Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
November 30, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Exporters advised to file Table 6A and GSTR 3B for processing of IGST Refund and for Refund of the unutilized Input Tax Credit;
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Problems faced by assessees in filing of GST Returns - Presentation as submitted by the Society for Tax Analysis and Research (STAR)
Income Tax
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Penalty u/s 271(1)(c) - Director’s remuneration - reallocation out of managerial remuneration to different units - claim of exemption u/s 80IC - at most, it was a case of the assessee making an incorrect claim in law which cannot tantamount to furnishing of inaccurate particulars of income - no penalty - AT
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Replacement of compressor of Colling unit - Nature of expenses - Compressor is admittedly a part of unit which is replaced and it longer life or it is procured independently is wholly irrelevant. - allowed as revenue expenditure - AT
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Valuation of closing stock - provisions of section 145A has overriding effect on the provisions of section 145 - the said provisions are applicable not only on closing stock but on inventory i.e opening and closing stock both and even on purchases and sales. - HC
Indian Laws
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Article by the Union Finance Minister on ‘The Fiction of Loan Waiver to Capitalists’
Central Excise
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Rebate claim - export related benefits - rule 16 of CER - Rule 16(1) and (2) may not apply for receiving duty paid biscuits in the factory for export of confectioneries and chocolates, since BFPL had not manufactured these products - the contention that the permission granted was in the nature of a misrepresentation and an attempt to mislead the authorities and this Court - HC
Case Laws:
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Income Tax
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2017 (11) TMI 1564
Revision u/s 263 - assessee has not recognized any income of the project for any earlier assessment year or succeeding assessment year applying AS-9 - Held that:- Once it is held that the assessee is following project completion method consistently and it has followed the same during the current assessment year in which the project has been completed, there is no question of recognizing any income for any earlier or succeeding assessment year. The ld. CIT’s observation that the loss does not seem to have been examined properly is also a surmise without any cogent reasoning. Furthermore, the ld. CIT has also directed to examine the allowability of expenses. For this also, no cogent reason has been mentioned by the ld. CIT. We note that the A.O. has examined the expenses incurred and made some disallowances also. Hence, the ld. CIT’s direction to examine the expenses is a direction for making a roving enquiry not permissible u/s. 263 of the I. T. Act. Hence, we set aside the direction of the ld. CIT qua examination of the method of accounting for revenue recognition and examination of expenditure. As regards the ld. CIT’s observation to examine the service tax, TDS and MVAT provision and their applicability, the ld. Counsel of the assessee’s submission is that these are not applicable and have been complied with to the extent necessary. In this regard, we note that the A.O.’s order is silent on these issues, hence, if the ld. CIT has given a direction to examine these issues, no prejudice will be caused to the assessee. Hence, we uphold the order of the ld. CIT to this extent only. - Decided in favour of assessee partly.
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2017 (11) TMI 1563
Disallowance of depreciation to assessee trust - denial of deduction as it amounts to be double deduction as the assessee has claimed the exemption under section 11 - Held that:- The assessee is entitled for deduction of depreciation even if in the year of purchase of the asset, the entire amount has been considered as application of income. See CIT v. Society of the Sisters of St. Anne [1983 (8) TMI 44 - KARNATAKA High Court] - Decided against revenue
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2017 (11) TMI 1562
Nature of income - Rent received - 'Income from house property' OR 'Income from other sources' - Held that:- Consistent with this view taken in the earlier years on similar set of facts which are permeating in this year also and as a matter of judicial precedence, we agree with the assessee's contention and hold that the income/receipts from PVR Ltd. is to be assessed under the head "income from house property" and the assessee shall be entitled for all statutory deduction as are permissible under the law including standard deduction of 30 per cent. This ground raised by the assessee (Revenue) is dismissed.
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2017 (11) TMI 1561
TDS credit - A.O passed the order u/s 154 of the Act withdrawing the credit of TDS - scheme of amalgamation - Held that:- No merit in the action of the AO for declining credit of TDS in the hands of the assessee company when undisputedly no credit of TDS has been claimed in the return of resulting company on demerger i.e., Reliance Fresh Limited and confirmation to this effect was also provided during the assessment proceedings that though trading income has been transferred to Reliance Fresh Ltd., the corresponding TDS has not been transferred and credit for such TDS is being claimed only by the assessee i.e., Reliance Hyper Realty Limited and not being claimed by the Reliance Fresh Ltd.. See Commissioner of Income Tax-15 Versus M/s Relcom [2015 (11) TMI 284 - DELHI HIGH COURT ] In view of the above, direct the AO to allow the credit of the TDS so deducted in the hands of the assessee company. - Decided in favour of assessee.
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2017 (11) TMI 1560
Reopening of assessment - reason to believe - Held that:- Assessing Officer is not justified in reopening the matter without bringing on record, any fresh tangible material or information more particularly when this aspect was considered by him at the time of assessment under section 143(3) of the Act. Even on merits also, disallowance of the prior period expenses is bad when the prior period income was assessed to tax and no deduction was claimed or allowed at the time when the provision was made. With this view of the matter, we delete the addition. Appeal of the assessee is allowed.
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2017 (11) TMI 1559
Revision u/s 263 - allowance of under section 11 or 12 erroneously - Held that:- Assessing Officer passed the assessment order only after seeking reply from the assessee. Though the Assessing Officer has not explained the nature of queries and his decision/observation/finding on such queries. We have further noted that the assessee was granted exemption under section 11 or 12 for the assessment years 1990-91, 2007-08, the assessment year 2008-09 and further in the assessment year 2014-15 in all assessment order passed under section 143(3) of the Act. We are of the considered view that the Revenue must follow the principle of consistency when there is no variance of fact. Admittedly there is no change in the constitution of the organisation/trust. Thus, in our view, the order passed by the Assessing Officer is not erroneous. Thus the twin conditions enunciated under section 263 is not fulfilled while revising the order. It is settled law that twin condition must be satisfied while exercising the order under section 263. Thus, in view of the above discussion, we hold that the assessee is not hit by the provision of section 13(1)(b) of the Act. - Decided in favour of assessee.
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2017 (11) TMI 1558
Disallowance of a deduction u/s 80P(2) - whether the assessee could be considered as a co-operative bank? Held that:- Nothing was brought on record by the Revenue to show that the Reserve Bank of India declared it as a co-operative bank. Neither was the assessee a primary agricultural credit society nor was it a primary co-operative agricultural and rural development bank. The hon'ble Karnataka High Court in the case of CIT v. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot [2015 (1) TMI 821 - KARNATAKA HIGH COURT] has clearly held that for a co-operative society to be considered as a co-operative bank, it was necessary that the Reserve Bank of India should have given such a classification to the said co-operative society. In the circumstances, we are of the opinion that section 80P(4) had no application in the case of the assessee. We do not find any reason to interfere with the order of the Commissioner of Income-tax (Appeals) in this regard. Appeal of the Revenue is thus dismissed. Treatment of interest under the head "income from other sources" instead of "income from business" - Held that:- It has not been disputed that interest income earned by the assessee were from deposits placed by it in banks. The contention of the assessee is that such interest should be considered only as part of its business income since the deposits were placed for meeting the requirements of statutory reserves under the Multi State Co-operative Societies Act, 2002. No doubt, in the case of Totgar's Co-operative Sale Society Ltd. (2010 (2) TMI 3 - SUPREME COURT) had held that interest received on deposits created out of sale proceeds received from the members not immediately disbursed to such members, was to be considered under the head "income from other sources". However, in the case before us, admittedly, the deposits were not out of sale proceeds from the members of the assessee-society. The Revenue has not rebutted the claim of the assessee that deposits on which interest was earned was for meeting investment requirement on statutory reserves under the Multi State Co-operative Societies Act, 2002. Clearly it was out of compulsions of business that the deposits were placed by the assessee in the banks. Earning of interest therefrom, in our opinion, could only be treated as income from its business. Thus we are of the opinion that the interest earned by the assessee could not have been treated under the head "Income from other sources" but only as a part of its business income. - Decided in favour of assessee.
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2017 (11) TMI 1557
Applicability of section 145A to the value of closing stock - Tribunal had held that the AO was not justified in adding Excise Duty only in closing stock of raw material and incidental goods and has accordingly directed the AO to compute total income by adding Cess, duty or tax paid not only in closing stock but also in purchases, opening stock and sales - Held that:- It is crystal clear that no such question of law arises out of the order of Income Tax Appellate Tribunal because Income Tax Appellate Tribunal has not deleted any addition made by AO but has directed the AO to recompute the assessee’s income after adjusting the values of opening stock, purchases, sales as well as closing stock and has directed the AO to verify the working submitted by assessee before Income Tax Appellate Tribunal. Applicability of section 145A to the value of closing stock on the ground of its overriding effect on the provisions of section 145. In this regard it is difficult to understand as to how the revenue can be said to be aggrieved by Income Tax Appellate Tribunal’s order, because the Income Tax Appellate Tribunal in expressed terms has already held that the provisions of section 145A has overriding effect on the provisions of section 145 but has further held that the said provisions are applicable not only on closing stock but on inventory i.e opening and closing stock both and even on purchases and sales. Thus, since the Income Tax Appellate Tribunal has already upheld applicability of section 145A, the substantial questions sought to be posed by revenue becomes purely academic.
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2017 (11) TMI 1556
Disallowance of the carry forward and set off of loss - petitioner's grievance is that the Assessing Officer did not give any opportunity to the petitioner with regard to the defective returns which has to be cured by the petitioner for the assessment year 1993-1994 and the petitioner came to know about it only when the order of the Assessing Officer giving effect to the order of the CIT(A) was passed for the assessment year 1996-1997 on 23.01.2002 - Held that:- I find that there has not been an examination of the merits of the matter, rather the petitioner has been shut out on technicalities. If the petitioner's contention that they had filed Audit Report on 31.10.1995 had been verified by either for calling for them before the Assessing Officer or calling for the assessment file, the factual dispute would have been cleared and a decision could have been taken on the merits of the matter. Thus, I am of the considered view that the matters require to be re-examined by the respondent by calling for the assessment files, examining the correctness of the stand taken by the petitioner that the tax Audit Reports were filed vide their letters dated 30.10.1995 and also examine the legal issue placed by the petitioner and pass fresh orders on merits. Writ Petitions are allowed and the impugned orders are set aside and the matter is remanded to the respondent for fresh consideration to take a decision in the matter
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2017 (11) TMI 1555
Rectification of mistake - Denying the carry forward of losses and depreciation - returns filed by the assessee were rejected as belated assessee-company which had been declared sick and was facing the supervision under BIFR - application filed under section 154 contending that the period for filing returns was extended by the BIFR by one year till December 31, 2001 - Held that:- The court is of the opinion that both the lower authorities did not give sufficient weightage to the fact that BIFR extended the period for filing the returns till December 31, 2001. This was expressly recognizing the fact that a new management had taken charge in 1996 pursuant to the freshly approved scheme and furthermore that the carry forward of losses and depreciation was an important component and rehabilitation plan contemplated by the parties. Thus Income-tax Appellate Tribunal, in our opinion, correctly inferred that the denial of the benefit to the assessee was not justified. No substantial question of law arises
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2017 (11) TMI 1554
Reopening of assessment - whether the shareholders who have invested in the shares of the Respondents are fictitious or not? - evidence to establish the existence of such Companies - Held that:- Once the Assessee has produced documentary evidence to establish the existence of such Companies, the burden would shift on the Revenue-Appellants herein to establish their case. In the present case, the Appellants are seeking to rely upon the statements recorded of two persons who have admittedly not been subjected to cross examination. In such circumstances, the question of remanding the matter for re-examination of such persons, would not at all be justified. The Assessing Officer, if he so desired, ought to have allowed the Assessee to cross examine such persons in case the statements were to be relied upon in such proceedings. Apart from that, the voluminous documents produced by the Respondents cannot be discarded merely on the basis of two individuals who have given their statements contrary to such public documents. We find no infirmity in the findings arrived at by the ITAT as well as CIT Appeals on the contentions raised by the Appellants-Revenue in the present case and, as such, the question of interference by this Court in the present proceedings under Section 260A of the Income Tax Act would not at all be justified. Apart from that, as rightly pointed out by the learned Counsel appearing for the Respondents, the CIT Appeals had also noted that proceedings under Section 147 of the Income Tax Act cannot lead to reverification of the records. These findings of the CIT Appeals have not been assailed before the Income Tax Appellate Court. - Decided in favour of assessee.
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2017 (11) TMI 1553
Addition u/s 69C - unexplained expenditure - Held that:- The assessee has not incurred expenditure in respect of which she has not been able to explain the source of such expenditure and hence the addition of ₹ 20,89,000/- is not tenable as the same amount of ₹ 20,89,000/- sum which is an amount received by the assessee and is thus fully explained and assessee has laid complete documentary evidences to establish the same as such, addition made and sustained is wholly unsustainable in law. Apart from above, the identity of the creditor and existence and identity cannot be doubted or disputed. Further merely because, such person on account of medical ground did not appear, but had duly filed all necessary detail, no adverse inference can be drawn against the assessee, as the power to enforce the attendance of a witness is with the AO. In fact it is settled law that if a creditor ignore the summons or don't appear before the AO could not be a ground to draw adverse inference against the assessee. In view of above, the addition in dispute is hereby deleted. Unexplained credit - Addition of sum received on 04.01.2011 from sale of plot at Nangloi, New Delhi - Held that:- The aforesaid sum of consideration had been received against the transfer made by the assessee through account payee cheque and same was also acknowledged by the assessee. Hence, the entire receipt is well explained and has not been doubted as an unexplained credit. The AO has again made no attempt to dispute the receipt through bank account of the vendee to whom the land was transferred which fact has duly been admitted by the transferee. In view of the above, the addition in dispute is hereby deleted. Amount received from sale of old furniture etc. - Held that:- Neither the identity of the creditor nor the creditworthiness can be disputed. Further merely because, such a person on account of medical ground did not appear in response to summons, but file all necessary detail, no adverse inference can be drawn against the assessee, as power to enforce the attendance of a witness is with the AO, as per settled law. In fact, it is settled law that if a creditor ignore the summons or don't appear before the AO could not be a ground to draw adverse inference against the assessee. In view of the in my opinion, since the assessee has discharged its burden and not an iota of material has been brought on record, except of harboring the suspicion, addition made by the AO and sustained by the learned CIT(A) is not tenable, hence, the same is deleted. Assessee appeal allowed.
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2017 (11) TMI 1552
Validity of assessment - no valid notice u/s. 143(2) was served upon the assessee - Held that:- The issue is squarely covered in favour of the Assessee and against the Revenue as relied on case of Ms. Meenakshi Aggarwal vs. ITO & Ors [2015 (12) TMI 706 - ITAT DELHI] wherein held that non-issue of notice u/s. 143(2) after filing of the return of the Assessee, by way of letter, makes the assessment order passed u/s. 143(3) r.w.s. 147 bad in law. - Decided in favour of assessee.
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2017 (11) TMI 1551
Assessment order u/s. 143(3) wherein TP adjustments been made by the AO without referring the matter to TPO - Held that:- AO did not made any reference to TPO which is a mandatory requirement, however while making additions, the AO has drawn references from TPO order for AY 2007-08 for making TP additions . During first appellate stage, the assessee conceded that the ground challenging the framing of assessment without taking recourse to prescribed procedure as is raised before learned CIT(A) is general in nature which should be dismissed. The learned CIT(A) dismissed this ground on the prayer of the assessee. Under the similar circumstances in the case of Carrier Race Technologies P. Ltd.(2015 (12) TMI 837 - MADRAS HIGH COURT) has restored the matter back to the file of the A.O for denovo determination of the issue’s on merits . Before us both the parties have conceded that the matter in the instance case also need to be restored back to the file of the A.O for denovo determination - Decided in favour of assessee for statistical purposes.
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2017 (11) TMI 1550
Reopening of assessment - non disposal of objections by AO to reopening of assessment so filed by assessee - Held that:- As AO has not passed any speaking order against the said objections so filed by assessee, which is a mandatory requirement as has been held by Hon'ble Apex Court in the case of M/s GKN Driveshafts (India) Ltd vs ITO [2002 (11) TMI 7 - SUPREME Court], reopening order held void. - Decided in favour of assessee.
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2017 (11) TMI 1549
Disallowance U/s 40(a)(ia) - non deduction of tax at source on the interest paid to financial institutions and also not admitting the certificate issued by the Chartered Accountant in the case of M/s Religare Finvest Ltd. as per Rule 46A - amount payable or paid during the year - Held that:- The issue regarding payable has been decided by the Hon'ble Supreme Court in the case of M/s Palam Gas Services Vs CIT in Civil [2017 (5) TMI 242 - SUPREME COURT] as held that when the entire scheme of obligation to deduct the tax at source and paying it over to the Central Government is read holistically, it cannot be held that the word 'payable' occurring in Section 40(a)(ia) refers to only those cases where the amount is yet to be paid and does not cover the cases where the amount is actually paid.therefore, this pleading is dismissed. As far as retrospectivity of amendment in Section 40(a)(ia) of the Act is concerned, hold that it was a substantive change in law. Every substantive change in statute is prospective except where it is expressly made retrospectively. Thus only pleading of ld. A.R. that certificate submitted for M/s Religare Finvest Ltd. was not considered by the ld. CIT(A) is remains to be considered. In view of various decisions of the Courts, this plea is allowed. The certificate produced needs consideration. In the interest of justice and equity, this issue is restored back to the file of the Assessing Officer for verification. The certificate issued by the C.A. in the case of M/s Religare Finvest Ltd. shall be considered by A.O. and of found in order, relief shall be allowed. As regarding the difficulty in submitting certificate from Barclays Investment & Loan (India) Ltd. is concerned, it is of the view that the assessee shall be provided one more opportunity to submit the same. Therefore, this issue is also restored to the file of Assessing Officer. The ground is partly allowed for statistical purposes Disallowance of interest paid on the borrowed funds and also making the interest free advances to M/s Ravi Associates - Held that:- Issues needs a fresh look at the level of the Assessing Officer, therefore, in the interest of justice and equity, the issues raised in grounds No. 2 and 3 of the appeal are restored back to the file of the Assessing Officer to be decided de novo.
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2017 (11) TMI 1548
Accrual of income - Addition on account of accrued interest income - assessee company followed mercantile system of accounting - Held that:- the assessee is following the accrual system of accounting the income is accrued only on the point when it is finally to be received by the assessee with reasonable certainty and absence of certainty of receipt and recovery of the amount cannot be classified as income accrued for the purpose of charging to income tax. The Hon’ble Supreme Court in case of CIT Vs. Excel Industries Ltd. (2013 (10) TMI 324 - SUPREME COURT) has observed that the probability or improbability of realization of the income by the assessee has to be considered from a realistic and practical point of view which is one test laid down by the Hon’ble Apex Court in determining the income when accrued. Only a right under the agreement to receive the interest by the assessee without reasonable certainty of realization of the same cannot be brought to income tax. Hence, in view of the facts and circumstances of the case when the realization of the amount is not certain then the same cannot be charged to income tax. - Decided against revenue
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2017 (11) TMI 1547
Addition u/s 68 - Held that:- In all the creditors’ case, the reliance of the ld. CIT(A) was only on the PAN card or the ITR, was not sufficient to establish the creditworthiness of these people. Further, it is also noticed that the Assessing Officer was asked to submit the remand report and he has noted that the assessee has not filed copy of bank statement of the persons from whom the loans were taken by the assessee. However, the Assessing Officer has not asked the assessee to submit such documents in the remand proceedings. Considering the totality of the facts and circumstances of the case, we find it appropriate to restore the issue to the file of the Assessing Officer wherein the assessee shall be at liberty to file necessary documents to establish the creditworthiness of all the creditors and the Assessing Officer shall decide the issue afresh Disallowance U/s 80C - Held that:- Assessee has paid life insurance premium of ₹ 50,000/- to Max New York Life Insurance Co. Ltd. on 18.09.2011. Copy of insurance premium receipt and policy owner data is at PB 23-24. These documents were also produced during assessment proceedings but AO incorrectly held that assessee has not filed any proof of payment and disallowed the deduction. Thus we are of the view that the ld. CIT(A) was justified in deleting the addition. Addition u/s 40A((2)(b)- Disallowance being 25% of the commission paid to three persons - Held that:- It is noticed that all the three persons were regularly assessed to tax and necessary TDS was also deducted. It was paid to the persons, who were relatives of the assessee. It was not wholly and exclusively for the purpose of business. It was excessive payment in view of the provisions of Section 40A of the Act. Thus, there is no clear cut finding that on what basis this payment was held to be excessive or unreasonable. Therefore, we direct to delete the addition. Rejection of books of account - trading addition - Held that:- We find that there was discrepancy in the reconciliation of TDS/TCS as per Income tax Return and as per Form 26AS. Further there was decline in the gross profit. The reason provided by the assessee are not convincing, therefore, we are of the view that the Assessing Officer has rightly rejected the books of account, which has been sustained by the ld. CIT(A). Assessing Officer and the ld. CIT(A) were quite reasonable in making and sustaining the gross profit rate @ 3.5% while it was 3.91% in the immediate preceding year and 4.99% in the year prior to the immediate preceding year. The Hon’ble Rajasthan High Court has ruled that average of the past years G.P. is good criteria to estimate the G.P. rate. When the books of account do not reflect the true affairs of income of the assessee then estimate based in past years gross profit is justified. In assessee’s case, it was even estimated less in comparison to immediate preceding year. The estimate @ 3.5% instead of 3.91% shall take care of fall in g.p. if any on account of increase in turnover and other factors as pleaded by the ld AR. Therefore we sustain the order of the ld. CIT(A). - Decided against assessee.
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2017 (11) TMI 1546
Unexplained share application money - assessee has failed to conclusively prove the genuineness of the transactions - Held that:- AO was not justified in making sweeping observations such as fabricated and prepared documents as a made-up affair and AO was not justified in drawing adverse inference against the assessee when the assessee company has led all the evidences including bank statement etc. AO has further gone wrong in drawing adverse inference on the basis of excel sheet which in fact support the case of the assessee. The AO was not justified in drawing adverse inference in respect of amount received from its director. The Director having appeared himself and having confirmed the amount being paid to the company and the assessment of the Director being made under Section 143(3), there was no reason for AO to make addition in the hands of the appellant company. The AO went wrong in drawing adverse inference on account of rotation of money from one Group Company to another Group Company. AO cannot sit into the judgment of the assessee Group Company about rotation of the funds so long the sources of the funds are explained. The assessee having discharged its onus fully, the Assessing Officer has made the addition merely on the basis of surmises and doubts. - Decided in favour of assessee.
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2017 (11) TMI 1545
Disallowance u/s 14A - non identification of expenses - Held that:- In the present case AO has not even identified any specific item of expense he merely says that explanation of assessee is not correct as huge investment is made. As per above discussion respectfully following above authorities which are binding on us it is held that there is no satisfaction of terms of s. 14A read with Rule 8 D. Copy of order for AY 08-09 is also placed as per which no disallowance u/s 14A was made, hence assessee is right in submitting that disallowance is also against the principle of consistency in the absence of any facts. - Decided in favour of assessee Ad-hoc disallowance of business promotion expenses - non rejection of books of accounts - Held that:- It is on record that assessee has made all the compliance from time to time. Purchases are fully vouched and accounts are not rejected. It is also a fact that no single item of expense is identified by AO which he could have stated as not incurred for business purposes. It is also borne out from order that such expenses are accepted in past when even % of expenses on sale was more in Ay 06-07. Sales have increased substantially. AR has relied on cases Ganpati Enterprises Ltd. (2013 (12) TMI 1097 - ITAT DELHI) and NATIONAL INDUSTRIAL CORP. LTD. Vs CIT [2002 (8) TMI 93 - DELHI High Court] in support of proposition that without rejection of accounts and without finding any basis/defect in specific expense, ad-hoc disallowance cannot be made. Accordingly, the addition of ₹ 2,00,000/- is hereby deleted. Replacement of compressor of Colling unit - Nature of expenses - revenue or capital expenditure - Held that:- Compressor is admittedly a part of unit which is replaced and it longer life or it is procured independently is wholly irrelevant. Issue is covered by various decisions in favor of assessee and expenditure is revenue in nature.
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2017 (11) TMI 1544
Penalty u/s 271(1)(c) - difference of opinion as to a particular expenditure being revenue in nature or capital - Held that:- It is not a case that the assessee had not been able to explain any expenditure or had failed to give any details and the Assessing Officer had added the same to the income. It is only a case where there is a difference of opinion as to a particular expenditure being revenue in nature or capital in nature. It is evident from the records that the assessee had given all particulars of expenditure and income and had disclosed all facts to the Assessing Officer. It is not the case where some new facts were discovered during the course of assessment proceedings or that the Assessing Officer had dug out some information which was not furnished by the assessee. Apex Court in the case of Commissioner of Income Tax vs Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT ) has also held that mere making of claim which is unsustainable in law, by itself, will not amount to furnishing of inaccurate particulars regarding the income of the assessee - Decided in favour of assessee.
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2017 (11) TMI 1543
TDS u/s 195 - payments to be made to The MITRE Corporation,USA under Agreement - whether the services would fall outside the ambit of FTS? - Held that:- A perusal of the assessment order shows that there was no proper submission made by the assessee before the Assessing Officer. Only before the CIT(A) the assessee made certain submissions based on which the ld. CIT(A) held that any payment made by the assessee to MITRE are in nature of FTS and chargeable in India under the Act and India – USA DTAA. He, therefore held that the assessee is under obligation to withhold tax from these payments u/s 195 of the I.T. Act. In our opinion, the matter requires a re-visit to the file of the Assessing Officer with a direction to adjudicate the issue afresh in the light of the various submissions made before us and in the light of latest decisions on this issue. The grounds raised by the assessee are accordingly allowed for statistical purposes.
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2017 (11) TMI 1542
Disallowance of expenses and depreciation - AO assumed that there was no business activity during the year - Held that:- Assessing Officer has computed the income of the assessee as “income from business” and not income from other sources. We further find the major amount of the administrative expenses relates to the rent and selling and managerial remuneration etc.. Merely because there is meager business the same, in our opinion, cannot be a ground to disallow the various expenses incurred by the assessee. It is not the case of the Assessing Officer that such expenses are bogus or not genuine. He has merely disallowed the same on the ground that the assessee has not done any business during the year. As mentioned earlier the Assessing Officer himself has mentioned in the body of the assessment order that the assessee has done trading of fabric in the month of February and March, 2009. Considering all we are of the considered opinion that the expenses claimed by the assessee under the head administrative and selling expenses and the depreciation cannot be disallowed. We therefore set-aside the order of the CIT(A) and direct the Assessing Officer to allow the expenses. The first ground raised by the assessee is accordingly allowed. Disallowing the unsecured loan - Held that:- Assessee has filed certain details to establish the identity and creditworthiness of the creditor and genuineness of the transactions. However, the above details according to the Assessing Officer are not sufficient to prove the loan transactions in terms of section 68 of the I.T. Act. Further, the Assessing Officer has neither summoned the above parties nor asked the assessee to produce them before him for his examination. For accepting any cash credit/loan transactions as genuine, the onus is always on the assessee to substantiate with evidence to the satisfaction of the Assessing Officer regarding the identity and creditworthiness of the loan creditors and genuineness of the transactions. In the instant case, although certain details were filed these were not properly appreciated by the Assessing Officer nor did he issue summons u/s 131 or called for information u/s 133(6). Considering all we deem it proper to restore the issue to the file of the Assessing Officer with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction regarding the identity and creditworthiness of the loan creditors and genuineness of the transactions.
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2017 (11) TMI 1541
Deduction u/s 80-IC - assessee was engaged in supplying personnel possessing computer skills to its clients - Held that:- The assessee controlled and provided all the facilities to its clients from Dehradun and the activities undertaken by the assessee falls in Item No. 13 of Part C of Schedule Fourteenth to the Income Tax Act, 1961. The assessee has its operational unit at Dehradun, paying taxes in Uttaranchal, creating jobs in the said State, bringing new IT call centres and BPO companies to Dehradun to deliver IT services. Therefore, it fulfills the conditions to claim the deduction u/s 80IC of the Act. We, therefore, by considering the totality of the facts as discussed hereinabove, are of the view that the assessee rightly claimed the deduction u/s 80IC of the Act and the AO was not justified in denying the said claim. - Decided in favour of assessee.
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2017 (11) TMI 1540
Penalty u/s 271(1)(c) - disallowance of bad debts - Held that:- It is undisputed that the debts had been written off by the assessee. There is only a difference of opinion between the assessee and the AO as to whether the write off was permissible or not. The assessee has taken a legally acceptable stand and the AO has not brought any adverse evidence on record to establish that the debts had actually not become bad. AO has only drawn inference from running accounts of the debtors that given the circumstances, the debts could not have become bad. However, this is not permissible under the amended provision of section 36(vii).Moreover, it is not a case of dispute in quantum of disallowance but a dispute relating to the sustenance of penalty. The AO has imposed penalty for furnishing inaccurate particulars. In the instant case, it cannot be said that the assessee had withheld any relevant information regarding bad debts written off from the AO. With regard to the provisions of section 271 (1) (c) of the Act pertaining to penalty, the Hon’ble Apex court in CIT versus Reliance Petroproducts (P) Ltd (2010 (3) TMI 80 - SUPREME COURT ) has laid down that making of a claim by the assessee which is not sustainable will not amount to furnishing inaccurate particulars. - Decided in favour of assessee.
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2017 (11) TMI 1539
Disallowance relating to the pre-operative expenses and legal and professional fees paid - proof of setting up of business - Held that:- In the instant case also, the moment the approval from the SEBI was received, i.e., on September 1, 2008 for commencement of AMS operation, it can be said that the business has been set up. The approval for advisory services is another activity of the assessee. Hence no fault can be found with the action of the assessee in taking the date of setting up of business as September 1, 2008. Hence all the revenue expenses incurred by the assessee after September 1, 2008 for running business enterprise cannot be treated as pre-operative expenses and should be allowable as revenue expenditure. Accordingly, we do not find any infirmity in the decision rendered by the CIT(Appeals) on this issue. Accordingly, we confirm the same. Disallowance of legal and professional fees - Held that:- Since we have already held that the business has been set up on September 1, 2008 and further expenses paid to the legal firm were related to drafting of mutual fund schemes etc., which are connected with the routine business activities, we are of the view that the learned Commissioner of Income-tax (Appeals) has rightly held the same to be revenue in nature. Accordingly, we uphold the order passed by the Commissioner of Income-tax (Appeals) on this issue also. Appeal filed by the Revenue is dismissed.
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2017 (11) TMI 1538
Penalty u/s 271(1)(c) - Director’s remuneration - reallocation out of managerial remuneration to different units - claim of exemption u/s 80IC - Held that:- It is undisputed that there are no norms prescribed under the Income Tax Act for allocation of common expenses incurred by the assessee and the same has to be apportioned to various manufacturing units on the basis of an estimate only. The assessee company adopted the capital basis for apportionment whereas, as per the Assessing Officer, the same should been allocated on the basis of salary and wages. Thus, it was only a case of difference of opinion between the Assessing Officer and the assessee. It is not the department’s case that relevant facts were not disclosed in the income tax return of the financial statement of the assessee. It is undisputed that the assessee had furnished all the details of expenditure as well as income and no such details were found to be inaccurate nor could be viewed as concealment of income on the part of the assessee. Therefore, at most, it was a case of the assessee making an incorrect claim in law which cannot tantamount to furnishing of inaccurate particulars of income. The Hon’ble Apex Court has held in Commissioner of Income Tax vs Reliance Petroproducts (2010 (3) TMI 80 - SUPREME COURT) that merely because the assessee had claimed a deduction which was not acceptable to the revenue, the same by itself would not attract the penalty u/s 271(1)(c) of the Income Tax Act.
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Customs
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2017 (11) TMI 1537
Conversion of shipping bills - Section 149 of the Customs Act 1962 - CBEC Circular No.36/2010–Customs dated 23/9/2010 - Held that: - It is not in dispute that the respondent is a manufacturer and exporter of Human Rabies Vaccine. The Tribunal has recorded a finding that fault lied with the EDI system. The Board Circulars are issued to ensure that standard operating system is followed. Here is a case where, technical error had crept in the computer system, which prevented generation of shipping bills - there is no infirmity in the impugned order passed by the Tribunal. The order under challenge is based on appreciation of facts and no substantial question of law arises for consideration - appeal dismissed - decided against appellant.
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2017 (11) TMI 1536
DEPB benefit - Applicability of Policy Circular No.6, dated 20.05.1998 and Policy Circular No.35, dated 03.09.1998 to the petitioner's case and what is the legal effect of such policy Circulars - Whether the denial of DEPB benefit based on the impugned policy Circulars is valid and proper? Held that: - This benefit which flows from the statutory policy is sought to be denied based upon the policy Circular Nos.6 and 35 as held in the case of Karle International Vs. Commissioner of Customs, Bangalore [2012 (10) TMI 652 - KARNATAKA HIGH COURT], the right conferred in the statute which in the instant case is in the nature of Export Import Policy cannot be taken away by issuing Circulars. Thus, the benefit which has accrued to the petitioner by virtue of Export Import Policy cannot be denied by relying upon the impugned policy circulars. Though the petitioner has challenged the amendment to Circular No.31/2000, eventually in the impugned order reference has been made to policy Circular Nos.6 and 31. In the light of the finding that the policy circulars cannot override the statutory benefit, the rejection of the petitioner's request for being eligible for DEPB Scheme vide order dated 28.02.2003 and the consequential communications of the 4th respondent dated 20.03.2003 and 04.03.2003 are held to be unsustainable in law. It may not be necessary for this Court to declare the policy circular as either null and void or ultravires and it would suffice to hold that the policy Circulars cannot overide the statutory policy which is the Export Import Policy of the year 1997 framed under the provisions of Foreign Trade (Development and Regulations) Act, 1992 - petition allowed - decided in favor of petitioner.
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2017 (11) TMI 1535
CFS - reopening of earlier proceedings - refund of excess cost recovery charges - Held that: - decision of the Hon'ble Division Bench of the Bombay High Court in the case of Vijal Marine Services V. Commissioner of Customs & C. Ex., Goa, [2016 (3) TMI 939 - BOMBAY HIGH COURT] referred, wherein the appellant sought for refund of the cost recovery charges paid under protest to the Customs authorities, the Division Bench held that since the appellant therein did not file any appeals against the demands confirmed for the charges/cost, the appellant cannot be allowed to circumvent confirmed demand by way of refund - this Court is not inclined to exercise discretion in issuing a writ of mandamus as sought for by the petitioner - petition dismissed - decided against petitioner.
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2017 (11) TMI 1534
Implementation of Order dated 5th February, 2010 - refund of duty drawback - Held that: - It is not case made out by the respondents that in terms of the order dated 5th February, 2010 refund of duty drawback has been issued - the respondents cannot refuse to comply with the order dated 5th February, 2010 which has attained finality. The ground raised that copies of the proceedings are not available in their office is totally unsustainable - appeal allowed.
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2017 (11) TMI 1533
Refund of excess duty paid - rejection on the ground of time limitation - While the original authority held the refund claim as time-barred, the lower appellate authority allowed the appeal on the ground that the export duty paid should be treated as paid under protest. Held that: - It cannot be denied that the facts leading to the filing of refund claim have occurred due to the change in stand of the department. In the first place, the Notification dated 13.6.2008 created a situation requiring issue of show cause notice for differential duty. Nonetheless, the Board Circular dated 10.11.2008 did a U turn in the existing practice and clarified that till 31.12.2008, the FOB price would be treated as cum-duty price. Appeal dismissed - decided against Revenue.
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2017 (11) TMI 1532
Refund claim - denial on the ground that as the appellant has not challenged the assessment of Bills of Entry - Held that: - the lower authorities cannot dismiss the refund claims merely on the ground that assessment of bills of entry has not been challenged by the appellant and therefore the refund claims are not maintainable - reliance placed in the case of AMAN MEDICAL PRODUCTS LTD. Versus COMMISSIONER OF CUSTOMS, DELHI [2009 (9) TMI 41 - DELHI HIGH COURT], where it was held that the refund claim of the appellant was maintainable under Section 27 of the Customs Act and the non-filing of the appeal against the assessed bill of entry does not deprive the appellant to file its claim for refund under Section 27 of the Customs Act, 1962. The matter is remanded back to the adjudicating authority to consider the refund claims filed by the appellant - appeal allowed by way of remand.
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2017 (11) TMI 1531
Non-fulfillment of export obligation - N/N. 48/99-Cus. Dated 29th April, 1999 - the proprietorship firm was granted Advance License, which was further converted into partnership firm - there was a inter-se litigation between the partners and vide the order of competent District Court No.48k by the Hon’ble Civil Judge, Moradabad, arbitrators were appointed under the authority of law and a compromise was arrived before the court, whereby, it was agreed that excepting the liabilities of M/s SOM. Industries, M/s M. K. Handicrafts, all other liabilities of Government or Non-Government shall lie with the respondent-Shri Manoj Sikka and his wife Smt. Hema Sikka - Held that: - both the parties are directed to bring the facts on record whether the duty and penalty as demanded which have survived through process of appeal at the first stage, whether the same have been paid or discharged.
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2017 (11) TMI 1530
Finalization of provisional assessment - whether the Lower Authorities can finalize the provisionally assessed shipping bills, based on the outcome of analysis report and re-determine the transaction value according to the report of the Deputy Chief Commissioner? - Held that: - both the Lower Authorities have incorrectly appreciated the law which is governing the valuation of the consignments of iron ore cleared for export is as per provisions of Section 14 and 18(2) of Customs Act, 1962 - similar issue decided in the case of Commissioner of Customs, Visakhapatnam Vs. Rashmi Metaliks Ltd. [2016 (11) TMI 300 - CESTAT HYDERABAD], where it was held that When the department accepts the BRC, as well as the final invoice of the exporter and has no doubt or dispute that amount other than what was reflected in final invoice was not received by the latter, the BRC has to be given credibility and reliance - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1529
Benefit of N/N. 94/96-Cus - DEEC Scheme - goods reimported for reprocessing/reconditioning, claiming Notification No.158/95-Cus - As the subject goods could not be re-exported within the period of six months prescribed in the said notification, they sought extension for re-export - Whether differential duty can be levied on goods re-imported with full duty exemption under Notification No.158/95-Cus. when the repaired/reconditioned goods have been exported only after expiry of the period prescribed in that notification? - Revenue neutrality - Whether the demands made on this score in these appeals can be set aside even on the grounds of revenue-neutrality? - Held that: - A close look at the conditionalities of the notification would reveal that the legislature has sought to clip any possibility of misuse. For example, by requiring that such goods are re-imported not beyond the period of three years from the date of their export. So also, to prevent any misuse of facilitating provisions by way of retention of goods in India, the notification also requires that after reconditioning/repair, the re-import goods shall have to be re-exported within a maximum period of 12 months from the date of such re-import. These time limits prescribed both, for re-importation as well as the re-exportation, in our view, are substantive conditionalities and not merely procedural. It is also not the case that when being required to pay duty forgone in the event of non-compliance of Notification No.158/95-Cus., the importer is left high and dry with no other remedy. Indeed, such importer, even if he has to discharge differential duty liability, provided he eventually re-exports the re-imported goods at some point, will surely be eligible to claim drawback towards the duties suffered on the goods exported - once the substantive post-importation condition of Notification No.158/95-Cus. is not satisfied or complied with, the importer will have no other option but to pay an amount equal to the difference between duty levied at the time of re-import and the duty leviable on such goods at the time of importation, but for the exemption contained in Notification No.158/95-Cus - decided in favor of appellant. Whether the appellants can claim the benefit of another N/N. 94/96-Cus or otherwise? - Held that: - Appellants have contended that since they have missed the bus in respect of Notification No.158/95-Cus., they should be nonetheless allowed to claim the beneficial provisions of Notification No.94/96-Cus. However, in view of the discussions supra regarding Notification No.158/95-Cus. and Notification No.94/96-Cus., we are unable to find much merit in this contention. Both these notifications have been issued for different situations and different reasons. Notification No.94/96 does not require that the re-importation is for the purposes of repair or reconditioning. There is also no requirement in that notification mandating re-export of the goods of the re-imported goods. In other words, Notification No.94/96-Cus. seeks to cover only those situations where the importer does not have any declared intent to immediately re-export the re-imported goods, as long as the duty liability specified in Col.3 of that notification is discharged. The importer can leave the goods undisturbed e.g., in their factory or premises, without any pressing need for their re-export. That however is not the case with Notification No.158/95-Cus which seeks to cover a situation where the goods are re-imported within 3 years, only for repair or reconditioning and proximate re-export thereafter - the contention of the appellants that they can very well claim alternative benefit of Notification No.94/96-Cus is misplaced - decided against appellant. Appeal allowed in part.
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2017 (11) TMI 1528
Quantum of redemption fine and penalty - Baggage Rules - valuation of electronic goods - Held that: - the goods imported are mainly electronic goods. These goods do get reduced in their value as they became outdated over a period of time, so also the appellant has paid Customs duty to the tune of ₹ 6,87,165/- on the goods - the Redemption Fine and penalty imposed is excess and, therefore, which we reduce the Redemption Fine to ₹ 2,50,000/- and penalty to ₹ 75,000/-, would meet the ends of justice - appeal allowed in part.
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2017 (11) TMI 1527
Confiscation - allegation of smuggling not established - Held that: - this Tribunal have categorically held that if the allegation of smuggling is not established confiscation is bad, as have been held by the Coordinate Bench ruling of this Tribunal in the case of M.B. Enterprises v/s CC, New Delhi - on the basis of such findings, holding the goods liable to confiscation under Section 111(d) of the Act is misplaced and erroneous, leading to miscarriage of Justice - confiscation, redemption fine and penalty set aside - appeal allowed - decided in favor of appellant.
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Corporate Laws
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2017 (11) TMI 1526
Entitlement to interest as compounded under of the clause as in the 1990 Mortgage Deed - Held that:- In so far as the payment of additional interest on account of default is concerned, it is stipulated that the parties agreed to payment of additional interest @ 2.5% p.a. on the total amount in default during the period of such default. Hence there is no mention of any interest which is compounded, to be paid on the defaulted amount. We therefore find merit in the submission of Mr. Kamat that when the parties had agreed to the payment of compound interest, it was specifically provided for, as in the 1987 Mortgage Deed and when they did not do so, it was conspicuously absent as in the 1990 Mortgage Deed. Hence the parties by contract having not provided for payment of compound interest the claim of the Appellant for computation of the amount on the basis of the usual banking practice of capitalisation of interest cannot be entertained. Appellant is not entitled to compound interest in terms of the clause as appearing in the 1990 Mortgage Deed, when the parties by contract have not provided for the same. We therefore do not find any fault with the order passed by the Learned Single Judge allowing the Official Liquidator's report in terms of prayer clauses (a), (b) and (d), resultantly rejecting the Company Application filed by the Appellant. There is therefore no merit in the above Appeal which is accordingly dismissed. However, time to deposit the amount as directed by the Learned Single Judge is extended by a period of 4 weeks from date.
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Insolvency & Bankruptcy
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2017 (11) TMI 1525
Corporate Insolvency Resolution Process - proof of existing debt - Held that:- The applicant has attached the relevant certified bank account statements along with certificate issued by Bank of India that Since January 2017 no amount has been paid by Respondent Corporate Debtor to the applicant. Further from the certificate issued by the Deutsche Bank it is clear that no amount has been paid by the respondent Corporate debtor between 17/08/2017 to 18/09/2017 in the account of the applicant operational creditor. This shows that the provisions of Section 9(3)(c) of the Code has been satisfactorily compiled with by the applicant. The present application is complete and there has been part admission of salary dues and non-payment of the same has caused default by respondent. Therefore, on fulfilment of the requirements of section 9(5)(i)(a) to (d) of the Code, the present application is admitted. A moratorium in terms of section 14 of the Code is being issued accordingly.
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2017 (11) TMI 1524
Corporate insolvency procedure - whether or not this petition should be admitted u/s 9 when one of the invoices is time barred by the time Company Petition filed? - period of limitation applicable to insolvency procedures - Held that:- If limitation is said as not applicable or giving life to time barred debts under the cover of Insolvency and Bankruptcy Code, it will be nothing but opening the lid of uncertainty giving a big hand to the persons not diligent of their rights. If this is the case, tomorrow a person forgets of his remedy many years before will come saying company is to be liquidated basing on a time barred debt. Moreover, so far it is a legitimate expectation of everybody - creditors as well as debtors that time is prescribed for every right of remedy including a remedy for liquidation, therefore lest doctrine of limitation be diluted. It can be an argument that since it is not a suit as mentioned in section 3 of Limitation Act 1963, it can’t be applied to the proceedings of IBC. My answer to the point is Tribunals are already counted is equivalent to Courts as long as Tribunals have trappings of courts, likewise when an order is passed giving finality to a controversy, it is as good as decree, therefore any proceeding given finality to a controversy, such judicial proceeding can be like any other suit proceeding, in any event application being included in section 3 of Limitation Act, this petition under IB code shall be construed as suit or application, as the case may be, under Limitation Act. There is a situation where Limitation Act could not reach, that is Constitution, there whenever any writ either under Article 226 or on fundamental rights is filed, since constitution governs every other statute, the Limitation Act will remain applicable to other statutes, for this reason only, delay and laches doctrine has been carved out to meet the situation in constitutional matters. Thus in whatever line so far limitation is applied to winding up cases, in the same line, prescription of limitation is applicable to the Code as well. As long as limitation is not prescribed under any specific enactment, it goes without saying Limitation Act, 1963 is automatically applicable to the Code as well. Company Petition is dismissed with liberty to the petitioner to proceed in respect to the claim within limitation by invoking section 14 of Limitation Act 1963.
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Service Tax
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2017 (11) TMI 1522
Demand of service tax - adjudication of case after the Scheme of Arrangement - sick unit - Held that: - This Court does not wish to express any opinion at this juncture, as the first respondent is yet to adjudicate the case. The first respondent, having issued the impugned demand, has to consider the petitioner's objections and pass an order and it is open to the petitioner to prefer an appeal. On the other hand, if the first respondent is convinced on the legal issue raised by the petitioner, it may even lead to dropping of proceedings. Therefore, necessarily, there should be an adjudication. The prayer sought for by the petitioner to quash the impugned show cause notice cannot be granted, as it is premature - writ petition is dismissed as premature.
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2017 (11) TMI 1521
Restoration of application for stay - Held that: - While deciding the application for stay, the Appellate Tribunal always could have gone into the question whether prima facie there is any merit in the appeal. However, from the impugned order, we find that the Appellate Tribunal has recorded a final finding on merits of the appeal by holding that the appeal was devoid of any merit. In fact, the Appellate Tribunal proceeded to dismiss the appeal and, consequently, the stay application was dismissed. The approach of the Appellate Tribunal is completely erroneous. What was heard before the Appellate Tribunal was the application for stay. There was no occasion for the Appellate Tribunal to go into the merits and decide the appeal itself by holding that it was devoid of any merits. The stay application will have to be restored to the file of the Tribunal.
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Central Excise
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2017 (11) TMI 1520
Rebate claim - export related benefits - rule 16 of CER - manufacture of biscuits - Held that: - in response to the prior correspondence attention of the BFPL was invited to discussions held on 5th April, 2004 when the Commissioner had apparently clarified that unless difficulties in observing the provisions of Rule 16(1) and (2) were established, no case had been made out for granting permission by Commissioner under Rule 16(3). During discussions, it was apparent that no difficulties were pointed out. Furthermore, in an earlier communication dated 25th February, 2004 BFPL was advised to follow the provisions of Rule 16(1) and (2) and since there was no difficulties in following Rule 16(1) and (2) the question of seeking the permission of the Commissioner under Rule 16(3) did not arise. The Commissioner had therefore directed BFPL to follow the procedure specified in Rule 16(1) and (2). Reference to the communication dated 25th February, 2004 issued by BFPL (Exhibit I) reveals that BFPL had admitted to manufacture of generically identical “biscuits” as those received in its factory from CMUs. These could be exported with attendant benefits only with permission from the Commissioner under Rule 16(3). Trade Notice No.2/2001 reveals that Rule 16(1) and (2) may not apply for receiving duty paid biscuits in the factory for export of confectioneries and chocolates, since BFPL had not manufactured these products. A fair reading of the letter reveals that it is in fact a denial of permission. It records in unequivocal terms that during discussions no difficulties were pointed out by BFPL in following the provisions of rules 16(1) and (2) and since no difficulties in following rules 16(1) and (2), the question of seeking permission of the Commissioner under rule 16(3) should not arise. There was a clear direction in the letter to follow procedure as specified under Rule 16(1) and (2) of Central Excise Rules, 2002. - the contention of Mr. Patil to the effect that the authorities of Commissioner had given permission is devoid of merit. In our view in both these matters there was no permission given for bringing goods to the factory of BFPL and for stuffing them in the containers. Since the products have not been manufactured by BFPL there was no occasion to export them. In the circumstances, the contention that the permission granted was in the nature of a misrepresentation and an attempt to mislead the authorities and this Court. Petition dismissed - decided against petitioner.
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2017 (11) TMI 1519
Clandestine removal - rejection of the request for cross-examination of witnesses - natural justice - Held that: - the Hon’ble High Court has not set aside the order of Tribunal dated 2.11.2015 but has confined the remand with a direction to the Tribunal to look into the plea regarding cross-examination of persons - the Tribunal has remanded the matter to the adjudicating authority with regard to certain point. Therefore, in the interest of justice, the adjudicating authority shall also consider the plea of the appellant for cross-examination of the witnesses - appeal allowed by way of remand.
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2017 (11) TMI 1518
Valuation - job-work - physician samples - samples sold on principal to principal basis and manufactured on job work basis and returned the goods to the principal - In case of sale of goods, the appellants are adopting the transaction value in terms of Section 4 (1) (a) of Central Excise Act, 1944 and in the case of job work they are paying duty on cost of manufacture plus 10% of notional profit - claim of the Revenue is that the value should have been arrived at on the basis of Rule 4 of Central Excise Valuation Rules, 2000 by taking the pro rata value of the trade pack of the same medicines. Held that: - very same issue decided in the case of Medispray Laboratories Pvt.Ltd. & Others [2017 (2) TMI 309-CESTAT Mumbai] - According to said judgement, Rule 4 of Central Excise Valuation Rules, 2000 shall apply only in those cases where the manufacturer manufacturing the physician samples and they themselves supplying free samples in the market and not in the case of physician samples sold on principal to principal basis. It was also held in the said judgements that in case of physician samples manufactured on job work basis and cleared to principal the valuation should be on 110% of the manufacturing cost. Appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1517
100% EOU - Penalty u/s 112(a) - violations of customs provisions - case against the EOU is that they have not undertaken any manufacture as mandated in the permission nor they have followed the procedure for getting the goods manufactured from the job workers - Held that: - the original authority analyzed various corroborative evidences and also detailed depositions made by the appellant himself during the investigation. A cumulative reading of the appraisal of evidences indicates that the findings of the original authority could not be refuted with any force by the appellant - considering the offence, the penalty amount is reduced - appeal allowed in part.
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2017 (11) TMI 1516
CENVAT credit - duty paying documents - receipt of invoices without actual receipt of goods - Held that: - There is no other evidence that has been adduced by the department to substantiate that Finecab had not received the inputs shown under 71 invoices of the suppliers. The assertion by Finecab that at the suppliers' end, excise duty had been discharged in respect of the goods covered in the invoices and that they themselves had made payments to the suppliers against those invoices by way of cheques, CR notes, Bank transfers etc., have also not been disproved or controverted by the department. Having drawn nothing from the separate investigations on Finecab including search of the factory premises, search of office premises, recovery of hard disk of main server and its analysis, recording statements of co-persons etc., the department has then resorted to draw in probable conclusions from an earlier DRI investigation into importers of copper rods and initiated these proceedings. Obviously then, except for a riding piggyback on the said DRI investigations, there is no precision or proof even to a prudent degree to back up the allegations against Finecab made by the department, surely, suspicion or presumption cannot take the place of proof. Reliance placed in the case of M/s Motabhai Iron & Steel Industries and others Versus CCE Ahmedabad-II [2014 (2) TMI 63 - CESTAT AHMEDABAD], where it was held that in absence of any perversity in the findings recorded by the Tribunal, the impugned order does not give rise to any question of law, much less, a substantial question of law so as to warrant interference. The impugned order confirming the allegations as made out in the show cause notice, fails the test of legal scrutiny. - Appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1515
Refund of excess duty paid - N/N. 04/2006-CE - whether the assessee herein is required to print RSP or otherwise for the cement cleared to A.P. State Housing Corporation Limited in bulk supply? - Held that: - an identical issue is decided by this Bench in the case of Sagar Cements Ltd., [2010 (4) TMI 418 - CESTAT, BANGALORE ] wherein benefit of Notification No.04/2006 as been extended. As regards the reliance placed by the Revenue on the judgment of the Tribunal in the case of Rain Commodities Ltd., [ 2011 (1) TMI 490 - CESTAT, BANGALORE], we find that the judgment of the Tribunal was first of all the ex-parte order; facts, in appeal as recorded by Bench is that the said Rain Commodities Ltd., has been formed to take up the activities of building houses for public and therefore is service institution and the clearance of the product is not on retail basis and is in terms of the agreement between the parties, there is no requirement of printing of MRP on the packages in which the product is packed; this factual aspect is noted by the Lower Authorities and being not disputed, the Bench held the benefit of Notification No.04/2006-CE is cannot be extended. Appeal dismissed.
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2017 (11) TMI 1514
Valuation - section 4A of Central Excise Act - fixation of MRP - process of packing/repacking - deemed manufacture - Original Equipment (OE) items like dash board, front module, rear module etc. of motor vehicle - Held that: - Undoubtedly, the appellant undertakes repacking and relabeling processes on the parts procured by them by way of import. It is also not disputed that these parts in such repacked or relabelled condition are cleared to their depots at Gurgaon, Taloja and Kolkata, which have been registered as manufacturers with the Central Excise Department. In the normal course, the impugned goods, by virtue of the provisions of Standards of Weights and Measures Act/ Rules (now presently Legal Metrology Act / Rules) are required to affix maximum Retail Sale Price (RSP) on each package and in consequence such packages will attract valuation and assessment for purposes of discharge of central excise duty liability as per provisions of Section 4A of Central Excise Act, 1944. In fact, the clearances of such goods, made directly to the dealers of HMIL are assessed only under section 4A ibid. The appellant has referred to Rule 2A of Standards of Weights and Measures Rules (presently Legal Metrology Rules) to contend that their depots where the goods are being transferred are industrial consumers for the purposes of Rule 2A, hence they will be excluded from the provisions of declaring RSP - We do not agree with those propositions of the appellant. Rule 2A of Standards of Weights and Measures Rules define industrial consumer as those consumers who buy packaged commodities directly from the manufacturers / packers for using the product in their industry for production etc. No doubt, the packages which are cleared by the appellant to their depots registered as manufacturing premises, undergo processing of repacking / relabeling which are deemed manufacture for the purposes of Central Excise levy. Whether deemed manufacture can be equated with actual production? - Held that: - as per Oxford Dictionary, the activity of manufacture is very often synonymously used for production. However, an activity involving repacking and relabelling really does not create a new product, name or character or use but is however deemed to be manufacture. Such manufacture by legal fiction, cannot be by any stretch of imagination be equated with actual production of goods. The impugned clearances made by the appellant from their Irungattukottai manufacturing unit to their depots/ manufacturing premises at Gurgaon, Taloja and Kolkata will surely attract section 4A valuation. Extended period of limitation - Held that: - the department was very much aware of the assessment procedure followed by the appellant for the disputed period. In fact, the department themselves have advised the appellant vide their letter dated 12.6.2009 to adopt the value using CAS- 4 costing method which is exactly what the appellant did. Having given such directions to the appellant, the department cannot then make allegations of suppression or mis-statement etc. and invoke extended period provided under section 11A(1) of the Central Excise Act, 1944 to justify issue of the show cause notice on 29.8.2013 that is almost more than four years after the aforementioned letter of the department - part of the demand which relates to the normal period of limitation alone will sustain is upheld along with interest thereon. Penalty - Held that: - none of the ingredients justifying the invocation of extended period under proviso to section 11A(1) are present in this case. Hence there is no justification for imposition of penalty under section 11AC of the Act - penalty set aside. For the limited purpose of ascertaining the quantum of such reduced duty liability, for the normal period of limitation, the matter is being remanded to the adjudicating Commissioner - Appeal partly allowed by way of remand.
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2017 (11) TMI 1513
Abatement - machinery sealed and kept without operation - present demand against the appellant is only on the ground that they have not followed the procedure of first paying duty based on the determination by the Jurisdictional Officers and thereafter claiming the abatement in terms of Rule 10 - Held that: - similar dispute came before the Hon’ble Gujarat High Court in the case of M/s Thakkar Tobacco (P) Ltd [2015 (11) TMI 319 - GUJARAT HIGH COURT], where it was held that if the assessee has correctly calculated the proportion of duty and set off the same against the duty payable for the next month, it cannot be said that the said action is contrary to the statutory scheme. The eligibility of abatement will arise only when the production is closed for a continuous period of 15 days or more - We note from the table annexed in the impugned order, at least in respect of one month (September, 2015), the continuous period of 15 days appears to have been not met. The fact of fulfillment of condition of continuous closer of 15 days or more can be re-verified by the jurisdictional authorities. Appeal allowed by way of remand.
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2017 (11) TMI 1512
Classification of goods - Cadbury Milk Treat - appellant claimed the classification under sub heading 1905.39 but the department has classified it under sub heading 1905.31 - Held that: - identical issue has came up before the Tribunal in the case of Cadbury India Ltd. vs. CCE, Indore [2017 (6) TMI 310 - CESTAT NEW DELHI], where it was held that the ingredients used in manufacturing of Milk Treat does not contained any Cocoa or Chocolate but only contained Cocoa butter and Cocoa butter is specifically excluded and does not cover under Chapter 18 of the Central Excise Tariff Act, therefore, the White Chocolate cannot be said as Chocolate. The product “Milk Treat” is not covered under Tariff Heading 19053211. The product in question under sub heading 1905.39 has been correctly classified by the appellants - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1511
CENVAT credit - input services - security services - courier services - repair and maintenance service - place of removal - Held that: - the claim of the appellants that the buyer’s premises should be treated as place of removal cannot be sustained as they cannot take contradictory stand in respect of freight/ insurance and transit security service - the credit of security guard availed for transit from the factory to the buyer’s premises is not admissible. Courier services - Held that: - credit so far as it relates to courier service availed for documentation purpose is allowed. Reliance placed in the case of Radical Instruments Versus Commissioner of Central Excise, Delhi-II [2015 (11) TMI 779 - CESTAT NEW DELHI] - In so far as courier service used for procurement of inputs would be allowed. reliance placed in the case of M/s Perfettti Van Meele India Ltd. Versus CCE, Delhi - IV [2016 (7) TMI 632 - CESTAT CHANDIGARH] - So far as it relates to clearance of finished goods the credit would not be admissible. Repair and maintenance service availed for the purpose of repair of office furniture - Held that: - it is apparent that the law on the issue is very clear and there is no scope of interpretation. The appellants have themselves been not including freight and insurance in the assessable value and also claiming that the place of removal is the buyer’s premises, itself show that their contradictory stand - there is no merit in the contention of the appellants that it is an issue of interpretation - credit of repair and maintenance service used in the factory premises is allowed. Appeal allowed in part.
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2017 (11) TMI 1510
Cancellation of registration - Since the respondents did not have a factory a notice was issued for cancellation of their registration as manufacturer - loan license basis - Held that: - In view of the fact that the respondents are merely loan licensee they cannot be treated as a manufacturer. Since the respondents are not manufacturer they cannot be allowed to operate under the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 as manufacturer and no registration can be granted to them as manufacturer - cancellation upheld - appeal allowed - decided in favor of Revenue.
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2017 (11) TMI 1509
Valuation - physician samples (distributed free of cost) - Rule 8 of the Central Excise Valuation Rules - CBEC Circular no.643/34/2002-CX dated 01.07.2002 - Held that: - Rule 8 of the Central Excise Valuation Rules cannot be used for valuation of the physician’s samples cleared by the appellants free of cost, and in such circumstances Rule 4 of the Valuation Rules would be applicable. Time limitation - penalty - Held that: - in the absence of any evidence to support the allegation of suppression, misrepresentation, extended period of limitation cannot be invoked - penalty under Section 11AC also set aside. The demand of duty and interest for normal period upheld - appeal allowed in part.
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2017 (11) TMI 1508
SSI Exemption - submission of all relevant documents - Revenue says that all the documents were not submitted before the original order - Held that: - all the documents were very much vital on the issue of the subject that whether the goods were manufactured on job work basis if it is so even though the goods is branded the duty cannot be charged to the job worker if the goods are manufactured and cleared under N/N. 214/86 or N/N. 83/94 and 84/94-CE. Even if some documents were not be submitted by the respondent at the time of adjudication and if the same are submitted before the Commissioner (Appeals), the said documents cannot be brushed aside by the Commissioner - matter remanded to the adjudicating authority for denovo order - appeal allowed by way of remand.
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2017 (11) TMI 1507
Provisional assessment - Rule 9B of Central Excise Rules, 1944 - case of appellant is that there is no order by the jurisdictional Assistant Commissioner in terms of Rule 9B - Held that: - even though no order under Rule 9B, the assessment can be considered as provisional in view of voluntary execution of a bond with a provisional assessment clause by the appellants - The said bond, a general purpose bond containing various obligations as can be seen from the title of the bond. On a plain reading of the bond, it is very clear that the bond can be invoked against the appellants, wherever there is an infringement of the undertaking. In fact, there were certain provisions which were not at all relevant to the appellants, for instance, fulfillment of proof of export etc. The said bond does not indicate automatically the existence of the provisional assessment. Admittedly, there was no order under Rule 9B by the Assistant Commissioner. There is no supporting evidence to hold that there was provisional assessment during the material time - any demand for differential duty shall be restricted to the normal period in terms of section 11A of the Central Excise Act, 1944 - appeal allowed in part.
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2017 (11) TMI 1506
Remission of duty - by-product, molasses - deterioration due to storage in earthen pits and passage of time - Rule 9A(5) of Central Excise Rules, 1944 - Held that: - Admittedly, the molasses from earthen pits are unfit for marketing. Admittedly, the rate of duty based on a rule, which is not available in 2006 cannot be legally tenable - similar issue decided in the case of Chengalrayan Co-op. Sugar Mills Ltd. Vs. CESTAT & Anr. [2017 (8) TMI 310 - MADRAS HIGH COURT], where it was held that without clearance of excisable goods, there can be no duty liability on the assesee - In the present case, there is no clearance of excisable goods - appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1505
Clandestine removal - allegations raised against the respondents were that they were removing Cone Yarn (dutiable) without paying duty under the guise of Hank Yarn (exempted) - Held that: - the demand is mainly raised based upon the statements of the co-noticees, who are the Reeling Units. However, the department has not filed appeal against the co-noticees and has filed appeal against only on the main appellant - the allegation of the department that the appellant did not remove Cone Yarn to the Reeling Units but instead they have dispatched the dutiable Cone Yarn to yarn traders, without payment of duty is not supported by any documentary evidences, though the learned Authorised Representative has attempted to argue based upon the entries in the Gate Register - also, there is no evidence relied by department to prove the allegations in the show-cause notice - appeal dismissed - decided against revenue.
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2017 (11) TMI 1504
Abatement claim - Rule 96ZO of the Central Excise Rules, 1944 - reason for rejection of abatement is that appellant did not pay the duty in advance as provided in proviso 96ZO - Held that: - the abatement should be granted without asking him to pay duty first or where he had paid the duty, he should be reimbursed of the amount of duty paid, in terms of the order of abatement issued by the Commissioner. The impugned order is modified to the extent of allowing the abatement for Sl.No.1 and 3 show in the Table for the period 14.04.1999 to 28.04.1999 and 22.10.1999 to 29.10.1999 for an amount of ₹ 4,72,222.30 and ₹ 2,28,494.70 respectively. The remaining part of the impugned order is not disturbed/interfered. Appeal allowed in part.
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2017 (11) TMI 1503
Short payment of excise duty - scope of word assessee - extended period of limitation - change of opinion - Held that: - Revenue have accepted M/s PCAL is the manufacture of the goods in question, by granting them registration as manufacturer and accepting filing of returns on payment of duty by them. Nowhere in the Show Cause Notice, it is alleged that instead of M/s PCAL why not M/s KCIL be treated as a manufacturer. Further, it is nowhere the case of Revenue that the depot of M/s KCIL located at Kolkata or the depot of the consignment agents are also the Depot of the manufacturer M/s PCAL. In such case and facts on record, I find that the whole Show Cause Notice is misconceived. Extended period of limitation - Held that: - the Show Cause Notice has been issued by way of change of opinion and the same is bad for invocation of extended period of limitation, there being no suppression of facts as admittedly the agreement between the parties was filed with the Revenue and proper returns etc. were filed and taxes were paid. Appeal allowed - decided in favor of appellant.
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2017 (11) TMI 1502
Clandestine removal - CENVAT credit - case of the revenue is that the appellant have maintained two sets of invoices bearing same serial numbers in a part of the financial year, having different dates of removal of goods - allegations are based solely on the statement of Shri Lal Singh ex-employee of the appellant company, a letter dated 06 October, 1998, which was served upon the appellant by officers of Godrej, namely, Shri K.N. Modi, General Manager purchase, alleging that appellant had openly started selling cylindrical luggage locks with the packaging in the name and style of Godrej in Delhi market - whether the appellant have indulged in clandestine removal of goods, and whether are required to reverse Cenvat Credit on non-taxable output removed under Rule 57 CC of CER, 1994, which is equivalent to Rule 6 of CCR 2004, and whether the appellants have resorted to undervaluation of their clearances? - principles of natural justice. Held that: - there are no such corroborative evidence to support the allegation of clandestine removal - In the facts of the present case it is an admitted fact that no investigation has been conducted as to procurement of raw material to manufacture such huge quantities of excisable goods, no attempt to be made find whether the appellant had the capacity to manufacture such a huge quantity of excisable goods as has been alleged in the SCN, no attempt is made to ascertain as to whether there had been any buyer of excisable goods cleared from the appellant’s premises clandestinely, there is no evidence found regarding transportation of such clandestinely removed goods, there is no evidence of any excessive power consumption, which is an important factor for determining clandestine removal. Such a large-scale production and clearance cannot be made without consuming excess power. No attempt has been even made to determine the electricity consumption pattern of the appellant during the relevant period, including the period of dispute. Thus, the allegation of the clandestine removal made by revenue have got no legs to stand and is fit to be set aside. Cross-examination - Held that: - in view of the admission of the illegal activity and admission to have made clearances without payment of duty, they cannot escape the liability by throwing the burden of evasion and illegal activity on the employee and on the plea that they were misguided by misplaced advice of their own authorized representative whose cross-examination have been sought. Reliance placed by learned Commissioner on the statement of Shri Lal Singh is not tenable in view of the provisions of Section 9D of the Act read with Section 14 of the Act.There is failure on the part of learned Commissioner in ensuring the attendance of witnesses, the statement of which have been relied upon in the show cause notice. Save and except issue of summons, the learned Commissioner have not done anything else. In spite of all the powers of a civil court vested in the authority for ensuring the attendance of witnesses and production of evidence - also, no study have been made with respect to the capacity of production whether the appellant had such capacity to produce such alleged clandestine quantities. The minutes of the meeting is prepared by Godrej, is prima facie not admissible and further observe that there is no specific allegation and/or admission on the part of the appellants with respect to clandestine manufacture and clearance by the appellant of the Godrej brand products. In the said minutes only doubts have been raised by the officers of Godrej. Further, prior to that meeting appellant have also vide a separate letter informed Godrej regarding availability of spurious locks in the name of Godrej in the market, expressing concern. Thus, the SCN is presumptive and also the impugned order are unsustainable as learned Commissioner have selectively relied on the evidence on record. The allegation of clandestine manufacture and removal is not established - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (11) TMI 1501
Initiation of reassessment proceedings - Section 21 of the 1948 Act - sale of SSF - Held that: - In view of the inextricable and umbilical link between the material and the formation of an opinion, in the considered view of this Court, it was wholly improper for the assessing authority to proceeded to assess the revisionist with respect to the sale of SSF - the assessing authority had never decided to reassess the revisionist on the issue of SSF. The formation of opinion was based solely upon material which seemed to suggest that the disclosure with respect to closing stock of forms was incorrect. Scope of SCN - Held that: - During the reassessment or after the said process was set in motion, it was not open to the assessing authority to review the entire assessment undertaken earlier. The path which the assessing authority proceeded to traverse could not have been validated or conferred an "imprimatur" by the Tribunal. This more fundamentally so since this issue neither formed the subject matter of the permission which was accorded by the Additional Commissioner, nor did it form part of the show cause notice. This fundamental flaw in the course adopted by the assessing authority could not have been cured by the liberty which was accorded by the Tribunal in terms of the order impugned. This additionally because the power to reassess was authorized by the Additional Commissioner in terms of the proviso to section 21. But for this permission, admittedly, the assessing authority had no jurisdiction to initiate or commence proceedings for reassessment. Revision allowed.
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Indian Laws
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2017 (11) TMI 1523
Auction purchaser aggrieved by the action of the secured creditor in forfeiting their money - remedy under SARFAESI Act - Held that:- Writ Court as also the Appellate Court were justified in dismissing the appellant's writ petition on the ground of availability of alternative statutory remedy of filing an application under Section 17(1) of SARFAESI Act before the concerned Tribunal to challenge the action of the PNB in forfeiting the appellant's deposit under Rule 9(5). We find no ground to interfere with the impugned judgment of the High Court. The appellant is, accordingly, granted liberty to file an application before the concerned Tribunal (DRT) under Section 17(1) of the SARFAESI Act, which has jurisdiction to entertain such application within 45 days from the date of this order. In case, if the appellant files any such application, the Tribunal shall decide the same on its merits in accordance with law uninfluenced by any of the observations made by this Court and the High Court in the impugned judgment.
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