed to the sales tax department and the turnover disclosed to the Income tax department on account of inclusion of Mahamai, handling charges and transit insurance and if the above items are excluded, there will be no difference of turnover disclosed to the sales tax department and the income tax department - Held that:- The assessee has not properly reconciled the two turnovers before the Assessing Officer and only argued without any supportive evidence. Thus it is appropriate to remit the issue back to the file of the Assessing Officer with a direction to the assessee to properly reconcile these two turnovers with supportive evidence before the Assessing Officer. Accordingly, this issue is remitted back to the file of the Assessing Officer for fresh consideration. - Decided in favour of assessee for statistical purposes. 2015 (11) TMI 10 Addition of prior period expenses - Held that:- the said prior period expenses are not allowable considering the system of accounting followed by the assessee. It is not the case of the assessee that the payability is crystallized during the year under consideration. After considering the facts narrated by the assessee as well as the relevant material placed before us, we are of the opinion, the conclusion drawn by the CIT (A) in this regard is fair and reasonable and it does not call for any interference - Decided against assessee. Addition of 25% of expenses of cost of production - expenses incurred in cash terming it as non-genuine - Held that:- Assessee has failed to discharge its onus in furnishing evidences in support of the cash expenses amounting to ₹ 2.01 Crs (rounded-of). We also find similar expenses were incurred in all the AYs commencing from AY 2007-08 to 2012-13 and the amount of expenses incurred vary from ₹ 2.2 Crs to ₹ 1.3 Crs in respect of the assessment years. It is also noticed that the Revenue did not make disallowance in some years and made disallowance of ₹ 5 laksh in AY 2011-2012 and ₹ 1 lakh in AY 2012-2013. It is also in the year under consideration, AO resorted to disallow 25% of the total claim and made huge addition of ₹ 50.42 lakhs. Considering the above facts, we are of the opinion that such % based ad-hocisam is not acceptable as it is without any basis. In all fairness, in our opinion, making an ad-hoc amount of ₹ 5 lakhs would meet the ends of justice. Accordingly, we direct the AO to restrict the disallowance to ₹ 5 lakhs on ad-hoc basis in order to bring the finality of the litigation on this issue as discussed in open court - Decided partly in favour of assessee. 2015 (11) TMI 9 Credit for TDS - CIT(A) allowed the claim - main contention of the assessee’s counsel is that the assessee remitted the entire subscription income to M/s. Sun TV and there is no element of income in the hands of the assessee from subscription received from other parties on behalf of M/s. Sun TV and the assessee received only commission from it - Held that:- To examine the same, the Bench called for Profit and Loss account and Leger accounts to know, how the subscription received was accounted in assessee’s book. The assessee’s counsel filed only financial statement and not filed ledger accounts of subscription received account. Hence, we are not in a position to express any opinion whether the assessee is having any element of income from subscription charges received from various parties. Therefore, if the entire subscription received by the assessee is transferred to M/s. Sun TV and the assessee is entitled only for commission on subscription income, then the Tribunal’s decision relied by the assessee’s in his own case for the assessment year 2006-2007 counsel is applicable. Accordingly, we are remitting the entire issue back to the file of the Assessing Officer to consider the issue afresh in the light of the above observation - Decided partly in favour of revenue for statistical purposes. 2015 (11) TMI 8 Rectification of mistake - ICAI has submitted that the Tribunal has made certain observations about the Chartered Accountancy (C.A.) profession, the conduct of some of the students pursuing the C.A courses and also about ICAI in the impugned order - Held that:- The observations made by the Tribunal about the C.A profession and conduct of the students pursuing the C.A courses, as submitted by Ld A. R, were not necessary to adjudicate the issues that were urged before the Tribunal by the appellant Shri Vijay V Meghani. However, in our view, the Income tax Appellate Tribunal, being a part of Government of India, should not shut its eyes when it is noticed that certain developments occurring in the Country may affect the Country as a whole, more particularly when the reputation of particular profession, from whom the Tribunal is getting assistance in the dispensation of justice, is at stake. Accordingly, we sincerely believe that it is the bounden duty of not only the Tribunal, but also the duty of one and all to point out and discuss about such kind of developments, when it is noticed that the same may affect the public at large. There cannot be any controversy that the interest of our Country is Supreme and no citizen can or should compromise on the same. We may clarify here that the observations were made by the Tribunal in the impugned order in that context only and it was not the intention of the Tribunal to target any particular person or the ICAI. Accordingly, none of the observations made in the order was intended to criticize should be construed as criticizing the functioning of the ICAI. In fact, the Tribunal has only applauded the strict standards followed by ICAI in imparting the education and training. It may be noticed that the paragraph 9.6 of the order, which is considered by the ICAI to be offensive, starts with the expression “However, if it is considered for a moment…..” Thus, it can be noticed that the Tribunal has considered a hypothetical situation and made further observations about the possible consequences, if the said hypothetical situation had been a reality. Hence, it would not be correct to interpret that the Tribunal has commented upon that the standards of C.A profession or the ICAI. The observations made by the Tribunal in the later part of paragraph 9.6 was intended to highlight or reiterate the importance of the articled clerk training and the self study model conceived by the ICAI and the same was intended only to give a wake-up call to the students pursuing C.A profession. Miscellaneous application filed by the ICAI is dismissed. 2015 (11) TMI 7 Addition u/s. 14A - CIT(A) deleted the addition - Held that:- It is now settled that Rule 8D is applicable from A.Y. 2008-09 by the decision of the Hon’ble High Court of Bombay in the case of M/s. Godrej & Boyce Manufacturing Co. Ltd. [2010 (8) TMI 77 - BOMBAY HIGH COURT]. However, at the same time, the Hon’ble High Court has held that there should be reasonable disallowance. In our considered view, disallowance @5% of the dividend income should meet the ends of justice. We, accordingly direct the AO to restrict the disallowance to 5% of the dividend income. Decided partly in favour of assessee. Disallowance made u/s. 40(a)(ia) - VSAT charges and Leaseline charges paid to stock exchange - Failure to deduct TDS - Held that:- This issue is squarely covered in favour of the assessee and against the Revenue by the decision of the Hon’ble Bombay High Court in the case of CIT Vs Angel Capital and Debit Market Ltd. [2014 (5) TMI 584 - BOMBAY HIGH COURT ] which has been followed by the Tribunal in assessee’s own case in A.Y. 2005-06 held VSAT and Lease Line charges paid by the assessee to Stock Exchange were merely reimbursement of the charges paid/payable by the Stock Exchange to the Department of Telecommunication - the VSAT and Lease Line charges paid by the assessee do not have any element of income, deducting tax while making such payments do not arise – Decided against Revenue. Treatment of Short Term Capital Gain as business income - Held that:- This issue arose in A.Y. 2006-07 and the Tribunal following the earlier order of the Tribunal in A.Y. 2005-06 directed the AO to treat the capital gains under the head ‘Capital Gains’ – Decided against Revenue. 2015 (11) TMI 6 Rectification of mistake - Relief of liability towards interest expenditure claimed by the appellant - deductibility of interest u/s. 57(iii) - Held that:- We have given our careful consideration to the matter. In our view, no claim for interest survives. This is not for the reason that no interest was contemplated or agreed upon at the time the debt came into existence or during the relevant years, as noted by the tribunal earlier. This is also not for the reason that no interest was agreed upon for subsequently, i.e., during and up to the relevant year, both of which are reasons, by itself sufficient to deny the assessee’s claim for interest on ground of no liability in its respect accruing or arising. The special court holds the sum/s payable by A to B as being liable to be adjusted against the liability of B, or of A, or even of C for that matter, in-as-much as A, B, C (and others) form one group, so that these can be utilized for discharge of their liabilities to third parties. In other words, A is equally liable for the liability of B, and so on. The liabilities, accordingly, only represent inter se balances held in account, not leading to any substantive right or liability per se. Where, we wonder, then, is the question of interest arising on such inter-personal balances? We have in fact already observed, and which is in keeping with the observations made in the impugned order, of there being nothing on record to show of accrual of any liability qua interest, which we confirm. We, accordingly, find little merit in the assessee’s claim for interest. That it (interest) may have been paid by one notified party to another, for any subsequent year, shall not in any manner alter our decision. This order, to the extent in conflict, supersedes our order u/s. 254(1) dated 10.03.2014, and is to be read in conjunction therewith. 2015 (11) TMI 5 Reallocation of expenditure between 80IB and non 80IB units - CIT(Appeals) has not found any merit in such reallocation of expenditure between 80IB and non 80IB units on mere conjecture and rejected the reworking of the eligible 80IB deduction by the Assessing Officer - Held that:- The Commissioner of Income Tax (Appeals) deleted the addition made by the Assessing Officer without any basis. The facts brought on record by the Assessing Officer suggest that the assessee lowered the profits of the units not enjoying deduction u/s.80IB, so as to reduce the liability of tax. It is appropriate to remit the issue back to the file of the Assessing Officer with a direction to examine the details furnished by the assessee with regard to all expenses including interest, finance charges, depreciation and other general administrative expenses on the basis of incremental inventory of work in progress from earlier assessment year to this assessment year, after giving due credit to the inflow of funds, if any in both units. The Assessing Officer shall independently examine the issue after proper enquiry. With these observations, we are remitting the issue back to the file of the Assessing Officer for fresh consideration. - Decided in favour of revenue for statistical purposes 2015 (11) TMI 4 Penalty u/s.271(1)(c) - AO observed that the assessee firm had not furnished the audit report U/s.44AB - Held that:- Assessing Officer has not heeded to the request of the assessee to while invoking the provisions of Section.44AF of the Act with respect to its actual turnover. It appears that AO had computed 5% of the turnover declared in the return of income or admitted by the assessee whichever is higher. On this issue, considering the facts and circumstances of the case, we are of the considered view that, the Ld. Assessing Officer should have computed 5% of the turnover on the actual turnover admitted by the assessee irrespective of the amount declared in the return of income because the claim of the assessee appears to be genuine. Therefore, we hereby direct the Ld. Assessing Officer to compute 5% of the turnover as admitted by the assessee and not as declared by the assessee in its return of income. Further, we find that the assessee has claimed interest paid to its partners as allowable deduction in accordance with Section 44AF(2) of the Act. The Ld. CIT (A) has not examined this issue in detail but brushed aside the claim of the assessee by stating that no evidence is available before him to establish that the interest has been actually paid to the partners. On this issue, we are of the considered view that one more opportunity should be provided to the assessee to furnish the evidence in regard to the payment of the interest to its partners and accordingly we remit the matter back to the file of the Ld. Assessing Officer to examine the scope of the applicability of Section 44AF(2) of the Act and to pass appropriate order as per merit and law. The assessee will not be liable to penalty U/s.271(1)(c) because the assessee had voluntarily filed the return of income though beyond the time limit prescribed U/s.139(4) of the Act. Only due to the filing of the return of income by the assessee the Revenue became aware of the assessee’s case and sprung into action to assess the income of the assessee invoking various provisions under the Act. From the facts and circumstance of the case we are also of the view that adverse inference need not to be drawn on the bona fide act of the assessee for filing the return of income thought beyond the time prescribed U/s.139(4) of the Act, when no other adverse facts emerge. Further we are of the considered view that this is not a case where the assessee has concealed its income or furnished inaccurate particulars of income. In these situation, we hereby direct the AO to delete the penalty levied by him which was further confirmed the Ld. CIT (A). - Decided partly in favour of assessee. 2015 (11) TMI 3 Disallowance u/s 40A(3) - cash payment in excess of limits prescribed - Held that:- The assessee has furnished the ledger copy, as maintained by the supplier, in their books of accounts. A perusal of the same demonstrates that supply of country liquor is made, only when the payment is made by the assessee to the supplier, who accounts for the same towards the cost of country liquor government dues, taxes, etc. Thus the payments in question were made in exceptional circumstances and hence fall within the exception read with rule 6DD. Thus, the disallowance under section 40A(3) is deleted. - Decided in favour of assessee. 2015 (11) TMI 2 Revision u/s 263 - AO allowed brought forward business loss and unabsorbed depreciation - Held that:- On the first issue, we find that as per the assessment order for assessment year 2008-09 dated 14/07/2011 available on record, the assessed income is positive income of ₹ 1777.24 lac. The present year is the very next year after assessment year 2008-09 and when there is positive taxable income in assessment year 2008-09, there cannot be any brought forward business loss or unabsorbed depreciation for set off in assessment year 2009-10 until and unless the addition made in assessment year 2008-09 is deleted by appellate authorities resulting into loss in that ear and such deletion of the addition in that year is accepted by the Department. The assessment order in the present year is dated 21/11/2011, which is after less than 11 months of the order passed by the Assessing Officer in assessment year 2008-09 and nothing has been brought on record to show that the positive income assessed by the Assessing Officer in assessment year 2008-09 was converted into loss in turn resulting into availability of any brought forward business loss or unabsorbed depreciation in the present year. Hence, the assessment order is clearly erroneous as well as prejudicial to the interest of Revenue on this issue because the Assessing Officer has allowed brought forward business loss and unabsorbed depreciation. Loss on investment - we find that although enquiry was raised by the Assessing Officer in respect of loss on investment but as per reply furnished by the assessee, it comes out that such loss is in respect of sale of investment and therefore the Assessing Officer was required to make enquiry as to whether such loss is eligible for set off against business income. Hence, on this issue, there is lack of enquiry as well as lack of application of mind by the Assessing Officer resulting into assessment order being erroneous as well as prejudicial to the interest of Revenue. Subsidy reserve fund - there is no enquiry by the Assessing Officer and therefore, there is lack of enquiry by the Assessing Officer resulting into assessment order being erroneous as well as prejudicial to the interest of Revenue. Amortization of Government securities - although there was enquiry by the Assessing Officer but no detail was furnished by the assessee before the Assessing Officer and hence, the Assessing Officer should have applied his mind to decide as to whether this claim of the assessee regarding amortization of Government securities at ₹ 99,32,984/- is allowable or not but there is no such mention in the assessment order passed by the Assessing Officer and therefore, on this issue, there is no application of mind by the Assessing Officer and hence, the assessment order is erroneous as well as prejudicial to the interest of Revenue on this issue. Thus the assessment order is erroneous as well as prejudicial to the interest of Revenue and therefore, no interference is called for in the order of learned CIT. - Decided against assessee. 2015 (11) TMI 1 Penalty under section 271(1)(c) - addition on 'deemed dividend’ under section 2(22)(e) - Held that:- It is a case where the assessee failed to substantiate its stand about the perception of viewing a particular transaction. A difference in perception about a transaction, in our view, would not constitute furnishing of inaccurate particulars of income within the meaning of section 271(1)(c) of the Act. Notably, a perusal of the assessment order passed by the Assessing Officer under section 143(3) of the Act on 5/11/2003 clearly suggests that the Assessing Officer has perceived the said transaction to be falling within the scope of the deeming provisions of section 2(22)(e) based on the particulars furnished by the assessee. It is not a case where assessee can be said to have concealed or furnished any wrong or false particulars about the transaction. Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd.(2010 (3) TMI 80 - SUPREME COURT) has held that unless there is a finding that any of the details or particulars supplied by the assessee in its return are found to be incorrect or erroneous or false, it would not invite the penalty under section 271(1)(c) of the Act merely because the claim made in the return of income has been found to be unsustainable. In the present case, factually speaking, the situation is of a varying perception of the nature of transaction which has resulted in application of section 2(22)(e) of the Act, thereby resulting in a difference between returned and the assessed income. Having regard to the entire conspectus of facts and circumstances of the case, in our view it is not a fit case for levy of penalty under section 271(1)(c) of the Act. Accordingly, we set aside the order of the CIT(A) and direct the Assessing Officer to delete the penalty imposed under section 271(1)(c) - Decided in favour of assessee. Customs 2015 (11) TMI 35 Denial of refund claim - Unjust enrichment - recovery of duty by encashment of the Bank Guarantee - earlier stay order was vacated due to failure comply with stay order - Held that:- It is only ₹ 17.50 lakhs which was deposited by the appellant pursuant to the interim orders of the Court. The Court had directed the appellant to deposit ₹ 70 lakhs. As far as the balance amount is concerned that could not be deposited. It resulted in vacation of the stay order. Thus, once the stay order was vacated, it was open to the Department to recover the amount of duty which was payable as per the orders passed at that time. The amount was, thus, recovered on encashment of the Bank Guarantee by the Department and it was on the basis of the order passed by the Court. The Court had, after vacating the stay order, only permitted the Department to encash the Bank Guarantee. - as far as refund of this amount is concerned, it had to be decided in the light of the doctrine of unjust enrichment which was clearly applicable - Decided against assessee. 2015 (11) TMI 34 Classification of goods - Classification of LPG - classification under Entry 27111900 or under Entry 27111300 - Held that:- Commissioner rightly rejected the position taken by the Revenue in this behalf and accepted the classification as done by the assessee which was prevailing for quite some time. The Tribunal has affirmed the aforesaid view of the Commissioner and we do not find any reason to interfere with the same. - Decided against Revenue. 2015 (11) TMI 33 Classification of goods - Classification of Tyre Scanner K2 type separation and Tread Porosity System and Software for Scanner K2 - Held that:- Tax effect is only ₹ 7,18,919/-. However, insofar as refund of the aforesaid amount is concerned, the matter is remitted back to the Adjudicating Authority to consider as to whether the tax effect was passed on by the assessee to the consumer or not and based thereupon, the issue of refund be decided keeping in view the principle laid down in Commissioner of Central Excise, Chennai-III Versus Grasim Industries [2015 (4) TMI 389 - SUPREME COURT]. - Appeal disposed of. 2015 (11) TMI 32 Confiscation of gold bars - Six bars recovered concealed in shoes and pant pockets - Foreign currency and Indian currency also found - Penalty imposed under Sections 112(a) and 114AA of Customs Act, 1962 - Revenue contends that passengers were intercepted after they crossed green channel thus claim of appellants that they have not crossed Customs barriers is not correct - Total quantity brought by them is much more than admissible quantity - Held That:- In absence of any challenge to Mahazar and cross examination of Mahazar with witness, it is not possible to accept claim of the appellants that they were intercepted in the Customs hall and had not crossed the Customs barriers - True declaration could have been made in disembarkation card in which case, no case could have been made against the appellants at all. Margin has gone up now since exchange rate between dollar and rupee is favourable - Found no reason to allow redemption on payment of fine under facts and circumstances - Penalties imposed under Sections 112(a) and 114AA is harsh - Because of seizure of gold and confiscation thereafter it cannot be said short levy has taken place - Penalties set aside - Decided partially in favour of Revenue. 2015 (11) TMI 31 Valuation – Confiscation and Demand of differential duty on account of valuation - Imported two CT scanner machines – Redemption fine and penalty imposed – Appellant contended that there was no mis-declaration - Chartered Engineer certificate obtained at back of appellant and principles of natural justice violated - Declared value should be accepted and there was no ground available to reject the same and onus was on Revenue to prove under-valuation - Not a case for confiscation or imposition of penalty as there was no mala fide or mis-declaration. Held That:- By consenting to enhancement of value and thereby foregoing need for SCN, appellant made it unnecessary for Revenue to establish valuation any further as consented value in effect becomes declared transaction value requiring no further investigation or justification and as such violation of principles of natural justice cannot be alleged - Onus will be on appellant to establish that valuation as per his consent suffered from fatal infirmity and such onus has not been discharged – Valuation as such is upheld. It is simply a case of valuation dispute devoid of any mens rea on part of appellant - Appellant never consented for confiscation and penalty and did not forego its right for SCN or personal hearing - Confiscation and penalty ordered in violation of principles of natural justice – Penalty set aside – Decided partially in favour of appellant. 2015 (11) TMI 30 Refund of differential duty - Import of Chlorohydrate Aniodorone – Benefit claimed under notification No. 21/2003 – Revenue contends that as per customs (IGCRDMEG) Rules, 1996, Rule 3 regulation stipulates that manufacturer has to obtain a registration and has to file an application to obtain benefit and importer has misrepresented facts as they had already imported and cleared the material on payment of duty on merits – Assessee contends they claimed refund under Sl.No. 80B and are also covered under Sl.No. 80A, certificate of registration under 80C not required before importation – Held That:- Requirements under Rule 3 and Rule 4 are merely procedural and intent of these statute is to ensure that use of goods imported by manufacturer are for intended purpose - Goods imported by respondent were bulk drugs and same are covered under Sl.No. 80 B of Notification No. 21/2003-Cus. - Impugned order of lower appellate authority does not suffer from any irregularity and is upheld – Decided in favour of assessee. Corporate Laws 2015 (11) TMI 29 Penalty imposed under Section 15H(ii) of SEBI Act, 1992 – Public Offer and Open Offer under Regulations 10 and 12 of Takeover Regulation 1997 – Delay of 89 days – Appellant contends that Regulation 24(1) requires merchant banker to ensure arrangements for funds before public announcement and finances were organised within 85 days thus open offer was rightly made on 89th day – Held That:- Very purpose of public offer would be frustrated if acquirers are given opportunity to make P.A. after a long lapse of time – There has been a definite prejudice to shareholders in matter of exercising their statutory rights - Time limit of 4 days prescribed in Regulation 14(1) is crucial and important - Monetary penalty of ₹ 8 lakh imposed under section 15H(ii) is not disproportionate as compared to maximum penalty of ₹ 25 crore imposable for such a violation - Any offer made by an acquirer after statutory time limit of 4 days prescribed in Regulations 14(1) would not amount to sufficient compliance of Takeover Regulations – Decided in favour of Revenue. FEMA 2015 (11) TMI 28 Tribunal while directing the petitioner(s) to deposit 15% of the amount of penalty imposed and to furnish reliable security for the balance amount of 85% as a pre-deposit for hearing of the appeal has noticed that the petitioner (s) has an arguable case and it would cause hardship in case the waiver is not allowed, but no case of complete waiver was made out. - petitioner(s) has been required to pre-deposit 15% of the penalty amount as a condition precedent for hearing of the appeal, which is reasonable and justified. In the judgment in A. Tajudeen's case (2014 (10) TMI 367 - SUPREME COURT) relied upon by the learned counsel for the petitioner, the principle of law enunciated therein, is well recognized, however, being based on individual fact situation involved therein would be of no help to his case. - no merit in the instant writ petitions - Decided against assessee. Service Tax 2015 (11) TMI 56 Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) - inquiry or investigation which is pending - Scope of notices correspondence between assessee and department - goods transport agency service - Notification No. 42/97-ST dated 05.11.1997 - Held that:- Intention of the Legislature appears to have been, undoubtedly, to entice large number of persons into paying the service tax dues with the assurance that, if the terms of the Scheme are complied with, they will not have to pay penalty and interest. This is, undoubtedly, for alluring such persons so that there is an increase in the revenue of the Government. But, at the same time, the Legislature was conscious of the criticism that could be levelled against such a Scheme being in the nature of promotion of dishonesty. It, therefore, felt that the Scheme should be limited to those cases, where there were no proceedings at all pending and where the concerned assessee may have, out of ignorance which is partly contributed to by the revenue in not taking any sort of action against them, not made payments, which they were otherwise liable to pay. This interpretation of ours appears to be inevitable on the clear language of Section 106 read as a whole and in part. In the show-cause notice issued, it is stated that, though the amount was deposited on 31.03.2013, it was when the investigation was pending. A reply was given by the assessee. The reply as such is not before us, but the learned counsel for the appellant would submit that the reply has been faithfully reproduced in the impugned orders. In the impugned orders, there is no reference to the Circular as such. In other words, there is no case set up by the assessee before the authority that the notices issued under Section 14 of the Central Excise Act were of a roving nature. Besides that, as we have already noticed, the notices do specifically refer to the transport service from out of the many services, which the appellant do perform, and the documents are sought with reference to the same. Having regard to the same, we would think that it would be a futile attempt to again remit the matter back to the authority for a de novo consideration. There was no interdiction by this Court against the authority considering the matter. In the circumstances of this case, therefore, noticing that the matter would be a futile exercise, we would decline to undertake the exercise of remitting the matter back. In regard to the payment effected being prior to the Scheme, we would think that, insofar as the payment was effected not as on 01.03.2013, but thereafter, namely, on 31.03.2013; though the express words of Section 107 appear to contemplate payments being made after the Scheme, but, insofar as requirement is that 50 per cent is to be paid prior to 31.12.2013 and the payment effected in this case being of the full amount prior to 31.12.2013, we would think that the appellant’s case cannot be thrown out on that ground. - Decided against assessee. 2015 (11) TMI 55 Business Auxiliary service - Advertisment service - Whether services provided by the appellant to M/s. Hero Honda Motors Ltd. through Cricket Celebrities namely Shri. Saurav Ganguly, Shri. Virender Sehwag, Shri. Yuvraj Singh, Shri. Harbhajan Singh and Shri Zaheer Khan is advertising services or otherwise - Held that:- All the cricket players are engaged through the appellant in providing advertisement and promotion of the product of M/s. Hero Honda Motors Ltd. The appellant are paid the consideration towards advertisement performed by the celebrities. It is also undisputed that the payment consideration towards advertisement performed by the celebrities are received by the appellant, therefore appellant is legally liable for payment of service tax under the category of advertising services during the period involved in the present case. - Commissioner (Appeals) has rightly held that service of celebrities to M/s. Hero Honda Motors Ltd. through appellant is advertising services and accordingly rightly upheld the order-in original Extended period of limitation - Held that:- Appellant has not disclosed the advertising services to the department and despite possessing the registration they have not disclosed to the department, the provisions of services and collection of amount there against. In such a situation it is clear case of suppression of facts on the part of the appellant. Moreover in some of the agreements, the clause related to payment terms contains the liability of payment of Service Tax. Therefore the larger period of demand was rightly invoked. Since there is suppression of facts, the appellant was legally liable for penalties under Section 76 and 78. - Decided against assessee. 2015 (11) TMI 54 Demand of service tax - Transportation of goods by air - whether the service tax payable on excess baggage charges paid by the passengers at the time of boarding the aircraft - Difference of opinion - Majority order - Held that:- Carrying of baggage by the appellant Airlines is incidental to the service being ‘transport of passengers by Air' and the same is classifiable under Section 65(105)(zzn). There is no separate contract in the facts of the case for transport of goods (excess baggage). More particularly, in the case of agreement of transport of passengers by Air, there is no element of transport of unaccompanied goods. Excess baggage charges collected by the appellant Airlines is integral part of the service provided for ‘transport of passengers by Air'. There is no case of any suppression on the part of the appellant Airlines. The appellant Airlines have duly disclosed the receipts from passengers towards excess baggage in their Books of Account, maintained in the ordinary course of business. I find that the issue is one of interpretation of the taxing statute and as such being debatable, there is no element of any fraud or suppression. Accordingly, the extended period of limitation is held not invocable. - there being no deliberate defiance of the provisions of law or non-compliance with the provisions of Service Tax, none of the penalties are held to be attracted. Accordingly, I agree with the learned Member (Judicial) on this point. Thus, the penalties are fit to be set aside. - Decided in favour of assessee. 2015 (11) TMI 53 Refund - Input services - Nexus with export of services - Business Auxiliary Service, Business Support Service, Management consultant and information technology software service - Held that:- There is no dispute even by the Original authority as well as the Commissioner (Appeals) that all these services covered under the definition of input services therefore Cenvat Credit is admissible. However, the refund was rejected on the said services on the ground that appellant could not establish nexus of these services with output services. In this regard, I am of the view that since, except small part for which no refund claim was filed, entire services have been undisputedly exported; no one to one co-relation is required to be proved. When entire services have been exported then it cannot be said that nexus of input services with the output services is not established. Nature of amount received against reimbursement of expenses - Held that - it is like export value devided into parts one, value of the software and part two on account of reimbursement; however there is no dispute that both the amounts have been realized in convertible foreign exchange. The reimbursement cannot be treated in isolation but is very much in connection with the export of services. Therefore in my view refund of the service tax on reimbursement which has been realized by the appellant from Foreign Service recipient in convertible foreign is admissible. - Matter remanded back - Impugned order is aside - Decided in favour of assessee. 2015 (11) TMI 52 Penalty u/s 78 - Adjustment of excess payment of service tax with penalty - Whether the adjudicating authority holding imposition of penalty of 25% of the penalty (50% of service tax amount) is correct and legal - Held that:- in the adjudication order the adjudicating authority has by mistake stated that 25% of the penalty (50% of the Service tax amount) whereas it is observed that there is no such provision under any statute for imposition of penalty of 25% of the penalty amount. - It is seen that against Revenue’s claim of ₹ 32,63,189/- the assessee has paid total amount of ₹ 35,33,189/- which is much higher than amount required to be paid. Only point is that assessee has paid excess amount of Service tax which in my considered view should be considered and adjusted against the short payment of penalty. However, Ld. Counsel has fairly agreed that they under take not to claim any refund if any amount found to be paid in excess. In view of the above position, I agree with the contention of the Ld. Counsel that the assessee has paid excess amount in to as compared to total amount required to be paid as per the revenue. Therefore, I do not find any reason to demand any further amount form the assessee. - Appeal disposed of. 2015 (11) TMI 51 Port services in Kakinada Port - reverse charge - infrastructural support was provided by GOAP at Port - Held That:- it is the assessee who is required to undertake the activity of assessment and there is no system of scrutiny of the assessment and confirmation of the correctness by the Revenue or the officers. In such a situation, it cannot be said that assessee was not aware of the classification of the service and the consequences of introduction of negative list and introduction of new definitions, etc. The very fact that the appellant defended the case by stating that Section 65 was not applicable and the definition of support service had undergone a change would show that the appellants were not prejudiced by the omission in the show-cause notice and the confirmation of demand by the Commissioner is on the ground that service is covered by the definition as we have mentioned that GOAP has provided infrastructural support. Once the service provider has paid the tax under reverse charge mechanism, service tax cannot be demanded from the appellant. Nevertheless it has to be appreciated that this is a mistake on the part of the appellant since they were liable to pay the tax but did not pay. However, remedy would lie in imposition of penalty for contravention of relevant provisions but not recovery of service tax. In this case penalty has been imposed on the ground that service tax was not paid and not for mere contravention of provisions. Demand for CENVAT credit of service tax of ₹ 7,54,47,488/ - Revenue contends that credit disallowed only on ground that port officer did not issue any invoice in name of appellant but had issued only an acknowledgement which is not a proper document - Held That:- If challan contains all details which are mentioned by appellant, credit is admissible and demand for more than ₹ 7.54 crores being CENVAT credit cannot be sustained. Demand of CENVAT credit of ₹ 6,60,545/- - Health service, insurance and motor vehicles, rent-a-cab service, works contract service and services in relation to 7th berth - Held That:- Provision of health care within port area where accident can take place cannot be said to be having no nexus to port service, thus credit of ₹ 83,430/- is admissible - It is a mandatory obligation to insure all vehicles used within port area, credit is thus admissible - Rent-a-cab service is not for personal use but for movement of authorities in providing port service, credit is eligible - Definition of input service includes works contract in relation to construction activity and not in relation to erection and installation activity thus benefit available to assessee - Geotechnical investigation services were provided in relation to 7th berth and same does not become operational, it may be premature to deny credit. Denial of CENVAT credit of ₹ 8,82,646/- - Credit is proposed to be denied on ground that the service provider was eligible for exemption, on this ground denial cannot be sustained - Decided in favour of Appellant. 2015 (11) TMI 50 Credit availed on exempted services - interest earned by the bank on loans and advances, whether it is exempted service or taxable service - Revenue contends that appellant has not complied with the requirements of Rule 6(3) (ii) and Rule (3A) of Rules, 6 thus liable to pay amount @ 8% of value of exempted goods and he should have paid CENVAT credit amount along with 24% interest - Demand raised under Rule 6(3)(i)is sustainable. Held That:- Board has clarified that prior to 17/3/2012 the value of interest was not be relevant for the reversal of credit under Rule 6(3) of Cenvat credit Rules. Moreover for the banking and financial institution under Rule 6(3) (D) the provision was available for straight 50% reversal of interest. In the present case the disputed value is of interest and Cenvat credit up to 50% of credit was required to be reversed Since appellant paid entire service tax credit availed by them alongwith interest @ 24% he could not be asked to pay 8% of interest amount in terms of Rule 6(3)(ii)and procedure as prescribed under sub rule (3A) of Rule 6 is not relevant because it is relevant only when appellant undertake to pay proportionate credit attributable to exempted service - Demand raised under Rule 6(3)(i) is not sustainable - Decided in favour of assessee. 2015 (11) TMI 49 CENVAT Credit - GTA Service - inward transportation of the vehicle from M/s. Maruti Suzuki India Ltd - Held That:- Appellant is entitle for credit in respect of GTA as input service thus demand of ₹ 11,68,494/- is set aside. - Decision made in case of Commissioner v. Shariff Motors [2009 (3) TMI 155 - CESTAT, Bangalore] followed. Credit of ₹ 2,08,665/- availed on building material is not admissible - Penalty of equal amount imposed and upheld by lower authority is maintainable - Decided partly in favour of assessee. Central Excise 2015 (11) TMI 45 Single registration in central excise - two separate units at a distance of 221 km - Held that:- Merely because the exempted iron ore concentrate manufactured at a separate plant and transported through pipe line for exclusive use in the manufacture of iron oxide pellets, to another factory situated 221 kms away would not make the two factories as one and the same. In our opinion also, the transfer of raw materials i.e. iron ore concentrate in slurry form through pipe line from Barbil factory to Jajpur Pellet factory cannot be construed that the Barbil plant is a captive plant of the Jajpur factory and entitled to a single Registration. CENVAT Credit - captive consumption - whether the appellant s Jajpur Unit engaged in the manufacture of Iron oxide pellets, a dutiable product, are eligible to avail CENVAT Credit on inputs, capital goods and input services used in or in relation to manufacture of iron ore concentrate at their Barbil Plant, which were ultimately be transferred to their manufacturing unit at Jajpur for manufacture of the said dutiable pellets falling under Chapter 26 of CETA, 1985 - Exemption under Notification No. 4/06-CE dated 1/03/2006 - Held that:- Out of iron ore fines(uneven sizes) iron ore concentrates in slurry form are manufactured and transported/cleared through pipelines to their pellet plant. The said iron ore concentrate became chargeable to duty w.e.f 01.03.2011. Therefore, it cannot be said that the inputs were directly used by bringing the same from the mines to the pellet plant at Jajpur. On the other hand, in the benefication plant the Iron Ore fines are converted into Iron ore concentrates in slurry form. In our opinion, therefore, the ratio laid down in Vikram Cement s case is not applicable to the facts of the present case. Consequently, the Appellants are not eligible to avail credit at their Pellet plant at Jajpur on the duty paid on the inputs , Capital goods and input services which are used in or in relation to the manufacture of Iron Ore concentrates at the benefication plant at Barbil. However, we find force in the contention of the ld. Advocate that in procuring the iron ore concentrate in slurry form through pipe line from their Barbil plant to Jajpur plant, the services used, fall within the scope of input services being specifically covered under the inclusive part of the definition of input service as prescribed at Rule 2(l) of Cenvat Credit Rules, 2004, hence, eligible to cenvat credit at their Jajpur Plant. Extended period of limitation - CENVAT credit had been availed at Jajpur factory, on an interpretation of the relevant provisions of the CENVAT Credit Rules and principle of law laid down by the Hon ble Supreme Court in Vikram Cement s case & other cases and also the demand notice is issued for the normal period without invoking suppression, mis-statement etc., therefore, in these circumstances penal provision, in our view is not attracted. Regarding levy of interest for availing the credit we find that a new plea has been raised by the Appellant, whereby it is claimed that they have availed the CENVAT credit at Jajpur plant in their books of accounts only on theoretical basis; actual production of iron ore concentrate(which become dutiable from 01.03.2011) at Barbil plant commenced from 06.06.2013. In our opinion these facts need to be scrutinized and thereafter the applicability of interest provision be accordingly decided in the light of the principles of law settled in this regard. - Appeal disposed of. 2015 (11) TMI 44 MODVAT Credit - Rule 57Q - Capital goods - Held that:- Tribunal had directed in its order to compute the irregular MODVAT credit availed. This implies that the MODVAT credit relating to input as well as capital goods is to be ascertained in accordance with law for right application of law. - adjudicating authority is directed to afford reasonable opportunity of hearing to the appellant within three months from the receipt of this order for segregation of the input credit and capital goods credit if any availed verifiable from statutory record and verify the concerned declarations filed in that regard before the jurisdictional authority. If such detailed exercise is done, the authority may precisely work out the respective credits for applicability of the law distinctly appearing in two different Rules i.e., Rule 57I and Rule 57S of the Central Excise Rules, 1944. Penal provisions in Rule 57I through sub-rule (4) and in Rule 57U through sub-rule (5), were incorporated after 23.6.1996. This being the cut-off date there shall be no penalty for the period prior to that date is leviable in the course of re-adjudication under Rule 57I and Rule 57U respectively. If any other penal provision is attracted, appellant is entitled to reasonable opportunity of defense before imposition if any. When neither there was any plea in this regard before the Tribunal nor there was decision by the Apex Court on that aspect. Therefore subscribing to the view advanced by the appellant is not possible at this stage after the order of Tribunal merged in the order of Apex Court. Accordingly, time bar plea is rejected. Appellant pleaded that it is entitled to rebate. But such plea fails when the inputs were not used in manufacture but were exported as traded goods and even unpacking the same but dispatched as was received from suppliers. - Matter remanded back - Appeal disposed of. 2015 (11) TMI 43 Duty demand u/s 11D - Denial of Cenvat Credit - activity of repacking from bulk to retail pack of refined edible oil - payment of duty in terms of the notification no. 37/03-CE dated 30.04.2003 - Held that:- Notification gives option of either paying duty of ₹ 1/- per kg. or claiming exemption of nil rate of duty on the goods which are refined edible oils and if they are packed into unit containers. It is also seen that Entry Nos. 244(B) and (C) do not have any condition and are also not mutually exclusive. It is a settled law that when there are two views possible on a Notification, the view which is more beneficial to the assessee has to be applied. In this case, the appellant felt that payment/discharge of duty of ₹ 1/- per kg. on the unit containers of refined edible oil manufactured by them would be more advantageous to him and has chosen to do so. When the Notification itself gives two options, the choice of the appellant to choose an option which is beneficial to him cannot be faulted with. - as it is seen that entry no. 244 (B) & (C) do not have any condition and are also not mutually exclusive. It is settled law that when there are two views possible on notification, the view which is more beneficial to the assessee is to be applied. In this case appellant feels that payment at discharge of duty at ₹ 1 per kg of unit container of refined edible oil manufactured by them would be more advantageous to them and has chosen to pay them. With notification itself give 2 options. Choice of the appellant to chose an option which is more beneficial to them cannot be faulted with. Entry at SI. No. 244 (C) of the notification is not applicable. Therefore, in the light of above cited decisions in the case of Sariba Agro Ltd. (2009 (2) TMI 297 - CESTAT, BANGALORE) we hold that appellant has rightly claimed entry 244 (B) of the notification no. 37/03-CE dated 30.04.2003 and chose to pay duty at the rate of ₹ 1 per Kg. In these circumstances, Cenvat Credit cannot be denaied to the appellant and appellant is availing Cenvat Credit and Paying duty on their final product. Therefore, provisions of section 11D are not applicable to the facts of this case. - Impugned order is set aside - Decided in favour of assessee. 2015 (11) TMI 42 Valuation of goods - Inflation in value of export goods - Levy of excess credit - Held that:- Commissioner (Appeals) in her order has observed that in case of Ujagar Prints, the processed goods were returned to the suppliers of the raw materials. In those cases the buyers had not done any processes in job workers premises. In this case the goods were directly cleared from the job workers premises for export and no processes were done by exporters in job-workers premises. It was therefore, necessary to clear the goods at export price which the processors has done. On this ground, she has differentiated the facts from those of Ujagar Prints.- there is no merits in the appeals filed by the Revenue - Decision in the case of Steel Authority of India Ltd., Vs. CCE, Raipur [2005 (3) TMI 377 - CESTAT, NEW DELHI] - Decided against Revenue. 2015 (11) TMI 41 Rejection of permission to remove the goods for further processing under Rule 16C of the Central Excise Rules, 2002 - respondent denied the permission on the grounds that the case of the appellant was not found a deserving case as is prescribed under the Board s Circular No.844/2/CX dated 31/01/2007 - violation of the prescribed procedure and conditions of Rule 16C as well as Rule 12AA - Held that:- Appellant has been granted the permission under Rule 16C of the Rules to remove the goods without payment of duty for carrying out certain processes not amounting to manufacture from the financial year 2011-12 till 2014-15. The only ground for refusal to grant permission for the year 2015-16 as mentioned in the impugned order is that the appellant s case was not found to be a deserving case for grant of extension. Further the impugned order does not mention any specific reasons as to how the appellant is not found deserving for grant of permission under Rule 16C of the Rules. Revenue has also failed to prove that the appellant has committed any violation of the terms and conditions and procedure prescribed by the learned Commissioner while granting the permission. In view of these circumstances, we hold that denial of permission under Rule 16C is not legally sustainable. - Impugned order is set aside - Decided in favour of assessee. 2015 (11) TMI 40 Evasion of duty - Penalty under Rule 26 for abetment - Held that:- Rule 26 speaks about imposition of penalty in the case where a person has knowledge or reason to believe that the goods are liable for confiscation. There are no documents or record to establish that the appellant had knowledge that M/s.B.S.Enterprises was evading duty. M/s.B.S.Enterprises sold goods to M/s.G & D Incorporation from where the appellants procured the products. Some of the G&D brand footwears were above ₹ 250/- and were excisable goods. The Commissioner (Appeals) has vaguely concluded that the appellant has abetted the omission and commission of act in contravention of provision of Central Excise Act and has proceeded to impose penalty. The participation of the appellant firm is not established by cogent evidence. There is no evidence to link the appellant firm with the clandestine activities of M/s.B.S.Enterprises. Penalty was imposed upon the partner Shri Virender Kumar which was paid by him. Shri Virender Kumar did not file appeal. - evidence placed and the judicial decisions, the penalty of ₹ 80,000/- imposed on the appellant under Rule 26 is unsustainable and the same is set aside. Taking into consideration, the argument of the learned counsel for appellant that after abatement the duty liability of the seized goods would only come to ₹ 21,365/-, the levy of redemption fine of ₹ 80,000/- in my view, is on the higher side - Decided partly in favour of assessee. 2015 (11) TMI 39 Denial of refund claim - Export of goods to Nepal - Availability of alternate benefits - Held that:- As per the facts available on record there are two procedures for export of goods to Nepal. One is prescribed under Notification No. 20/2004-CE(NT) on payment of duty and the second is prescribed under Notification No. 45/2001-CE(NT) under Bond without payment of duty. Both the notifications are conditional notifications subject to fulfilling certain procedures and conditions Appellant opted to pay duty under Notification No. 20/2004-CE(NT). - There is no provision for normal rebate of duty paid on excisable goods under Section 11B of the Central Excise Act, when goods are exported to Nepal in view of Notification No. 20/2004-CE(NT) and accordingly there is no scope for a third alternative with the appellant seeking refund under Section 11B of the Central Excise Act 1994 by fitting the shipping bills filed and assessments completed. Appellant has also not challenged the assessment made in the shipping bills. It is also not the case of the appellant that it was prevented from opting benefit under Nofification No. 45/2001-CE(NT). - order passed by the first appellate authority is legally correct and there is no reason to interfere with order - Decided against assessee. 2015 (11) TMI 38 CENVAT Credit - Job works - Held that:- There is no dispute on the facts that the appellant received the fabrics under the cover of Central Excise Challans issued under Rule 57F(4) of the erstwhile Central Excise Rules and corresponding Rule of Central Excise Rules, 2012. The appellant after due process of fabrics returned the goods to the raw-material supplier, who used in the manufacture of finished products and cleared on payment of duty. - In such cases, duty liability is required to be discharged by manufacturer and not by the job worker. Accordingly, the job worker is not eligible to avail credit in such situation. Duty on inputs used in the manufacture of final products cleared without payment of duty for further utilisation in manufacture of final product, which were cleared on payment of duty by principal manufacturer, on job work basis not hit by provisions of Rule 57F of erstwhile Rule. Rule 57F(4) of the erstwhile Rule corresponding to Rule 4 (5)(a) of the Cenvat Credit Rule 2002, permits the manufacturer to clear the goods to job worker without payment of duty for processing. There is no dispute that the job-work materials were used in manufacture of finished goods by the principal manufacturer, who cleared the goods on payment of duty. Thus, it is the case of Revenue neutral in so far as the payment of duty by the job-worker will enable the principal manufacturer to avail cenvat credit. Hence we find that the order passed by the Adjudicating authority is legal and proper. - Decided in favour of assessee. 2015 (11) TMI 37 Duty demand - extended period of limitation - whether or not the appellant is liable to pay 10% of value of electricity wheeled out of their factory during the relevant period - Held that:- On perusal of the case details it is clear that the matter regarding the status of electricity whether the same is excisable, exempted is a matter of dispute and has been subject matter of various rulings by CESTAT, Hon’ble High Courts and Hon’ble Supreme Court. In the appellant’s own case earlier proceedings were initiated on the same grounds and adjudications were done. In 2006 same issue was taken up in audit and there were correspondence discussing the eligibility of Cenvat credit. Hence, we find that the allegation of willful suppression with intention to evade is not sustainable in the present case and the show cause notice-cum-demand issued on 12/11/2009 is hit by time bar beyond the normal period. It is seen from the impugned order that from October 2008 to June 2009 (covered by first show cause notice dated 12/11/2009) and during July 2009 to December 2009 (covered by second show cause notice dated 18/03/2010) and for the period January 2010 to June 2010 (covered by third show cause notice dated 03/02/2011), the appellant have reversed Cenvat credit attributable to input services used in relation to manufacture of electricity cleared outside. - show cause notice dated 12/11/2009 is hit by time bar beyond the normal period - Decided in favour of assessee. 2015 (11) TMI 36 Denial of CENVAT Credit - credit on various items like MS sheets, plates,joist, channel etc. used for the purpose of manufacture / installation of molasses tanks, boiler etc - adjudicating authority denied the cenvat credit on the ground that items are neither capital goods nor inputs - Held that:- items are used for fabrication of capital goods, namely, shape and sections, plates, hot strips, PMP Plate, Angles, and Channels, Hot Strip Mill Plate, Joints Skelp etc. - appellant is entitled to take Cenvat credit on these inputs as inputs of capital goods. Same has taken the support of CBEC Circular No. 964/07/2012 CX dated 2.4.2012. In these terms, I hold that appellant is entitled to take Cenvat Credit on the items in question. Consequently, appellant is not required to reverse the cenvat credit. In these terms, I set aside the impugned order - Decided in favour of assessee. CST, VAT & Sales Tax 2015 (11) TMI 48 Benefit of form III-B for concessional rate of tax under Section 4-B - Maintainability - Alternate remedy - Whether use of diesel oil in generator sets to run plant and machinery to manufacture the final products as mentioned in the Recognition Certificate would qualify the essential requirement "for use in the manufacture of notified goods" under Section 4-B(2) of the Act - Held that:- Article 226 of the Constitution of India confers very vide powers on High Courts to issue writs but this power is discretionary and the High Court may refuse to exercise the discretion if it is satisfied that the aggrieved person has adequate or suitable remedy elsewhere. It is a rule of discretion and not rule of compulsion or the rule of law. Even though there may be an alternative remedy, yet the High Court may entertain a writ petition depending upon the facts of each case. It is neither possible nor desirable to lay down inflexible rule to be applied rigidly for entertaining a writ petition. In order to run plant and machinery, the generators are essential, and for that purpose, diesel oil has been used in the generators. There is no denial of the fact that the entire process of manufacture carried on by the petitioners for converting raw material into finished goods essentially require generators in which diesel oil has been used. Thus the generation of power by generators by use of diesel oil so as to run plant and machinery is integrally connected with the manufacture of the notified goods i.e. the final product of the petitioners. Thus the manufacture of the notified goods itself is dependent upon the use of diesel oils in the generator sets directly. The power supply through generators by use of diesel, is so integrally connected with the ultimate production of notified that without it manufacture of the notified goods would be commercially inexpedient. The use of diesel oil to operate generators so as to run plant and machinery by the petitioners is so integrally related to the manufacture of their final products that without that process or activity manufacture shall not be possible. Therefore, diesel oil required to run generators would necessarily fall within the expression "for use in the manufacture of notified goods" - expression "for use in the manufacture of notified goods" which finds mentioned in Section 4-B(2) of the Act, would take within its sweep the "diesel oil" used by the petitioners in the generators installed in the factory premises to produce electricity to run their plant and machinery so as to manufacture their final product i.e. notified goods. - Impugned order is set aside - Decided in favour of assessee. 2015 (11) TMI 47 Levy of purchase tax - Section 5A - Reopening of assessment - exemption from sales tax on sale of rice and bran - Tribunal held that the assessing authority cannot levy tax on purchase under Section 5A of the Act 1963, when the stage of levy is already fixed in the State Enactment - Held that:- assessee having purchased paddy from agriculturists, no tax was leviable or realised on the first sale of paddy, since the sale was from agriculturists, who were exempted to pay any sales tax. - Paddy being a declared goods under the Central Sales Tax Act, 1956 as well as the second schedule of the Act, 1963, the provisions of Section 15 of the Central Sales Tax Act, 1956 are also attracted. Section 14 of the Central Sales Tax Act, 1956 enumerates the goods, which have been declared as goods of special importance in Inter State trade or commerce. Under Section 14, paddy and rice both have been declared as goods of special importance. Under Section 5 read with second schedule to the Act, 1963, sales tax was leviable on sale of paddy. Although the tax is leviable on the sale of paddy as per second schedule, tax could not be collected on account of exemption to the agriculturists in sale of their paddy. The assessing officer although initially did not assess the assessee for any purchase tax on paddy, but subsequently, assessment was reopened and assessee was held liable to pay purchase tax under Section 5A on the purchase of paddy. - first sale was by agriculturists in favour of the assessees, who were not liable to pay tax. The mere fact that payment of tax was exempted cannot furnish any basis for the respondents to shift the liability of tax on purchase, whereas, under second Schedule, liability is only on first sale. As per Section 15(a), there is restriction in levying tax by a State Legislature on more than one stage. When the second schedule has levied the tax on the first sale, there is no jurisdiction in the respondents to shift the levy on purchase. Tribunal which rightly deleted the levy of purchase tax on the assessee and committed no error in following the Apex Court judgment in Peekay Re-Rolling Mills's case (2007 (3) TMI 356 - SUPREME COURT OF INDIA). - Decided against Revenue. 2015 (11) TMI 46 Levy of VAT on set top boxes (STB) - Whether the petitioners-assessees are liable to pay value added tax (VAT) in terms of the Tripura Value Added Tax Act, 2004 (for short, "the TAVT Act") in respect of contracts entered into by them with the customers whereby they have agreed to provide direct-to-home (DTH) service to the customers in the State of Tripura - Held that:- As far as STBs are concerned they are in total control of the customer. Under his effective control the STBs are installed in the house of the customer. He can use the STB when he wants to. He can use the STB to view whichever channel he wants to view. He may or may not use the STB. The company does not even have the power of enter ing the premises of the customer. Most importantly as per the terms of the agreement, the companies are responsible for the functioning of the STBs only for a period of 6 (six) months. The warranty is valid only for six months and thereafter there is no warranty. Therefore, if STB of a customer is spoiled after six months he will have to pay for repair or replacement of the same. We are of the considered view that this amounts to transfer of the right to use goods. - after the Forty-sixth Amendment the sale element of all the six contracts covered under clause (29A) of article 366 are separable and may be subjected to sales tax. Finally in para 92, the apex court again held that when a telephone connection is given there may be transfer of right to use goods and where both composite contract of service and sales is concerned the State may impose tax on the sale elements provided there is discernible sale and only the sale element can be taxed. State is assessing the tax solely on the basis of the value of the STBs as given in the books of account of the petitioners. The petitioners claim depreciation, etc., on these STBs and the valuation given by the petitioners is the value of the goods, the right to use which has been transferred to the customers. This is easily separable and discernible and the State has the full authority to levy value added tax on the sale part of the transaction, i.e., the value of the STBs. - no merit in the petitions - Decided against assessee. Wealth tax 2015 (11) TMI 27 Rejection of application for registration as a valuer under Section 34-AB of the Wealth Tax Act, 1957 - Held that:- Central Government is responsible for the appointment of Valuation Officers, according to Section 12A of the Wealth Tax Act, 1957 and the conditions of service are also listed in the Central Government. Besides, the petitioner does not possess the necessary qualification and experience in the field of Civil Engineering and according to the amended Rule 8-A (2) (ii) of the Wealth Tax Rules of 1995 and the amendment, which came into effect on 31/01/1995, the petitioner does not possess the necessary qualification and experience in the field of Civil Engineering and the application has thus been rightly rejected by respondent No.1 The Chief Commissioner of Income Tax. The basic qualification of an Engineer is a degree on the Civil side and since the matter pertains to being appointed as a valuer of immovable property, land or machinery, and the basic qualifications either being Civil Engineer, Architecture or Town Planning can not be marginalized or blinked away. Hence, we find that the submissions put forth by the Counsel for the petitioner can not be accepted and the petition must be dismissed as being without merit. - Decided against assessee.
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